India: Competition (Amendment) Bill, 2023: One Step Forward, Two Steps Back?

1. BACKGROUND

1.1. On February 08, 2023, the Central Government introduced the Competition (Amendment) Bill, 2023 ("2023 Bill") in the Lok Sabha (i.e., the lower house of Parliament), and proposed additional amendments to the Competition (Amendment) Bill, 2022 ("2022 Bill")¹ which was introduced earlier in the Lok Sabha on August 05, 2022. Given that the 2022 Bill proposed overhauling provisions of the Competition Act, 2022 ("Competition Act"), it was referred to the Standing Committee on Finance ("Committee") for its review, on August 17, 2022.² Thereafter, the Committee invited suggestions from various stakeholders and tabled its recommendations³ on the 2022 Bill before the Lok Sabha on December 13, 2022.4 The key additional amendments proposed by the 2023 Bill, which may have farreaching consequences, are set out in detail below.

2. ADDITIONAL AMENDMENTS PROPOSED BY THE 2023 BILL

I. Anti-trust provisions:

A. Penalties to be imposed on 'global turnover'

2.1. The Competition Act empowers the Competition Commission of India ("CCI") to impose penalties upon the contravening parties based on their 'turnover'. ⁵ Previously, the Supreme Court in Excel Crop Care Limited v. Competition Commission of India & Anr.⁶ ("Excel Crop Case"), in line with global best practices and the doctrine of proportionality, had clarified that the CCI should impose penalty only on the 'relevant turnover', i.e., an enterprise's turnover pertaining to products and services that have been affected by such a contravention and not on the total turnover.

2.2. In antithesis to the Excel Crop Case, the 2023 Bill proposes to expand the computation of penalty from 'relevant turnover' to 'global turnover derived from all the products and services' by the contravening parties. Thus, this proposal (if passed into law) will result in much higher penalties for global multiproduct enterprises.

B. 'Intention to participate' will amount to cartelisation

2.3. The 2022 Bill proposed to expand the scope of cartel prosecution by bringing hybrid anti-competitive agreements (such as hub and spoke cartels) within its ambit to enable the CCI to treat cartel facilitators (who actively participated) at par with the cartel participants. The 2023 Bill proposes to further expand the scope of cartel prosecution to include non-participants who had 'intended to participate' in the cartel.

2.4. Thus, it appears that the 2023 Bill seeks to introduce an element of mens rea in cartel prosecution. Given the high monetary penalties prescribed under the Competition Act for cartels, it is imperative that a proper standard of proof is adhered to in such cases, so that mere knowledge of a cartel (with/ without the knowledge of its legality) or an omission to file a leniency application does not get unduly equated to an 'intention to participate' in a cartel.

C. Compensation claims to be allowed in settlement cases

2.5. The 2022 Bill proposed to introduce a mechanism for settlements, enabling the parties to propose settlements to the CCI in anti-trust cases (except in cartel cases), after the Director General's ("DG") investigation report is issued but before the CCI issues its final decision ("Settlement"). Additionally, the 2022 Bill proposed to allow aggrieved parties to file compensation claims after the orders of the Supreme Court (in addition to filing them post the orders of the CCI and National Company Law Appellate Tribunal). However, it was not clear if compensation claims could be filed in cases where Settlement was reached.

2.6. The 2023 Bill, in accordance with the Committee's suggestions, has proposed to allow compensation claims even in Settlement cases. Thus, it appears that availing the Settlement mechanism entails a mandatory admission of guilt by the settlement applicant. Given that a settlement applicant may be liable not only to pay a penalty to the CCI but also compensation to aggrieved parties, the Settlement mechanism is likely to have limited success.

II. Merger control provisions:

A. Only target to be considered for the local nexus test under 'deal value' threshold

2.7. The 2022 Bill proposed introducing a new criterion for notifying a merger or acquisition, i.e., a 'deal value' threshold ("DVT"), whereby any transactions, where: (i) the global deal value is in excess of INR 2,000 crore (approximately USD 250 million); and (ii) either party has 'substantial business operations in India', will have to be notified to the CCI.

2.8. The 2023 Bill, in accordance with the Committee's recommendations, has clarified that for evaluating 'substantial business operations in India' (i.e., local nexus), the relevant enterprise will be the target enterprise. This is a welcome change as it will ensure that transactions that are unlikely to cause an appreciable adverse effect on competition in India are not unduly caught under the DVT.

B. Procedural timelines

2.9. The 2022 Bill proposed to expedite the merger review timelines by reducing the timeline for CCI's: (i) formation of a prima facie view, i.e., whether a transaction raises competition law concerns or not (from 30 working days to 20 calendar days); and (ii) formation of final view, i.e., approving/ modifying/ disapproving a transaction (from 210 calendar days to 150 calendar days, extendable by 30 calendar days). While the 2023 Bill proposes no change in relation to the 2022 Bill's proposed reduction in the overall timeline for the CCI's formation of the final view, it proposes to increase the timeline for CCI's formation of its prima facie view from 20 calendar days to 30 calendar days. This is a welcome change as parties can expect faster approvals in non-problematic transactions as the timeline for a prima facie view would still be reduced from the current 30 working days to 30 calendar days.

III. Miscellaneous provisions:

A. Limiting the powers of the DG

2.10. The 2022 Bill proposed to expand the DG's powers of investigation by, inter alia, empowering it to examine the agents of the enterprise (such as legal advisors, bankers, and auditors of an enterprise) in addition to officers, employers, etc., under investigation on oath.

2.11. However, the 2023 Bill has limited the DG's powers to examine, inter alia, only the legal advisors employed by the enterprise (i.e., the in-house legal counsel) under investigation. As such, now the DG cannot examine the external legal advisors. This is a laudatory step as it seeks to preserve the sacrosanct principle of attorney-client privilege enshrined in the Indian Evidence Act, 1872, and the rules of the Bar Council of India.

3. INDUSLAW VIEW

3.1. While the 2023 Bill has ironed out the industry concerns regarding the 2022 Bill (e.g., regarding the DVT), its introduction of provisions regarding computation of penalty on global turnover and mens rea in cartel cases has taken the legal fraternity as well as the business community by surprise, as they have been introduced without inviting any comments from stakeholders. Further, the 2023 Bill did not incorporate some of the key and meaningful recommendations proposed by the Committee, such as: (i) the introduction of an 'effects-based' test; and (ii) extending the intellectual property rights exemption, for abuse of dominance cases; which are in line with the global best practices and could have further bolstered the Indian competition law regime.

3.2. Given the timely introduction of the 2023 Bill (post the review by the Committee) in the first part of the budget session of the Parliament, it is clear that overhauling the Competition Act is a priority for the Government. However, as the first part of the Parliament's budget session ended on February 13, 2023 (there will be a recess from February 14, 2023, to March 12, 2023) and the proposed additional amendments will have significant consequences, the recess will allow the Parliament an opportunity to understand the feedback and the concerns of the stakeholders before incorporating the additional amendments into a law.

Footnotes

1 Available here: https://prsindia.org/files/bills_acts/bills_parliament/2022/Competition%20(Amendment)%20Bill,%202022.pdf.

2 Our detailed analysis of the 2022 Bill is available at: https://induslaw.com/publications/pdf/alerts2022/Infolex_Alert_Competition_Amendment_Bill_August_2022.pdf.

3 Available here: https://prsindia.org/files/bills_acts/bills_parliament/2022/SC%20Report_Competition%20(A)%20Bill,%202022.pdf.

4 Our detailed analysis of the Committee's report is available at: https://induslaw.com/publications/pdf/alerts2022/Infolex-Alert-Competition-Amendment-Bill-Standing-Commitee-Suggestions-December-2022.pdf.

5 Section 27 of the Competition Act.

6 Civil Appeal No. 2480 of 2014, Excel Crop Care Limited v. Competition Commission of India & Anr., order dated May 08, 2017.

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