Why does all not seem hunky-dory with the latest Competition Amendment Bill?

Money Control, March 31, 2023 

By Pradeep S Mehta

The Competition (Amendment) Bill, 2022 seeks to revamp the two-decade-old competition law of India. While reform of old, outdated provisions is a much welcome step, certain new provisions have been introduced out of the blue. The provision which empowers the Competition Commission of India (CCI) to penalise entities based on their global turnover, is one such unwelcome ‘wild card entry’, which is unprecedented and will prove to be an investment dampener.

It is a settled universal postulate, that relevant turnover will be considered for penalties, not the total turnover. The same was reinforced by the apex court in India as well, back in 2017. This provision comes as a surprise, and even more so as it was not mentioned in the previous version of the Bill, on which public consultations were undertaken. The provision can prove to be detrimental for the investment climate, ease of doing business and economic growth of India. As warned by Vijay Kelkar and Ajay Shah in their book In service of the Republic: The Art and Science, a badly drafted law can raise more problems rather than provide solutions as intended.

The particular provision seems to be inspired by the European Union (EU), without understanding the nuanced contours of policy and practice there. In the EU, a similar cap exists for levying a maximum of 10 percent fine on the overall annual turnover of a company. But the EU law highlights the need for fining policy guidelines and lays down the specifications very clearly in the policy documents.

However, certain welcome proposed amendments in the Bill include the definition of control as material influence, commitment and settlement mechanism, deal value threshold to regulate mergers and combinations, and reduction in procedural timelines from 210 days to 150 days.

Lack of Holistic Stakeholder Consultation

This recent version of the Bill which includes these key changes has not undergone a consultative process adequately. The penalty provision has been brought to light only after the Bill was passed by the Lok Sabha. The draft bill on which public consultations happened did not include this provision. So hardly any concrete policy discussion took place on such issues before the passage of the Bill. Reportedly, the Lok Sabha passed the Bill amid chaos and sloganeering without any actual discussion on the provisions of the Bill.

Due process should be followed before the passage of any Act, especially such a crucial one. The Bill seeks to prevent anti-competitive practices, promote, and sustain fair competition, protect consumer interests, and ensure freedom of trade. These are issues which significantly impact the Indian economy and growth. Therefore, consultation and discussions should have been undertaken more seriously. The hasty passage of the Bill raises concerns.

A Missed Opportunity?

The present version of the amendment Bill followed a slew of noteworthy deliberations and developments. These included the previous Bill drafts, the Competition Law Review Committee (CLRC) and the most recent examination of the Bill by the Parliamentary Standing Committee on Finance. I also participated in the same.

However, it is unfortunate that many recommendations proposed by the committees and policy discussions have been missed and overlooked in the current version of the Bill passed by Lok Sabha. These include provisions related to mandatory consultation between sector regulators and competition authority, as per the practice in the EU, and competition advocacy, among others.

Scope for Excessive Discretion

A few provisions under the recent Bill are ambiguous and have been left for determination through regulations. Thus, the executive can do more harm in designing onerous rules. Furthermore, the Bill vests excessive power with the investigative authority, with the inclusion of the intention to collude through the hub and spoke arrangements as anti-competitive conduct.

Need for Forward-Looking Provisions

The past few years have been replete with changes in the competition landscape globally. Several novel anti-competitive concerns, including increased entry barriers, high concentration of market power, predatory pricing, lock-in effects, network effects, lack of neutrality, consumer behavioural bias, etc. have emerged. Parallelly, there has been a lot of movement and efforts to understand how to regulate such concerns.

For India to pre-empt and be ahead of the curve, it is necessary to inculcate a research and advocacy-driven competition culture. Measures driven in this direction would greatly help in understanding the growing Indian digital economy better and ensuring the promotion of a healthy competition culture.

In order to do this, we have been constantly advocating the adoption of the National Competition Policy, which was drafted in 2011. Furthermore, to also expand the scope of Competition Advocacy, which is covered in the Competition Act of 2002 under Section 49. Moreover, there have been proposals to include collective abuse of dominance provision, introduce a market monitoring mechanism and revive the specialised Competition Appellate Tribunal (COMPAT). It may be relevant to revisit these recommendations and consider futuristic goals.

India is considered a potential investment hub and a leading example of development in the world. The Indian competition regime must take this into account and ensure that India provides a platform for an innovative, lucrative, competitive market for both domestic and international enterprises.

Pradeep S Mehta is Secretary-General at CUTS International. With inputs by Vidushi Sinha and Shiksha Srivastava, Senior Research Associates, CUTS International. Views are personal, and do not represent the stand of this publication.

(PRADEEP S MEHTA is Secretary-General at CUTS International. Views are personal, and do not represent the stand of this publication.)

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