A Parliamentary panel on Tuesday recommended significant changes to the Competition (Amendment) Bill, 2022, including modifications to the provision on Rs 2,000-crore deal value threshold that would bring high-value offshore mergers and acquisitions with an Indian connection under the radar of the Competition Commission of India.

The Parliamentary Standing Committee on Finance, which tabled its report on the Bill in Parliament on Tuesday, has also suggested bringing cartels under the scope of settlements and continuing with the current timelines for approval. The settlement and commitment framework seeks to incentivise parties in an ongoing investigation through lower penalty and providing information on other cartels.

“The Bill does not provide guidance on how the deal value is to be calculated and the meaning of direct, indirect and deferred consideration,” said the report by the the committee headed by BJP MP Jayant Sinha. It further noted that the uncertainty about these terms can potentially bring transactions which are unlikely to cause adverse effects on competition under the merger control mechanism.

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“The committee is of the opinion that the proviso needs to specify with clarity that the ‘enterprise’ being referred to is the party being acquired,” it said. Enterprise refers to the business or entity being acquired as part of the merger and acquistion. The local nexus condition should also be defined with clarity in the Act itself to ensure predictability and certainty,” it said.

Industry has been worried about the provision and, in their submissions to the panel, had suggested doing away with it or adding enabling clauses.

The Bill has also seeks to modify the definition of control for classification of combinations and introduce a clause that it is the ability to exercise material influence over the management, affairs, or strategic commercial decisions. The committee has recommended that material influence is a settled standard and should be defined explicitly in the scope of the Bill. “Control means the ability to exercise material influence as may be specified by regulations, in any manner whatsoever, over the management or affairs or strategic commercial decisions,” it has suggested.

It has also suggested that cartels should also be included in the scope of settlements. “The argument against including cartels is that they, by their very nature are anti competitive,” the report said, adding that the committee recommends that the CCI should consider expanding the scope of settlements to include cartels also as a pragmatic recourse to the whole process.

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According to the Competition Act, cartel refers to an association of person including producers, sellers, distributors, traders or service providers who are engaged in identical or similar trade and by agreements amongst themselves decide to determine the purchase or sale prices, limit or control the production, distribution or sale of goods and services. The CCI is responsible for prohibiting cartelisation.

The Bill has proposed to introduce a settlement and commitment framework to help reduce litigations for faster resolution of investigations into antitrust cases but does not include cartels in this at present.

The Amendment Bill proposes to reduce the timeline for the CCI to pass an order on application for approval of combinations from 210 days to 150 days. Similarly, the timeline to form a prima facie opinion has been reduced from 30 days to 20 days. However, apprehensions were raised by the CCI and other stakeholders that it would put the authority in a difficult and onerous position.

“The committee is of the opinion that reducing the time line can be burdensome for an already understaffed commission,” the report said, adding that the committee recommends that the current prima facie opinion timeline and that of passing the order for approval of combinations, should remain unchanged.

Experts welcomed the report and said it has called for clarity and reasoned analysis in the Indian competition framework.

“Its recommendation to include intent as a key element of hub and spoke cartels and to extend effects based test and IPR exemption to abuse of dominant position will encourage nuanced analysis by the CCI. The report also recommends regulation making on key aspects of deal value thresholds, which will ensure that only relevant transactions are notified to the the CCI and parties entering into mergers have clarity on the threshold criteria,” said Saksham Malik, programme manager, The Dialogue.

The Bill, which was tabled in Parliament in August this year, seeks to amend the Competition Act of 2002.