Competition (Amendment) Act 2023: A Step Towards Promoting Competition in India

Pranav Vijay Sonar

Abstract

The Competition (Amendment) Bill 2023 was passed by the Indian Parliament on March 29, 2023. The bill amends the Competition Act, 2002, which was the primary law governing competition in India. The amendments aim to strengthen the Competition Commission of India (CCI) and make it more effective in preventing and punishing anti-competitive practices. It is too early to assess the impacts it has brought, as the act has been in development partially.

What led to the law

Before the liberalization of the Indian economy, the MTRP(Monopolies and Restrictive Trade Practices) Act, 1969, was in effect to regulate unfair trade practices and restrict the growth of monopolies. The competition act, 2002, was enacted to counter the challenges the Indian economy faced after liberalization by promoting competition in India and prohibiting anti-competitive agreements between firms. This Act was established to safeguard consumer interests and economic growth due to a healthy environment in the market. The Competition Commission of India (CCI) was established to regulate mergers and acquisitions. The commission has the power to inquire about matters of concern. 

Indian competition act is very similar to that of the United States and European Union. In the US, Sherman Act, 1890 is the federal antitrust law that deals with anti-competitive agreements and regularisation of monopolies in firms. Along with the Sherman Act, The Clayton Act of 1914 deals with business mergers and acquisitions. DOJ and FTC independently enforce these two acts. Whereas in European competition law, the European Council, entrusted by the European Commission, ensures compliance with the Treaty and the enforcement of policies.

There has been significant growth in Indian markets and a paradigm shift in the way businesses operate now than before. To tackle the new issues, the Government of India constituted Competition Law Review Committee(CLRC) in 2018. The CLRC was given the responsibility to examine the primary law and suggest modifications to it. The CLRC submitted its recommendations in 2019 and to provide regulatory certainty and a trust-based business environment, amendments to the law were mooted.

Key Objectives of the Competition (Amendment) Act

The Bill seeks to make several changes to the Competition Act, including:

  • Expanding the definition of anti-competitive agreements.
  • Increasing the penalties for anti-competitive behavior and for furnishing false information.
  • Reducing the time limit for the Competition Commission of India (CCI) to review mergers and acquisitions from 210 days to 150.
  •  Introducing a new framework for the settlement of competition cases.
  •  Imposing penalties on global turnover.
  •  Introduction of Deal Value as another criterion for notifying M&As.
  • Limitation Period of 3 years for filing Information(s)                    
  • Amendments to the previous act

The Competition (Amendment) Act, 2023 has partially come into force from May 18, 2023. For example, the CCI has recently issued new guidelines on the definition of anti-competitive agreements, settlements, and commitments. The new guidelines expand the definition of anti-competitive agreements to include agreements having a “significant adverse effect on competition” (SAEC). This means that even agreements that do not have a “dominant position” in the market can be considered anti-competitive if they have a SAEC.

The CCI has also increased the penalties for anti-competitive behavior. The maximum penalty for an anti-competitive agreement has been increased from 10% of the turnover of the offending parties to 20% of the turnover. The maximum penalty for abuse of the dominant position has been increased from 10% of the turnover of the offending party to 30% of the turnover.

Evaluating the Competition (Amendment) Act

It is too early to assess the performance of the Competition (Amendment) Act in terms of its application in businesses in India. However, the changes that have been made to the Competition Act are likely to help reduce the new challenges faced by industries and help ease doing business. The expansion of the definition of anti-competitive agreements and the increase in penalties for anti-competitive behavior will make it more difficult for businesses to engage in anti-competitive behavior. 

This will lead to a more competitive market environment, which will benefit consumers in the form of lower prices and better quality products and services. The reduction in the time limit for the CCI to review mergers and acquisitions will also help to promote competition. This is because it will make it more difficult for businesses to engage in mergers and acquisitions that would have an anti-competitive effect.

The Competition (Amendment) Act, 2023 is likely to have a significant impact on competition in India. The changes that have been made to the Competition Act will make it more difficult for businesses to engage in anti-competitive behavior and will help to promote competition in the market. This will benefit consumers in the form of lower prices and better quality products and services. The Bill is also likely to positively impact the Indian economy. A more competitive market environment will increase efficiency and productivity, which will boost economic growth in the country.

Emerging Issues

Several emerging issues will need to be addressed as the Competition (Amendment) Bill, 2023 is implemented. These include:

  •  The definition of “significant adverse effect on competition” (SAEC). The CCI will need to provide more guidance on interpreting this term.
  • The application of the new penalties for anti-competitive behavior. The CCI must determine how these penalties will be applied in practice.
  • The impact of the Bill on mergers and acquisitions. The CCI will need to assess how the reduction in the time limit for reviewing mergers and acquisitions will affect the market.
  •  The role of the CCI in regulating the digital economy. The CCI will need to develop new expertise to regulate the digital economy, which is a rapidly changing sector.
  • The CCI will need to provide more guidance on how the new provisions of the Competition Act will be interpreted and applied. The CCI will also need to monitor the impact of the Bill on the market and make adjustments as needed.

In conclusion, the Competition (Amendment) Act, 2023 has brought significant amendments to Competition Act, 2002, and aims to bring antitrust law at par with changing markets. The act provides more powers to the CCI by providing the authority to appoint Director General with the approval of the central government. The law will be useful in the scope of the digital market, with the introduction of the Deal Value threshold limit, the scope of agreements will be reviewed by CCI.

References

●       Competition (Amendment) Bill 2023, PRS India

https://prsindia.org/billtrack/the-competition-amendment-bill-2022

●       Competition Act, 2002, Ministry of Corporate Affairs, Government of India

https://www.mca.gov.in/Ministry/actsbills/pdf/The_competition_Act_2002.pdf

●       CCI Annual Report, 2023

https://www.cci.gov.in/public/images/annualreport/en/annual-report-2021-221671704224.pdf

●       Tarafdar, Arijit (2021, May 15). Development of Competition Law- A brief overview

https://www.northeastlawjournal.com/post/development-of-competition-laws

●      Manchanda, Shruti (2023, June 01). India: Analysis of the Competition     (Amendment) Act, 2023

https://www.mondaq.com/india/cartels-monopolies/1323672/analysis-of-the-competition-amendment-act-2023

● https://www.cci.gov.in/images/publications_booklet/en/competition-amendment-act-2023-salient-features1684831868.pdf

Pranav Vijay Sonar is a Research Intern at IMPRI.

Acknowledgement: Author would like to thank Samriddhi Sharma, Garvit Gupta, and Sundaram Balasubramaniam for their kind comments and suggestions to improve the article.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation. 

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