Analysis of Competition (Amendment) Bill, 2020

Introduction:

The Competition (Amendment) Bill, 2020, contained suggestions for amendments to the Competition Act, 2002 while The Monopolies and Restrictive Trade Practices Act of 1969 was repealed and replaced with the Competition Act of 2002.

Monopolies and Restrictive Trade Practices Act, 1969

The Monopolies and Restrictive Trade Practices Act of 1969 was established to prevent economic power from being concentrated in the hands of a few wealthy individuals. The main purpose of this Act was to prevent anti-competitive actions in India that would harm competition. This act failed due to:

• Its vague and potent nature
• Lack of clearly defined procedure
• Cumbersome rules and regulations
• The changing economic and trade environment

It didn’t work as well as it was intended to. As a result, the Raghavan Committee, chaired by SVS Raghavan, advocated repealing the MRTP Act and replacing it with the Competition Act.

The Competition Act, 2002

The activity or state of seeking to earn or win something by conquering or establishing supremacy over others is referred to as competition.

1. Arun Jaitley introduced the Competition Bill, 2001, in the Lok Sabha, and it was passed on November 16, 2002. A bill becomes an act if it is passed. The Competition Act of 2002, often known as the Anti-Trust Law, was enacted. It was enacted by the Indian Parliament and applies to the whole country, except Jammu & Kashmir. This law safeguards consumers’ interests while encouraging free and fair competition. It outlaws anti-competitive agreements, abuses of dominant position, and mergers, and establishes the Indian Competition Commission.
2. Anti-Competitve Agreements: (Section 3)^[1]
   Agreements involving production, distribution, or supply that could have a negative influence on competition in India are deemed illegal.
3. Abuse Of Dominant Position: (Section 4)^[2]
   If any party is found to be engaging in unfair or discriminatory acts, it will be deemed an abuse of the dominant position and will be investigated by the appropriate authorities.
4. Combinations: (Section 5)^[3] and (Section 6)^[4]
   Section 5 states about combinations and Section 6 states about the regulation of combinations. Terms that lead to acquisitions or mergers are combinations. If such combinations cross the limits as put forth by the Act, then the parties involved would be under the scrutiny of the Competition Commission of India. A few examples of combinations are as follows:
   • Combination of Jet Airways and Etihad Airways^[5]
     Jet Airways and Etihad Airways are both involved in the international air transportation business. Etihad had expressed interest in owning a 24 percent stake in Jet Airways as part of an investment arrangement to help the airline grow through joint ventures. Etihad has purchased a 24 percent ownership in the company and has the right to designate two directors out of six shareholder directors, including the board director of the jet.
   • Combination of Tata steel and Corus group^[6]
     Tata Steel acquired Anglo-Dutch Steel on January 31, 2007, in one of the largest cross-border merger deals in history. Corus Group Plc is a company based in the United Kingdom. For a total of $13.7 billion. Tata Corus employs 84,000 employees in 45 countries as a result of the merger. It can manufacture 27,000,000 tonnes of steel per year, making it the world’s fifth-largest steel production. Tata Steel gained access to Corus’ extensive distribution network in Europe as a result of the transaction.
5. Competition Advocacy: (Section 49)^[7]
   CCI stands for the Competition Commission of India. The Government of India formed it in March 2009 under the Competition Act, 2002 for the administration, implementation, and enforcement of the Act. It is a self-contained entity. A maximum of six people makes up the Commission. They are in charge of preserving and promoting consumer interests. The commission advises the Indian government on economic competition and raises public awareness about the problem. Competition advocacy can be seen in the Department of Telecommunications, the TRAI, and the Department of Shipping, to name a few.

The MRTP Act VS The Competition Act

In MRTP Act, there wasn’t/weren’t-

• Expressly defined competition concepts
• Regulations of combinations
• Advocacy role
• Power to impose a penalty
• Provision for statutory authorities to seek the opinion of the CCI
• The government department outside its ambit

In the Competition Act, there is/are-

• Expressly defined competition concepts
• Provision of regulation of combination
• Provision for advocacy
• Power to impose penalty factor
• The statutory authority can seek CCI’s opinion
• The government department within its ambit

The Competition (Amendment) Bill, 2020

Before 2020, The Competition Act, 2002 has already been amended twice, i.e., in 2007 and 2009 -: Competition (Amendment) Act, 2007^[8] & Competition (Amendment) Act, 2009^[9].

On October 1, 2018, The CLRC- Competition Law Review Committee of 2018 was set up by the Ministry of Corporate Affairs to review the Competition Act, 2002. It was in July 2019 that CLRC released the report. The Committee reviewed whether the Act of 2002 was effective enough to deal with the changing market policies or not. The changing economy with digitalization was kept in mind. The Committee sought to suggest the structural and procedural changes in the Act to deal with the current market situations. On behalf of the suggestions of the Committee, the Government drafted The Competition (Amendment) Bill in 2020. This draft was issued on 20th February 2020. The Bill was then asked for public comments.

Suggestions from the Committee

The Competition Law Review Committee suggested to:

Introduce some structural changes in the CCI

The CCI performs too many functions to regulate the provisions of the Act like- Advocacy Functions, Regulatory Functions, Investigative Functions, Adjudicatory Functions. Hence, The Committee felt the need to reduce the burden of the CCI by introducing a governing body in its structure. The governing body could be supposed to perform the advocacy and quasi-legislative functions of the CCI.

To integrate the Director-General (DG) office with the CCI

The Committee felt the need to merge the office of DG with the CCI. It found that the DG office is in no way a separate part from the CCI and that it is a ‘specialized investigative wing of the CCI.

To increase the accessibility of the CCI

The Committee felt the need to introduce some regional offices in different geographical areas as the CCI only works in Delhi currently and this would help increase the accessibility of common people to the CCI easily. 

To introduce a “Green Channel”

The Committee saw the need to speed up the resolution of individual merger and acquisition situations when there is no underlying danger of harm to competition regulations or a significant adverse effect on competition. This provision made it relatively simple for a party to navigate the complexities of the merger control framework.

To add ‘Hub and Spoke’ Agreements

The Committee felt the need to increase the effectiveness of the CCI to prevent anti-competitive agreements and hence suggested adding ‘Hub and Spoke’ Agreements as a type of agreement to the Anti-Competitive Agreements which are:

• Horizontal Agreements- Section 3(3)
• Vertical Agreements -Section 3(4)

In ‘Hub and Spoke’ Agreements, the third-party (hub) passes the sensitive information among two or more competitors (spokes) and leads to collusion among them.

Make it mandatory to issue guidelines

The Committee felt the need to make it mandatory for the CCI to issue guidelines on the imposition of penalty. 

To introduce Additional Enforcement Mechanisms

 The Committee felt the need to do so for the resolution of the anti-competitive conduct cases in a speedier way.

To recognize digital markets

The Committee felt the need to change the restrictive approach of the Competition Act to make it comply with new-age technology. 

Suggestions accepted as Amendments

The suggestions of the Committee that were accepted as amendments and were introduced in the Bill are as follows:

1. Introduction of the Governing Body by the introduction of a new Clause (1A) under Section 8 of the Competition Act. The CCI is made up of the Chairperson and six additional members who are all chosen by the Central Government. They are long-term members (WTMs). The Part-Time Members (PTMs) are a new type of Governing Body member introduced by the Bill. The composition of the Governing Body is provided under Section 8 (1A) of the Bill. The qualifications for the members of the Commission are provided in Sub-Section 2 of Section 8. On the recommendation of the Committee, the Bill seeks to include the knowledge of “administration” or “technology” as the qualification criteria for the appointment of the members of both the CCI and the Governing Body in Section 8 (2). The Bill imposes the Governing Body with advocacy and quasi-legislative functions by introducing a new Section 18A in the Bill.
2. Introduced the merger of the DG office with the CCI. The Committee took into account the model which is followed internationally by the regulators of competition in different nations. The Committee found that many developed countries like the European Union (EU), the UK, the US, and Brazil follow the Integrated Agency Model and there is no such separation of the investigation wing with the regulating body like India. The Committee noticed that many domestic regulatory bodies such as SEBI, IRDAI, PFRDA do not have such separation in their regulatory framework. On this basis, the Committee found the division of the DG office from the CCI as useless. The Supreme Court stated in the case of CCI v Steel Authority of India Ltd. (2010) 10 SCC 744 (SAIL Judgment) that the DG office is a “specialist investigation wing of the CCI.” This establishes that the DG’s office is a part of the CCI rather than a distinct organization. The separation of the DG office and the CCI is simply de jure (a legal state of affairs), not de facto (a state of affairs that is true in fact). The executive and administrative functions are allowed in India to be delegated. The permission of delegation of such functions is also provided in the Indian Contract Act, 1872. The Bill of 2020 provides the power to the CCI and the Governing Body to delegate their executive and administrative functions. The Bill sought the insertion of Sub-Section 13A under Section 13 that specifically deals with the provisions of the power of delegation of the CCI and the Governing Body. It allows both to delegate their power through special or general orders in writing to lower officers. But there is some limit on the power of delegation, as only the executive and administrative functions are supposed to be delegated. The CCI is not allowed to delegate its quasi-judicial function and the Governing Body is not allowed to delegate its quasi-legislative function, as per the recommendation of the Committee. The regional bodies like SEBI (under Section 19 of the SEBI Act), IBBI (under Section 240 of the IBC)^[10] , and PFRDA (under Section 49 of the PFRDA Act), delegate their powers. The delegation of power is an effective mechanism to deal with the workload.
3. Introduction of ‘Hub and Spoke’ anti-competitive activities were done in the draft of the Competition Bill as the observation of the Committee found that there is the possibility that the hub can escape in lack of any provision to punish such practices. It is done by widening the scope of Section 3 (3) and Section 3 (4) by including the anti-competitive activities to be recognized even if those do not come under the scope of horizontal and vertical agreements respectively. The rationale behind the insertion of this anti-competitive agreement is clear to have a better competitive market. The main objective to prevent anti-competitive activities of the Competition Act can be strengthened by this amendment in the Act. In the Hyundai Motors Case, Case No. 36 and 82 of 2014, and the Uber Case, Case No. 37 of 2018, the CCI has recognized the instances of ‘hub and spokes’ agreements. The CCI has elaborated it in the Uber Case and observed such practices as anti-competitive. Also, in the case of Hiranandani, Case No. 39 of 2012, the Court observed that an agreement between a hospital and a stem cell bank was not coming under any of the agreements, neither horizontal nor vertical agreements. Such types of instances need to widen the scope of Section 3 of the Competition Act to include other types of agreements that are anti-competitive. 
4. The introduction of “Green Channel” is one of the major changes that the Bill is supposed to do in the field of combinations. It is an effective way for the approval of combinations. The Competition Act of 2002 had the provision of voluntary notification of mergers in its original form. But Section 6 (2) of the Act was amended in 2007 and the provision of mandatory notification of mergers was introduced. The Green Channel for combinations could provide the parties to waive the need of waiting for the statutory period of 210 days of expiration. If the parties qualify for the channel, they can notify the CCI about the merger through the Green Channel. The pre-consultation of the parties with the CCI is required for filling the notification through the channel. One of the strict requirements of this process is to correct and accurate information about the combination. The timeline for phase 1 for the merger review procedure under Section 19 (1) of the Act is supposed to be reduced to 150 days in the drafted Bill from the 210 days’ timeline in the Act. There are many advantages of the Green Channel that were highlighted by the Committee in its report:
   • Automatic route for the approval of combinations
   • Reduce the time and cost of transactions
   • Minimal regulatory compliance
   • No adverse effect on the function of the CCI
5. The introduction of the settlement and commitment mechanism in the antitrust proceedings. This is a mechanism to seek remedies from the parties to an antitrust proceeding. There is no express provision of settlement and commitment mechanism in the Competition Act but in implied form, the CCI is empowered to provide some settlement in the cartel cases. The main rationale behind the insertion of the settlement and commitment mechanism in the antitrust cases is the need for the speedy resolution of cases. The settlement mechanism requires the party to agree on the commission of guilt and make a remedy for the victim itself. In the case of the Tamil Nadu Film Exhibitor Association v CCI, 2015, the Madras High Court recognized the powers of the CCI to do settlement under Section 27 of the Competition Act, 2002. The Committee took it as a support for the need for the introduction of express provisions for the settlement mechanism in the Act. Many regional regulatory bodies provide for the settlement mechanism for the resolution of cases. SEBI [under Section 15B of the Settlement Mechanism SEBI Act, 1992 and SEBI (Settlement Proceedings) Regulation, 2018] and Income Tax Act [under Section 245 B of the Income Tax Act, 1961 and the Income Tax Settlement Commission (Procedure) Rules, 1997] provides for the settlement mechanism. Not only the regional regulatory bodies but also the international regulatory bodies follow up on the settlement mechanism. Countries like the EU, UK, and Singapore are examples of this.

Conclusion

I would like to conclude by stating that I believe these amendments will bring about a positive change and that this bill must go in the direction of becoming an Act. Demerits are bound to be there. But if merits are many, then those should not be ignored owing to few demerits. My kind appeal to the authorities to make this bill an Act soon. This is because if The Competition (Amendment) Bill, 2020 becomes The Competition (Amendment) Act, 2020, then it will prove to be very beneficial.

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References:

[1] The Competition Act, 2002.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Evolution of Competition Commission of India in the Airline sector: A critical study of Jet and Etihad Airways Combination – CCLE, https://www.icle.in/resource/evolution-of-cci-in-the-airline-sector-a-critical-study-of-jet-and-etihad-airways-combination/ (last visited Oct 25, 2021).

[6] Tata Steel Acquiring Corus plc: A Case of an emerging MNE acquiring a traditional European MNE, https://xim.edu.in/jcr/Tata.pdf.

[7] Ibid at 1.

[8] Introduction Of The Competition (Amendment) Bill, 2007 – Anti-trust/Competition Law – India, www.mondaq.com, https://www.mondaq.com/india/trade-regulation-practices/52606/introduction-of-the-competition-amendment-bill-2007 (last visited Oct 25, 2021).

[9] Competition (Amendment) Act, 2009.

[10] I. B. C. Laws, Section 240 of Insolvency and Bankruptcy Code, 2016 (IBC): Power to make regulations IBC Laws (2018), https://ibclaw.in/section-240-power-to-make-regulations/ (last visited Oct 25, 2021).