PART A – LEGAL AND REGULATORY DEVELOPMENTS

The Competition (Amendment) Bill, 2023, (“Amendment Bill”) was passed by the lower house of the Indian Parliament, Lok Sabha on 29 March 2023, and by the upper house i.e., Rajya Sabha on 03 April 2023. The bill received the assent from the President of India on 11 April 2023 and the Competition (Amendment) Act, 2023 (“Amendment Act”) was enacted. The Amendment Act clarified that the effective dates of the changes brought about by the Amendment Act will be notified subsequently and that different provisions of the Amendment Act may be notified on different dates.

1.Scope of cartels to include ‘Hub and Spoke’ arrangements

The Competition Act, 2002, (“the Act”) prior to the Amendment Act dealt with anti-competitive agreement between enterprises that are engaged in similar or identical trade involving the same goods or services only. However, the Amendment Act states that any enterprise, an association of an enterprises, a person or an association of persons even if they are not engaged in an identical or similar business, participates in any agreement as mentioned in Section 3 of the Act, would result in a hub and spoke cartel. The same has been introduced through proviso to Section 3(3) of the Amendment Act. The said proviso is extracted below:

"Provided further that an enterprise or association of enterprises or a person or association of persons though not engaged in identical or similar trade shall also be presumed to be part of the agreement under this sub-section if it participates or intends to participate in the furtherance of such agreement."

2. Introduction of limitation period to file an information

The Amendment Act has introduced a limitation period of three years to file an information or a reference before the CCI from the date on which the cause of action arises with respect to any contravention of the provisions of the Act. However, if the informant is able to establish the reasons for delay in filing the information and the CCI is satisfied with the same, the said period of delay may be condoned by the CCI. The same has been introduced through proviso to Section 19 (1):

“(a) in sub-section (1), the following provisos shall be inserted, namely:— "Provided that the Commission shall not entertain an information or a reference unless it is filed within three years from the date on which the cause of action has arisen:

Provided further that an information or a reference may be entertained after the period specified in the first proviso if the Commission is satisfied that there had been sufficient cause for not filing the information or the reference within such period after recording its reasons for condoning such delay."

3. No inquiry into allegations of anti-competitive conduct if substantially same facts and issues have already been decided by the CCI in a previous case

The Amendment Act also provides for the application of the principle of res judicata, which empowers the CCI to reject an information filed before it, if the information is based on the same facts or the same cause of action, that has already been addressed and adjudicated upon by the CCI. The limitation period of three years for filing an information has been introduced through Section 14 of the Amendment Act, and the principle of res judicata has been introduced through Section 19 of the Amendment Act. The relevant provision is extracted below:

"(2A) The Commission may not inquire into agreement referred to in section 3 or conduct of an enterprise or group under section 4, if the same or substantially the same facts and issues raised in the information received under section 19 or reference from the Central Government or a State Government or a statutory authority has already been decided by the Commission in its previous order."

4. Pre deposit of 25 per cent penalty amount before NCLAT during appeal

The Amendment Act mandates deposit of 25 per cent of the penalty amount imposed by the CCI for violation of the provisions of the Act, at the time of challenging the order of the CCI before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) in an appeal under Section 53B. The proviso to Section 53B(2) also empowers Hon’ble NCLAT to seek pre-deposit of any other percentage of penalty amount, as it may deem fit. The relevant proviso has been extracted below:

"Provided further that no appeal by a person, who is required to pay any amount in terms of an order of the Commission, shall be entertained by the Appellate Tribunal unless the appellant has deposited twenty-five per cent. of that amount in the manner as directed by the Appellate Tribunal."

5. Public consultation for framing regulations / guidelines

The Amendment Act has introduced a mandatory procedural obligation with respect to making and enforcing regulations and guidelines by the CCI in order to ensure transparency. The CCI is now required to publish draft regulations and guidelines, along with all other details for inviting public comments on the same. Subsequently, the CCI is required to publish a general response to the public comments received. However, CCI may not be required to follow public consultation process if the CCI is of the opinion that certain regulations are required to be made or existing regulations are required to be amended urgently in public interest or the subject matter of the regulation relates solely to the internal functioning of the CCI.

6. Enhancing the penalty amount imposed for furnishing false information or omission to furnish material information

The Amendment Act has increased the penalty amount imposed for furnishing false information or failing to furnish material information with respect to any merger and acquisition transaction, from INR 10 million to INR 50 million.

The above mentioned amendments had come into effect on 18 May 2023.

7. Appointment of the Director General

The Act gives the Central Government the power for the appointment of the DG. The Amendment Act changes this position and gives CCI the power to appoint the DG, but with prior approval of the Central Government. The MCA vide notification dated July 18, 2023, notified the provisions of the Amendment Act with respect to the appointment of the DG, which will be done by the CCI, with prior approval of the Central Government, henceforth, from July 18, 2023, the effective date for the provision.

The above mentioned amendment came into effect on 18 July 2023.

8. Penalty under the Act to be imposed on ‘global turnover’ or “income”

The Amendment Act provides that penalties imposed on enterprises for anti-competitive agreements and abuse of dominance would be calculated based on the ‘global turnover’ derived revenue generated from all products and services offered by such enterprises.

The said amendment is a huge deviation from the judgment of the Hon’ble Supreme Court of India in the case of Excel Crop Care Limited v. Competition Commission of India & Anr.[1]; wherein the Hon’ble Supreme Court of India applying the doctrine of proportionality (as envisaged under Article 14 of the Constitution of India) held that in case of multiproduct companies, the penalties can only be imposed on the turnover of the relevant product under contravention and not the total turnover of the enterprise. Since pronouncement of the judgment in Excel’s case, Competition Commission of India has been forced to apply concept of “relevant turnover” while imposing the penalties on multiproduct companies/ enterprises.  Excel Crop Care Limited was represented by AnantLaw Partners Rahul Goel and Anu Monga before the Hon’ble Supreme Court of India.

The relevant provision is extracted below:

'(b) impose such penalty, as it may deem fit which shall be not more than ten per cent. of the average of the turnover or income, as the case may be, for the last three preceding financial years, upon each of such person or enterprise which is a party to such agreement or has abused its dominant position: Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten per cent. of its turnover or income, as the case may be, for each year of the continuance of such agreement, whichever is higher.

Explanation 1.—For the purposes of this clause, the expression "turnover" or "income", as the case may be, shall be determined in such manner as may be specified by regulations.

Explanation 2.—For the purposes of this clause, "turnover" means global turnover derived from all the products and services by a person or an enterprise.'.

The Amendment Act also introduces the term “income” for imposition of penalties on individuals and/ or proprietary firms. It is viewed that the insertion of the word “income” in Section 27(b) of the Amendment Act may allow Competition Commission of India (“CCI”) to impose penalties on individuals under Section 48 (which was being repeatedly done; however, without having explicit mention of the work “income” for individuals).  The Amendment Act also changes the scope of application of Section 48 and limits it to cartel agreements. The relevant amendment is extracted below:

“48 (1) … Provided that in case any agreement referred to in sub-section (3) of section 3 has been entered into by a cartel, the Commission may unless otherwise provided in this Act, impose upon such persons referred to in sub-section (1), a penalty of up to ten per cent. of the income for each year of the continuance of such agreement.”

CCI has also issued draft CCI (Determination of Turnover or Income) Regulations, 2023, which mention that turnover or income, as the case may be, shall include the total value of sales or revenue or receipts and other operating income and the turnover or income shall exclude indirect taxes, trade discounts, and intra-group sales, if any. Further, the income in case of an individual shall be the gross total income as per the Income Tax Returns (ITRs) as prescribed under the Income Tax Act, 1961 and the rules made thereunder. CCI is yet to issue final CCI (Determination of Turnover or Income) Regulations, 2023.

CCI’s power to impose penalties on individuals/ officers of the company under Section 48 of the Act is pending adjudication before the Hon’ble Supreme Court in Cadila Healthcare Ltd. & Anr v. Competition Commission of India. Also, the vires of Section 48 of the Act have been challenged under Article 226 and 227 of the Constitution of India before the Hon’ble High Court of Delhi in the case of Tranter India Pvt Ltd. & Ors. v. Union of India & Ors. AnantLaw is representing appellants/ petitioners in the above cases.

9. Introduction of Settlement and Commitments for violations relating to vertical agreements (under Section 3(4)) and abuse of dominance (under Section 4)

The Amendment Act has introduced the framework for two mechanisms as a way of behavioural correction for parties under investigation for anti-competitive conduct by entering into anti-competitive agreements or by abuse of their dominance in the market called settlement and commitments mechanisms that can be offered by any enterprise/entity in violation of the provisions of the Act. The provisions with respect to settlement  and commitment have been introduced through Section 48A and 48B of the Amendment Act, respectively.

Section 48A of the Amendment Act is extracted below:

“(1) Any enterprise, against whom any inquiry has been initiated under sub-section (1) of section 26 for contravention of sub-section (4) of section 3 or section 4, may, for settlement of the proceeding initiated for the alleged contraventions, submit an application in writing to the Commission in such form and upon payment of such fee as may be specified by regulations.

(2) An application under sub-section (1) may be submitted at any time after the receipt of the report of the Director General under sub-section (4) of section 26 but prior to such time before the passing of an order under section 27 or section 28 as may be specified by regulations.

(3) The Commission may, after taking into consideration the nature, gravity and impact of the contraventions, agree to the proposal for settlement, on payment of such amount by the applicant or on such other terms and manner of implementation of settlement and monitoring as may be specified by regulations.

(4) While considering the proposal for settlement, the Commission shall provide an opportunity to the party concerned, the Director General, or any other party to submit their objections and suggestions, if any.

(5) If the Commission is of the opinion that the settlement offered under sub-section (1) is not appropriate in the circumstances or if the Commission and the party concerned do not reach an agreement on the terms of the settlement within such time as may be specified by regulations, it shall, by order, reject the settlement application and proceed with its inquiry under section 26.

(6) The procedure for conducting the settlement proceedings under this section shall be such as may be specified by regulations.

(7) No appeal shall lie under section 53B against any order passed by the Commission under this section. (8) All settlement amounts, realised under this Act shall be credited to the Consolidated Fund of India.”

Section 48B of the Amendment Act is extracted below:

“(1) Any enterprise, against whom any inquiry has been initiated under sub-section (1) of section 26 for contravention of sub-section (4) of section 3 or section 4, as the case may be, may submit an application in writing to the Commission, in such form and on payment of such fee as may be specified by regulations, offering commitments in respect of the alleged contraventions stated in the Commission's order under sub-section (1) of section 26.

(2) An offer for commitments under sub-section (1) may be submitted at any time after an order under sub-section (1) of section 26 has been passed by the Commission but within such time prior to the receipt by the party of the report of the Director General under sub-section (4) of section 26 as may be specified by regulations.

(3) The Commission may, after taking into consideration the nature, gravity and impact of the alleged contraventions and effectiveness of the proposed commitments, accept the commitments offered on such terms and the manner of implementation and monitoring as may be specified by regulations.

(4) While considering the proposal for commitment, the Commission shall provide an opportunity to the party concerned, the Director General, or any other party to submit their objections and suggestions, if any.

(5) If the Commission is of the opinion that the commitment offered under sub-section (1) is not appropriate in the circumstances or if the Commission and the party concerned do not reach an agreement on the terms of the commitment, it shall pass an order rejecting the commitment application and proceed with its inquiry under section 26 of the Act.

(6) The procedure for commitments offered under this section shall be such as may be specified by regulations.

(7) No appeal shall lie under section 53B against any order passed by the Commission under this section.

Any settlement or commitment can be offered/applied for by an enterprise for settling any proceedings initiated against them for an alleged involvement in anti-competitive agreements (Section 3(4)) or abuse of dominance. Parties are eligible to apply for settlements once they have received the report of the DG’s investigation but before the CCI has issued its final order in the matter basis the DG’s investigation report. The procedure for filing a settlement application and the timelines therein, have been discussed and elaborated in the draft CCI (Settlement) Regulations, 2023, published by the CCI for inviting public comments. The draft settlement regulations state that an application for a settlement has to be filed within 45 days from the receipt of the DG report. However, the final settlement regulations are yet to be notified/ issued by the CCI.

Similarly,  the procedure for filing a commitment application and the timelines therein, have been discussed and elaborated in the draft CCI (Commitment) Regulations, 2023, published by the CCI for inviting public comments. The draft commitment regulations state that an application for a settlement has to be filed within 45 days from the receipt of the order passed by the under Section 26(1) directing the DG to cause an investigation into the anti-competitive conduct. However, the final commitment regulations are yet to be notified/ issued by the CCI.

In settlements or commitments, if the applicants of the respective applications fail to comply with CCI’s order regarding settlement and commitment, or the applicant makes a false disclosure in the application, or if there has been a material change in the facts with respect to the applications, the orders passed by the CCI, allowing the applications may be revoked and withdrawn. The same has been provided under Section 48C of the Amendment Act.

10. Addition of definition of ‘party’

The Amendment Act introduces definition of party; which will provide clarity on implementation of substantial provisions.

'(ka) "party" includes a consumer or an enterprise or a person or an information provider, or a consumer association or a trade association, or the Central Government or any State Government or any statutory authority, as the case may be, and shall include an enterprise or a person against whom any inquiry or proceeding is instituted; and any enterprise or person impleaded by the Commission to join the proceedings;'

11. Definition of relevant product market expanded

The definition of relevant product market has now been expanded to also include interchangeability and substitutability by the supplier. Relevant product market means a market comprising of all those products or services -

“(i) which are regarded as inter-changeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; or

(ii) the production or supply of, which are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices;';

12. Scope of Section 3(4) has been expanded to include all kind of agreements

The Amendment Act increases the scope of Section 3(4) to include all other agreements and also agreements which relate to ‘services and not just ‘goods’.

13. Introduction of ‘leniency plus’ provision for lesser penalty applicants

The Amendment Act introduces a provision of ‘leniency plus’ which states that if a member of any cartel also being a lesser penalty applicant, discloses the existence of another cartel during the investigation that was previously not in the knowledge of the CCI,  it will allow the lesser penalty applicant to the benefit of lesser penalties for both the cartels.

The CCI on October 16, 2023, released the CCI (Lesser Penalty) Regulations, 2023, which brings about two key amendments. Firstly, it amends the definition of ‘Applicant’ for lesser penalty applications to include an enterprise/ person or their associations if it/they participate or intend to participate in the furtherance of any cartel, even if they are not engaged in identical or similar trade and approach the CCI with a ‘full, true and vital’ disclosure of the cartel. And secondly, the introduction of ‘lesser penalty plus’ provision in furtherance of the Amendment Act.

14. Introduction of Deal Value Threshold for notifying combinations to CCI

The CCI while giving approvals to merger and acquisition transactions filed before it, takes into account the asset and the turnover criteria under the provisions of the Act. The asset and the turnover threshold for assessing the CCI notification requirement is that the combined valuation of the assets of the acquirer and the target company should be more than INR 10 billion and the combined valuation of the turnover of the acquirer and the target company should be more than INR 30 billion.

The deal value threshold (“DVT”) introduced by the Amendment Act brings under the ambit of CCI’s approval all the mergers and acquisition transactions, the value of which is more INR 20 billion and the enterprises being acquired/ taken control of / merged or amalgamated have substantial business operations in India. The Amendment Act has also defined the ‘value of transaction’ to include the value of every valuable consideration with respect to the transaction. The relevant provision is extracted below:

"(d) value of any transaction, in connection with acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation exceeds rupees two thousand crore:

Provided that the enterprise which is being acquired, taken control of, merged or amalgamated has such substantial business operations in India as may be specified by regulations.”

15. Assessment of ‘material influence’ to determine control

As the provisions of the Act stand, ‘control’ is defined to mean controlling the affairs or management of an enterprise or group by one or more enterprises or one or more groups. However, the CCI has by way of decisional practice, determined that control would also include the right and the position to exercise material influence.

The Amendment Act gives a formal assent to the decisional practice of CCI while determining control, and amended the definition of control to formally mean the ability of an enterprise to exercise ‘material influence’ over the management or affairs of an entity or a group of entities and the power to influence the strategic commercial decision. The relevant provision is extracted below:

“(a) "control" means the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions by— (i) one or more enterprises, either jointly or singly, over another enterprise or group; or (ii) one or more groups, either jointly or singly, over another group or enterprise;”.

16. Exemption from stand still obligation in merger and acquisition transactions.

The merger control provisions of the Act provides for a standstill obligation which essentially states that without the CCI’s approval, the parties to a transaction are not permitted to go ahead with the transaction or any part of it. Acknowledging the onerous nature of such a blanket restriction, the Amendment Act allowed for transactions involving open offers or acquisitions of shares or securities through a series of transactions on a regulated stock exchange to be exempted from the standstill obligations on satisfying the two conditions of notifying the CCI about the transaction in a timely manner, and that the acquirer in the transaction would not exercise its ownership, rights or interests in such securities or shares until CCI’s approval to the transaction. The relevant amendment is extracted below:

“6A. Nothing contained in sub-section (2A) of section 6 and section 43A shall prevent the implementation of an open offer or an acquisition of shares or securities convertible into other securities from various sellers, through a series of transactions on a regulated stock exchange from coming into effect, if—

(a) the notice of the acquisition is filed with the Commission within such time and in such manner as may be specified by regulations; and

(b) the acquirer does not exercise any ownership or beneficial rights or interest in such shares or convertible securities including voting rights and receipt of dividends or any other distributions, except as may be specified by regulations, till the Commission approves such acquisition in accordance with the provisions of sub-section (2A) of section 6 of the Act.

Explanation.—For the purposes of this section, "open offer" means an open offer made in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011 made under the Securities and Exchange Board of India Act,1992.”

17. Extending the ambit of gun-jumping to include deal value threshold

The Act mandates a penalty of 1% of the value of assets or turnover for gun-jumping violations, as the value of the assets and turnover were the two thresholds to be taken into consideration for notifying merger and acquisition transactions to the CCI. However, the penalty imposed on parties for gun-jumping violations can also be imposed on the deal value / value of transaction at the same rate of 1%, pursuant to deal value being added as a threshold for notifying merger and acquisition transactions to the CCI. The relevant amendment is extracted below:

“43A. If any person or enterprise fails to give notice to the Commission under sub-section (2) or sub-section (4) of section 6 or contravenes sub-section (2A) of section 6 or submit information pursuant to an inquiry under sub-section (1) of section 20, the Commission may impose on such person or enterprise, a penalty which may extend to one per cent., of the total turnover or assets or the value of transaction referred to in clause (d) of section 5, whichever is higher, of such a combination:

Provided that in case any person or enterprise has given a notice under sub-section (4) of section 6 and such notice is found to be void ab initio under sub-section (6) of section 6, then a notice under sub-section (2) of section 6 may be given by the acquirer or parties to the combination, as may be applicable, within a period of thirty days of the order of the Commission under sub-section (6) of that section and no action under this section shall be taken by the Commission till the expiry of such period of thirty days.”

II. CCI gets full quorum with appointment of chairperson and 3 members

The CCI was lacking quorum with the presence of only two member including the acting chairperson, and therefore, the CCI was unable to exercise its power to adjudicate upon enforcement and combination matters. However, in February, 2023, on account of the rising number of pending combinations for CCI’s approval, the CCI invoked the ‘doctrine of necessity’ to allow itself to examine and clear combination cases, meanwhile continuing the search for the new Chairperson and other members.

On May 16, 2023, Ms. Ravneet Kaur was appointed as the Chairperson of the CCI. On September 19, 2023, Ms. Sweta Kakkad, Mr. Deepak Anurag, and Mr. Anil Agarwal were appointed to the CCI, following the retirement of Ms. Sangeeta Verma and Mr. Bhagwant Singh Bishnoi. The appointments of September 19, 2023 increased the strength of CCI to 4 members, including the Chairperson, Ms Ravneet Kaur.

III. Constitution of Digital Competition Law Committee

The MCA on February 06, 2023, directed the constitution of the Competition Digital Law Committee (“Committee”), to see if the existing provisions of the Act can sufficiently address the challenges that arise from anti-competitive conduct in the rapidly growing digital economy in India, and to assess the need to have a new set of laws with an ‘ex-ante’ framework under a separate legislation to regulate competition in the digital market.

The Committee was tasked to finalise its report and prepare a draft of the proposed laws to govern digital market within 3 months, since the constitution of the Committee. However, extensions were granted to the Committee several times with the last extension being granted on November 07, 2023, up to December 31, 2023.

Author: Rahul Goel and Anu Monga

Footnote

[1] https://main.sci.gov.in/supremecourt/2014/3244/3244_2014_Order_08-May-2017.pdf