What is Competition (Amendment) Bill, 2022?

Amendment Bill UPSC PrepLadder

Enhance your UPSC CSE preparation with our daily dose of Current Affairs. In today’s discussion we will talk about The Competition (Amendment) Bill, 2022. Read further to upgrade your IAS knowledge base and also understand the topic’s relevance to the UPSC syllabus.

For Prelims: Indian Competition Act

For Mains: Indian Competition Act, Enactments, policies and measure to ensure fair competition

Context

A Bill to amend the Indian Competition Act 2002 was recently tabled in the Lok Sabha.

Practice Question

Critically evaluate the salient features of the recently introduced Competition (Amendment) Bill 2022.

About The Indian Competition Act, 2002

  • The act was passed in 2002 but enacted in 2009.
  • The Competition Commission primarily pursues three issues of anti-competitive practices in the market: 
    • Anti-competitive agreements, 
    • Abuse of dominance,
    • Combinations of the above points.
  • The Competition Commission is a statutory body, formed to execute the act across the country.
  • Later a review committee was established in 2019.
  • Committee was formed due to the technological advancements, artificial intelligence, and the increasing importance of factors other than price, thus to sustain and promote market competitiveness there is a need for amendments.
  • The committee proposed several major amendments to the Competition Act, 2002.

Need for the Amendment

  • Jurisdictional thresholds: 
    • Any acquisition, merger or amalgamation may constitute a combination.
    • Section 5 of the 2002 Act says that the parties indulging in a merger, acquisition, or amalgamation need to notify the Commission of the combination only on the basis of ‘asset’ or ‘turnover’.
    • However, a majority of which were not reported earlier, as the asset or turnover values did not meet the jurisdictional thresholds.
  • Gun jumping:
    • It happens when the combining parties close a notified transaction before the approval or have consummated it without bringing it to the Commission’s knowledge.
    • The time period to approve the clearance of the combination took more than half a year, thus the case of Gun-jumping increased drastically.
  • Open Market Purchase: Any acquisitions that involve the open market purchase of target shares must be completed quickly, so the waiting time for clearance may become the transaction unaffordable. 
  • Anti-Competitive Agreements: 
    • The prohibition on such agreements, covering those entities with similar trades, ignoring hub-and-spoke cartels operated at different levels of the vertical chain by distributors and suppliers.
    • 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 (spokes).

Read yesterday’s edition of current affairs on Lord Curzon and the Partition of Bengal , in case you missed reading it.

Significant Change in Dealing with New-Age Market Combinations

  • Deal Value Threshold: 
    • The amendments mandate the parties 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’, to strengthen the Commission’s review mechanism.
  • Combination:
    • To execute a combination, they must inform the Commission, which may approve or disapprove the combination, due to adverse effects on competition, if any.
  • Time period: 
    • To speed up the clearance of combinations and the importance of prefiling consultations, the new Bill Commission seeks to accelerate the timeline to 150 from 210 working days.
    • In addition to the conservatory period of 30 days for extensions, after which it is automatically approved.
  • Gun-Jumping:
    • The penalty for gun-jumping will be 1% of the deal value (earlier, a total of 1% of the asset or turnover). 
  • Open Market Purchases:
    • The bill proposes to exempt such purchases and stock-market transactions.
    • The exemption is subject to the condition that the acquirer does not exercise voting or ownership rights until the transaction is approved and the same is notified to the Commission subsequently.
  • Anti-Competitive Agreements: Its scope is broadened by the amendments, to catch entities that facilitate cartelization even if they are not engaged in identical trade practices.
  • The ‘settlements’ and ‘commitments’ mechanisms: 
    • A framework is proposed for settlements and commitments for cases relating to vertical agreements and abuse of dominance.
    • Settlement is considered after the submission of the report and before the decision of the commission.
    • In vertical agreements and abuse of dominance, the parties may apply for a ‘commitment’ before the Director General (DG) submits the report.
  • Leniency Plus: The commission to give an additional waiver of penalties to those applicants who discloses the existence of another cartel in an unrelated market. 
  • Appointment of the Director General (DG): The Commission will have greater control by appointing DG (who have the power to conduct investigations), instead of Central Government.
  • Consideration of Information: The Commission will only consider information filed within three years of the occurrence of the cause of action. 
  • Penalties and penalty guidelines: 
    • For any false information filed, a penalty of ₹5 crores will be imposed,
    • For failure to comply with the Commission directions, a penalty of ₹10 crores will be imposed. 
    • 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 changing time there is so much need to implement the amendments and in fact necessarily amend the law regularly.

  • Although the proposed amendments depend heavily on regulations that will be notified by the Commission later. Thus the implementation is dependent on regulations. 

News Source: The Hindu

Alo watch a detailed video on Functions of the Speaker of Lok Sabha by M Puri Sir our faculty for Polity, IR & Governance:

Download the Prepladder App to study from India’s Top UPSC Faculty and transform your UPSC Preparation from the Beginner level to the Advanced level. You can also join our Telegram channel for UPSC coaching and to stay updated with the latest information about the UPSC exam. 

Own Your Dream 

Team PrepLadder 

PrepLadder UPSC

Get quick access to the latest happenings across the globe. Articles revolving around factual data that aims to boost your UPSC CSE preparation and make your dreams become a reality!