The Competition Law Review Committee (CLRC) has suggested a new set of changes in the competition law of the country. The various structural and functional changes suggested also include the introduction of a settlement and commitment clause. The Ministry of Corporate Affairs (MCA) had also invited public comments on the draft of the new amendment bill on 6th March 2020.
The Competition Law Review Committee (CLRC) through its Chairman, Mr. Injeti Srinivas submitted its report to the Ministry of Corporate Affairs on July 26, 2019 recommending amendments to the Competition Act, 2002 (hereinafter referred to as “The Act”). The Act establishes the Competition Commission of India (CCI) to promote competition, prevent anti-competitive practices and protect consumer rights. The various recommendations by the committee summarily are:
- Settlement and Commitments
This permitted the party that is being investigated to voluntarily undertake certain commitments and offer a settlement in lieu of the anti-competitive activity or abuse of dominance proceedings against them. This is also done by the European Union against companies in anti-trust disputes. There are certain methods that the bill envisages to achieve an improved system of settlements and commitments with the same:
- Prior to the final order and after receiving the DG’s report, the application for the settlement should be put forth.
- It is the discretionary power of the CCI to either accept the same or reject it, once rejected, it cannot be appealed against.
- The terms and amount may also be determined by CCI that will be abided by the party. Further the order/application can also be revoked if CCI is dissatisfied with the disclosures made and finds them to be false.
An improved system for settlement or commitment will allow for faster disposal of cases and both the CCI and the investigated party may be spared from extensive examinations. The Committee endorsed this process for speedy resolution of cases.
2. Control/ Material Influence
The Act influences combinations that are in the form of mergers, amalgamations or acquisitions. In order to properly determine the rights as specified under the Act, the bill defines ‘control’ to include the test of ‘ability to exercise material influence’ over the management of commercial/corporate decisions. This test has a wider ambit.
The proposed bill focuses on deciphering the difference between various types of controls such as ‘significant influence’ and ‘material influence’ separately as practiced by the commission, making it more reliable and authentic.
3. Green Channel Process
Under the previous rules, there were certain mergers which would face unnecessary delay on account of high scrutiny as they required mandatory approval from the CCI. This made the process more time-consuming even when no major concern of abuse of dominance or appreciable adverse effect on competition existed.
Thus a ‘green-channel’ route was introduced for prompt/automatic approvals from the CCI in order to pace-up this task for the Commission. Such transactions can be notified in a separate prescribed form and the regular form of notice to the CCI need not be given.
4. Empowering Provision
Previously, the acquisitions which met the asset and turnover requirements as prescribed in the Act or the acquisitions which fit properly under the definition of ‘combination’ under Section 5 were subject to a mandatory pre-merger notification to the CCI. Thus, some acquisitions which were significant but nevertheless did not meet the threshold, went unnoticed.
The Bill proposed an ‘empowering provision’ which would give the Central Government the power to consult the CCI and provide any criteria that may be used to construe a transaction within the definition of a combination. Thus, the transactions which would skip the entire examination could also be covered under this clause.
5. Structural & Functional Changes
There were various structural changes suggested by the committee
- Framing of a Governing Body: In order to make the accountability of the commission more reliable the bill suggests the creation of a governing body for supervisory roles and quasi-legislative functions. The body will consist of six whole time, six part-time members and one Chairperson.
- Framing of an Appellate Authority: A specific bench only devoted to hear appeals under the Competition Act to be created. Those heard by the National Company Law Appellate Tribunal (NCLAT) need to be disposed or heard off within 6 months but could not be done due to the burden on NCLAT.
- Director General’s Office: In order to increase efficiency it was suggested for the CCI to have the Director General’s (DG) office to be subsumed in the CCI’s main office. This is necessary because all the major inquires under the Act have to be done by the DG and the DG is directly appointed by the Central government and is also answerable directly to them.
- Penalties: The Committee noted that the rate of recovery of penalties under the Act is low because several CCI orders are challenged before courts. One of the reasons for this may be that the penalties imposed seem disproportionate and excessive. (1) Therefore, the Committee recommended that CCI should be mandated to issue guidance on calculation and imposition of penalties under the Act.
6. Exemptions From Standstill Requirements
Through this amendment, the Central Government, in consultation with the CCI, can permit and exempt certain exceptional combinations from complying with the requirements and standstill obligations including notifications to the CCI. These exceptional combinations should be such in which awaiting the approvals of the commission would make it lose its essence and will not be practicable for the desired combination. Combinations from the standstill obligations under Section 6(2A) of the Act will be exempted as per the bill, if the combination involves (2)
- implementation of an open offer
- an acquisition of shares or securities, through a series of transactions on a regulated stock exchange.
This can be done only on one condition, that the CCI is being notified of the same and acquirers do not enjoy and beneficiary rights till the commission approves. (3)
The Committee recommended amendments to the definitions of:
- ‘Cartels’ to have/include buyers’ cartel,
- ‘Consumer’ to include government departments or agencies,
- ‘Turnover’ (used for the purpose of determining combinations) to exclude intra-group sales, indirect taxes, and trade discounts, and
- ‘Hubs’ which share sensitive information among cartels in order to bring them together need to be defined along with penalties over such hubs.
(1 ) Roshni Sinha. (September, 2019). Report of the Competition Law Review Committee. New Delhi : PRS Legislative Research.
(2) AZB Partners Advocates & Solicitors . (March, 2020). Summary of Key Changes In The (Draft) Competition (Amendment) Bill, 2020. Competition / Antitrust .