In what could be a huge reprieve to India Inc, the Parliamentary Standing Committee on Finance is likely to recommend inclusion of cartels within the settlement and commitment mechanism under the Competition Reforms Bill. The Bill had, however, extended settlement and commitment framework to cases of market power abuse and kept the cartels out of its purview. Cartels are considered to be the most egregious infractions of competition law as they can lead to higher prices, reduced competition and innovation, besides creation of monopolies or oligopolies, which can have negative effects on the economy and consumers.
This is likely to provide a huge relief to the industry as monetary penalties for cartelisation are extremely high. The Competition Commission of India (CCI) has imposed a penalty of ₹6,700 crore on leading cement companies in the past and has recently imposed a penalty of ₹1,788 crore on top tyre companies, for cartelisation.
The panel conducted its last sitting on December 8 and adopted the draft report on the Competition (Amendment) Bill, which was sent to it for examination and report consequent upon its introduction in the Lok Sabha in the monsoon session. The report is likely to be tabled soon in the House.
During its last sitting, the panel examined Additional Law Secretary over the expansion of powers of the Director General (DG) under the Bill where under the DG can even summon legal advisors to depose them on oath. The legal fraternity vehemently opposed the proposal by arguing that it impinged upon client-attorney privilege protected under the Indian Evidence Act. The panel is likely to propose insertion of a clarification to address the objections raised by the Bar.
Deal value
The Bill proposes deal value threshold of ₹2,000 crore as an additional criterion for notifying M&As to CCI for approval if the target has “significant business operations” in India. The proposal was mooted to capture killer acquisitions in digital markets. The stakeholders have raised concerns about the low threshold as it may capture a number of transactions in the new age markets, which may be required to be notified to CCI. This was perceived to increase compliance burden upon the stakeholders. To allay the concerns, the panel has recommended periodic revision of basic deal value of ₹2,000 crore and the revisions will be indexed to inflation, said sources close to the development.
Definition of Control
The Bill proposes a lower threshold of ‘control’ in the context of merger control regime by defining it as the ability to exercise material influence, in any manner, over the management or affairs or strategic commercial decisions. The panel found threshold of ‘material influence’ to determine ‘control’ as too overarching and is likely to recommend a higher benchmark of‘decisive influence’.
Merger Timelines
However, one of a very significant proposal in the Bill for reduction of overall time-limit for approval of M&As from 210 days to 150 days and the requirement to obligate CCI to form prima facie opinion within 20 calendar days of receipt of merger filings, did not find favour with the panel. The panel is likely to give more flexibility and time to CCI to process merger filings.