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The guest post* is authored by CS Jinal Jain, associate at Fox Mandal & Associates and assisted by Shivi Agarwal, Senior Editor, RFMLR
1. INTRODUCTION
In India, competition law is evolving to address the country's growing and complex market dynamics. The Competition Act, 2002, enforced by the Competition Commission of India (“CCI”), serves as the framework for regulating anti-competitive practices, mergers, and acquisitions. Over the past few years, there have been several emerging trends, amendments and developments in the competition law landscape that are shaping India's approach to ensuring fair competition. In the present article, the author has tried to elucidate the recent trends in the competition and highlighted their impact on the market.
2. IMPACT OF COMPETITION LAW ON MARKET CONDITIONS
Competition law has a significant impact on market conditions and stock exchanges, shaping the dynamics of businesses and market participants. Firstly, it promotes market efficiency by curbing anti-competitive practices such as cartels and monopolies, ensuring a level playing field that fosters innovation, reduces prices, and improves product quality, ultimately benefiting consumers. Secondly, the enforcement of competition laws safeguards consumer welfare by preventing harmful practices like predatory pricing and price-fixing, leading to better choices, lower prices, and increased consumer confidence, which creates a stable and predictable environment, attracting both domestic and foreign investors. Thirdly, competition law can impact stock prices, as companies penalized for anti-competitive behavior may experience a decline, whereas those that comply with competition laws can enhance their reputation and potentially see an increase in stock value. Additionally, it enhances corporate governance and transparency, boosting investor confidence and stock performance. Lastly, by reducing entry barriers and promoting market dynamism, competition law encourages smaller players, improves market structure, and prevents market manipulation, ensuring price transparency and market efficiency, which benefits long-term market growth and fosters a healthier stock exchange environment.
Source: OECD Competition Trends 2024
Here are some recent instances of CCI Approvals including domestic companies and MNCs:
CCI approval on December 20, 2024 for UltraTech Cement Limited’s acquisition of a 32.72% stake in The India Cements Limited from its promoters, along with up to 26% through an open offer.
CCI approval on December 17, 2024 for Ramon Investments Pte. Ltd. (Acquirer), a subsidiary of Temasek Holdings (headquartered in Singapore), authorizing to acquire a certain stake in Speed JVco S.à r.l. (Target), a company providing visa outsourcing and related travel services.
In Press Release No. 82/2024-25, CCI approved BREP Asia III India Holding Co VIII Pte. Ltd. (Acquirer), an affiliate of Blackstone Inc., to acquire a certain stake in Bagmane Developers Private Limited and Bagmane Rio Private Limited (Target Entities), which are involved in commercial real estate development and hospitality.
In Press Release No. 81/2024-25, CCI approved the acquisition of 100% share capital of thyssenkrupp Electrical Steel India Private Limited (thyssenkrupp India) by Jsquare Electrical Steel Nashik Private Limited (Jsquare), a wholly owned subsidiary of JSW JFE Electrical Steel Private Limited, which is a joint venture between JSW Steel and JFE Steel Corporation.
3. EMERGING TRENDS IN ANTITRUST ARENA
There are various new regulations brought in the competition law to deal with the recent growing technological advancements and their dynamic impact on the market ecosystem. Their regulations aim to ensure a fair and competitive marketplace for all. The key trends of Competition Law are outlined in this section.
1. The CCI has now been increasingly focused on regulating the digital economy, particularly scrutinizing large tech companies like Google, Amazon, and Facebook. Concerns over unfair business practices, algorithmic pricing, data collection, and market dominance have raised the need for adapting competition laws. Additionally, the e-commerce sector faces scrutiny over preferential treatment, pricing practices, and exclusive agreements between platforms and sellers. Further, with evolving data protection regulations under the Personal Data Protection Bill (PDPB), there is growing concern about the use of data by dominant firms, requiring adjustments to competition laws to address potential data monopolies.
2. To safeguard the competition, CCI has heightened scrutiny of mergers and acquisitions (M&As), particularly in telecom, media, technology, and pharmaceuticals. It has revised merger notification thresholds to include smaller transactions with potential anti-competitive effects. The CCI also investigates anti-competitive practices like price-fixing and abuse of dominance, especially in the pharmaceutical sector, to ensure fair pricing and availability of medicines.
3. The CCI is increasingly favouring behavioural remedies over structural ones in cases of anti-competitive conduct. These remedies can involve changes in business practices, data access, or non-discriminatory pricing. In rare instances, such as in the telecom sector, the CCI has considered structural remedies like divestitures to prevent market concentration, as seen in the Vodafone-Idea merger.
4. Also, India’s competition regime is evolving to balance competition with public welfare. The CCI is increasingly considering the social and economic impacts of its decisions, particularly in sectors like healthcare, agriculture, and telecommunications. The focus is on promoting consumer welfare, ensuring access to essential services, and addressing concerns in sectors critical to national development.
5. The CCI has been actively investigating and penalizing cartels, particularly in sectors such as cement, pharmaceuticals, and construction, where price-fixing, market allocation, and collusion are prevalent. The Indian government is also focusing on the link between cartels and corruption, tightening regulations to prevent both anti-competitive and corrupt practices, particularly in public procurement and infrastructure development. India’s competition law regime is aligning with international standards, fostering greater cooperation between the CCI and global regulators. India actively participates in global organizations like the International Competition Network (“ICN”) and Organisation for Economic Co-operation and Development (“OECD”), collaborating with authorities with developed competition regimes, and other regions on cross-border competition issues.
6. while sustainability has not been a central focus of the Competition Act, there is growing awareness of the relationship between competition and environmental policies. Future challenges may include addressing anti-competitive practices under the guise of sustainability goals, especially in environmental cartels.
4. THE COMPETITION (AMENDMENT) ACT, 2023: RESHAPING INDIA'S ANTITRUST LANDSCAPE
The Competition (Amendment) Act, 2023, strengthens India's competition law by enhancing enforcement, increasing penalties for non-compliance, and improving merger and acquisition regulations, particularly targeting global giants like Google and Amazon. The following are the key changes introduced by the 2023 Amendment:
a) The Competition (Amendment) Act, 2023, strengthens India’s competition law framework with significant reforms. The transaction value threshold for merger scrutiny is expanded to Rs 2,000 crores, including both direct and indirect deal values.
b) Penalties for non-furnishing of information on combination have been increased, with fines up to 1% of the higher of assets, turnover, or deal value and the procedural timeline for CCI to pass an order on combinations has been condensed to 150 days, with flexibility for case-specific durations.
c) The definition of "control" is expanded to include the ability to exercise "material influence" over important and strategic commercial decisions of its enterprise.
d) Hub and spoke cartels are now included under anti-competitive agreements, even if businesses are not directly involved in similar industries.
e) A settlement and commitment framework is introduced, allowing businesses to resolve cases faster by submitting an application for settlement with the prescribed fees, and several offenses are decriminalized, replacing criminal fines with civil penalties, including failure to comply with CCI orders. Additionally, a three-year limitation period is introduced for filing cases, with provisions for condonation of delays in specific circumstances.
f) The amendment also provides for penalties for anti-competitive behaviour can now be imposed on all parties to such agreement with the penalties based on global turnover, aligning India’s competition laws with international standards.
5. NAVIGATING THE HURDLES: CHALLENGES IN IMPLEMENTING THE RECENT AMENDMENTS
The Competition Act's recent amendments and the introduction of new penalty guidelines mark a significant shift in India’s antitrust landscape. These updates impact penalty calculations, mergers and acquisitions, and enforcement mechanisms, introducing complexities for both regulators and corporations. In this section, the author has attempted to discuss certain challenges that the CCI may encounter while implementing the recent amendments and emphasizes the need for addressing these issues to ensure the smooth enforcement of the regulations and the effective realization of the amendment's objectives.
Firstly, The CCI (Determination of Monetary Penalty) Guidelines, 2024 bring important updates to penalty imposition. A major change is replacing 'relevant turnover' with 'global turnover' for penalty calculations, which could lead to higher fines, especially for multinational corporations and the guidelines. Additionally, By way of these guidelines, the interpretation given by the court in the case of Excel Crop Care Ltd v. CCI has been overturned which held that ‘turnover’ u/s 27(b) is to be read as relevant turnover, thereby now applying penalties based on global revenues instead of relevant turnover. The new penalty guidelines raise concerns about fairness and proportionality, as global conglomerates may face disproportionately harsh penalties despite the possibility that its legal actions have caused less harm than some organizations that do not have a global presence. Additionally, the reliance on global turnover risks dual penalties, leading to double jeopardy in cases where multiple jurisdictions impose fines for the same offense. While the guidelines suggest using global turnover only when relevant turnover computation is unfeasible or deterrence is insufficient, practical challenges in imposing and collecting monetary penalties still persist.
Secondly, the recent amendments to the Competition Act, including the introduction of the Deal Value Threshold (DVT) and an expanded definition of material influence, will significantly affect mergers and acquisitions in India. These changes will require more transactions to be notified to the CCI, potentially increasing scrutiny, costs, and timelines. These changes will now significantly impact the digital and technology sector that have minimal assets but significant data and market power. Henceforth, all the transaction that were exempted due to de minimis exemption route for being asset-light or low turnover, but were apparently anti-competitive will now be scrutinized by the current laws
Lastly, the CCI is already faced ongoing staffing shortages, operating at only about 67% of its sanctioned capacity. This has resulted in significant delays, especially in high-profile cases involving global tech companies like Google and Apple. Additionally, the CCI's lack of enforcement powers, coupled with a staffing gap and a backlog of cases, hampers its ability to ensure timely compliance and effectively enforce competition laws in India. To address these challenges, there is an urgent need for the CCI to strengthen its staffing, enhance its enforcement capabilities, and streamline its processes to ensure timely and efficient implementation of competition laws.
6. WAY FORWARD
In conclusion, while the recent amendments to India's competition law aims to enhance regulation and enforcement, some challenges such as staffing shortages, delays, and complexities in penalties remains. A holistic approach to resource allocation, clearer guidelines, and stronger enforcement mechanisms, including measures to address delays in penalty collection and payment, are crucial. These actions will enable the CCI to uphold fair competition, promote sustainability, and strengthen India's growing global economic presence.
*The views expressed by the author are personal and not linked to her affiliation.
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