Competition (Amendment) Bill 2023: Big Tech firms’ ‘killer’ acquisitions on radar

Amendments to the competition law

By Neelambera Sandeepan

The Competition Amendment Bill, 2023 was passed by the two houses of the parliament last week and it represents the dawn of the new phase of the competition law in India. Since its enforcement in 2009, this will be the first amendment to the Competition Act, 2002 (Competition Act).

The 2023 Amendment has taken close to 4 years of extensive discussion and deliberations which started in 2019 by way of the Competition Law Review Committee. In 2022 the draft amendment bill was referred to the Parliamentary Standing Committee on Finance for its review before being tabled before the parliament.

The 2023 Amendment is a game changer and is set to bring the tools available under the competition law in India at par with the advanced and nuanced antitrust laws globally. The amendments are forward-looking and capable of handling competition law issues of the future. On one hand, it enhances the powers of investigation and penalty available to the regulator – the Competition Commission of India (CCI), on the other, it also widens the array of resources available to the industry. While the amendment strengthens the overall competition law regime in India, there has been a significant focus on the regulation of Big Tech firms and the amendments reflect this position.

Deal Value Threshold

The 2023 Amendment introduces an additional threshold to the existing jurisdictional thresholds (based on the assets and turnover of the enterprises to the transaction) for notification of mergers and acquisitions. Going forward, transactions that exceed a global deal value of Rs 2,000 crore ($244 million) will require approval from the CCI in the event the target has “substantial business operations” in India. The amendment is aimed at subjecting killer acquisitions to review by the CCI. Killer acquisitions refer to acquisitions made by incumbent firms in niche markets to eliminate competition by potential competitors who have relatively insignificant market presence. Typically, such acquisitions do not trigger merger review given the size of the target but involve substantial consideration. In the past transactions in the digital markets (Facebook’s acquisition of WhatsApp) and real estate sectors have escaped review as they did not trigger the notification thresholds although the resultant impact on competition was substantial. This amendment seeks to subject high-value transactions typically seen in high-tech startups and innovative pharmaceutical sectors to review by the competition regulator.

The amendment has positive intentions to preserve potential and disruptive competitors in dynamic markets. However, successful implementation of the deal value threshold would require significant clarification from the CCI, especially with respect to computation of deal value and what would constitute India nexus.

Settlement and Commitment

One of the significant changes being introduced is the provisions relating to offering voluntary settlement and commitments to the regulator in cases of anti-competitive behaviour in exchange for termination of the investigation. These provisions will reduce the time and cost associated with protracted litigation on the parties as well as the CCI. At the same time, the desired market correction will be expediently achieved.

Given the recent orders of the CCI, which have not only imposed monetary penalties but directed significant changes to the business practices of digital market companies, these provisions are likely to be highly attractive to these companies.

Global turnover to be subjected to penalties

One of the rather surprising amendments is the power given to the CCI to impose penalties on the global turnover of companies. This is a clear departure from the Supreme Court of India’s ruling which laid down the guiding principle for penalties for anti-competitive behaviour as a percentage of the “relevant turnover” i.e., turnover derived from the infringing products or services. This amendment is focused on creating a deterrent effect on companies and encouraging leniency applications and recourse to the newly introduced settlement and commitment provisions.

While all multinational companies operating in India are affected by this amendment, a significant impact is likely on the several Big Tech firms given the slew of ongoing investigations in this sector. Moreover, the Big Tech companies' multiple lines of business and operations across geographies substantially enhance the potential penalty implications for them under this new power.

The 2023 Amendment requires the CCI to issue penalty guidelines, which have been long overdue. The actual impact of the amendment remains to be seen.

The recement amendments address the needs of a rapidly growing and evolving economy in India. The increased digitalisation of the economy has raised novel issues which require the laws to evolve and adapt to the changing environment. The 2023 Amendment is a step in the right direction. Laws are only as good as their implementation and the next phase will require a considered approach by the CCI in formulating guidance and guidelines to achieve the results intended by the lawmakers.

Neelambera  Sandeepan is a partner in Lakshmikumaran & Sridharan attorneys, she handles the law firm’s competition and antitrust practice.