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Certain provisions of the Competition (Amendment) Act, 2023 notified
On 18 May 2023, the Ministry of Corporate Affairs (MCA) notified certain provisions of the Competition (Amendment) Act, 2023 (Amendment Act). We highlight key amendments that are now in force, some implications, and also discuss the amendments that are not yet effective. The amendments not yet in force largely include provisions that require further regulations to become operational, such as settlements & commitments, deal value threshold, revised timelines for merger approvals, etc.
Definitions: The amendments and inclusions to various definitions in the Competition Act, 2002 (Competition Act) are now in force.
Some key definitions include those of “commitments” and “settlements” (Section 2(ea) and 2(ua)). However, the substantive provisions setting out the process for these mechanisms have not been notified.
Another important definition that is now in force is “party” to proceedings before the Competition Commission of India (CCI), which identifies specific stakeholders such as consumers, investigated enterprises and enterprises or persons who are impleaded into CCI proceedings (Section 2(ka)).
Additionally, the amendments have also updated the definition of relevant product market to include supply-side substitutability factors (Section 2(t)).
Hub-and-spoke cartels: The Amendment Act expanded the scope of cartelization under Section 3(3) of the Competition Act to include enterprises that may not be direct cartel participants, but “participate or intend to participate in the furtherance of” the cartel. The CCI is now empowered to investigate hub-and-spoke cartels more effectively.
Vertical restraints: The Amendment Act tweaked Section 3(4) of the Competition Act that listed several vertical restraints.
It expanded the scope of vertical restraints to include agreements between enterprises that are not vertically related in any market.
The Amendment Act also excluded agreements between an enterprise and end-consumers from the scope of vertical restraints.
Limitation period for competition cases: The Amendment Act introduced a limitation period of 3 years from the date on which the cause of action has arisen for cases to be brought to the CCI. It also grants the CCI discretion to condone delays in bringing cases, on sufficient cause. (Section 19(1))
Factors for competition impact assessment: The Amendment Act slightly tweaked the factors that the CCI must consider in assessing competitive harm, which now read: “foreclosure of competition” and “benefits or harm to consumers”. (Section 19(3))
Factors for market definition: The updated list of factors that the CCI must consider in defining relevant product and geographic markets are now in force. These are product/service characteristics, switching costs and categories of consumers. (Section 19(6) & (7))
Changes to merger control thresholds: The amendments tweak the Central Government’s existing power to modify thresholds by also allowing it to “keep [thresholds] at the same level” and also consider factors other than the wholesale price index and exchange rate fluctuations when considering such modifications to thresholds. (Section 20(3))
Casting vote by Chairperson: The notified amendment to Section 22(3) will no longer allow the Chairperson a casting vote.
Inquiry process: The CCI is now empowered to reject cases that involve the same facts and issues, if it has already decided these in a previous case. (Section 26(2A))
Expert evidence: The MCA has now notified the provision that empowers parties to call on experts to appear before the CCI during proceedings. Previously, only certain specified categories of representatives were allowed to appear before the CCI. (Section 35(2))
DG’s expanded powers to investigate: The MCA has notified the amendments to Section 41 that expand the DG’s investigative powers, which empower the DG to, among other things, call for information from any person other than a party, retain documents for a period of at least 180 days and to examine on oath a wide range of individuals, including “agents” of a party under investigation and, with the CCI’s prior approval, “any other person”.
Penalty provisions: The MCA has notified only limited amendments that relate to the CCI’s penalty powers. These are:
The power of the CCI to penalise parties or persons for contravention of its orders under particular sections, which now include Sections 6, 43, 44 and 45.
The upper limit of penalties for making false statements and omission to furnish material information is now five times higher, i.e. approx. USD 600,000 or INR 5 crores.
Penalty deposit on appeal: Parties are now required to deposit 25% of penalties imposed by the CCI, prior to filing an appeal before the National Company Law Appellate Tribunal (NCLAT), the statutory appeals body. (Section 53B(2))
Compounding of offences: The MCA has also notified Section 59A, which allows for compounding of offences under Section 42(3) of the Competition Act.
Contempt proceedings before the NCLAT: The MCA has notified the provision empowering NCLAT to initiate contempt proceedings in case of non-compliance with its orders. (Section 53Q read with Section 53U)
CCI’s power to make rules & regulations: The CCI is now empowered under Section 63 and 64, to create rules and regulations that relate to many of the substantive amendments to the Competition Act, which include, among other things, deal value threshold, Green Channel notifications (which secure deemed approval), merger remedies, leniency “plus”, penalty computation, settlements and commitments. The MCA has also notified the provision requiring the CCI to engage with stakeholders while drafting regulations, to ensure transparency.
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