Competition Amendment Bill, 2022 – What lies ahead for the regulated entities?
The Indian government has tabled the Competition (Amendment) Bill, 2022 in the lower House this week. Given the overwhelming majority the ruling alliance has in both the Houses, the Bill is most likely to observe a smooth passage. The said Bill has introduced few substantial, as well as procedural changes which are likely to amend the overall regulatory framework. Some of the key changes include introduction of settlement and commitment schemes, change in the definition of the ‘relevant market’, lowering of merger threshold and introducing a comprehensive framework for the DG to conduct investigation. Other procedural changes include introducing a timeframe for receiving an information from the Informant from the cause of action, amending the text of section 3 of the Act to explicitly include hub and spoke agreements and amending definition of terms like ‘enterprise’, ‘tie-in arrangement’ and ‘control’.
Change in the definition of ‘Relevant Market’
Under the principal Act, ‘relevant market’ is defined in terms of ‘Relevant Product Market’ and ‘Relevant Geographic Market’. Currently, RPM is defined as, “..a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use..”. The proposed Bill has amended the definition in following terms, “..market comprising of all those products or services— (i) which are regarded as inter-changeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; or (ii) the production or supply of, which are regarded as inter- changeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices..”. The said change is not only likely to affect the enforcement framework of section 4 of the Act, i.e. abuse of dominant position, but may have a bearing on the overall objectives of the Act as well. The Preamble of the Act reads the objective as to “..protect the interests of the consumer..” However, with the change in definition of RPM, as well as section 19(7) of the Act, the legislature has ought to give due significance to the producers’ interests as well. The same may result in difficulties for the consumer, as well as for the DG while delineating RM, as consumer data is easily available compared to producer data. The said change is likely to increase the ‘producer welfare’ standard for achieving overall objectives of the Act.
Settlement and commitment scheme
The Bill has introduced the settlement and commitment scheme through insertion of section 48A and 48B to the principal Act respectively. The aim of both the schemes is to reduce litigation by obtaining a form of ‘compromise’ from the parties under investigation on mutually acceptable terms. At a first reading, the text of both the schemes sounds promising, however the modalities of it would only be known through the delegated legislation. Given that the proposal by the respondent entities has been explicitly made non-challengeable under section 53B of the Act subject to the Commission’s approval, it remains to be seen how the Informant’s interests would be accommodated in the same. Such a scenario gains further prominence wherever the Commission consents to a ‘commitment’ as in such a case even a contravention is not established thereby acting as a roadblock for the affected parties to even claim compensation under the Act. Our research fellows have earlier written a paper on the proposed scheme which can be accessed here.
The Bill through insertion of section 5(d) to the principal Act has introduced a concept of deal ‘value’ while notifying transactions to the CCI. The said concept is in addition to the existing criteria of assets and turnover of the merging entities thereby expanding the scope of jurisdiction of the CCI. The said concept may further allow the Commission to look into transitions which are entered into asset-light companies.
The Bill through multiple sections has further reduced the time taken by the CCI to approve transactions in line with its policy on ease of doing business. The said reduction is in furtherance of ‘Green Channel’ which allowed non-horizontal businesses to conduct mergers through an automatic route.
Section 3 of the Act
The Bill has not only added a second proviso to section 3(3) of the Act to include hub and spoke agreements into the purview of the Commission, but has amended the text of section 3(4) of the Act to expand the mandate of the CCI and allow it to scrutinize all forms of agreement which may not be directly between enterprises and persons. The said amendment is a welcome move to an extent that based on the past experience, it would address technical challenges raised by the respondent entities on non-applicability of section 3(3) and 3(4) of the Act on them while facing scrutiny, The same move, however, may not have substantial impact on enforcement of section 3 of the Act as the CCI in the past have paid ample reliance on section 3(1) of the Act wherever it has been stuck through the contours of section 3(3) and 3(4) of the Act.
Receipt of Information and investigation by the DG
The Bill had added a timeframe of three years from the date of cause of action for the Informants to file an information under section 19(1) of the Act. The said proviso purports to treat the contraventions under the Act in personam in nature when the same are held to be in rem in nature through multiple pronouncements. Even though such a timeframe has been enacted in the Bill for the Informants, no such bar has been placed on the powers of the CCI where it may take suo motu cognisance of the violation.
Over the last 13 years, it was also realised that there were certain lacunae to address procedural aspects arising out of the supplementary investigation ordered by the CCI under section 26 of the Act. The Bill, therefore, has correctly inserted section 26(3A), 26(3B) and section 26(9) to the principal Act.
The changes introduced through the said amendment are likely to substantially alter the enforcement of the Indian competition legal framework. The amended definition of ‘relevant market’ and the introduction of settlement and commitment schemes are, in all likelihood, set to balance the ‘producer welfare’ against ‘consumer welfare’ standard to achieve the overall objectives of the Act. The lawmaker has corrected a few drafting errors by replacing the incorrect phrases with the correct ones which is a welcome move. It has also omitted the provisions for setting up a Governing Board within the Commission and extending the exemption given to IPR laws under abuse of dominant position after due consultation, both of which are welcome moves in light of the evidence available.