GS Paper 3
Syllabus: Indian Economy
Source: TH
Context: The Lok Sabha on Wednesday cleared the Competition (Amendment) Bill, 2022
Aim of the Bill:
Bring in greater regulation of corporates (particularly Big Tech firms)
and promote and sustain competition in markets, protects consumers’ interest, and ensures freedom of trade for market participants.
Background of the bill:
It was introduced by the Ministry of Finance to amend the Competition Act, 2002 to bring it in line with the modern development of new technology and the digital market. In December 2022, the Bill was referred to the Parliamentary Standing Committee on Finance for further scrutiny.
Key Features of the Competition (Amendment) 2022 Act
| Feature | Description | Significance |
| Increases the regulation of combinations based on the ‘Value of Transaction’ | Definition: ‘Combinations’ means mergers, acquisitions, or amalgamation of an enterprise.
Any transaction exceeding ₹2,000 crore would require CCIs approval, helping to bring acquisitions in digital markets (Big Tech firms) under it.
Also, the bill prohibits entering into a combination that may cause an appreciable adverse effect on competition. |
Enhances scrutiny and regulation of larger transactions to prevent anti-competitive practices. |
| Reduces the time limit for approval of combinations | The bill reduces the time limit for CCI approval on such transactions to 150 days from 210 days | Speeds up the approval process for combinations, providing greater certainty for businesses. |
| Expands the definition of ‘control’ for the classification of combinations | Definition: ‘Control’ means, who (individual or other enterprises) exercises influence in the company.
The bill expands the definition of control as the ability to exercise material influence over the management, affairs, or strategic commercial decisions of an enterprise. |
It now provides greater clarity on which transactions will be scrutinized. |
| Broadens the scope of Anti-competitive agreements | Definition: Anti-competitive agreements are any agreement for goods or services which has an appreciable adverse effect on competition in India and is therefore prohibited.
As per the new Bill, even the enterprises or persons not engaged in identical or similar businesses shall be presumed to be part of such agreements if they actively participate in such agreements.
Previously, such entities were exempted.
|
Including participation by unrelated entities, strengthens the regulation of such agreements. |
| Introduces Framework for Settlement and Commitment in anti-competitive proceedings | The bill provides a framework for settlement and commitment for faster resolution of investigations by CCI.
The bill limits the time period for filing information on it to CCI to three years. |
Allows for faster resolution of anti-competitive proceedings and encourages enterprises to self-regulate. |
| Decriminalisation of certain offences | The Bill changes the nature of punishment for certain offences from the imposition of fines to civil penalties. | Reduces the burden on courts and provides a more proportionate punishment for certain offences. |
| Penalties | CCI can impose a penalty of up to 10% of a company’s average turnover in the “relevant market.
“Turnover” will refer to the “global turnover derived from all the products and services by a person or an enterprise” |
Experts say this is the highly contentious provision that will result in higher penalties for global multi-product companies. |
Terms used in the Bill
- Hub-and-Spoke Cartels: Entities not engaged in similar businesses but have influence. The amendment broadens the scope of ‘anti-competitive agreements’ to catch entities that facilitate cartelisation even if they are not engaged in identical trade practices.
- Gun Jumping: Gun jumping refers to the illegal practice of prematurely disclosing information or completing a transaction related to a merger or acquisition before the transaction has been fully approved by regulatory authorities.
- New Age Market: New technology-enabled firms or new types of businesses, that are not under the preview of CCI
Way forward:
‘A National Competition Policy’ is needed in India: E.g. Competition policy has also been adopted and implemented by the UK, Australia, Denmark, Italy, Turkey, Mexico, Hong Kong, Malawi and Botswana.
Conclusion:
With the new changes, the Commission should be better able to manage certain aspects of the New Age market and make its operation more robust.
About CCI
The Competition Commission of India (est. 2009 under the Competition Act, 2002; Ministry Of Corporate Affairs) is a statutory, quasi-judicial body, which primarily pursues three issues of anti-competitive practices in the market:
- Anti-competitive agreements.
- Abuse of dominance.
CCI consists of one Chairperson and six Members who shall be appointed by the Central Government.
Insta Links:
Mains Links
- How would the recent phenomena of protectionism and currency manipulations in world trade affect the macroeconomic stability of India? (UPSC 2018)
