New Delhi: The Lok Sabha on Wednesday passed amendments to the competition law for stricter compliance, including by empowering the antitrust regulator to impose penalties on global turnovers of erring firms, a move that could open the doors for harsher punishments on entities like Big Tech firms.
The changes, proposed as part of the Competition (Amendment) Bill, 2022 that was cleared amid pandemonium in the House, also include expanding the scope of penalties to entities collaborating in cartelisation.
At present, the antitrust watchdog, the Competition Commission of India (CCI), cannot impose penalties on corporate entities based on their global turnover. Penalties are currently restricted to the company’s sales in the relevant market only, experts said.
The amendments also make compliance easy by allowing CCI to regulate mergers and acquisitions (M&A) based on the value of transactions with ₹2,000 crore threshold, if the target entity has substantial business operations in India. It also proposed that CCI would need to take a view within 30 days on the likelihood of a combination or M&A causing adverse effect on the competition.
The Bill was initially introduced on August 5, 2022 in the house. On August 16, it was referred to the parliamentary committee on finance. Based on the panel’s recommendations, which submitted its report in December, the government moved the bill on February 8 with some additional amendments.
{{/usCountry}}The Bill was initially introduced on August 5, 2022 in the house. On August 16, it was referred to the parliamentary committee on finance. Based on the panel’s recommendations, which submitted its report in December, the government moved the bill on February 8 with some additional amendments.
{{/usCountry}}Unnati Agrawal, partner at IndusLaw said the move is a “timely” and “laudatory” development to align the Competition Act in line with the changing economic and business reality in India and provide CCI with more teeth and flexibilities.
“Introduction of major amendments, such as, deal value thresholds will bring transactions involving ‘asset lite’ and ‘low revenue’ companies (which were previously not notifiable), under the CCI’s scrutiny,” she said. It will be interesting to see if the Rajya Sabha is also inclined to endorse the introduction of the highly contentious provisions, she said referring to provisions such as computation of penalty based on global turnover, which will result in higher penalties for global multi-product companies.
According to Avaantika Kakkar, partner and head – competition at law firm Cyril Amarchand Mangaldas, “India would now have a much-needed commitment and settlement regime which would be applicable to contraventions related to anti-competitive vertical restraints and abuse of dominance.”
“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,” she said.
Commenting on penalties based on global turnover of an entity, Kakkar said: “From a business’ point of view, 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,” she added.