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  • Karan Singh Chandhiok

Report of the Parliamentary Standing Committee on the Competition Bill

Updated: Dec 15, 2022


In 2018, the process of amending the Competition Act, 2002 (Competition Act) was initiated with the setting up of the Competition Law Review Committee (CLRC). Based on the CLRC’s report (released in July 2019), a draft amendment bill was released for public comments in March 2020. In August 2022, the Competition (Amendment) Bill, 2022 was introduced in the Indian Parliament (2022 Bill). The 2022 Bill was referred to the Parliamentary Standing Committee on Finance (Committee) for examination. The Committee's current agenda includes examining issues related to “anti-competitive practices by big tech companies.” The Committee released its report on the 2022 Bill on Tuesday (13 December 2022) (Report). The Report is a mixed bag with some laudable recommendations and some of that merit a more nuanced assessment and re-look. We provide a snapshot of the hits and misses and an overview of the recommendations.

Snap Shot

Hits

Effects-based analysis for abuse of dominance

DG cannot depose or procure information from lawyers

Greater clarity on the “Deal Value Threshold” and local nexus requirement

Parties permitted to withdraw settlement offers

Parties allowed to offer settlements in cartel proceedings

IPR defence introduced in abuse of dominance cases

Reprieve for “innocent” hubs in the hub and spoke cartels

• No changes in the approval timing for mergers


Misses

No clarity on admission for settlements and commitments

Compensation claims will be permitted in cases of settlements

No clarity on the status of an informant in consultations during settlement and commitments

• Appeals from settlements and commitments permitted in certain situations

No provision to make the presence of a judicial member mandatory for final hearings

Material influence prevails as the standard of control, but the scope may be defined by regulations

No comments on some concerning provisions THE HITS


The requirement to look into effects in case of abuse of dominant position: Perhaps the biggest contribution of the Report is the explicit recognition of the requirement to consider effects in cases of abuse of dominant position. Assessment of effects in case of abuse of dominant position has been a point of contention with the Competition Commission of India (CCI) adopting inconsistent positions and more recently, explicitly rejecting the requirement to assess consumer harm or impact on competition in cases of abuse of dominant position.

The Director General (DG) cannot depose or procure information from lawyers: the 2022 Bill gave wide powers to the DG to direct any “agent” of an investigated party to provide information and/or depose them. “Agent” was defined to include legal advisors. The Report recommends that DG should not be allowed to depose legal advisors which include, lawyers employed by a company. To that end, the Report recommends that the 2022 Bill should clarify that the powers of the DG cannot be in contravention of the Indian Evidence Act which protects attorney client privilege.

Clarity on Deal Value Threshold (DVT) and “local nexus”: While the Report recommends retaining DVT, it does provide some reprieve on the determination of DVT. Sympathetic to the concerns around lack of clarity in the calculation of DVT, the Report recommends that the manner of calculation should be clarified by regulations. It also recommends that the notifications may be revised annually. The Report also recommends that the requirement of “local nexus” should be calculated vis-a-vis the target.

Parties permitted to withdraw a settlement offer: The Report recommends that the 2022 Bill should allow a party to withdraw a settlement offer. While the Report recognizes that the ability to withdraw should be given for commitments also it does not recommend a consequent amendment to the proposed clause on commitments.
Parties allowed to offer settlements in cartel proceedings: The Report recommends allowing parties to offer settlements in cartel proceedings as well. This will allow parties an avenue to seek reduction in fine, in addition to the leniency regime. However, it is unclear how this will operate in practice, as the Report notes that “prima facie, admission of guilt should not be mandated”.

IPR defence introduced in abuse of dominance cases: In a much-awaited move, the Report recognises the need to provide protection to IPR holders in cases of abuse of dominance. The Report proposes including a new provision which will allow IPR holders to restrain any infringement and to impose reasonable conditions, as may be necessary for protecting their IPR without being affected by Section 4 of the Competition Act.

Reprieve for innocent hubs in a hub and spoke cartel: The Report acknowledges that the concept is complicated and may cover intermediaries and trade associations who do not participate in a cartel. Recognising the implications of this broad reading, the Report recommends adding a requirement of “intention” before liability can be imputed to all potentially qualifying “hubs”. While including this requirement is well intentioned, it may pose concerns. Whether the recommendation provides the necessary reprieve would depend on how the CCI interprets and applies the requirement to demonstrate intent. Notably, the current standard for “hubs” is “facilitation” which does not require proof of intent.

No changes in the approval timing for mergers: The 2022 Bill proposed to reduce the overall timeline for merger approvals from 210 days to 150 days and the time to form a prima facie view from 30 days to 20 days. After noting the reservations by various stakeholders, including the CCI, the Committee observed that reducing the timelines would put the CCI in a difficult and onerous position. The Report therefore recommends retaining the current timelines (210 and 30 days).

THE MISSES

No clarity on admission in settlements and commitments: The 2022 Bill provides the party being investigated under the Competition Act with the option to settle or offer commitments in respect of the alleged contravention. However, the 2022 Bill does not clarify whether offering settlements or commitments will imply that parties admit to the alleged contravention. The Report, rightly so, recommends that the admission of guilt should not be mandated”. However, it does not recommend any clarificatory amendment to the relevant clauses of the 2022 Bill. A clarification regarding the admission of guilt will certainly be a progressive step to the success of the objective of the provision.

Compensation claims will be permitted in cases of settlements: In what may prove to be a setback to success of settlement regime, the Report recommends that compensation claims should be permitted where the CCI accepts settlement offers. The Report does not clarify why compensations claims are permitted in case of settlement, especially when admission of guilt is not mandated.

No requirement for the CCI to consult “other parties” before accepting settlements and commitments but no clarity on status of informant: The 2022 Bill required the CCI to seek comments from the “party concerned” or “any other party” before accepting settlements and commitments. While the Report laudably removes the obligation to consult third parties, it still leaves room for consultation with the informants (complainants). This overlooks the limited role of informants in the CCI inquiry process. Moreover, applicants will likely be wary of disclosing their proposed settlements or commitments with informants who may be competitors or proxy litigants. Unlike mediations, there is no statutory protection that offers of settlements and commitments cannot be used in subsequent proceedings by the informants or by the CCI itself.

Appeals permitted in cases of settlements and commitments in certain situations: The 2022 Bill provided a complete bar on filing appeals against orders of settlements and commitments. The Report recommends that parties which did not agreeto settlement or commitment proposal, can file an appeal. The intention appears to be to allow the party offering the settlement and commitment i.e., the applicant, to file an appeal. However, it is unclear why the applicant would not agree with the settlement or commitment, especially if it can withdraw its application at any stage. The current wording may also allow the informants to file an appeal and prevent settlements and commitments from providing the quietus they are intended to provide.

No provision to make presence of a judicial member necessary: The Report refrains from providing any observation or recommendation on the issue of the presence of a judicial member during final hearings, as the issue is currently pending adjudication before the Supreme Court of India. While the Report notes the recommendation of the CLRC Report and the judgement of the Delhi High Court on the concerned issue, a recommendation would have been a step in the right direction.

Material Influence is the standard to determine control but scope may be defined by regulation:The Report recommends cementing “material influence” as a standard to determine control, primarily since the CCI has been following this standard. However, adopting the lowest standard to determine control may prove to be burdensome and is likely to result in the notification of a number of combinations with acquisition of mere minority protection rights. The Report is, however, sympathetic to the need for clarity on what would constitute material influence and recommends clarifying the CCI’s position through regulations.

No comments on some concerning provisions:The Report does not deal with a few other concerning provisions of the 2022 Bill like the requirement to pre-deposit part of penalty imposed for admission of appeal, recovery of legal costs by the CCI, and appointment of the DG.

What Next?

We may have to wait a little more for the amended Competition Act. The Report has been presented to the Indian Parliament. The concerned Ministry (Ministry of Corporate Affairs) may now accept or reject the suggestions in the Report and present a revised Bill to the Parliament. The amended Bill is likely to be tabled in the Parliament in the next session between February and March 2023.


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