Multinational enterprises including Big Tech are now set to face heat with Parliament on Monday passing the Competition (amendment) Bill 2022 that, among other changes, seeks to levy penalties for any abuse of dominant position on a benchmark of ‘global turnover’ of such enterprises.

The Bill is the most comprehensive amendment undertaken till date by the Government to the competition law. Prior to this, there were three amendments to the law in 2007, 2009 and 2018. 

The other noteworthy features of the proposed law —which was passed by Rajya Sabha on Monday through a voice vote —include introduction of a settlement and commitment framework so as to ensure faster market correction; introduction of concept of deal value threshold for notifying mergers and acquisitions to address killer acquisitions in the digital market and introduction of “leniency plus’ regime. 

Leniency plus regime is basically a new cartel detecting tool that would encourage companies already under investigation for one cartel to report other cartels unknown to the competition regulator.

Finance Minister Nirmala Sitharaman on Monday moved the Bill for consideration and passage in the Rajya Sabha. The Upper House passed this Bill without any discussion.

This Bill was passed by Lok Sabha on Wednesday last week after Sitharaman moved as many as 13 official amendments in the lower house.

All eyes are now on the Competition Commission of India (CCI), which will now go about framing regulations on the various new features of the law. 

Besides reducing the timelines for clearing mergers and acquisitions ( to 150 days from 210), the Bill has also provided for appointment of Director General (Investigation) by the CCI. Hitherto, the DG (Investigation) was directly appointed by the Central Government.n

Another significant change relates to 25 percent deposit of penalty for appeals. Also, the Bill provided for inclusion of facilitators of certain anti-competitive agreements within the framework of law (hub—and—spoke).

EXPERTS’ TAKE

Nischal S Arora, Partner- Regulatory, Nangia Andersen India, said that the Competition (Amendment) Act, 2023 has, through an explanation to Section 27 of the Competition Act, 2002, clarified that penalties for abuse of dominant position under the Act shall be computed on “global turnover” of such enterprise.  “This amendment has come from the left field as it was not part of Competition (Amendment) Bill, 2022 and would have far reaching consequences for Multi National Enterprises doing business in India”, Arora said.

Samir Gandhi, Partner & Co founder, Axiom5, said “With the passing of the Amendment Bill, we can expect the focus to now shift to the implementation of the various new provisions of the Act. This will require broad stakeholder consultation and discussion before the framing of regulations.”.

Shweta Shroff Chopra, Partner, Shardul Amarchand Mangaldas & Co, said that the amendments formally fix responsibility on facilitators of cartels such as trade associations, agents and even customers if they act as hubs for illegal information exchange. “Now, they will be penalised in the same way as the cartelists themselves, which could be up to 10 per cent of average global turnover for the preceding three financial years, or three times of profit for each year of the continuance of the cartel or 10 percent of the global turnover for each year of the continuance of the cartel, whichever is higher. It would be interesting to see if this expanded definition also covers AI software offering pricing suggestions.”, she added.

Unnati Agrawal, Partner, IndusLaw said the expedited nod of the Upper house (Rajya Sabha) to the Competition (Amendment) Bill, 2022 demonstrates that overhauling the competition law in India is a top-priority for the government.

“The Bill is an important development and plugs a significant gap in the toolkit of the CCI. One of the major amendments in the Bill is the expansion of the scope of cartels by bringing hybrid anti-competitive agreements (such as hub and spoke cartels) within its ambit. Now the CCI will be empowered to treat cartel facilitators (who actively participated or intended to participate) at par with the cartel participants. Hence, dealers/suppliers of a cartel participant may also be prosecuted under these provisions.

Thus, for cartels, the DG and the CCI would now have to establish mens rea (which is usually a concept of criminal law) as well. Hence, it is of utmost importance that further clarity with regard to standard of proof (by way of guidelines/regulations/notifications) is provided by the CCI”, she added.

Competition law gets an overhaul :  Key Features

Penalties linked to global turnover

Settlement and commitment framework introduced

Deal value threshold for notifying mergers and acquisitions

Timeline for M&A reduced to 150 days from 210

Introduction of ‘Leniency Plus’ regime

25% of penalty to be deposited for appeals  

Competition Commission to appoint D-G (Investigation)

Limitation period for filing an information/reference

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