It’s been over two decades since India’s market regulator – the Competition Commission of India (CCI), was conceived with the enactment of the Competition Act, 2002. Since then, rapid economic growth and changes in market behaviour have required a relook at the legal framework. The process of future-proofing the law began in 2018 with the appointment of the Competition Law Review Committee (CLRC).
The CLRC suggested wide-ranging changes to introduce a competition law 2.0, which would enable the CCI to address contemporary issues and many of these recommendations found their way into the Competition Amendment Bill, 2022. Given the extent to which the Amendment Bill altered the existing law and its wide-ranging repercussions, it was referred to the Parliamentary Standing Committee on Finance for greater deliberation. The Committee, headed by Jayant Sinha, undertook an extensive research and consultation exercise, which culminated in a report that was presented in Lok Sabha on December 13, 2022.
The Standing Committee Report is both timely and extensive given the magnitude of the task and the short time in which it was completed. The Committee has done a terrific job of parsing through several complex issues and considering a wide range of stakeholder views while making a set of meaningful recommendations to fine-tune the Amendment Bill.
First off, the Report must be complimented on staying razor-focussed on balancing requisite regulation with the ease of doing business. Processes have been tightened, gaps have been filled and shortcomings have been addressed.
Vital Fixes
If I was to take three notable examples of the substantive improvements to the Act, I would highlight: (a) the (re) introduction of the intellectual property (IP) defence in abuse of dominance cases, which allows dominant IP owners to take steps to protect their rights; (b) the specific introduction of the “effects test” for abuse of dominance cases, which requires that conduct of dominant enterprises be evaluated for their actual or potential adverse effect on competition; and (c) the introduction of an intention-based guardrail for so-called “hub and spoke cartels”, which requires actual proof of intention to participate in a cartel, rather than simply acting as a “hub” for the flow of information.
The first two substantive changes were considered by the CLRC but did not find their way into the Amendment Bill and it’s heartening to see the Standing Committee rectifying this omission.
For any law to be effectively implemented, it’s critical to have certain “nuts and bolts” in place. Here again, the Standing Committee does a laudable job of diving into the minutiae of implementation and addressing some of the shortcomings of the Amendment Bill.
Two instances of this “ironing out” exercise are: (a) the removal of the truncated merger review timelines which would have required the CCI to complete its review within 20 days in phase 1 and 150 days overall. While shorter clearance timelines would seem appealing at first, they would have invariably (and ironically) resulted in greater timing burden and uncertainty for the CCI and filing parties through the approval process; and (b) removing the power to interview and depose lawyers representing the companies that are being investigated, which if accepted would have run contrary to every accepted rule of attorney-client privilege and confidentiality. The Amendment Bill had been widely criticised on both these issues and the recommendations of the Standing Committee successfully address them.
But perhaps the Standing Committee’s biggest contribution to improving the law are the significant changes made to the commitments and settlements mechanism.
The Committee’s recommendations make the settlement and commitment procedure more user-friendly by (a) enhancing its coverage to include cartels; (b) not making the admission of guilt a precondition to applying for a settlement or commitment; (c) limiting the rights of “third parties” as part of the commitment and settlement discussions and thereby preserving the confidentiality and sanctity of the process; (d) allowing applicants to either withdraw the application or seek a revision of the terms of such a settlement or commitment; and (e) preserving a consumer's right to seek compensation even in instances where a settlement or commitment has been agreed. These changes go a long way in making the entire system more usable and transparent.
Issues Unaddressed
An analysis of the achievements of the Standing Committee would be incomplete without pointing to the missed opportunities, of which they are a few: first, the lack of concrete guidance on how the value of a transaction will be computed or the substantive business operations of a company will be assessed for determining whether a combination is notified under the proposed “deal value thresholds” (DVT) is unfortunate.
Second, the Committee declined to recommend the inclusion of at least one judicial member in the CCI, only because this issue is being considered by the apex court.
Third, the failure to segregate the functioning of the investigative arm of the CCI – its Director General – from the Commission itself will result in continued constitutional and legal challenges in every case and is a missed opportunity to prevent such litigation.
We will look forward to a lively debate on these recommendations on the floor of the house and to seeing these recommendations make their way into a revised Amendment Bill.
Samir R Gandhi is a co-founder of Axiom5 Law Chambers, a boutique competition law practice, and visiting faculty at the National Law School of India University, Bangalore.
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