Competition amendment bill, 2022
What is the Competition amendment bill,2022?
Competition amendment bill, 2022 was introduced in the Lok Sabha on 5th August, 2022 and was sent to a standing committee on 17th August, 2022 for further discussion. It aims to amend the competition act, 2002. The Competition Commission of India (CCI) is created by the Act to oversee market competition
What was the need for a new bill?
- The market has evolved: Changes became necessary to maintain and foster market competitiveness as the dynamics of the market rapidly changed as a result of technological breakthroughs, artificial intelligence, and the growing relevance of factors other than price.
- Gun jumping: The term "gun jumping" refers to the failure of merging parties to notify the competition authority of a merger, to implement all or a portion of the merger during required waiting periods, or to coordinate their competitive behavior prior to closing.
- Maintaining fair competition: To ensure the protection of our domestic digital market by empowering the competition commission of india.
- Issue of Acquisition: Section 5 of the act states that parties engaging in mergers, acquisitions, or amalgamations are required to inform the Competition Commission of India of a combination on the basis of assets or turnover.
What amendments will be made to the competition act, 2002?
- Addition of the deal value threshold: Addition of the deal value threshold: Any merger, amalgamation, or acquisition may be considered a combination. Currently, Section 5 states that parties making acquisitions, amalgamations, or mergers must inform the commission of the combination only if it affects their assets or their revenue. A deal value threshold is proposed to be added under the new bill. It will be necessary to notify the Commission of any transaction if the deal value is larger than 2,000 crores.
- Gun Jumping: Instead of the previous penalty of 1% of the asset or turnover the bill now suggests that the penalty for gun jumping will now be 1% of the deal value.
- Exemption of Open Market Purchases: It is suggested to waive the need that stock market transactions and open market purchases notify the Commission beforehand.
- Regulations for Penalties: The Commission will create regulations outlining the severity of certain competitive violations. The party must pay 25% of the penalty sum in order for the National Company Law Tribunal (NCLT) to hear an appeal against the Commission's order.
What is competition commission of India (CCI)?
- It is a statutory body and also a quasi-judicial body
- It enforces the competition act, 2002
- It was duly constituted in March, 2009
- The monopolies and restrictions trade practices act,1969 was repealed by the competitions act,2022 on the recommendations of the raghavan committee
What are the key provisions of the bill?
Regulation of combinations based on transaction value:
-prohibits any person or enterprise from entering into a combination which may cause an appreciable adverse effect on competition
-Any acquisition, amalgamation and merger may constitute a combination
-The prohibition applies to transactions where parties involved have
- Cumulative assets of more than Rs. 1000 crore
- Cumulative turnover of more than Rs. 3000 crore subject to certain other conditions -The bill expands the definition of combinations to include transactions with a value above Rs 2000 crore
Definition of control for classification of combination:
-The act defines control as control or management by one or more enterprises over another enterprise or group
-The bill modifies the definition of control as the ability to exercise material influence over the management, affairs or strategic commercial decisions.
- Time limit for approval of combinations: The new amendment accelerated the timeline from 210 working days to only 150 working days with a conservatory period of 30 days for extensions
- Settlement and commitment in anti-competitive proceedings:
- Entering into anti-competitive agreements
- Abuse of dominant position
- Appointment of director general: CCI to appoint the director general, with prior approval of the government
- Qualification of members of CCI: professional experience of atleast 15 years in fields such as economics, competition matters, law, management or business plus field of technology
- Decriminalization of certain offenses: These offenses include failure to comply with orders of CCI and directions of Director general with regard to anti- competitive agreements and abuse of dominant positions
How will it impact digital mergers and acquisitions?
- Any acquisition, amalgamation and merger may constitute a combination
- Section 5 currently says parties acquisitions,amalgamation,mergers need to notify the commission of the combination only on the basis of asset or turnover
- The new bill proposes to add a deal value threshold
- When business entities are willing to execute a combination, they must inform the commission
- The penalty for gun jumping was a total of 1% of the asset or turnover
- This is now proposed to be 1% of the deal value
What is gun jumping?
The term "gun jumping" refers to the failure of merging parties to notify the competition authority of a merger, to implement all or a portion of the merger during required waiting periods, or to coordinate their competitive behavior prior to closing.
Why were officials of companies like Swiggy, Zomato, Flipkart, Oyo and Ola invited to attend the parliamentary standing committee?
The conference was presided over by BJP leader and former union minister Jayant Sinha. It delved deeply into a number of market competition-related topics, including grievances against well-known e-commerce operators, online aggregators, and industry stakeholders of digital gaming companies. Leading tech-first start-up representatives spoke before the influential Parliamentary Standing Committee on Finance to share their perspective. The government officials talked with the executives from Zomato, Flipkart, Swiggy, Ola, Oyo and All India Gaming Association about their market conduct amid rising anti-competition complaint