The Financial Express
The Rajya Sabha on Monday passed the Competition (Amendment) Bill, 2023 without any debate amidst continued ruckus by the Opposition for a probe by a Joint Parliamentary Committee into the allegations around Adani Enterprises. The Bill, which seeks to amend the Competition Act, 2002, was passed by the Lok Sabha on March 29.
This has been a key legislative agenda of the government for the current session of Parliament as it proposes to revamp the competition law and bring it in sync with new economic practices and issues. It will empower the CCI to impose stiff penalties based on global turnover of an entity for anti-competitive practices by an additional amendment that was moved by the ministry of corporate affairs.
The rate of penalty for any abuse of dominant position would now be imposed upto 10% of the global turnover of the entity or three times the profits of the companies for the last three preceding financial years. The turnover was earlier for the relevant domestic entity and this amendment can potentially impact multinational companies in India as well as Indian firms with a global presence.
“An explanation was inserted to Section 27 (b) to provide for determination of turnover through regulations framed by the Commission. It was thought that this would provide flexibility to the Commission for imposition of a penalty up to total turnover of an enterprise or a party,” said an official statement. However, to make it more explicit, another explanation is being introduced to state and clarify that turnover would mean global turnover from all products and services of a contravening enterprise, it further said.
Through another key amendment, all deal values involving acquisitions, mergers and amalgamations exceeding Rs 2000 crore having target enterprise in India shall be notified to the CCI for approval before their consummation. It has also introduced a Green Channel route for certain combinations which shall be eligible for deemed approval in a trust-based framework, upon filing of a combination notice. Further, de-minimis exemption for combinations below a certain threshold (measured in terms of asset or turnover) would be provided through rules is proposed to be included in the Act itself.
The revision of combination threshold is currently on the basis of only the wholesale price index or fluctuations in exchange rate of rupee or foreign currencies, are considered relevant for revision of combination thresholds. At present, the government has the option only of either enhancing or reducing the thresholds by way of notification.
The Bill has now provided that other factors, which are “relevant” in the option of the government such as global competitive scenarios or revision of thresholds in other jurisdictions can also be used to review the combination threshold. Further, it has also been provided that the government after considering all these factors may also keep the thresholds at the same level.
The scope of anti-competitive agreements is also being widened to include agreements other
than vertical and horizontal agreements which are anti-competitive in nature such as hub and scope cartels.
“The Bill is an important development and plugs a significant gap in the toolkit of the CCI. One of the major amendments in the Bill is the expansion of the scope of cartels by bringing hybrid anti-competitive agreements (such as hub and spoke cartels) within its ambit,” noted Unnati Agrawal, Partner, IndusLaw.
Pallavi Shroff, Managing Partner, Shardul Amarchand Mangaldas & Co said that whereas 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,” she said.
Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.
