Co-authored by Zenia Cassinath (Principal Associate) and Vrinda Gundam (Associate)
On 19 May 2023, various provisions of the Competition (Amendment) Act, 2023 (Amendment Act) were brought into force with effect from 18 May 2023. Set out below is a brief overview of some of the key changes to the Competition Act, 2002 (Competition Act) that have been brought into effect.
The existing provisions of the Competition Act relating to anti-competitive horizontal agreements have been expanded to include any entity that ‘participates or intends to participate in the furtherance of such agreements. As such, by addressing the limited scope of anti-competitive collusion (as presently set out in the Competition Act) and widening it to include all players who participate in or facilitate such activities, the Amendment Act allows the Competition Commission of India (CCI) to also assess anti-competitive coordination taking place through hub and spoke arrangements (e.g., collusion through trade associations) under the cartel provisions of the Competition Act.
The scope of vertical restraints, as envisaged under the Competition Act, has been expanded to also include agreements between enterprises that are not at different stages or levels of the production chain but are in the nature of commercial arrangements discussed in Section 3(4) of the Competition Act. Additionally, the Amendment Act also makes an exclusion for agreements between enterprises and end consumers from the purview of vertical restraints.
Cognisance of Enforcement Matters
The CCI has been barred from entertaining any matter in relation to anti-competitive agreements or abuse of dominance violations unless the information relating to the same has been filed within three years from the date of the cause of action. That said, the CCI has the discretion to take up such matters after the three year time period lapses, if it is satisfied that there was sufficient cause for the delay and its reasons are recorded in writing. Further, the CCI cannot conduct an inquiry in relation to anti-competitive agreements or abuse of dominance violations that are based on facts or issues that have already been decided by the CCI in a previous order.
DG’s Powers of Investigation
The scope of the Director General’s (DG) (i.e. the investigative arm of the CCI) powers to investigate contraventions under the Competition Act have been widened to allow the DG to examine ‘agents’ of the party being investigated which would include such entity’s bankers, legal advisors, and auditors. Further, the Amendment Act also sets out the manner in which the DG must handle documents in its custody and the process that must be adopted while conducting search & seizure operations.
In order to increase transparency during the process of framing and implementing regulations, the CCI is required to publish a draft of the proposed regulations on its website and invite public comments. Thereafter, on or before the date of notifying such regulations, the CCI is also required to provide a general statement responding to such public comments. However, the CCI has been given limited discretion to deviate from this process after recording its reasons in writing if the said regulations are required urgently in the public interest.
The maximum penalty that can be imposed for the omission of material information and submission of false statements has been increased from INR 1 crore (~USD 121,000) to INR 5 crores (~ USD 600,000).
25% of Penalty to be Deposited
Parties who want to appeal a decision of the CCI before the National Company Law Appellate Tribunal will be required to deposit 25% of the penalty amount ordered by the CCI as a condition to such appeal being entertained.
These welcome changes help pave the way for the CCI to be a future-ready regulator that is bringing global best practices into the fold of the Indian regulatory environment. That said, in the absence of guidance from supporting regulations that are yet to be issued by the CCI there still remain some important provisions of the Amendment Act that are due to come in to force such as the deal value threshold, revised merger review timelines, settlements, and commitments process.