Key takeaways from the Competition Amendment Bill, 2020
Key takeaways from the Competition Amendment Bill, 2020

By Debanis Roy Chowdhury, Associate, COMPAD

(The Government has invited comments on the Bill and stakeholders have the opportunity to provide their views until 6 March 2020.)

The draft Competition (Amendment) Bill, 2020 (Bill) attempts to bring in certain significant changes to the Competition Act, 2002 (as amended) (Act) to streamline the legal provisions and to incorporate the learnings of the Competition Commission of India (CCI) from the last decade. The proposed amendments are largely based on the recommendations made by the Competition Law Review Committee (CLRC) after extensive consultation with various stakeholders. Some of the key proposed changes are as follows:

1. Definition of ‘Cartel’ – The definition of ‘cartel’ is proposed to be amended to expressly include buyers’ cartels (i.e., a cartel where buyers together agree on what they would pay for goods and/or services) and hub and spoke cartels (i.e., indirect information exchange through a vertically related supplier/distributor/retailer as against information exchange between direct competitors).

2. Widening the Scope of Section 3(4) – The Bill proposes to widen the scope of Section 3(4) of the Act by including the term “any other agreement” to expressly cover arrangements which may not fit within the strict categorization of either a horizontal or a vertical agreement. This is particularly relevant in the context of digital markets wherein there may be unanticipated linkages and innovative arrangements that may not fall strictly within the existing classification of agreements envisaged under the present construct of Section 3 of the Act. The Bill also proposes to revise the definition and scope of certain types of vertical agreements such as tie-in arrangements, exclusive supply arrangements and resale price maintenance to accommodate novel vertical arrangements such as online selective distribution, online sales bans, minimum advertised prices (MAP), dual pricing, etc.

3. Settlement Mechanism – The Bill has come out with a new mechanism for settlement and commitments by investigated persons / entities for contraventions related to vertical agreements and abuse of dominance. However, this mechanism would not be available in case of cartels.

4. Definition of Control – The Bill proposes to clarify that the test for assessing control would be based on the ability to exercise ‘material influence’ over the management and affairs or strategic commercial decisions.

5. Reducing Review Timelines – The Bill also proposes to expedite and streamline various timelines and processes that are applicable to the CCI’s merger control approval. The Bill, very significantly, proposes to reduce the time available with the CCI to form its prima facie opinion as to whether a combination has caused or is likely to cause an appreciable adverse effect on competition from the existing 30 working days to 20 calendar days from the receipt of the filing. The Bill also proposes to reduce the statutory ‘deemed’ approval timeline by a month to 150 calendar days (plus additional 30 calendar days to clear any defects) from the existing 210 days from the date of making the merger filing. The timelines and the process for modifications / remedy discussions too have been streamlined / shortened.

6. Deposit of Penalty Prior to Appeal – In an unfavorable move for companies who may receive a penalty from the CCI, the Bill proposes to allow them to exercise their right to appeal only after they deposit equal to or more than 25% of the penalty amount. Considering that the CCI’s penalties mostly run in millions of rupees, requiring penalized companies to deposit such large amounts without letting them exhaust the due process of law may not go down very well with the stakeholders.

7. Establishment of Governing Board – In the light of the recent judgment of the Delhi High Court in respect of the CCI’s administrative and decision-making powers and its composition, the Bill proposes to make structural changes to the current framework of the CCI by introducing a “Governing Board’’. The Bill proposes to segregate the CCI’s administrative and rulemaking powers from the adjudicatory powers and former powers to vest in the Governing Board.

8. Green channel process- The Bill grants statutory recognition to the CCI’s ‘green channel’ process by providing that the Central Government (in consultation with the CCI) can in the public interest specify a deemed approval process for transactions which are not otherwise exempt from notification to the CCI. Such transactions can be notified in a separate prescribed form and the regular form of notice to the CCI need not be given. In line with the existing ‘green channel’ regime, this statutory provision will enable the CCI to approve non-contentious transactions. So far, the ‘green channel’ regime is applicable only to transactions involving no overlaps (horizontal, vertical or complementary) between the activities of the parties.

9. Derogation from the standstill requirement- The Bill also proposes that the Central Government (in consultation with the CCI) be permitted to prescribe certain criteria which would exempt certain combinations from the requirement to notify to the CCI or comply with the standstill obligations. This derogation from the requirement to notify to the CCI or comply with the standstill obligations, is envisaged as being applied only in exceptional circumstances, where waiting for approval or the expiration of the statutory merger review period is not feasible – instances where the target is undergoing insolvency proceedings, or has vital assets that would rapidly devalue while awaiting merger clearance.

10. Guidance on Issues – The Bill provides for a specific provision mandating the CCI to publish guidance on the Act or the rules and regulations framed thereunder. It specifically mandates the CCI to issue guidance on the appropriate amount of penalty for contraventions under the Act.

11. No change to the composition of the CCI- The CCI to comprise of a Chairperson and 6 other “whole time” Members to be appointed by the Central Government. The Central Government had earlier proposed to reduce the size of the Commission to three members. The Proposed amendment reinstates the original position and does not incorporate the requirement of a judicial member as per the Delhi High Court’s decision in the Mahindra Case.

12. Expanding powers of granting leniency- A welcome development in line with the jurisdictions like UK, US, Singapore and Brazil, where a party implicated in a cartel investigation makes a true and vital disclosure of another undisclosed cartel, the CCI is empowered to grant lesser penalty. Further, the Bill includes a provision where the CCI may allow a leniency applicant involved in a cartel to withdraw its application for lesser penalty. However, in case of a withdrawal the CCI is at liberty to use the evidence submitted by the applicant, subject to the admissibility of such evidence.

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