Both the Houses of the Indian Parliament, i.e. the Lower House (Lok Sabha) and the Upper House (Rajya Sabha), passed the Competition (Amendment) Bill, 2023 (‘Bill’) that proposes significant changes to the Competition Act, 2002 (‘Act’).

Set out below is: (i) a summary of the key amendments to the Act; and (ii) the impact of the key amendments and next steps for passage of the Bill.

A.     Summary of Key Amendments Proposed:

Merger Control

• Introduction of Deal Value Threshold: The Bill requires notification of transactions that exceed a global deal value of INR 2000 crores (approx. USD 251.74 million), subject to the target having “substantial business operations” in India. Some key facts are as follows:

1. This is an additional threshold added as part of the existing jurisdictional thresholds;
2. The applicability of the threshold will not be affected by the target or de minimis exemption. In other words, even if the de minimis exemption is available, a transaction may be notifiable to the Competition Commission of India (‘CCI’) if the deal value thresholds are met;
3. The CCI will issue regulations to determine the scope of ‘substantial business operations’;
4. The deal value will include every valuable consideration (direct or indirect or deferred); and
5. This threshold will apply across sectors and is not limited to digital markets.

• Shorter Merger Review Timelines:
  

1. The Bill proposes to shorten the review timeline from the current 210 (two hundred and ten) days (from the date of notification) to 150 (one hundred and fifty) days;
2. Under the Bill, the CCI is required to form its preliminary view on a transaction within 30 (thirty) calendar days (as opposed to the current timeline of 30 (thirty) working days); and
3. If the CCI does not issue an order within these timelines, the combination will be deemed approved.

• New Threshold of Control:
  

1. The Bill formalizes a lower threshold of ‘control’, i.e., the ability to exercise material influence, in any manner, over the management or affairs or strategic commercial decisions; and
2. The CCI in its decisional practice has considered material influence to include factors such as shareholding, special rights, status and expertise of a person, board representation or commercial / financial arrangements.

• Derogation from Standstill Obligations for Stock Market Purchases:

1. The Bill proposes to exempt combinations from the standstill obligations under Section 6(2A) of the Act, if the combinations involve: (a) an open offer; or (b) an acquisition of shares or securities, through a series of transactions on a regulated stock exchange; and
2. The acquirer, in the above cases, would be allowed to acquire shares but cannot exercise any ownership or beneficial rights or voting rights or receive dividends / any other distributions, till the CCI approves such acquisition. This amendment enables time-sensitive on-market stock purchases while fulfilling the notification requirements to the CCI.

• Increase in Penalty for False Statement or Omission: The Bill increases the maximum penalty for making false statement or omission to submit material information from INR 1 crore (approx. USD 122,000) to INR 5 crores (approx. USD 608,000).

Antitrust

• Introduction of Commitments and Settlements:

1. In probably the most significant amendment, the Bill introduces provisions allowing parties to offer settlements and voluntarily undertake certain commitments;
2. Commitments can be offered at any time after an investigation has been initiated but before the investigation report is issued. Settlements can be offered after the investigation report is issued, but before the CCI issues its final decision. Commitments or settlements can be offered for both anti-competitive vertical agreements and abuse of dominant position, but not cartels;
3. While considering the applications for settlements / commitments (the Bill prescribes a fee to submit these applications), CCI will have to provide an opportunity to the concerned parties, the Director General (‘DG’), and to other third parties to submit their objections or suggestions. The CCI’s decision on settlements / commitments will not be appealable;
4. The Bill proposes to allow compensation claims in settlement cases, i.e., implied admission of guilt by a settlement applicant; and
5. The introduction of these amendments could potentially save parties the time, effort and legal costs involved in lengthy litigation processes.

• Computation of Penalty on Global Turnover: The Bill clarifies that the monetary penalty for anti-competitive conduct will be computed on the global turnover of the contravening parties (as opposed to ‘relevant turnover’ from the infringing product, mandated by the Supreme Court). The Bill increases the penalty exposure for global conglomerates contravening the provisions of the Act.
• Expansion of Scope of Cartels: The Bill expands the scope of cartels to include ‘hub and spoke’ arrangements implemented by entities involved at different levels of the value chain. The Bill allows CCI to proceed against any entity which participates or intends to participate in facilitating a horizontal agreement or cartel, in whatever capacity (i.e., non-competing entities).
• Inclusion of Limitation Period: The Bill introduces a limitation period of 3 (three) years (from the date on which cause of action arose) to file a complaint with the CCI. However, CCI is empowered to condone delays.
• Expansion of DG’s Powers: The Bill allows the DG to retain documents, information, books, papers, etc. requisitioned by the DG during the investigation for up to 360 (three hundred and sixty) days. Apart from summoning and examining officers, employees, etc. of a company under investigation on oath, the Bill allows the DG to examine ‘agents’ on oath. The Bill proposes that the term ‘agents’ includes bankers, and only those auditors and legal advisors employed by a company under investigation.
• Expanding Powers of Granting Leniency: A welcome development in line with the jurisdictions like the United Kingdom, the United States of America, Singapore and Brazil, where a party implicated in a cartel investigation makes a true and vital disclosure of another undisclosed cartel, CCI is empowered to also grant an additional lesser penalty for the cartel already being investigated.
• Withdrawal of Leniency Application: The Bill allows a leniency applicant to withdraw its application. However, the DG / CCI may use the information in the withdrawn leniency application for the purposes of investigation, except the admissions of the leniency applicant.
• Provision to Avoid Multiple Proceedings: The Bill allows the CCI to reject any complaint, if the same is based on same/similar facts and issues addressed in a previous order issued by the CCI.
• Provision to Call Experts: The Bill allows parties to call upon experts in the field of economics, commerce, international trade, or any other discipline to provide their opinion before CCI.

Others

• Appointment of DG: The Bill empowers the CCI to appoint the DG with a prior approval from the Central Government (instead of the existing practice whereby the Central Government directly appoints the DG).
• 25% Pre-deposit of Penalty on Appeal: The Bill proposes a pre-deposit of 25% (twenty five percent) of the penalty imposed by the CCI in order to file an appeal before National Company Law Appellate Tribunal.
• Issuance of Guidelines: The Bill requires the CCI to publish guidelines regarding the appropriate amount of penalty to be levied for any contravention of the Act.
• Transparency in Making Regulations: The Bill requires the CCI to invite public comments before publishing regulations.

B. Impact of Proposed Amendement and Way Forward

The Bill seeks to further empower CCI to effectively regulate the Indian markets. These amendments are likely to have following impact:

• Increase in the number of transactions to be caught under merger control jurisdiction of the CCI, through (i) introduction of the deal value threshold; and (ii) dilution of the threshold for control;
• Widening the scope of the penalty provisions to include global turnover;
• Snowballing violations by widening the scope of instances where a person is liable to pay penalty and by increasing the quantum of maximum penalty for false statements;
• Shortening merger review timelines which may increase the number of information requests issued by the CCI, when reviewing a transaction and at most result in potential invalidations. This could also lead to the CCI requiring parties to undertake pre-filing consultation before the formal notification;
• Facilitating faster resolution of enforcement proceedings (through settlements and commitments); and
• Lowering the threshold of a cartel infringement to include ‘intention to participate’ in which a person will be liable to a penalty.

In terms of next steps, the Bill as passed by both Houses of the Parliament will be submitted to the President for her assent, following which it will be effected into law.