COMPETITION (AMENDMENT) BILL

1. Context

2. What is Competition (Amendment) Bill, 2022?

• It was introduced by Ministry of Finance to amend the Competition Act, 2002 to bring it in line with modern development of new technology, digital market.
• The 2002 Act establishes the Competition Commission of India (CCI) for regulating market competition.
• Later, the Bill was referred to the Parliamentary Standing Committee on Finance for further scrutiny.

3. Key features of the 2022 Bill

• Regulation of Combinations based on transaction value: The Act prohibits any person or enterprise from entering into a combination which may cause an appreciable adverse effect on competition. Combinations imply mergers, acquisitions, or amalgamation of enterprise. The prohibition applies to transactions where parties involved have: (i) cumulative assets of more than Rs 1,000 crore, or (ii) cumulative turnover of more than Rs 3,000 crore, subject to certain other conditions. The Bill expands the definition of combinations to include transactions with a value above Rs 2,000 crore.
• Time limit for approval of combinations: The Act requires the CCI to pass an order on an application for approval of combinations within 210 days.  The Bill reduces this time limit to 150 days. 
   
• Definition of control for classification of combinations: For classification of combinations, the Act defines control as control over the affairs or management by one or more enterprises over another enterprise or group.  The Bill modifies the definition of control as the ability to exercise material influence over the management, affairs, or strategic commercial decisions.
   
• Anti-competitive agreements: Under the Act, anti-competitive agreements include any agreement related to production, supply, storage, or control of goods or services, which can cause an appreciable adverse effect on competition in India.  Any agreement between enterprises or persons, engaged in identical or similar businesses, will have such adverse effect on competition if it meets certain criteria.
• Settlement and Commitment in anti-competitive proceedings: Under the Act, CCI may initiate proceedings against enterprises on grounds of: (i) entering into anti-competitive agreements, or (ii) abuse of dominant position.  Abuse of dominant position includes: (i) discriminatory conditions in the purchase or sale of goods or services, (ii) restricting production of goods or services, or (iii) indulging in practices leading to the denial of market access.  The Bill permits CCI to close inquiry proceedings if the enterprise offers: (i) settlement (may involve payment), or (ii) commitments (may be structural or behavioural in nature).  The manner and implementation of the framework of settlement and commitment may be specified by CCI through regulations.
• Decriminalisation of certain offences: The Bill changes the nature of punishment for certain offences from imposition of fine to penalty.  These offences include failure to comply with orders of CCI and directions of Director General with regard to anti-competitive agreements and abuse of dominant position.

4. Why global turnover provision could spell trouble for the Big Tech?

• While the new provision on global turnover will not be exclusively applicable to tech companies, they are likely to be the most aggrieved by it given the nature of their business which cuts across geographies.
• Typically, the revenue these businesses earn from their India operations is much smaller than their income in other regions such as the US and Europe.
• 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.
• In the European Union, the penalty imposed on an entity for anti-competitive activity has been limited to 10 percent of the overall annual turnover of the company.
• The 10 percent limit can be based on the turnover of the group to which the company belongs if the parent of that group exercised decisive influence over the operations of the subsidiary during the infringement period.

5. The jurisprudence on the definition of 'turnover' in India

• The definition of 'turnover' had been a widely debated subject in the competition law landscape, and it was in 2017 when the Supreme court had fixed how it should be determined in such cases.
• On 8 May, 2017, in a landmark judgement, the top court had upheld the principle of relevant turnover for determination of penalties in competition law contraventions.
• In a case related to alleged contravention of the Competition Act, 2002 in the public procurement of Aluminium Phosphide tables by the Food Corporation of India, the CCI had imposed a penalty at the rate of 9 percent of the total turnover of the concerned tablet manufacturers, Excel Corp. care Limited, United Phosphorous Limited, and Sandhya Organic Chemicals Private Limited.
• The Competition Appellate Tribunal (COMPAT) had however later said that the turnover will have to be relevant turnover, that is turnover derived from the sales of goods and services.

6. Competition Comission of India

• The Competition Comission of India (CCI) was established in March 2009 by the Government of India under the Competition Act, 2002 for the administration, implementation, and enforcement of the Act.
• Competition Comission of India consists of a Chairperson and 6 Members appointed by the Central Government.

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