.png)
This post, the Winning Entry of the 4th RFMLR Freshers' Article Writing Competition, 2023, is authored by Gautam Taneja and Natasha Mittal, first-year students of B.A. LL.B. (Hons.) at Rajiv Gandhi National University of Law, Punjab.
Introduction and Overview
The long-awaited revision to the Competition Act of 2002 finally received President’s assent and got notified in the Official Gazette of India on 11th April, 2023. The Act was passed through a voice vote and with hardly any deliberations or discussion upon it. The recent Competition (Amendment) Act, 2023 brings significant modifications to the already existing legal framework. The amendment was made with the primary objective of bringing the existing regulations in line with changing business and economic realities, expedite and streamline the administrative process, and hence creating a level-playing field. Among the various modifications some significant modifications are as follows –
· Incorporation of a new deal value threshold and establishment of new timeframe for certain processes.
· Now extensive investigative powers have been bestowed to the Competition Commission of India (“CCI”) which in turn lends more teeth to the authority in further implementing the regulatory landscape.
· Settlement and Commitment mechanisms for inquires based on anti-competitive agreements have also been added. This is similar to the settlement method which was implemented by European Commission anti-trust regulation in Europe.
While the 2002 legislation meets the bulk of its goal, there are certain areas which required a revamp, and this is where the recent amendment comes in.
Addressing the Gaps
The Competition Act of 2002, a natural successor to the erstwhile The Monopolistic and Restrictive Trade Practices (MRTP Act) which serves as an economic cornerstone in the history of country’s legislation principally aiming at preventing anti-competitive practices and fostering healthy competition in the interest of consumers. It establishes a business-conducive environment with the help of a regulatory and autonomous authority, CCI which helps in the enforcement of anti-cartelization, competition advocacy, competitive pricing, and regulation of combinations. But given the convoluted relationship between competition law and a fast-changing market, law can become obsolete if it is not abreast with the new age problems in the changing business milieu. The 2002 Act presented itself with several ambiguities and loopholes in respect to India’s competition which resulted in delayed resolution of proceedings and compiling of cases. There is a delineation from traditional concepts of “monopoly” and “market”, due to lack of requisites in the aforementioned act. Often there is overlapping of jurisdictions due to unilateral attempt by the regulating authorities like CCI or Telecom Regulatory Authority of India (“TRAI”) due to conflict between section 60 of the act which contains a non-obstante clause and section 62 which provides for the harmony with other statutes. There is also inadequate proportionality in respect to imposition of penalties as it may not accurately reflect the accrued economic gains through anti-competitive practices and hence, undermining the efficacy of the enforcement mechanism. Lack of clarity in regards to Director General’s (“DG”) autonomy and investigative powers has also prompted inconsistencies in the legal proceedings due to lack of structured initiation procedures. The recent amendment eliminated majority of the aforementioned problems and served towards streamlining legal proceedings and competition regulation, hence fostering a business-friendly environment. Due to introduction of settlement and commitment provision there would be speedy resolution of cases and strengthening of penalty provisions would act as a formidable deterrent against anti-competitive behaviour. The aforementioned Act also enhances the overall enforcement mechanism along with clearing the ambiguity in regards to the regulatory role of DG. Hence, the aforementioned changes brought in by the amendments will have several legal and business implications, especially pertaining to the broadened scope of anti-competitive agreements and cartels.
Broadened Scope & Regulatory Challenges
The amended Act brings in an intriguing tableau of legal implications, notably now transactions involving mergers or acquisitions which surpasses the threshold of INR 2000 crores and the entities having substantial business operations in India are to be notified to CCI. While such an amendment brings in more power and control to CCI to check anti-competitive agreements, but at the same time some critical questions arise, such as what would the scope of such business operation be or would it include the mergers in the digital arena? Furthermore, the amendment makes no mention of whether the deal value threshold would also apply to agreements which are signed but not concluded on the day of the notice. Hence, an enforcement gap could be seen in CCI’s ability as it doesn’t include the mergers of those big-data companies which have a threshold of under INR 2000 crores but have considerable influence in the digital hub. In the acquisition of Freecharge by Axis Bank, the monetary valuation of the transaction fell below the prescribed threshold at the pertinent time, while both entities possessed a considerable market share with respect to digital data and customer base. The amendment also extends its crescendo to the realm of cartel regulations, by encompassing “hub and Spoke” arrangement of cartels and now, a non-competing entity could also face CCI scrutiny in-case a participation in being made in furtherance of a horizontal agreement. In past events as well, CCI has been penalizing such parties, but now, this modification formalizes the legal stance. Now, in order to not be declared culpable, any company working in tandem with a cartel will be required to separate themselves from such cartels or report about such cartel to CCI to reduce or even totally waive off their penalty. In the realm of antitrust enforcement, a noteworthy change has been made in section 3(3). The scope of section has been expanded to not just direct competitors but even facilitators or hub who may not be participants or even in same line of business. The implication lies in the establishment of Mens Rea to participate in such agreement. This marks a significant departure as it puts onus on proving intention in cartel investigation, an aspect which until now was circumvented due to the civil nature of cartel offences. Thus, the crux of the matter lies in questioning if cartel offences are dealt under civil law, then how inclusion of Mens rea could be deemed acceptable?
The bill has put forward better lucidity and precision pertaining to scrutinised transactions and the business implications associated with it. Widening the ambit of section 3(4) would now include all kinds of business agreements whose scope is not limited to vertical or horizontal agreements or between enterprises or individuals. Hence, it would be assailable to the scrutiny of appreciable adverse effect on competition (AAEC). This might result in the review of business practices and aligning the existing agreements to the amendments such as withdrawal of clauses like non-compete or parity and most favoured nation (MFN). As under the new amendment the presumption of AAEC has been extended to the facilitator as well as hub-and-spoke cartels, commercial entities and intermediaries might need to remain cautious and ensure clarity in communication due to the ambiguity of application of preponderance of probability. They might also be subjected to greater scrutiny as it is unclear if hubs would be qualified to fall for leniency as it not under the purview of settlement and commitment provisions under the new bill. To contrast it, the EU's competition law framework, particularly under Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and Merger Control (Regulation (EC) No 139/2004) was effective in the settlement provision introduced, as given in the case of Commission v. Alrosa Co. Ltd and promoted innovation, compliance and risk mitigation in business planning and consumer welfare. Avaantika Kakkar, Partner at Cyril Amarchand Mangaldas said, “consideration of total turnover for penalty may lead to ‘unfair and punitive’ outcomes” as enterprises based on their expanse of production would be penalised differently. The increase in number of parties in an agreement due to inclusion of “intention” of hub and spoke cartel would further increase subjectivity or discretion by the concerned authorities. Due to the expansion of scope of definition of “relevant product market” there is now inclusion of all those products and services which are interchangeable or substitutable in nature, resulting in consideration of supplier’s perspective with respect to dynamic market conditions, hence promoting fair competition. But overall there would be promotion of competition advocacy agreements and fostering of more anti-competitive business practices.
Recommendations & Way Forward
To address the critical gaps in the amendment and increase its efficacy, such as in leniency mechanisms, it is imperative that the inclusion of hubs be involved in the cartel activities of the settlement and commitment provisions. For resolving cross-border anti-competitive practices, there could be strengthening of collaborations and data-sharing with international competition authorities. To expand the scope of competition advocacy, section 49(1) of the amendment can be mandated to include competition law reviews from Central and State Governments and make reference to CCI in their policy standpoints.
In summary, the recent amendment is a step in the right direction to modernize the law and to ensure it accelerates the building of the Indian economy in a manner which is competitive and at the same times ensures that businesses have clarity on how to comply with the law and there is predictability with respect to the enforcement of the provision. But at the same time, there are some potholes and it is imperative for the government to fill them up with adequate explanation and further legislation to make sure the act achieves its true potential. As aptly put in United States v. Topco Associates Inc., “Antitrust laws are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.” This underscores the importance of antitrust and competition regulation in flourishing free-market economy.
Comments