The Competition Amendment Bill was passed in the Lok Sabha amid ruckus on Wednesday bringing in a slew of changes in the existing act, including calculation of penalty on global turnover of companies, commitment and settlement regime. The bill has also introduced a threshold deal value that will enable the Competition Commission of India (CCI) to review transactions depending upon their values.
The Competition Bill’s amendments have proposed that the total turnover from all products and services globally will be considered, instead of the previously used methodology of considering only the relevant Indian turnover.
“From a business’ point of view, the consideration of total turnover may lead to ‘unfair and punitive’ outcomes and would also lead to discrimination between enterprises who commit a similar contravention but are penalised differently depending on the expanse of their business,” said Avaantika Kakkar, Partner & head-Competition, Cyril Amarchand Mangaldas.
The bill has also introduced “intention to actively participate” for assessing hub-and-spoke cartels. “Such an inclusion not only increases the number of parties that can be included in a hub-and-spoke cartel investigation, but also increases the level of subjectivity and discretion of the investigating authority,” Kakkar said.
The Competition Bill was originally introduced in the Lok Sabha last August. Thereafter it was referred to the Parliamentary Committee on finance headed by Jayant Sinha.
Most of the suggestions given by the house panel were rejected by the government.
The bill has reduced the time limit for approval of mergers and acquisitions from the existing 210 days to 150 days. The deal value threshold has been made an additional criterion for notifying M&As. This has been done to capture killer acquisitions in digital markets, which were so far falling below the notification criteria because of their asset- and revenue-light business models.
“While certain amendments are business friendly and consistent with the government’s “ease of doing business” mission, others may raise more uncertainty in their implementation. A lot will also depend on the regulations to be issued by the CCI to flesh out many of these broad proposals,” said Pallavi Shroff, Managing Partner, Shardul Amarchand Mangaldas & Co.
Some of the other changes include formal introduction of the leniency plus model--CCI would incentivise parties in ongoing cartel investigations in terms of lesser penalty to disclose information regarding other cartels.
The bill has also brought legislative clarity on the definition of “control”, applicability of compensation claims provisions to settlement orders of the CCI. Material influence’ will be used as the basis for “control”in the target company for CCI approval. This was also one of the suggestions of the standing committee.
“After much back and forth, the much needed amendments should guide the next phase of competition law enforcement by the CCI. The changed business landscape which has seen technology become the focal point across sectors required the law to be updated,” said Ravisekhar Nair, Partner, Economic Laws Practice.
The bill is likely to be tabled in Rajya Sabha next week, according to government sources.