By MM Sharma
The Competition (Amendment) Bill, 2022, referred to the Standing Committee on Finance on August 14, 2022, attempts to promote ease of doing business while maintaining strong regulatory oversight on market discipline and competitive markets, the essential pillars of a free market economy. The Bill also attempts to address the competition issues in the digital markets by the Big Tech companies.The reference to the Standing Committee is a positive step. The 2019 report of the Competition Law Review Committee (CLRC), on which the Bill is based, had flagged important issues that needed to be discussed and debated.
The Standing Committee’s focus, while reviewing the Bill, has to be on anti-competitive practices employed by Big Tech companies. The most critical issue in the platform-driven digital markets—the attempt to monopolise by indulging in predatory conduct even before acquiring a position of dominance—was highlighted in the CLRC report, but the Bill fails to make any suggestion. Moreover, the emerging reality of algorithmic collusions, though flagged in the CLRC report, has not been addressed.
When it comes to the regulation of mergers and acquisitions, many welcome steps have been included in the Bill. However, the change in the definition of “control”, from being based on “decisive influence” to material influence is debatable, and the committee must consider the dissent notes of some of the members of the CLRC. Additional thresholds based on “transaction/deal value” exceeding Rs 2,000 crore for merger notification (besides the existing assets/turnover-based thresholds), with a mandatory requirement of having a “local nexus “, though, must be welcomed to include large transactions amongst Big Tech companies. These had escaped scrutiny earlier as they did not hold substantial assets or turnover in India. The exemption from standstill obligation/suspensory regime for certain M&As involving “open offer”/acquisition of shares/securities, etc, on a regulated stock exchange, provided the acquirer informs the CCI prior to exercising any ownership or beneficial rights facilitates ease of doing business, as does the green channel provision that allows ‘deemed approval’ of certain benign M&As between parties that don’t have any horizontal, vertical, or complementary overlap. The reduction of time limit for approval of M&As, from existing 210 to 150 days, and for making a prima facie opinion on whether to investigate an M&A, from 30 to 15 days, etc, and mandating the CCI to form such prima facie opinion within 20 days of receipt of the filing will foster regulatory certainty.
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The proposed time limit of three years for filing information on any anti-competitive conduct with the CCI, though in sync with the common law on limitation, may discourage whistle-blowers. Moreover, unlike most civil wrongs, market distortions, such as cartels and/or unilateral market conduct by dominant enterprises to create entry barriers for new entrants are conceived in secrecy, and are dynamic in nature, and it may be difficult to pinpoint the “date on which cause of action has arisen”.
The introduction of “Settlements” and “Commitments” is in sync with similar provisions in advanced jurisdictions. This provides accused parties a new window to either offer a “settlement” after the receipt of the investigation report, subject to the implementation of the settlement terms being monitored by the CCI, or “commitments” before the receipt of the investigation report but soon after the CCI directs such investigation, subject, again, to CCI monitoring. This is an important step towards ease of doing business as it allows the parties to avoid the time and cost of facing a full-blown investigation. However, once the CCI passes an order accepting settlement or commitments, the appellate recourse ceases. Also, the provisions do not apply to anti-competitive agreements between direct competitors or cartels. This needs to be debated by the Standing Committee. It is also not clear whether either order would also release the parties from liability for compensation claims by victims.
Broadening the definition of “enterprise” to include firms and departments of the government and their units, divisions, and subsidiaries that have been engaged in any economic activity, excluding atomic energy, currency, defence, and space, will help level the playing field and bring in necessary competition.
The introduction of a “leniency-plus” regime to encourage members of a cartel under investigation to disclose other cartels for waiver of penalties is a change whose necessity had become evident from the regulatory experience so far.
Vesting the power to appoint the director general, who heads the investigative wing of the competition watchdog, with the CCI has been provided for in the Bill, presumably, to integrate the investigative wing with the adjudicatory function of the CCI to enhance efficiency in enforcement. But, this may dilute the functional autonomy of the DG office. The Standing Committee needs to weigh this carefully.
Enhancing investigative powers of the DG by giving it the powers, inter alia, to approach the chief metropolitan magistrate, Delhi, to obtain search warrants for conducting raids to seize evidence of suspected cartelisation, bid rigging, etc, could be fruitful. But, the inclusion of “legal advisers” in the definition of “agent” under the Explanation to Section 41, and empowering the DG to direct such “legal advisers” to give evidence under oath during investigation is a controversial provision as it is not clear if “legal adviser” will include external counsels and/or practising lawyers and advocates. Inclusion of these categories, unless specifically exempted, will clash directly with the settled law on “professional communication” between lawyers/attorneys and their clients, which is protected from disclosure to even courts of law under Section 126 of the Evidence Act, 1872.
What the Bill also misses addressing is the issue of the financial independence of the CCI and appointment of the judicial member in the CCI, though both were highlighted in the CLRC report with recommendations to make necessary provisions in the Bill. Particularly, the appointment of judicial members in the CCI is needed to comply with the directions issued by the Delhi High Court in the Mahindra case. This omission may make the Bill and the orders passed by the CCI under it, if it gets enacted in the current form, vulnerable to challenge in the High Court.
To conclude, the proposed amendment Bill seeks to bring in many long-awaited changes, but the few anomalies that remain, hopefully, will be removed by the Standing Committee.
The author is Head–competition law, Vaish Associates Advocates
Views are personal