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Comparative and Critical Analysis of Competition Act, 2002 and The Draft Competition (Amendment) BILL, 2020

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The article seeks to highlight major amendments proposed by the Ministry of Corporate Affairs (MCA) to the Competition Act, 2020. The suggested amendments are a culmination of the Competition Law Review Committee (CLRC) and the Rules & Regulations.  After considering them, the MCA prepared the Draft Competition (Amendment) Bill, 2020. 

Objective:

The Bill seeks to bring about the much-needed clarity to certain provisions of the Act. Further, it seeks to bring more transparency in the regime and improve the robustness and efficiency of the system. 

Analysis:

Depiction  of Major Amendments in the Proposed Bill

A)    Anti- Competitive Agreements & Abuse Of Dominant Position:

(A.1)  Definitions:

SectionDefinition
2(c)Expanded scope of the cartel by including Buyer’s Cartel. 
2(f)Expanded scope of Consumers, by:(i)  including the Department of the Government;(ii)Including accrual of Harm caused to the consumer, while determining whether the agreement has AAEC under section 3.   
2(h)Expanded scope of the term “Enterprise” by including “other entities regardless of its legal form”.  Also, “Enterprise”, would mean “any person engaged in any economic activity” 
2(t)Expanded the term“Relevant product market” by including supply side in addition to the existing demand side.   
2(kc)Added definition to the term “party”, which includes: A consumer, an enterprise, a person, an information provider, a consumer/ trade association, the central/ state government or any statutory authority. 

(A.2)  Anti-competitive Agreement

Further, a proviso to section 3(3) bars anti-competitive agreements between persons who are not engaged in identical or similar trade. Amendment to section 3(4) now includes any other agreement between persons including but not restricted to agreements amongst persons at a different stage. The amendment also proposes not just goods but also anti-competitive service agreements. The purview of the “tie- in- arrangements” has been extended to even “distinct goods”.

(A.3)  Misuse of Dominant Position

The purview of misuse of the dominant position has been extended to any unfair condition/ price for sale and purchase of goods and services. A welcome proposal in the Bill has been introduced as Section 4A, whereby a person is exempted under section 3 & 4 of the Act with respect to agreements which deals with such persons IP Rights on existing IP laws.

B)    Compounding

The Bill proposes empowers the Appellate fora to compound any offence (other than those punishable with both imprisonment and fine). This perhaps means that the Appellate forum can allow compounding of offences with monetary implications only.

C)    Regulatory Structure, Functions & Powers:

(C.1)  Introduction of Governing Body, at least one member would be ex-officio, Central Government whose functions are to: 

Making regulations, carrying administrative functions, promote competition advocacy, assist C.G. in drafting competition policy, create awareness, etc. This perhaps has been introduced so that the Commission can devote more time to enquiry investigation & adjudication.

Also, as per the amendment, the Commission shall have 6 whole-time members in addition to the Chairman. Surprisingly, however, as per the amendment, the Chairman of the commission may not be a Whole-time member. [Omitted section- 8(3)]. [Suggestion: We may suggest that one member in the Commission as well as in the Governing Body should be a judicial member].

(C.2)  The Appointment & Powers of the D.G.:

The Bill proposes to grant power to the CCI to appoint the D.G., instead of the Central Government. The Bill also proposes to confer wider powers to the D.G. in as much as, if a person fails to produce any documents, information or record or fails to appear before the D.G. personally or fails to answer any question which is put by the D.G. or fails to sign notes to any cross-examination, shall be punished with imprisonment for a term which may extend to 6 months or with fine (INR One Crore), or with both, coupled with a further fine which may extend up to INR Five Lakhs for each day contravention.

Suggestion: To propose amendments to Section 41(3) to (14):

  1. 41(3) (a) – No time limit prescribed and the time limit should be as stipulated under various Acts, such as, Companies Act, 2013, Income Tax Act, etc. 
  2. 41(7) & (8) – Right to be given to a person who is examined, to be accompanied by an advocate or a representative. Also, D.G. being the investigating agency/ authority, the D.G. cannot adjudicate a cause and penalise the party under 41(8).  

D)Penalty:

(D.1)  Amendment to Section 27:

The bill provides for the imposition of Penalty on individual up to a cap of 10%of an individual’s average income for the last 3 preceding financial year, who have violated section 3 and 4 of the Act. However, the word income has not been defined. The Bill states that the same shall be prescribed.

The Bill proposes that the Commission may allow a producer, seller, distributor, trader, buyer, or service provider included in a cartel to withdraw its application for the lesser penalty in a manner that shall be specified. However, the D.G. and the Commission shall be entitled to use any evidence submitted by such party, save and except its admission. 

Further, during the course of investigation where a producer, seller, distributor, trader, buyer, or service provider has disclosed the cartel makes a disclosure to another cartel where it has acted in violation of section 3, the Commission may impose upon such party a lesser penalty in respect to a cartel already being investigated. Without prejudice to such party obtaining lesser penalty regarding the newly disclosed cartel.

(D.2)  Introduction of Settlements & Commitments under Penalty:

The Bill proposes certain provisions which permit the party facing investigation to offer a settlement or voluntarily undertakes certain commitments in connection with an anticompetitive vertical agreement or abuse of dominance [Section 48A & 48B].

In case a party facing investigation offers a settlement or voluntarily undertakes certain Commitments and the same is accepted by the Commission, such offer or Commitment has to be complied with in time frame, failing which order passed by the CCI under section 48(A) & (B), shall stand revoked and the person will be liable to pay the appropriate legal cost incurred by the Commission, which may extend to rupees One Crore and the Commission may initiate/continue with the inquiry. [Section 48C].

The CCI’s order allowing or rejecting a Settlements or Commitments, is not appealable However, the mechanism for Settlements & Commitments shall be laid down through regulation. It is pertinent to mention that Settlements, Commitments & appropriate legal cost has not been defined under the amendment. 

E)    Appeal to Appellate Tribunal:

The amendment mandates a pre-deposit of 25% of the amount ordered against the Appellant or such other lower amount as may be prescribed and in such manner as may be prescribed.

Compounding of Offence by NCLAT [Section 53A]

F)     Combination and Regulation for Combination:

(F.1) Empowering provision to revise Threshold:

Presently for Combinations any amalgamation, merger or acquisition if it meets the monetary & turnover thresholds, it qualifies for scrutiny for Regulation of Combination under section 6. The Bill empowers the Central Government in consultation to the Commission to prescribe with additional criteria in the public interest for amalgamation, merger or acquisition. 

The Bill further proposes certain thresholds below which any amalgamation, merger or acquisition will not qualify as “Combination”, under section 5. Further, term such as ‘control’ has been made stringent in as much as if strategic commercial decisions are taken by one or more enterprise over another enterprise, the same would be understood ‘control’. 

Similarly, the term “Turnover” for the purpose of said section shall mean: Turnover certified by statutory auditor basis the last available audited accounts of the company in the financial year immediately preceding the financial year in which notice is filed under section 6(2) or 6(4). 

(F.2) Green Channel Concept:

The Green Channel was introduced by CLRC with the idea to:

“Enable fast-paced regulatory approvals for the vast majority of mergers & acquisitions that may have no major concern regarding appreciable adverse effects on competition. Empirical evidence shows that most Combinations need not be subjected to standstill obligations in the first place, and hence they may simply disclose their transaction to CCI and proceed to consummate it. The aim is to move to a ‘disclose and comply’ regime with strict consequences for not providing accurate or complete information. Further, it was also recommended that the combinations arising out of the insolvency resolution process under the Insolvency and Bankruptcy Code should be eligible for the Green Channel.” (Reference to CRCL Report) 

Green Channels are aimed to sustain & promote speedy, transparent & accountable review of combination cases by striking a balance between facilitation & enforcement functions.

Amendment to Section 6 (4) & (5) states that: 

If a combination fulfills criteria as may be prescribed in public interest by the central government (in consultation with the commission), then notice for such Combination may be given in the form prescribed under the amended section 6(4), and, once the Commission acknowledges receipt of such notice under amended section 6(4), the proposed Combination shall be deemed to have been approved by the CommissionAlso, under Amended section 6(7) the Central Government may in consultation with Commission prescribe certain criteria in public interest, the fulfilment of which shall exempt certain categories of Combinations from complying with section 6(2), (2A) & 4). Further under amended section 6A Combinations involving implementation of an open offer or acquisition of shares or securities through a series of transactions on regulated stock exchanges have been exempted from the obligation under section 2A. 

Comparative Analysis 

Section TitlePrior Draft Amendment Bill, 2020After Draft Amendment Bill, 2020
DEFINITIONS (Section- 2)
2(c)CartelExcludes Buyer’s CartelIncludes Buyer’s Cartel.
2(f)ConsumersExcluded Department of the Government.Excluded accrual of Harm caused to the consumerIncludes Department of the Government;Includes accrual of Harm caused to the consumer [S.19 (3) (d)].
2(h)EnterpriseExcluded “other      entities regardless of its legal form”. Excluded “any economic activity”Includes “other entities regardless of its legal form”. Includes “any economic activity”
 
2(t)Relevant Product MarketDealt only with demand side.Considers Supply side also in addition to the existing demand side.  
2(kc)Party—-Defined as: “Party includes- A consumer, an enterprise, a person, an information provider, a consumer/ trade association, the central/ state government or any statutory authority”.

ANTI-COMPETITIVE AGREEMENTS (Cartel; Section- 3)
3(3)Liability of hubs in “Hub- Spoke cartel”—-Included via proviso
3(4)Scope of anti- competitive agreementsLimited/ Restricted Reason:any agreement“Goods”Comprehensive Reason:any other agreement“goods or services”
Tie- in- arrangementLimited (“purchase some other goods”)Comprehensive (“purchase some other distinct goods”)
19(3)Scope of AAEC factorsLimitedReason:Exhaustive list 



Foreclosure of competition by hindering entry into the marketConsumer harm not included (“accrual of benefits”)
Comprehensive Reason:Inclusive list  i.e., “any other factors specified by regulation” [19(3)(g)- inserted]“Foreclosure of Competition” [19(3)(c)- amended]
Includes the same. (“accrual of benefits or harm”) [19(3)(d)- amended]

MISUSE OF DOMINANT POSITION (Section- 4)
4(2)Scope of Misuse of Dominant PositionLimitedComprehensive
Condition/ Price 
IP rights absent
Conditions/ Prices
IP rights now extends to section 3 & 4

COMBINATION & REGULATION OF COMBINATIONS        (Section- 5 & 6)
5Definition of “Control”Less stringent More stringent (inclusion of word “material influence”) [Section 5, Explanation (a) – amendment].
Definition of “Group”IrregularLess irregular (“where one enterprise controls the other”)[Section 5, Explanation (b) – amendment].
Definition of “Turnover”AbsentDefined[Section 5, Explanation (d) – inserted].
6Green Channel Concept—-Defined 
Time period for combination to take effect210 days150 days [Section 6 (2A) – amendment].
6(4) & (5) Considered as filing requirementMade as an exemption. 
Regulatory Structure, Functions & Powers(Section- 8)
8Governing Board—–Introduced [Section 8 (1A) – insertion]. 
Composition1 Chairperson 2-6 members appointed by Central Government 1 Chairperson 
6 Whole- time members appointed by Central Government
Chairman as whole-time memberYesSilent [Section 8(3)- via removal]
10Term of Office of Part- time member—–Not more than 3 years from the date of his appointment. [Section 10 (1A)- via insertion]
Vacancy of Part- time member—–To be filled by fresh appointment. [Section 10 (2A)- via insertion]
13Delegation of Power by Commission & Governing Board.—–Present[Section 13 (A)- via insertion]
18Functions and Meetings of Governing Board.—–Introduced :Making regulations, carrying administrative functions, promote competition advocacy, assist C.G. in drafting competition policy, create awareness, etc.
[Section 18 (A)- via insertion]
Inquiry Procedure(Section- 26, 27 and 41)
26Procedure for InquiryCCI to pass orders only after considering the D.G.’s report.Expressly empowers CCI to close a case upon fulfilment of the conditions provided in the provision.
[Sub- sections (2A), (3A) and 9- via insertion]. 
27Computation of PenaltyConsiders: TurnoverConsiders: “relevant Turnover or income”.
41Powers of DG and rights and duties of business and officials in enforcement procedure AmbiguousCodified 



[Sub-section 3- via insertion].
42Deterrent effect Less More (by including more sections under contravention)
46Leniency Less More 
48Provision for Settlement & Commitments —-Under Section 48(A) & 48(B)
[via insertion]
Appeals(Section- 26, 27 and 41)
53 (A)Compounding of Offence —-Can be done by NCLAT 
[via amendment]
53(B)Deposition of 25% of the ordered amount—-Mandatory

[Section 53(B) 2- via insertion]

Conclusion:

Thus, after considering above analysis, we may conclude this that the present Competition Draft (Amendment) Bill, 2020, seeks to provide a flexible law meeting the present competition in the economy of our Indian market, thereby keeping a close eye on the activity that hinders a true and fair competition and thereafter growth of our economy, by stringently punishing those acts/ omissions.  

As it was well said by Karl Marx that:

“A law that possess progressive character, is a law that receives social acceptance                                                                                                            

References:

1.      The Competition Act, 2002. 

2.      Competition Law Review Committee Report, 2019. 

3.      The Draft Competition (Amendment) Bill, February 20, 2020.   

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Nikita Raj

Student, Vanasthali Vidyapeeth

Nikita Raj is an ambitious, enthusiastic and hard-working individual and is keen at exploring different dimensions of the legal field. With an openness trait willing to learn and grow and at par carve a way to contribute substantially in the empowerment of the society at different front. For any clarifications, suggestions and feedback kindly find her at nikita.llb.bba@gmail.com

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