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Mains Practice Questions

  • Q. Recently there is an increase in focus on bringing changes in the Competition Act, 2002 to keep pace with time. In this context discuss the proposed changes in the Competition Bill,2022. (250 Words)

    07 Sep, 2022 GS Paper 3 Economy

    Approach

    • Start your answer by giving a brief about the Competition Bill,2022.
    • Discuss the significance of the Competition Bill,2022.
    • Discuss the proposed amendments in the Bill.
    • Conclude by giving a way forward.

    Introduction

    Recently, the Bill to amend the Competition Act, 2002, was finally tabled in the Lok Sabha.Its basic purpose is to bring new changes to keep pace with time and to reform the languishing competition act of 2002.

    Body

    Significance of New Amendments

    • New Age Market: As the dynamics of the market change rapidly due to technological advancements, artificial intelligence, and the increasing importance of factors other than price, amendments became necessary to sustain and promote market competition.
    • Issue of Acquisition: According to section 5 of the act, parties indulging in mergers, acquisitions, or amalgamation need to notify the Competition Commission of India of the combination only on the basis of asset or turnover.
    • Gun Jumping: It happens when the two or more combining parties close a notified transaction before the approval or have consummated a reportable transaction without bringing it to the Commission’s knowledge.
    • Hub-and-Spoke Cartels: A Hub-and-Spoke arrangement is a kind of cartelization in which vertically related players act as a hub and place horizontal restrictions on suppliers or retailers.
      • At present, the prohibition on anti-competitive agreements only covers entities with similar trades that engage in anti-competitive practices.
      • This ignores hub-and-spoke cartels operated at different levels of the vertical chain by distributors and suppliers.

    Proposed Amendments in the Bill

    • Deal value Threshold: The new Bill proposes to add a deal value threshold.Further, it will be mandatory to notify the Commission of any transaction with a deal value in excess of ₹2,000 crores and if either of the parties has substantial business operations in India.
    • Substantial Business Operations:
      • The Commission shall frame regulations to prescribe the requirements for assessing whether an enterprise has substantial business operations in India.
        • It will strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space, a majority of which were not reported earlier, as the asset or turnover values did not meet the jurisdictional thresholds.
    • Speed Up Clearance of Combination:
      • For any business entities wanting to execute a combination, they must inform the Commission.
      • Earlier it had 210 days to approve the combination, after which it is automatically approved.
        • The new amendment accelerated the timeline from 210 working days to only 150 working days with a conservatory period of 30 days for extensions.
          • It will speed up the clearance of combinations and increase the importance of pre-filing consultations with the Commission.
    • Gun Jumping: Earlier the penalty for gun-jumping was a total of 1% of the asset or turnover which is now proposed to be 1% of the deal value.
    • Exemption of Open Market Purchases: It proposes to exempt open market purchases and stock market transactions from the requirement to notify the Commission in advance.
    • Hub-and-Spoke Cartels: 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.
    • Settlements and Commitments: The new amendment proposes a framework for settlements and commitments for cases relating to vertical agreements and abuse of dominance.
      • As in the case of vertical agreements and abuse of dominance, the parties may apply for a commitment before the Director General (DG) submits the report.
    • Other Major Amendments:
      • Provision of Leniency Plus:
        • It allows the commission to give an additional waiver of penalties to an applicant who discloses the existence of another cartel in an unrelated market, provided the information enables the Commission to form a prima facie opinion about the existence of the cartel.
      • Appointment of Director General:
        • The appointment of a Director General by the Commission rather than the Central government gives the Commission greater control.
          • It gives the Commission greater control.
      • Guidelines Regarding Penalties:
        • The Commission will develop guidelines regarding the number of penalties for various competition violations.
          • For an appeal to be heard by the National Company Law Tribunal (NCLT) against the Commission’s order, the party will have to deposit 25% of the penalty amount.

    Way Forward

    • 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.
      • The proposed changes are undoubtedly necessary; however, these are highly dependent on regulations subsequently notified by the Commission.
      • In addition, the government must recognize that market dynamics are constantly changing, so laws need to be updated regularly.

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