Antitrust law gets more teeth, mergers to win swifter clearances

Context: Parliament cleared the Competition (Amendment) Bill, 2023, paving the way for the government to enact some significant changes to the country’s antitrust regime, including swifter clearances for mergers and acquisitions (M&As).

The Competition (Amendment) Bill, 2023: Key Features

  • Regulation of combinations based on transaction value: The Act prohibits any person or enterprise from entering into a combination which may cause an appreciable adverse effect on competition.  Combinations imply mergers, acquisitions, or amalgamation of enterprises. The prohibition applies to transactions where parties involved have: (i) cumulative assets of more than Rs 1,000 crore, or (ii) cumulative turnover of more than Rs 3,000 crore, subject to certain other conditions. The Bill expands the definition of combinations to include transactions with a value above Rs 2,000 crore.
  • Time limit for approval of combinations: The Act requires the CCI to pass an order on an application for approval of combinations within 210 days.  The Bill reduces this time limit to 150 days.
  • Definition of control for classification of combinations: For classification of combinations, the Act defines control as control over the affairs or management by one or more enterprises over another enterprise or group.  The Bill modifies the definition of control as the ability to exercise material influence over the management, affairs, or strategic commercial decisions.
  • Anti-competitive agreements: Under the Act, anti-competitive agreements include any agreement related to production, supply, storage, or control of goods or services, which can cause an appreciable adverse effect on competition in India.  Any agreement between enterprises or persons, engaged in identical or similar businesses, will have such adverse effect on competition if it meets certain criteria.   These include: (i) directly or indirectly determining purchase or sale prices, (ii) controlling production, supply, markets, or provision of services, or (iii) directly or indirectly leading to collusive bidding.  The Bill adds that enterprises or persons not engaged in identical or similar businesses shall be presumed to be part of such agreements, if they actively participate in the furtherance of such agreements.
  • Settlement and Commitment in anti-competitive proceedings: Under the Act, CCI may initiate proceedings against enterprises on grounds of: (i) entering into anti-competitive agreements, or (ii) abuse of dominant position.  Abuse of dominant position includes: (i) discriminatory conditions in the purchase or sale of goods or services, (ii) restricting production of goods or services, or (iii) indulging in practices leading to the denial of market access.  The Bill permits CCI to close inquiry proceedings if the enterprise offers: (i) settlement (may involve payment), or (ii) commitments (may be structural or behavioural in nature).  The manner and implementation of the framework of settlement and commitment may be specified by CCI through regulations.
  • Decriminalisation of certain offences: The Bill changes the nature of punishment for certain offences from imposition of fine to penalty.  These offences include failure to comply with orders of CCI and directions of Director General with regard to anti-competitive agreements and abuse of dominant position.

Economic Rationale for Competition

  • Competition is the best means of ensuring that the common man has access to the broadest range of goods and services at the most competitive prices.
  • With increased competition, producers will have maximum incentive to innovate and specialise. This would result in reduced costs and wider choice to consumers.
  • Fair competition in the market is essential to achieve this objective. The goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.

The Competition Act

  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws.
  • The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

Competition Commission of India

  • The objectives of the Competition Act are sought to be achieved through the Competition Commission of India, which has been established by the Central Government with effect from 14th October 2003.
  • CCI consists of a Chairperson and 6 Members appointed by the Central Government.
  • It is the duty of the Commission to eliminate practices having adverse effects on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

PYQ 2015: With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?

  1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent.
  2. It has made recommendations concerning sector-specific grants.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (a)


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