The Competition (Amendment) Act, 2023 (“Amendment Act”) to amend the Competition Act, 2002 (“Competition Act”) has received the assent of the President of India and was published in the Official Gazette on 11th April 2023. The provisions of the Amendment Act will come into effect on such date(s) as may be notified in the Official Gazette by the Government of India, and the Competition Act will stand amended.

The Amendment Act, inter-alia, aims to amend the substantive provisions of the Competition Act dealing with behavioural aspects and combinations and seeks to amend the provisions concerning procedural and operational matters. Given below are some of the significant changes the Amendment Act aims to bring to the Competition Act.

Merger control

Additional thresholds for notifying combinations based on deal value 

In addition to the asset or turnover thresholds, the Amendment Act adds deal value as another threshold. If the value of an acquisition, merger or amalgamation exceeds INR 20 billion (approximately USD 250 million) and the target enterprise has substantial business operations in India, the transaction would be considered a combination and must be notified to the CCI. The value of the transaction is to include every valuable consideration, whether direct or indirect or deferred, for any acquisition, merger or amalgamation. The CCI will publish regulations to clarify and define what constitutes “substantial business operations” of the target in India. This amendment will substantially increase the number of transactions that require to be notified to the CCI and would cover all transactions that did not meet the asset or turnover thresholds but may have otherwise needed a competition-based assessment/review by the CCI.

Shortened timelines for approval of combinations

The Amendment Act shortens the time period for Phase I review by CCI to 30 calendar days as against the existing timeline of 30 working days. For Phase II, the Amendment Act now proposes a timeline of 150 days for clearance of a combination by the CCI, thus reducing the review period from 210 days (the previous timeline).

Definition of Control

The definition of ‘control’ has been amended by introducing the concept of ‘material influence’. Material influence over the management or affairs or strategic commercial decisions of an enterprise will be considered as the yardstick by the CCI to determine control. Hence, even minority rights could attract review by the CCI if they cause a material influence. Regulations on this aspect will lend greater clarity on what constitutes material influence.

Behavioural 

Introduction of the hub and spoke model 

The Amendment Act contains an additional presumption by which enterprises and associations, even though not engaged in an identical or similar activity and not at the same level of activity, will be presumed to be part of anti-competitive agreements if they participate in the furtherance of anti-competitive agreements. This change has explicitly brought under its purview the hub and spoke arrangements. Further, the amendment proposes a penalty to be imposed if any party intends to participate in a cartel.

Introduction of settlement and commitment framework

The Amendment Act incorporates a provision for a settlement mechanism which would enable a party in contravention of anti-competitive agreements at a vertical level and for abuse of dominant position to offer a settlement to the Competition Commission of India (“CCI”). While considering the settlement terms, the CCI would have the power to revoke its order and approve the settlement.

Penalty based on global turnover

The Competition Amendment Act empowers the CCI to impose penalties based on the global turnover of the enterprises contravening the provision of the Competition Act, which would include all products and services of the enterprise that contribute to its global turnover. This change waters down the effect of the order passed by the Supreme Court of India that had limited the definition of turnover to include only the relevant turnover of the product and services[1].

Leniency Plus

The Amendment Act has provided for a lesser penalty to be imposed on a party or an enterprise that makes a full, true and vital disclosure about another cartel, enabling the CCI to form a prima facie opinion about the existence of the other cartel.

Other important changes

• The definition of the term “enterprise” is amended by introducing the concept of ‘economic activity’, which aligns with the decisional practice of the CCI and the ruling of the Supreme Court of India.
• Clarification that agreements entered into between enterprises and end consumers will not be treated as an anti-competitive agreement.
• Broadening the scope of exclusive supply agreements to include other exclusive dealing arrangements.
• The Amendment Act has introduced a three-year limitation period for filing a reference or information relating to anti-competitive agreements or abuse of dominant position. CCI has been vested with the power to condone delays on sufficient grounds.
• Introduction of a requirement to deposit one-fourth of the penalty for filing appeals against orders of the CCI.

By: Competition Team at Chitale & Chitale Partners 

For any queries, contact suchitra@chitales.com

[1] Excel Crop Care Ltd. vs CCI (Civil Appeal No. 2480 of 2014)