COMPETITION (AMENDMENT) ACT 2023 – Requirement etc

The Central Government came up with varied provisions of the Competition (Amendment) Act (CAA) 2023, which aimed at amending the Competition Act (CA), 2002. Competition Act (CA), 2002 was aimed to maintain healthy competition among private and non-private firms for the promotion of a conducive environment for business and investments.

What is Competition Act 2002?

Competition (Amendment) Act (CAA) 2023

Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was an act which was restrictive and paused investments. Hence, to overcome the issues of the MRTP Act, it was replaced by the Competition Act 2002. Competition Act 2002 provided for the Competition Commission of India (CCI) as a statutory body to look after competition-related disputes in India.

The act bans anti-competitive agreements, corporate abuse of dominant positions, and combinations (including acquisitions, takeovers of control, and mergers and acquisitions) which may have a conclusive negative impact on competition in India.

Changes in definitions – 2023

  1. The act has broadened the definition of combinations (mergers, acquisitions, or amalgamation of enterprises) for the inclusion of transactions with a value above Rs 2,000 crore. This would make the act more comprehensive and inclusive.
  2. The time limit for approval of combinations has been reduced from 210 days to 150 days. Now, The CCI will have to make an on-face direction on a combination within 30 days, else, the combination will get approved. This would lead to a rampant reduction in the time cost and will increase the efficiency of the firms.
  3. CAA changes the meaning of control as the ability to exercise material influence over management, affairs, or strategic commercial decisions. This would make the act more precise and shall reduce ambiguity in the act.
  4. Companies and firms which are away from identical or similar business activities can also be held accountable for an anti-competitive horizontal agreement (cartelization). Cartelization is considered a non-conducive practice and leads to private monopoly. Thus, the government aims to regulate the same to ensure smooth pricing and supply in the market.

Redressal and Penalty

  1. A complaint against anti-competitive practice has to be filed before the Competition Commission of India (CCI) within 3 years from the date of omission of the action. CCI might even allow the same after the expiry of the said period (3 years). However, this depends upon the discretion of CCI.
  2. Penalty for false statements/ omission of material information has been increased from ₹ 1 crore to ₹ 5 crore. Experts are citing the penalty amount as good and it would create a fear of losing out in the minds of the firms.
  3. The penalties for anti-competitive agreements and abuse of dominant position shall be imposed based on the global turnover obtained from all products and services by the person or the enterprise.
  4. A clause of computing of any offence has been included. Compounding means that the victim has received some sort of compensation from the accused not only in terms of money to avoid the litigation process.
  5. CCI is also empowered to grant an additional lesser penalty if any party makes vital and true disclosure regarding any anti-competition practices or any cartel.
  6. The CAA altered the quality of punishment for certain offences from the imposition of fines to penalties. Some of these are failure to comply with orders of CCI and directions of the Director General about anti-competitive agreements and abuse of dominant position.

Other clauses

  1. As per the amended rules, the Director General (DG), shall now be appointed by the CCI with prior approval of the Central Government. Earlier, Central Government alone appointed the DG.

Merits of the Amendment

  1. The amendment would lead to speedy approvals for the firms and companies. This would reduce their time as well as labour cost increasing their efficiency and competence in the market. Thus, leading to a healthy business environment.
  2. CCI has been empowered to approve the transactions that exceed Rs 2000 crore threshold. This would help to keep a check on the large-scale mergers and acquisition transactions and their related anti-competitive practices and promote fair competition in the market.
  3. The amendment provides for higher penalties and penalties based on global turnover of both goods and services which would automatically lead to a higher amount of penalties. Thus, this act would create high deterrence for firms and companies against unfair practices.
  4. There is a huge increase in the number of transactions under the merger control jurisdiction of the CCI. This is done by the introduction of the deal value threshold and dilution of the threshold for control.
  5. The amendment forces the faster resolution of enforcement proceedings. This would be done through settlements and commitments.

Demerits of the Amendment

  1. There is ambiguity in the understanding of the terms like material influence, transaction value etc. This would make the implementation difficult due to the non-precise nature of the clauses mentioned in the act.
  2. There is an increased burden on parties to have a detailed engagement and discussion with the CCI. This increases room for corruption and governance-related malpractices.
  3. There is a good amount of pressure concerning time on CCI and the parties. This might lead to an increased margin of error.
  4. The act has reduced the threshold of transactions to be notified to CCI. Now, CCI will be flooded with the details of the enormous amount of transactions.

Solutions

  1. Clearly define the terms in the act
  2. Fasten the process of engagement between the CCI and the parties.
  3. Relieve CCI and the parties from the time pressure.
  4. Increase the working efficiency and staff of CCI so that it can handle a large number of transactions with efficiency.

Also Read –

Indian Space Policy 2023-

India-US Summit-

Liberalised Remittances Scheme (LRS)

United Nations – Reforms and UNSC

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