Competition means a situation or circumstance where the person does the same activity which the other persons do and this affects the profit or activity of the other. The person should plan accordingly to sustain in the market. Competition law is a body of legislation intended to prevent market misrepresentation caused by anti competitive practice. Anti competitive practices are those which prevent competition in the market. The effect is on the consumer, these anti competitive practices lead to the increase in the price of the product in the market involving output- restricting or price fixing cartels. In general there are 4 major types of competition: perfect, monopolistic, oligopoly and monopoly competition. Perfect competitions are those which sell similar products and the market share doesn’t affect the price of the product. Companies cannot determine the price. Monopolistic are those where the companies offer products that are similar but not identical, they have different pricing systems and marketing strategies. In monopoly competition it lacks competition and there is no close substitute. The oligopoly market is dominated by a small number of suppliers.
COMPETITION ACT 2002:
The competition act aims to protect or defend the consumer interest from anti – competitive behavior, safeguard the customer’s interest and guarantee other market participants freedom of trade. The Monopolies and Restrictive Trade Practices Act was replaced by the Competition Act, 2002. The main reason for passing this act or legislation is to make sure that the market operates as intended and the customer has a broader variety of goods at reasonable cost.
The main object of this act is to prevent practice which is of adverse effect; to promote and sustain competition in markets; to protect the interest of consumers and to endure freedom of trade. There was a bill proposed in the year 2022 and later in 2023 few provisions were altered as per the standing committee report. This 2023 amendment has focused on speedy procedure, hefty fines and limitation of powers on part of the Director General.
On February 8th 2023, the Central Government introduced the Competition (Amendment) Bill, 2023 in the Lok Sabha. There were certain amendments which were proposed in the lower house.
- Anti – trust provisions:
Anti – trust provision protects unlawful merger and business practice, abuse of dominant position and so on. There were certain changes made to the anti – trust provisions.
- a) Penalty to be imposed on “global turnover”:
Ø Global Turnover means the turnover derived from all products and services by a person or an enterprise or business. And a provision for penalty on “Global turnover” was added. The term “Relevant Turnover” means turnover of certain produce that form the subject matter of contravention of the act or provision. The new amendment imposed a penalty upon the contravening party based on their global turnover rather than relevant turnover.
Ø Comment: The Government imposed a penalty on the basis of global turnover from all products and services by the violating enterprise. This amendment will result in a much higher penalty for those enterprises that violate law. For a small enterprise this could be a hefty price in case of violation of the law.
- b) Intention to participate will amount of Cartelisation:
Ø The term Cartel means an associate of sellers, distributors, traders, producers and those who provide service by agreement among themselves, limit, control the production, distribution, sale or price of the product or service. According to Competition Act, those who have participated in the cartel will be held liable for a penalty up to 10% of their income for each year of the continuance of the cartel.
Ø Comment: In the 2022 bill there was a proposal to include the Hybrid anti – competitive agreements like hubs and spoke cartel who assisted or helped to create the cartel. But in the 2023 amendment, it further included non participants. It is stated that those who have intended to participate in the cartel will also be held liable under the Competition Act. The new amendment has also introduced the concept of mens rea. This amendment causes a fear in the mind of the people who think or who intend to be a part of the cartel. This will help to keep a check on the illegal practice or cartel which affects the consumers.
- c) Compensation claim to be allowed in settlement cases:
Ø The section 29 of the Competition Act states that the Director General will submit a report to the commission. In the 2022 bill, it has suggested a mechanism for settlement. This enables the parties to propose settlement to CCI in anti – trust cases. Generally a settlement will be done by the Director General but in this proposal it is stated that the proposal could be filed by the party itself before the CCI issues the final decision i.e. settlement. In the 2023 bill it was included that even the settlement cases could propose compensation claims. This applied to settlement cases as well.
Ø Comment: This concept of compensation claim by the party himself aims at admission of guilt by the person who has indulged in unlawful practice. The party will be held liable for penalty as well as compensation claim.
- Merger Control provisions:
Merger control is a procedure of reviewing merger and acquisition under competition law and the purpose of merger control is to prevent merger which causes anti – competitive practice or causing dominant position.
- a) Target to be considered for local nexus test under “deal value” threshold:
Ø The term deal value threshold means the value for which the merger or acquisition is made.
- If the Deal Value Threshold is more than INR 2,000 crore (245 USD) should be informed to the CCI
- If either of the party has substantial business operation in India
Ø Comment: In case the Deal Value Threshold is more than 2,000 crore then they have to notify the CCI (Competition Commission of India). For evaluating “substantial business operation in India” the enterprise will be the target enterprise. This states that regardless of the presence of the purchaser. This provision will be a check in case the unlawful transaction or in case unethical merger or acquisition takes place. This will ensure that transactions that would cause adverse effects on competition among the other business entities.
- b) Procedural timeline:
Ø Under the procedure for investigation of combination, there is a certain time line in conducting investigation of combination. Changes in formation of
- Prima facie view, the time period has been reduced to 30 calendar days before it was 30 working days.
- Formation of final view, (approving, modifying, disapproving transaction) from 210 calendar days to 150 calendar days.
Ø Comment: This reduction in the number of days in the final view and the increase in the number of days in prima facie view will ensure speedy approvals if they find any adverse competition. This reduces the burden on the CCI by disposal of cases. If the prima facie stage is completed soon, it will proceed to the next stage. The reduction in the final view stage to 150 calendar days could help to tackle complex merger control cases.
- Miscellaneous provision:
- a) Limitation regarding the power of the Director General:
Ø The Director General can examine the in – house legal advisors who are employed by the enterprise. But they could examine the bankers, auditors of an enterprise. They could not examine legal advisors who are employed by the parties of the investigation.
The amendment bill of 2022 which was proposed by the standing committee consists of various aspects which need to be changed. But this 2023 amendment bill has made only few changes many were not taken into consideration. In 2022 amendment bill there they suggested for codification of Standard for control in Indian Competition Law, changes in the framework for settlement and commitment (S&C), requirement of a judicial member, IPR as a defense of abuse of dominant position and effect based test. Certain issues were only addressed and only few provisions were amended. Certain issues such as the mandatory pre – deposit of 25% penalty amount with the appellate tribunal, power regarding the autonomy in investigation were not regarded in this amendment. Even Though, these issues were not addressed or not regarded the new amendments will pave way for healthy competition in the society as well as speedy procedural aspect.