It will be the first time since the enforcement of the Competition Act in 2009 that amendment will be made to the Act
Lok Sabha on Wednesday passed the Competition Amendment Bill, 2022, more than seven months after it was introduced in the Lower House in August last year. The bill provides for the Competition Commission of India (CCI) to impose penalties on entities based on their global turnover instead of the current practice of considering only relevant market turnover.
Amid din in the Lower House, Corporate Affairs and Finance Minister Nirmala Sitharaman moved the bill for consideration and passage. The bill was passed without a debate. The corporate affairs ministry has made certain amendments to the original bill. One of the changes is with respect to the turnover that will be considered for the imposition of penalty in case of competition law violations.
"... turnover means global turnover derived from all products and services by a person or an enterprise," as per the amendments that were approved by the Lok Sabha on Wednesday. Another amendment is that the CCI has to form a prima-facie opinion about a filing related to a combination within 30 days of receiving the filing.
Currently, the regulator can form a prima-facie opinion within 30 days working days of receiving a combination filing. In competition law parlance, combinations refer to mergers and acquisitions, and deals beyond a certain threshold require the approval of CCI.
Avaantika Kakkar, Partner & head – Competition at law firm Cyril Amarchand Mangaldas, said that in terms of merger control, the bill has introduced a deal value threshold, which will enable the CCI to review transactions depending upon the value of a transaction alone, provided that the target enterprise has 'substantial business operations in India.
However, she noted that some of the more debatable aspects of the bill include the imposition of enforcement penalties basis the global turnover of an entity, implying that the total turnover from all products and services globally, will be considered instead of the previously used methodology of considering only the relevant Indian turnover. From a business point of view, she said, the consideration of total turnover may lead to 'unfair and punitive' outcomes and would also lead to discrimination between enterprises who commit a similar contravention but are penalised differently depending on the expanse of their business.
"Further, an intention to actively participate has been introduced for assessing hub and spoke cartels. Such an inclusion not only increases the number of parties that can be included in a hub and spoke cartel investigation, but also increases the level of subjectivity and discretion of the investigating authority," Kakkar noted. The Competition (Amendment) Bill, 2022, was introduced in Parliament on August 5 last year. Then, it was referred to the Parliamentary Standing Committee on Finance chaired by BJP member Jayant Sinha.
The panel tabled its report in Parliament on December 13. It will be the first time since the enforcement of the Competition Act in 2009 that amendment will be made to the Act. The Act was brought in 2002 and subsequently, it underwent amendments in 2007 and 2009. In May 2009, the anti-trust provisions of the law came into force and two years later in May 2011, CCI started screening mergers and acquisitions.