Article By : Sushil Joon
In October 2018, the Ministry of Corporate Affairs (MCA) set up a Competition Law Review Committee (CLRC) to review and suggest amendments for a new and robust competition regime. With an aim to prepare for the possible future challenges, it undertook a comprehensive and detailed assessment of the current act and submitted its report in July 2019. After considerations, the bill was released on 12 February 2020. Out of 50 recommendations proposed by CLRC, 45 have been accepted by MCA[i]. Some of the significant changes in the bill are limited to:
a. Increasing ease of doing business and facilitating the green channel process. It would allow CCI to focus it's time and energy on other essential functions.
b. Explicitly include certain principles in the act which has been developed through judicial decisions over the years.
c. Correcting any possible errors in current recognized practices.[ii]
The proposed bill omits 4 sub-sections, inserts 12 new sections and amends various other sections. Some of the changes in the bill include:
The key highlight of the bill was to introduce the concept of commitment (section 48 A) and settlement (Section 48 B). According to the provision, any party who is willing to commit to fair trade practices in the future confess its guilt even after the proceedings have started can plead for early closure of proceedings and get a discount on penalty imposed. CCI then at its discretion, choose to accept or reject the application for settlement considering the gravity and nature of offence. This would allow for quicker disposal of cases and would allow both parties to be spared against lengthy investigations.[iii] But there appears to be a lacuna in the provision. The act does not specify if the provision would be applicable to the present cases as well and if the party is required to confess its guilt.
The bill gives power to CCI to place new thresholds for merger controls by introducing a provision under section 5. CCI can now set the threshold on the basis of deal value or the transaction size. This amendment has been introduced in the furtherance to capture transactions that happen in digital markets.[iv] This also gives CCI the ability to peruse mergers and acquisitions that often slips under CCI's radar in the technology sector. It often leads to silent market concentration unknown to the user and even the regulator. Some of the examples include Facebook acquiring WhatsApp and Instagram. The main reason for such market concentration is that it is difficult to measure the assets and nature of such concentration in digital markets. But considering the mutable nature of digital markets, such power ought to be used cautiously, or it might affect the ease of doing business and increase business compliance costs.[v]
The definition of cartel has been expanded in the bill. The previous bill mentions only of the producer, distributors and sellers' cartels. The new bill recognizes the buyers’ cartels (section 3 (3)) as well. The same section also includes facilitators of cartel and the hub and spoke cartels. The act aims to penalize every individual who aids in furtherance of a cartel by providing sensitive information. In the case of AC Treuhand[vi] the court held that a consultancy firm could be penalized for facilitating cartels.[vii]On the contrary, nothing has been explicitly mentioned about the hub and spoke cartels.
The bill establishes a governing board consisting of 13 members including a chairperson, 6 full time members, 2 government representatives and 4 part time members. The board would make various regulations pertaining to the administration of CCI. It would also function on behalf of CCI to enter various memorandums and enter, amend and cancel any contract without any statutory intervention. The main objective of introducing a governing board was to bring greater transparency to the functioning of CCI and build up an even more robust governing structure.[viii] But on the contrary to the intentions of the bill, the introduction of the governing board might just do the opposite. Transparency and objectivity might be compromised by government intervention. Independence of the commission is of utmost importance and is imperative for a robust competition law authority. As there would be 2 government officials in the board and the 4 part time members will be appointed by the central government, it is a significant threat against the independence of the CCI considering the fact that the majority of decisions are taken by a simple majority.[ix]
The bill also proposes to protect the holder of Intellectual Property (IP) rights. As of now, the rights are currently restricted to anti-competitive agreements. But as per clause 4A now the rights also extend to imposing reasonable restrictions necessary for the protectionof IP rights and restrain infringement of such rights to proscribe abuse of dominance (Section 4). The bill also extends the scope of rights for which protection is available to IP rights holders.[x] Earlier it was restricted to only 5 statutes but now has been extended to 6 statutes and a residual clause that covers any other law protecting the rights of IPR holders.
As per the new act, all the orders by the CCI passed under specific provisions would be appealable to National Company Law Tribunal (NCLAT) under section 53A. In the case of CCI v. Steel Authority of India[xi], SC taking a strict interpretation of 53A held that appeals would be allowed only against the orders passed by CCI under the sections that are specifically mentioned under section 53A. The consequence of this strict interpretation was that the orders passed after DG's investigation cannot be appealed against. The bill, by making certain amendments in sections 26 and 53A seeks to correct this anomaly.[xii]
Although the amendments introduced are laudable, there are still few more amendments the bill could have proposed. The chief among which is the provision of a judicial member. In the case of Mahindra Electric Mobility Ltd. v. CCI[xiii], Delhi HC passed orders that CCI must have a judicial member present at the time when final orders arepassed. This is imperative considering the fact that important judicial decisions are carried out by CCI. But unfortunately, CCI is stillfunctioning without any judicial member and no amendments have been proposed in this regard.
The CCI also does not have an adequate framework to address competition issues prevailing in Internet markets. Also, the current laws do not take into account privacy concerns while hearing competition related cases (Vinod Gupta v WhatsApp Inc[xiv].).Various big organizations use our personal data as a proxy for a certain price. Our rights may be harmed by such opaque streams of data integration through which services are offered to customers.Appropriate mechanisms should be proposed through which such individual concerns might be addressed[xv].
Another area where CCI could have done a little more is the provision to allow withdrawal of complaints. There are plenty of instances where the informant's dispute had been addressed by settlements. But according to the current act, an investigation once started cannot be withdrawn and ends only after DG ‘s investigation is over. CCI has to then pass an order agreeing or disagreeing with the DG’s recommendation. Such provision allowing withdrawal in cases where an investigation has not even started could save plenty of time and precious resources at CCI's disposal.[xvi]Also, a statutory provision setting up a separate bench of NCLAT tribunal would help in speedy disposal of cases.[xvii]
So in conclusion, most of the changes introduced in the bill are laudable and imperative to the robust and efficient functioning of CCI. But there are still some provisions and amendments as we discussed above which were missing and which could have made a difference.
References :
[i]Karan Chandihok and Deeksha Manchanda, A look at Draft (Competition) Amendment Bill, 2020- Clarity, Transparency, robustness and a bit more to be desired,Bar and Bench, ( April 20, 2020, 12:13 PM), https://www.barandbench.com/columns/a-look-at-the-draft-competition-amendment-bill-2020-clarity-transparency-robustness-and-bit-more-to-be-desired. [ii]Avinash Amarnath and Shrishti Sharma, Draft Competition (Amendment) Bill 2020:Welcome changes and Missed Opportunities, Live Law (April 20, 2020, 2:45 PM), https://www.livelaw.in/columns/draft-competition-amendment-bill-2020-welcome-changes-and-missed-opportunities-155255. [iii]AZB partners, Summary of key changes in the (Draft) Competition (Amendment) Bill 2020, AZB & PARTNERS (April 19, 2020, 9:00 PM), https://www.azbpartners.com/bank/summary-of-key-changes-in-the-competition-amendment-bill-2020/. [iv]Id. [v]IFF, IFF’s response to Draft Competition (Amendment) Bill 2020. Our ask? Hold Big Techs accountable, Internet Freedom Foundation, (April 19, 2020, 9:05 PM), https://internetfreedom.in/read-iffs-response-to-the-draft-competition-amendment-bill-2020-our-ask-hold-big-tech-accountable/. [vi]AC Treuhand v Commission, C-94/14 P. [vii]Avinash Amarnath and Shrishti Sharma, Supra note iii. [viii]Karan Chandihok and Deeksha Manchanda, Supra note ii. [ix]Avinash Amarnath and Shrishti Sharma, Supra note iii. [x]Akanshha Agarwal, Draft Competition (Amendment) Bill, 2020: How life may change for tech firms, Business Standard, (April 20, 2020, 2:00 PM), https://www.business-standard.com/article/opinion/draft-competition-amendment-bill-2020-how-life-may-change-for-tech-firms-120030100856_1.html. [xi]CCI v Steel Authority of India, (2010) 10 SCC 744. [xii]Avinash Amarnath and Shrishti Sharma, Supra note iii. [xiii]Mahindra Electric Mobility Ltd. v. CCI, 2019 SCC Online Del 8023. [xiv]Vinod Gupta v. WhatsApp Inc., 2017 SCC OnLine CCI 32. [xv]IFF, Supra note vi. [xvi]Karan Chandihok and Deeksha Manchanda, Supra note ii. [xvii]Id.
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