The Competition Amendment Bill, 2022, introduced in Parliament earlier this month, marks a significant effort to align a two-decade-old law with today’s realities. A salient feature of the Bill is its effort to regulate transactions in the digital space, which may escape the radar of the competition law in its present form. Therefore, Section 5 of the Competition Act — which defines the asset and turnover thresholds for an M&A (or ‘combination’) to require the nod of the Competition Commission of India (CCI) — is proposed to be amended to include ‘deal value threshold’ or the value of the transaction itself. Under this, the CCI will review a transaction with a deal value of over ₹2,000 crore, or if either party has ‘substantial business operations in India’, even if their collective asset and turnover levels are below the specified limit; in the digital space, influence is exercised in a manner that is not readily matched by assets and turnover levels. Given the mushrooming of innovation in the digital economy, the need to ring-fence this area from unfair competition cannot be denied. However, there could be a major disruption of legitimate M&As in other sectors if the transaction value norm and the rather vague notion of ‘substantial business operations’ are applied indiscriminately. The regulations to be issued under the law must specify circumstances where the clause will apply. However, in order to ‘enhance ease of doing business’, the Bill moots that the CCI should take a view on a merger within 150 days, and not 210 days as at present; this could be further reduced. The fine line between improving regulation and not being too heavy-handed about it, must be kept in mind when the Bill is debated.

The amendment Bill has a few stand-out features, one of which is creating the scope for ‘settlement’ of anti-trust cases. However, the introduction of a ‘leniency plus’ clause appears to be a contentious move. Under this, an enterprise being investigated for anti-competitive practices can get away with a lower penalty if it provides information on additional cartels. Apart from this going against the basic principles of natural justice (that is, for every wrongdoing, there ought to be a specific punishment), it could lead to a wrongdoer being let off the hook by providing unverifiable information. The monetary penalties invoked for settlement should be linked to the profile of the enterprises concerned for them to work as a deterrent. Yet, there is a case for promoting settlement, given that the CCI has not been effective in enforcing earlier verdicts; rulings against cement and tyre industries are mired in litigation.

Another important feature of the Bill is that it expands the scope of anti-competitive practices to include ‘hub and spoke’ cartels and not just ‘horizontal’ ones. Therefore, vertical integration will be viewed with a critical lens as well; cartel ‘facilitators’ and ‘participants’ will be regarded as one, in line with global practices. The Bill seeks to define ‘control’ of one company over another by going beyond voting rights and heft in the board to include ‘material influence’. This too could become contentious as the phrase is a nebulous one and subjective too. In sum, the Bill rightly tries to expand the ambit of regulation, while also making compliance easier. But some rough edges need to be ironed out.