Cartelisation, predatory pricing and deliberate attempts to prevent market access by a group of companies could attract stringent punitive measures under a proposed anti-trust regime.
The Competition (Amendment) Bill, 2007, which was passed by the Lok Sabha on Thursday, has laid down strict norms for disclosures of mergers and acquisitions (M&As) to prevent corporations from building dominant market positions artificially.
In case, any agreement between companies results in a cartel, they might have to pay hefty financial penalties up to thrice the value of profits earned.
The bill, piloted by Corporate Affairs Minister P.C. Gupta, said the Competition Commission of India (CCI) would eventually replace the Monopolies and Restrictive Trade Commission (MRTPC). The Commission was established in 2003.
MRTPC would continue to deal with pending cases even two years after the establishment of CCI and would be dissolved thereafter. However, MRTPC would not entertain any new cases after the CCI is constituted.
The new law has sought to make M&A deals more transparent. Companies would have to inform the CCI about the deal within 30 days or face penalties.
The CCI will be an expert body, which would function as a market regulator to prevent and regulate anti-competitive practices in the country. It would also have advisory and advocacy functions in its role as a regulator.
The Bill has also sought to establish a three-member quasi-judicial Competition Appellate Tribunal (CAT) that would be headed by a person who is or has been a judge of the Supreme Court or the chief justice of a high court.
The CCI will exercise its powers through various benches, including those designated for mergers.
The Competition Act was enacted in 2002 keeping in the wake of economic developments that resulted in the opening up of the Indian economy, removal of controls and consequent economic liberalisation. This required that the economy allowed competition in the market from within and outside the country.
The CCI was established in 2003 but could not be made functional due to a writ petition before the Supreme Court. The Supreme Court held that if an expert body is to be created by the government, it might be appropriate to create two separate bodies — one with expertise for advisory and regulatory functions (CCI) and the other for adjudicatory functions (CAT) — based on the doctrine of separation of powers as enshrined in the Constitution.