Analysis of Draft Competition Amendment Bill, 2020

    India is the developing economy of the world. Therefore, in order to regulate the market, the Government decided to regulate the market in order to prevent unethical trade practices in the economy. The Monopolies and Restrictive Trade Practices Act, 1969[1] came into force on 27th December 1969. The Act aimed for the welfare of the traders and avoided the concentration of power. But after the introduction of LPG it was found that the Act required more strictness and a concrete approach for the market and thereafter, the Competition Act, 2002 [2] came in the picture. The Competition Act, 2002 was enacted to ensure fair and ethical trade practices in the market. On 20th February 2020, the Government introduced Draft Competition Amendment Bill, 2020 in the public domain. The bill has been prepared by the Committee set up in the year 2018 known as Competition Law Review Committee (CLRC) which submitted its report in July 2019.[3]

    Introduction

    After LPG there was a dramatic change in the Indian Economy. The Indian Economy became more flexible and welcoming to the Private Sectors as well as the foreign investments. The Government also thought to have a regulatory authority that will act as a watchdog for the market. The MRTP Act, 1969 was becoming outdated and was not able to control the developing market. In the year 1999, a Committee was set up to recommend a legal reform that would transform the Indian Market Regulation. The committee was known as Raghavan Committee and prepared the report known as Raghavan Committee Report. The Report was based on the concept of the Anti-Trust Law of the US and the Sherman Law. The recommendations of the committee were taken into consideration and then in 2002 Competition Law was implemented. 

    The Competition Act, 2002 provided for economic development in the market. The act also aimed for fair competition in the market as well to protect the consumers from unethical and unfair practices in the market.

    The Competition Act provides four main concepts. The Act includes the Appreciable Adverse Effect of Competition, Cartelisation, Abuse of Dominance, and Competition Advocacy. It not only acted as a guardian to the market but also acted as a welfare tool for the consumers. It also aimed to create a Competition Commission and eliminate monopoly from the market.

    Competition Law Review Committee Report (CLRC)

    As stated earlier that due to change in the Indian Economy the government of India resorted to making the legal reforms stricter and evident to secure the Indian market from outsiders who are not trading with the State. In the year 2018, a committee was set up for reviewing the Competition Act, 2002. The committee gave recommendations i.e. amendments required in the Act for making it more regressive for the outsiders to interfere with the Indian market. The committee was called the Competition Law Review Committee. The committee had submitted its report on 26th July 2019 to the Finance Ministry and the report is published on the website of the Ministry of Corporate Affairs. The Competition Commission of India has opened a public review portal regarding their views on the suggested amendments recommended by the committee. As per the article published in the Hindustan Times, the Finance Minister has asked the CCI to take stricter measures for the betterment of fair trade activities. She has asked the CCI to take immediate suo moto against the outsiders who are not trading with the country. [4]

    Working Process of the Committee

    The Committee [5] met on 31 August 2018 and were divided into four groups. The following groups gave their suggestions and prepared their observation to form the report. The observations were related to the regulatory structure, advocacy, substantive issues of competition law and new age markets, and big data. The committee consisted of the following:

    1. Dr. M.S. Sahoo dealt with the issues related to the Regulatory Structure
    2. Dr. S. Chakravarthy discussed the substantive issues related to the Competition Law
    3. Dr. Aditya Bhattacharjea discussed the concept of advocacy-related with the Competition Law
    4. Dr. Harsha Vardhana Singh dealt with the concept of new age markets and big data

    The Ministry of Corporate Affairs also took the help of Vidhi Centre for Policy Research and to get to the core of the legal aspect and also to understand the International aspects of the Competition law.

    Structure of the Report

    The Report consists of the recommendations provided by the committee. It also includes the recommendations in relation to the Act and related legislation. The recommendations in the report are the ones that are approved and agreed upon by the majority of members of the committee. The report is divided into 10 chapters and four annexures along with the observations of certain members of the committee.

    Analysis of the Report

    Regulatory Framework

    The recommendations made by the committee acknowledge the regulatory framework of the Competition Commission. There have been various instances and precedents regarding the stature of the Competition Commission as a judicial body or as a regulator of the activities in the competitive market. Taking acknowledgment of certain precedents the commission gave their observation for the regulatory architecture of the Competition Commission. In the case of Brahm Dutt v. Union of India [6] The Supreme Court of India has stated that the chairman need not be a person of Judiciary and also that CCI is an expert body appointed as a regulator. In another case Mahindra and Mahindra Ltd. v. CCI [7]. The court itself stated that the CCI has the same role as that of SEBI to act as a watchdog for regulating the competition in the market.

    Introduction of a Governing Body

    As per Section 8 of the Act, [8] the Competition Commission should consist of one Chairperson and 6 members who are appointed by the Central Government. These members should not have less than 15 years of experience in the fields of economics, law, finance, competition etc. [9] The committee has called them the Whole Time Members (WTMs). The CCI has to function as a regulator as well as the watchdog in the market. But at the same time, it is partly adjudicatory as well. Therefore the committee suggested based on their observation that the CCI should consist of six Part-Time Members (PTMs) including the ex-officio persons. Drawing their observation from the Mahindra case The role of CCI is that of the role of RBI, SEBI, IBBI, etc. and the work is done by CCI has required to establish a governing body with a Chairperson, Six Whole Time Members, and Six Part-Time Members including ex-officio members.

    Merger of Director General’s (DG) Office with CCI

    As per Section 16 of the Act, the Director-General is appointed by the Central Government to assist the Competition Commission as per the Competition Act. the director General is answerable to the Central Government. The committee observed that the Director-General is an added and extraordinary support to the adjudication done by CCI. Therefore, the committee recommended that the CCI office should be clubbed with CCI and accountable to it. It becomes the investigating authority to CCI.

    CCI Office Locations and Preparation of Accounts

    Competition Commission is fully functional in Delhi. There are no more offices of CCI in India. The committee has suggested that CCI should have fully functional offices in different locations of the country. 

    As per Section 5 of the Act, CCI is mandated to prepare the financial statements and the rules are laid for the same. Also, the accounts have to be prepared on the basis of the instructions given to them by the Ministry. The Committee recommended that the CCI should prepare the accounts in a detailed way in order to strengthen the commission.

    Appellate Authority

    An appellate authority should be set up in order to deal with the cases related to Competition Law. Therefore the act has stated to form COMPAT, that is Competition Appellate Tribunal. [10] But after the Finance Act, 2017 [11] suggested dissolving COMPAT and the cases should be given to NCLAT that is National Company Law Appellate Tribunal. The NCLAT had cases related to Company Law and further when IBC (Insolvency and Bankruptcy Code) came into the picture the cases of the code also given to NCLAT. The workload and burden tripled itself and the members were also less for the adjudication. Therefore the committee recommended increasing the number of members for speedy disposal of the case and also to increase the efficiency of the tribunal.

    Functioning of Competition Commission of India

    The committee suggested the functioning of CCI. The Committee recommended that CCI should conduct meetings on the regular basis. The information regarding the meetings should be informed earlier to the members of the Governing body. The notice of the meeting should also state the agenda. In the meeting, maximum should be present including the Chairperson. There should be voting and maximum members should be present. In order to agree on the agenda two-thirds of members should vote in favor of the agenda. Along with it the summary of the said meeting should be prepared by the Commission and shall be published on the CCI website. The committee also suggested that CCI should have Quasi Legislative and Quasi-Judicial Functions as well. The committee suggested that CCI should prepare and implement draft regulations for better functioning of the commission. The Chairperson along with three Whole Time Members should work for the adjudication of the proceedings.

    Anti Competitive Agreements and Attendant Sections

    The Section states different types of Anti Competitive Agreements.[12] These agreements lead to the Appreciable Adverse Effect on Competition in the Market. The committee is of the view that the agreements as per the Act have been stated well and the CCI should also ensure that the agreements should not prevail inside the market. The committee also included the liability of the third parties. The committee suggested there should be clarifications of the agreements of anti-competitive especially Horizontal Agreements (Section 3(3) and Vertical Agreements Section 3(4)). 

    https://legalreadings.com/role-of-competition-advocacy-in-digital-markets/

    The committee also recommended that CCI should identify the relevant market. The relevant market is categorized on the basis of the relevant product or the relevant geographical indications. 

    The Committee also noted that the Ambit of Section 3 of the Competition Act, 2002 should be widened. The Committee stated that there can be certain agreements that are anti-competitive in nature and since they do not constitute in the Act therefore no penalties or actions are taken in the case. The Committee took note of a precedent that is the Hiranandani case [13] The agreement between the Hospital and the stem cell bank cannot be established as an anti-competitive agreement under Section 3(4) of the Act. Therefore the committee recommended that the Section should include all those agreements which might be anti-competitive in nature but do not fall in the ambit of Section 3 of the Act. The Committee also made the list of factors causing AAEC inclusive and also stated that the list should include all those factors which might lead to AAEC and are not part of the list under Section 19(3) of the Act.

    The Committee took notice of the formation of the hub and also stated that the concept of the hub should also be incorporated in the Section. The committee took help from the Hyundai Case [14] and Uber Case [15]. In the Hyundai case, the concept of the hub was not discussed in the judgment whereas in the Uber Case the concept was elaborated by the Court. The Committee stated that hub should be added under the purview of Section 3(3) of the Act and liability shall be imputed on the same. 

    Inquiry Procedure and Penalty

    The procedure [16]  has been practiced by CCI to ensure that the market does not have any anti-competitive practices and there shall be fair and ethical practices. But it has been seen that there have been enforcement gaps under this section. Therefore the committee has been asked to make a procedure that is more robust. The Committee has asked to make amendments in Section 26(7) and 26(8) of the Competition Act, 2002 [17] so as to clarify and enable CCI to pass the appropriate orders. The committee also recommended that there shall be amendments in Section 53A of the Act as per Section 26(7) and Section 26(8) of the Act. After receiving the report from the Director-General a report of the charges should be made and shall be provided to the respective parties in order to have transparency and accountability in the procedure.

    Section 27 of the Competition Act states that after the procedure has been followed then if the CCI has found that there are anti-competitive practices are existing then a penalty can be imposed. The total penalty will be 10% of the average turnover of the profits earned in the last 10 preceding years. If there are cartels [18] as per Section 3(3) then the penalty would be three times the ten percent of the amount in the last preceding 10 years. [19]

    The Committee took notice of the Excel Corp Ltd. v. CCI and Ors [20] The question was whether total turnover or relatable turnover to be considered in order for the calculation of the penalty. The court held that relatable turnover should be taken into consideration as it will help in giving a more accurate picture for the calculation of the penalty. The Court also stated that if the cartel is related to one product only then it is not justified to include other products of the same enterprise.

    The Committee is of the view that the relatable turnover should be taken into consideration rather than total turnover as stated by the Court. The committee also mandated that there should be the issuance of guidance in regards to the penalty issued by CCI and also stating the reasonable grounds.

    The Committee also aimed to the Extraterritorial Jurisdiction [21] of the Act. As per the Committee, Section 32 should not be amended, and that the inquiry procedure shall be governed under Section 26 and Section 29 of the Act to fill in the enforcement gaps.

    The powers of the Director-General [22] are required to be more clarified. There should be provision for proper rules and obligations in order to conduct an inquiry by DG. The committee also insisted that the provision of search and seizure should also be ensured by the DG as it is the investigating authority of the CCI. The Committee insisted that DG should limit itself to Section 41 of the Act rather than the provisions laid in the Companies Act, 1956. [23]

    Combinations

    The acquisition of one or more than one person or merger or amalgamation of one or more than enterprise then it is known as a combination of such person or enterprise. [24]  The concept of the combination was a part of the Act to check whether the merger or the acquisition does not lead to AAEC in the market.

    Section 5 of the Act states that the enterprise has to notify the CCI about such a combination. The CCI would analyze such combination as to it causes AAEC in the market and if such combination is anti-competitive then the CCI within 210 days has to give notification of the same and within these days the enterprise should not work as a combination with the other enterprise.

    Control

    The term Control has been defined in the Act as the management of affairs of one or more enterprise singly or jointly over the other enterprise or group of one or more than group singly or jointly over other group or enterprise. [25] The committee is of the view the concept of control should be taken in the main picture under Section 5 of the Act and should be considered during the assessment of the combination for AAEC.

    Green Channel Combinations

    The competition in the market has been significantly increased due to an increase in the market activities. The process of a combination is crucial and time-consuming as per the Competition Act, 2002. The committee thinks there is a requirement of a procedure that is effective and efficient at the same time. The Committee is of the opinion that the process green channel should be implemented by the CCI. The process reduced to 30 days so that there shall be no backlog for the CCI.

    Technology and New Age Markets

    In recent years there has been a significant change in market behavior. The development of Information and Technology has given rise to a whole new market. The Market is not restricted to the outside world but also it is available in a digital manner in our homes. The committee is of the view that the development of technology and data should be considered by CCI. The Committee focused on the concept of Price [26] and that it should include non-monetary aspects such as data. The Committee also emphasized increasing the ambit of Section 3 and Section 4 in respect of the new age markets and digitization of the markets. The Committee also emphasized that the Government should formulate a forward approaching the threshold for combinations of the digital markets. The committee also emphasized widening the scope of the Geographic Market [27] and Relevant Product Market [28] as well.

    Competition Advocacy

    The CCI is not only a regulator but also performs administrative and adjudicatory functions as well. The Competition in the market is increasing day and day and the responsibility of the CCI is to regulate the market as well as to safeguard the market from the anti-competitive nature. The Committee observed that CCI has taken certain measures such as spreading awareness of the Law through roadshows, college education, Workshops, and Seminars etc. The CCI has ensured to maintain transparency and accountability for the information. 

    The CCI is also subject to advocacy and advisory functions. When the Central or State Government wants to implement changes in the competition policy they can take reference from the Commission regarding the policy. This is Competition Advocacy

    The Committee has given certain recommendations to widen the scope of advocacy. The Committee recommended that roadshows should not be limited to cities like Delhi or Mumbai. More and More initiatives should be taken in the fields of education of the law and promote awareness and research. The CCI should provide funding in setting up research centers. The Advocacy booklets should be translated in vernacular languages so that more awareness and knowledge can be developed.

    Shortcomings of the Latest Amendment

    1. There has been no procedure in regards to the appointment of Part-Time Members and Ex-Officio  Members.
    2. There has been no separation of powers in regards to the adjudicative and investigative functions.
    3. The process of Compounding of Offences by NCLAT has not been specified by the Committee.
    4. The power to review which was repealed in the year 2007 should have been discussed by the committee.

    Conclusions 

    The Competition in the market has been significantly increased and has changed the current market scenario. The Competition Act, 2002 became a  significant law for safeguarding the interest of the market and also safeguarding the interest of the consumer as well. There were amendments made in the Act especially in the Appellate Authority. But it was high time to review the law and to see whether the current act is functional in the current market or not. The amendments recommended by the committee are a major breakthrough in the field of Competition Law.

    References

    [1]   The Monopolies and Restrictive Trade Practices Act, 1969 (Act 54 of 1969). 

    [2]   The Competition Act, 2002 (Act 12 of 2003).

    [3]   Ministry of Corporate Affairs, “Report of the Competition Law Review Committee” (July 2019).

    [4]   CCI 2.0 to look what is developing globally is available at https://www.hindustantimes.com/business-news/act-on-global-cos-abusing-indian-firms-sitharaman-to-cci/story-ByeJaKS3dYL01dqanJcl0O.html (Last visited on 24 March 2021).

    [5]   Ministry of Corporate Affairs, “Report of the Competition Law Review Committee” (July 2019).

    [6]   Brahm Dutt v. Union of India, AIR 2005 SC 730.

    [7]   Mahindra and Mahindra Ltd. v. CCI, (2019) SCCOnline Del 8032.

    [8]   The Competition Act, 2002 (Act 12 of 2003).

    [9]   The Competition Act, 2002 (Act 12 of 2003), s. 8(2).

    [10]  The Competition Act, 2002 (Act 12 of 2003), s. 53A.

    [11]  Finance Act, 2017, Part XIV of Chapter VI.

    [12]  The Competition Act, 2002 (Act 12 of 2003), s. 3.

    [13]  Shri Ramakant Kini v. Hiranandani Hospital, Powai, Mumbai, Case No. 39 of 2012.

    [14]  Fix Enterprise Solution India Pvt. Ltd. v. Hyundai Motor India Ltd., Case No. 36 and 82 of 2014.

    [15]  Samir Agrawal v. ANI Technologies Pvt. Ltd., Case No. 37 of 2018.

    [16]  The Competition Act, 2002 (Act 12 of 2003), s. 26.

    [17]  The Competition Act, 2002 (Act 12 of 2003).

    [18]  The Competition Act, 2002 (Act 12 of 2003), s. 2(y).

    [19]  The Competition Act, 2002 (Act 12 of 2003), s. 27(b).

    [20]  Excel Corp Ltd. v. CCI, AIR 2017 SC 2734.

    [21]  The Competition Act, 2002 (Act 12 of 2003), s. 42.

    [22]  The Competition Act, 2002 (Act 12 of 2003), s. 41.

    [23]  The Companies Act, 1956 (Act 1 of 1956).

    [24]  The Competition Act, 2002 (Act 12 of 2003), s. 5.

    [25]  The Competition Act, 2002 (Act 12 of 2003), s. 5(a).

    [26]  The Competition Act, 2002 (Act 12 of 2003), s. 2(o).

    [27]  The Competition Act, 2002 (Act 12 of 2003), s. 19(3).

    [28]  The Competition Act, 2002 (Act 12 of 2003), s. 19(4).

    [29]  The Competition Act, 2002 (Act 12 of 2003), s. 49.

    BY- MEDHA MALIK | AMITY LAW SCHOOL, NOIDA

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