Competition (Amendment) Bill, 2023: The next steps

The Bill will most likely have a significant impact on the investigations currently ongoing before the CCI. In the past two years, 14 investigations have been initiated in multiple sectors.

Competition (Amendment) Bill, 2023: The next steps

Friday April 14, 2023,

4 min Read

The Competition (Amendment) Bill, 2023 was recently passed by both houses of Parliament. The Bill has spurred the competition policy community to look back at the manner of its development, especially in the context of the recommendations given by the Parliamentary Standing Committee on Finance (the Committee).

It is noteworthy that even though more than 15 recommendations were provided by the Committee, only five of them were accepted

At the same time, lawyers, policy analysts and economists are also prospectively analysing the future implications of the Bill, including its impact on the Competition Commission of India’s enforcement activity.

The Bill will most likely have a significant impact on the investigations currently ongoing before the CCI. In the past two years, 14 investigations have been initiated in multiple sectors and a few key investigations are pending in markets for app stores, online goods marketplaces, online food aggregators and digital news publications.

It is anticipated that a few of these investigations will conclude and final orders will be given by the CCI later this year.

A surprise inclusion in the Bill is likely to have a significant impact on the final orders in these cases. The Bill proposes that penalties shall be calculated on the basis of ‘global turnover derived from all the products and services’ of the party.

The change contradicts the Hon’ble Supreme Court’s decision in Excel Corp v. CCI, wherein it had held that the penalty is to be calculated according to ‘relevant turnover’ and had observed that the penalty cannot be disproportionate and cannot lead to shocking results.

The Bill’s proposed change will have consequences not only for international technology conglomerates but also for homegrown companies and startups in the entertainment space that are currently under investigation, including those in the online ticketing and cinema theatre sectors.

The Bill also introduces a new Settlements & Commitments (S&C) mechanism which can allow ongoing cases to be settled by the parties with the commission, potentially saving them from the burden of large financial penalties.

However, key omissions in the Bill pertaining to these mechanisms may possibly disincentivise parties to opt for the route.

For instance, the Committee had recommended removing a clause allowing third parties to provide objections and suggestions in S&C applications in the interest of the confidentiality of proceedings.

It also suggested allowing parties to withdraw the application within a specific time frame since the Bill only gives the power to conclude these proceedings to the CCI. However, neither of these was incorporated in the 2023 Bill. In light of these key lacunae, the extent of buy-in by parties currently under CCI scrutiny for the S&C route could be underwhelming.

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Lastly, it will be crucial to keep a close eye on the updated merger control regime due to its implications for upcoming policy frameworks. The Bill introduces a Deal Value Threshold (DVT), which provides that transactions with a value above Rs 2,000 crore will have to seek the CCI’s approval if the target entity has substantial business operations in India.

A key motivation for the change is the limited efficiency of the existing assets and turnover-based thresholds for covering transactions in digital markets. To tackle the same concern, the proposed Digital Competition Act (DCA) is also mulling a provision that mandates important digital intermediaries in India to mandatorily notify all its transactions to the CCI, even if they don’t satisfy the jurisdictional thresholds.

Imposing a wider set of obligations to essentially tackle the same concern may lead to regulatory arbitrage and compliance burden for companies. It remains to be seen the extent to which the Committee on Digital Competition Law (CDCL), which is drafting the DCA, accounts for the role that the DVT criteria can play in addressing the common concern.

The CCI has an important part to play in determining how these developments materialise. It is hoped that the Commission will impose penalties judiciously, facilitate S&C proceedings in a fair and confidential manner and meaningfully discuss the extent of the DVT criteria’s efficacy in the CDCL. Competition enforcement, policy-making and merger control in India are going to witness momentous developments this year and the 2023 Bill will be instrumental in shaping their scope, priorities and consequences.

Edited by Affirunisa Kankudti

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)