The government proposes a number of amendments to the competition law

The government has proposed a number of amendments to Competition Law on Friday, including the introduction of a settlement system, shortening the time limit for association approval, and providing incentives for parties to disclose information in cartel investigations.

Competition (Amendment) Act 2022, introduced in Lok Sabhaand also proposed provisions for using “transaction value” as a criterion for notification of mergers Competition Commission of India (TPP). These amendments are aimed at catching up with the business models of new generation companies, as well as expanding the scope of anti-competitive agreements and granting merger approvals in a timely manner.

These changes are based on recommendations from the Competition Law Review Committee, which has been set up by the government to study changes that need to be made to the law.

“Over the past decade, there has been significant growth in Indian markets and a paradigm shift in the way businesses operate,” Union Finance and Corporate Affairs Minister Nirmala Sitharaman said in a statement on the goals of the bill. “After reviewing the recommendations proposed by the committee, consulting with the public, and in order to ensure regulatory certainty and a trusting business environment, it is considered necessary to amend said law.”

Until now, corporate transactions such as mergers and acquisitions were only required to be notified to the Chamber of Commerce and Industry if the parties involved in the transaction had assets or turnover above a certain threshold. In particular, if the assets of the company exceeded Rs 2,000 crores or if the company’s turnover exceeded Rs 6,000 crores, CCI approval was required.

Now the government has introduced an additional criterion – the cost of the transaction. If the total value of the transaction exceeds Rs 2,000 crore, the antitrust regulator will need to be notified. This change aims to bring e-commerce and startup under the rules. Until now, such transactions have not been required to be notified, as companies in the sectors usually have light assets, below the set minimum threshold.

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“This change is ostensibly being introduced to handle certain types of transactions, such as transactions in digital markets, that may not require notification under the existing jurisdictional threshold,” said Vaibhav Chouske, partner at JSA Associates. “These transactions are currently evading scrutiny because the CCI does not have residual jurisdiction to evaluate non-noticeable transactions, even if their potential competitive harm is clear.”

Other amendments include a three-year statute of limitations for reporting anti-competitive agreements and abuse of dominance to the Chamber of Commerce and Industry, changes to the definitions of certain terms such as “undertaking”, “relevant product market”, “group” and “control”. ‘ for clarity.

The government also plans to introduce a “settlement and commitment system to reduce litigation” and incentivize parties in the ongoing cartel investigation in terms of lesser penalties for disclosing information about other cartels.

“The introduction of settlement rules will allow the Chamber of Commerce and Industry to deal effectively with competition cases in a timely manner and effectively, without getting involved in lengthy litigation,” said Sameer Gandhi, head of antitrust practice at AZB Partners. “However, cases of cartels are excluded from the scope of settlement, as they have a significant negative impact on the competitive market.”

Currently, if the CCI initiates an investigation, it is followed by a commission order.

Among other amendments, the government proposed the appointment of a director general of the Chamber of Commerce and Industry with the prior approval of the central government and the issuance of guidelines, including fines imposed by the commission.

The bill also proposes to reduce the time for approval of CCI associations to 150 days from the current 210 days. In addition, the Chamber of Commerce and Industry will have to form a prima facie opinion on the transaction within 20 days for speedy approval. A provision for settling cases under the Competition Act was also proposed.

The government has also introduced stricter penalty provisions, increasing the fine to Rs 3 crore and three years in prison or both if either party violates orders issued by the National Companies Court. The Tribunal is currently considering competition appeals.

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