Competition (Amendment) Act 2023 – Definition | Amendments | Highlights

Table of Contents

1. Amendments made by the Competition Amendment Act,  2023 at a Galnce
2. Highlights of the Competiton Amendment Act, 2023
3. Overview of Competition Act, 2002
4. Major changes made and proposed in Competition (Amendment) Act, 2023

Check out Taxmann's Competition Laws Manual with Case Laws Digest which is an authentic compendium of Competition Laws in India. What sets this book apart is the unique way of presenting the Amended & Updated text of the Competition Act along with relevant Rules & Regulations, Circulars & Notifications, and Case Laws mapped with the relevant Section of the Act.

It also includes a short commentary in 150+ pages on the Competition Act.

1. Amendments made by the Competition Amendment Act,  2023 at a Galnce

Note: For the words and figures “the Companies Act, 1956”, wherever they occur, the words and figures “the Companies Act, 2013” shall be substituted.

For the figures and word “1 of 1956”, wherever they occur, the figures and word “18 of 2013” shall be substituted.

2. Highlights of the Competiton Amendment Act, 2023

The Competition (Amendment) Act, 2023 was passed by Parliament in April 2023. The Amendment Act has received assent of President on 11-4-2023. Some amendments have been notified and made effective on 18-5-2023, 18-7-2023 and 26-10-2023.

However, amendments in respect of provisions relating to combinations [sections 5, 6, 6A, 29, 29A, 31, 32], settlement [section 48A] and commitment [section 48B and section 48C] are not yet brought into force.

The Amendment Act has made substantial changes in Competition Act and has practically overhauled the Competition Act.

New Concepts in the Competition (Amendment) Act – Many new concepts have been brought in. These are summarized below –

(a) Deemed approval of combination in specified cases [section 6(4) and 6(5)]

(b) Blanket Exemption of provisions relating to combination [section 6(7)]

(c) Exemption to open offer from provisions relating to combination subject to conditions [section 6A]

(d) Penalty for contravention of provisions relating to Anti-competitive agreements [section 3] and Abuse of dominant position [section 4] on basis of global turnover [Explanation (ii) to section 27]

(e) Proposal for modifications by party in combination-thus agreeing to changes through discussions with Commission [section 29A]

(f) Powers of Director General for conducting an inquiry have been considerably enhanced [section 41] [provision effective from 18-5-2023]

(g) Settlement in respect of Anti-competitive agreements [section 3(4) only] and Abuse of dominant position [section 4] on payment settlement amount and other conditions, after report of DG [section 48A]

(h) Commitment in respect of Anti-competitive agreements [section 3(4) only] and Abuse of dominant position [section 4], before report of DG [section 48B]

(i) Issue of guidelines by Competition Commission of India (CCI) [section 64B].

(j) Other comparatively minor changes.

3. Overview of Competition Act, 2002

It is necessary to have an idea of the basic scheme of the Competition Act, 2002, so that proposed charges can be understood better.

The Competition Act, 2002 is designed for following purposes –

• Prohibition of anti-competitive agreements [section 3 of Competition Act].
• Prohibition of abuse of dominant position [section 4 of Competition Act].
• Regulation of combinations (acquisition by merger or amalgamation) [sections 5 and 6 of Competition Act].
• Competition advocacy or culture – Opinion to Central/State Government on effect on competition while Government is forming a policy and promotion of completion advocacy and culture  [section 49 of Competition Act].

Purpose of the Act is to ensure free combination and eliminate abuse of dominant position and thereby protect interests of consumers – The Act does not provide any blanket ban or prohibition on any agreement, dominant position or combination. What is prohibited is there should be no abuse of dominant position or agreement or combination having adverse effect on competition. The purpose of the Competition Act is to ensure free and fair completion and free trade, thereby protecting interests of consumers.

Implementation of Competition Act – An authority named as ‘Competition Commission of India’ (CCI) [In the Act, referred to as ‘Commission’] has been constituted under section 7 of the Competition Act. The Commission will be headed by Chairperson and will have members with specified qualifications and experience. The Commission will function through meetings under section 22 of the Act. Commission is empowered to pass interim orders under section 33 of the Act. Commission can rectify its orders [section 38], but cannot review its orders [section 37 omitted].Commission is empowered to frame regulations under section 64 of the Competition Act.

Office administration of Commission will be handled by Secretary appointed under section 17 of Competition Act.

Director General, appointed under section 16 of the Act, will assist CCI in conducting inquiry into contravention of any of the provisions of Competition Act. His powers and authorities have been specified under section 41 of the Competition Act.

Anti-competitive agreements and Abuse of dominant position – Commission will conduct inquiry into alleged contravention of provisions of Anti-competitive agreements [section 3] and Abuse of dominant position [section 4] under section 19 of the Act on own motion [suo motu]  or on receipt of information or reference. Procedure for inquiry has been specified in section 26 of the Act. After inquiry, Commission can pass suitable order under section 27 or section 28 of the Competition Act.

Combinations – Commission will conduct inquiry into combination under section 20 of the Competition Act suo motu or on receipt of information. Procedure for investigation of combinations has been specified in section 29 of the Competition Act. After inquiry, Commission can try to find amicable solution under section 29A of the Act through discussions. After inquiry, Commission will pass suitable orders under section 31 of the Act.

Penalty – Penalty provisions are contained in sections 42 to 48 of the Act.

Appeal and compensation – Appeal against order of Commission can be filed before NCLAT. The provisions are contained in section 53A to section 53U of the Act. Section 53N of the Act empowers NCLAT to award compensation.

Arrangement of chapters and sections of Competition Act, 2002 – The overall arrangement is as follows:

4. Major changes made and proposed in Competition (Amendment) Act, 2023

The major changes made and proposed changes are discussed below.

4.1 Some Definitions broadened

Definitions of enterprise [section 2(h)] and relevant product market [section 2(r)] have been broadened to ensure that there is no escape route [provision effective from 18-5-2023].

Inclusive definition of ‘party’ [section 2(ka)] has been introduced to broaden scope of persons who can approach Competition Commission of India (CCI), Appellate Tribunal (NCLAT) and Supreme Court [pro-vision effective from 18-5-2023].

References to Companies Act, 1956 in definitions have been replaced by corresponding provisions of Companies Act, 2013 [provision effective from 18-5-2023].

Definition of ‘control’ has been broadened. The present definition of ‘control’ requires actual control over other enterprise, while in substituted definition, ‘ability to exercise material influence’ is sufficient [Explanation (a) to section 5].

4.2 Scope of Anti-competitive agreements and Abuse of dominant position broadened

Coverage of Anti-competitive agreements [section 3] and Abuse of dominant position [section 4] broadened to include ‘services’ also [provisions effective from 18-5-2023].

4.3 Coverage of ‘combination’ broadened

Coverage of Combinations [section 5] is any way very broad. Now, it has been further broadened.

4.4 Transaction will be ‘combination’ if value of transaction exceeds Rs. 2,000 crores

Any acquisition will be combination, if value of any transaction, in connection with acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation exceeds rupees 2,000 crore  [section 5(d)] of Competition Act, proposed to be inserted vide Competition (Amendment) Act, 2023 from date to be notified.

“Value of transaction” includes every valuable consideration, whether direct or indirect, or deferred for any acquisition, merger or amalgamation [Explanation (d) to section 5 of Competition Act, proposed to be amended vide Competition (Amendment) Act, 2023 from date to be notified].

4.5 Transaction outside India can get covered if the enterprise has substantial operations in India

Any acquisition outside India will get covered if the enterprise which is being acquired, taken control of, merged or amalgamated has such substantial business operations in India as may be specified by regulations, if value of transaction exceeds Rs. 2,000 crores [proviso to section 5(d) of Competition Act, proposed to be inserted vide Competition (Amendment) Act, 2023 from date to be notified].

If ownership of an Indian subsidiary gets changed due to merger or amalgamation outside India, the transaction may get covered under aforesaid proviso, if required conditions are satisfied. As per section 32 of Competition Act, CCI has power to inquire into any combination, if such combination has appreciable adverse effect on competition in relevant market in India and can pass suitable orders.

4.6 General Exemption from provisions of ‘combination’

Government can grant general exemption if value of assets being acquired are below prescribed limits [section 5(e)].

Regulation of Combinations – It is made clear that application for approval of combination can be made any time after approval of proposal of merger or combination by Board of Directors or execution of agreement or document for acquisition of control, but before consummation of the combination [section 6(2) amended]. [Presently, application is required to be made within 30 days of approval by Board of Directors or date agreement].

Cooling period reduced to 150 days – Cooling period has been reduced from 210 days reduced to 150 days. Thus, combination can be made effective if Competition Commission of India (CCI) does not pass order under section 31 within 150 days [section 6(2A) amended].

4.7 Relaxations from provisions relating to Combinations

Provisions of section 6 have been amended and section 6A inserted to provide relaxations in certain cases of combinations as explained below:

(a) If specified criteria is fulfilled, simple notice under section 6(4) is sufficient and no further approval is required i.e. it will be ‘deemed approval’ [section 6(5)]. Of course, if Commission finds that the criteria is not fulfilled, the Commission can declare the combination void ab initio, after giving hearing [section 6(6)].

(b) Government can grant general exemption to combinations which fulfil prescribed criteria [section 6(7)].

(c) Provisions of ‘combination’ do not apply to acquisition of shares or financial facility by Public Financial Institution, Foreign Portfolio Investor, Bank or Category I alternative investment fund [section 6(9)].

(d) Open Offer on stock exchange as per SEBI Regulations are exempted from provisions relating to combination, if notice is given to Commission and the acquisition is as per regulations issued by Competition Commission of India (CCI) [section 6A].

4.8 Restrictions on Chairperson and members of Commission after retirement

Chairperson and members of Competition Commission of India (CCI) cannot appear before Commission. They cannot accept employment for two years or act as consultant of enterprise which was before Competition Commission of India (CCI), unless they were employees of Government earlier [section 12] [provision effective from 18-5-2023].

4.9 Appointment of Director General

The Commission may, with the prior approval of the Central Government appoint a Director General for assisting CCI in conducting inquiry into contravention of any of provisions of the Act and for performing such other functions as are, or may be provided, by or under the Competition Act [section 16(1) of Competition Act – The words in italics substituted vide Competition (Amendment) Act, 2023 from 18-7-2023. The earlier words were – Central Government may, by notification].

4.10 Commission can enter into memorandum or arrangement with any foreign agency

Competition Commission of India (CCI) can enter into memorandum or arrangement with any foreign agency for purpose of its duties and functions, with previous approval of the Central Government [proviso to section 18].

4.11 Three year time limit for submitting information in respect of Anti-competitive agreements and Abuse of dominant position

Information in respect of alleged contravention of provisions relating to anti-competitive agreements [section 3(1)] or Abuse of dominant position [section 4(1)] should be submitted within three years, unless Commission is satisfied that there was sufficient cause for delay in filing information [first and second proviso to section 19(1)] [provision effective from 18-5-2023].

4.12 Chairperson will not have casting vote in meetings of Commission

Chairperson of Competition Commission of India (CCI) will not have casting vote in meetings of Commission [section 22] [provision effective from 18-5-2023].

4.13 Procedure for conducting inquiry in respect of Anti-competitive agreements and Abuse of dominant position

The Commission may not enquire into anti-competitive agreements [section 3(1)] or Abuse of dominant position [section 4(1)], if same or identical matter was already decided in earlier proceedings [section 26(2A)] [provision effective from 18-5-2023].

Commission can direct Director General (DG) to carry out further investigations, after DG has submitted its report under section 26(3) [section 26(3A)]. Then DG will submit supplementary report [section 26(3B)] [provision effective from 18-5-2023].

After completion of inquiry in respect of anti-competitive agreements [section 3(1)] or Abuse of dominant position [section 4(1)], Competition Commission of India (CCI) can close the matter, after giving notice [section 26(9)].

4.14 Penalty for Anti-competitive agreements and Abuse of dominant position based on global income or turnover

Penalty for Anti-competitive agreements [section 3] and Abuse of dominant position [section 4] imposed can be upto 10% of average global turnover or income derived from all the products and services by a person or enterprise of last three financial years – Explanation 2 to section 27(b).

The term ‘global turnover or income’ is really misleading. The ‘global turnover or income’ does not mean turnover of all the group companies. What is covered is only ‘global turnover derived from all the products and services (including exports) by a person or an enterprise.  Present practice is only to consider turnover of relevant market of the person or enterprise. Of course, penalty on basis of total turnover of person or enterprise can be a very huge amount, but the penalty has to be commensurate with offence and cannot be so huge as to cripple the person or enterprise and may lead to insolvency.

4.15 Procedure for investigation into combinations

Time limits for various steps specified in section 29 in respect of investigation into combinations have been curtailed to speed up process of investigation into combinations [section 29(1), 29(1B), 29(2), 29(3), 29(4) and 29(5)]

Commission can accept modifications offered by parties or suo motu propose modifications, before proceeding into investigating into combinations [section 29(7)].

4.16 Parties can submit offer for modifications in scheme of combination

Parties can submit offer for modifications in scheme of combination, to overcome objections to scheme of combination as may be raised by Competition Commission of India (CCI). The Commission can itself propose modifications to the scheme and approve scheme with modifications as agreed by parties and approved by Commission [section 29A].

4.17 Order of Commission on Combinations

The procedure has been considerably modified and simplified.

If the Commission does not form prima facie opinion under section 29(1B) in respect of adverse effects of proposed combination, the proposal of combination shall be deemed to have been approved [proviso to section 31(1)].

Commission can outright reject proposal of combination [section 31(2)].

Commission can approve combination with modifications [section 31(3)].

The parties will carry out modifications [section 31(4)].

If the suggested modifications are not carried out, Commission can reject the Combination or declare it void [section 31(5)].

If Commission does not pass any order in respect of combination within 150 days, the combination shall be deemed to have been approved by Commission [section 31(6)].

4.18 Party can call experts or submit expert opinion

Party can call experts to appear before Commission or submit expert opinion during hearing [section 35(2)] [provision effective from 18-5-2023].

4.19 Enhanced powers of Director General during Investigation w.e.f. 18-5-2023

Earlier, the Director General, while carrying out investigation, had only following powers –

(a) Powers of Competition Commission of India (CCI) under section 36(2) – section 41(2)

(b) Powers of Inspector under section 217 of Companies Act, 2013 [corresponding section 240 of the 1956 Act] and section 220 of Companies Act, 2013. [corresponding section 240A of the 1956 Act] – [section 41(3)].

Now, the powers which were available to Inspector under Companies Act are enhanced and specified in section 41 of Competition Act itself. The powers and requirements, effective from 18-5-2023, are summarized below –

(i) Duty of officers, employees and agents of party to produce records and give assistance during investigation by DG [section 41(3)].

(ii) Director General can call for information [section 41(4)].

(iii) Director General can keep the books and documents upto 180 days but even after return to party after 180 days, these can called for again for a period of 180 days. Parties can take copies at their own cost [section 41(5)].

(iv) Director General can examine a person on oath [section 41(6)].

(v) Such examination will be recorded in writing and signed and can be used as evidence [section 41(7)].

(vi) Director General can make application to Chief Metropolitan Magistrate, Delhi for order of seizure of information, books, records [section 41(8)].

(vii) Director General can seek assistance of police or other Government Officer for seizure [section 41(9)].

(viii) Chief Metropolitan Magistrate, Delhi can authorise Director General to enter and search premises and seize records [section 41(10)].

(ix) Such records will be returned after investigation is completed [section 41(11)].

(x) Search and seizure will be as per CrPC [section 41(12)].

All amended provisions of section 41 are effective from 18-5-2023.

4.20 Penalty provisions modified in view of new provisions in the Act

Penalty provisions have been modified as many new provisions have been introduced in Competition Act. In some cases, the word ‘fine’ has been replaced by ‘penalty’. The changes are summarized below.

Penalty for contravention of orders of Commission [Section 42] – The term ‘fine’ has been replaced by penalty, which can be imposed by Commission. This cannot be termed as ‘de-criminalisation’, as even earlier CCI was empowered to impose fine [provision effective from 18-5-2023].

Penalty for failure to comply with directions of Commission [Section 43] – The term ‘fine’ has been replaced by penalty, which can be imposed by Commission [provision effective from 18-5-2023].

Penalty for non-submitting information on combination [Section 43A] – The provisions have been modified to align them with new provisions of section 6 relating to regulation of combinations. Penalty can be upto 1% of value of transaction referred to in section 5(d).

Penalty for making false statement or omission to furnish material information [Section 44] – Maximum penalty leviable increased for Rs. one crore to Rs. five crores, which can be imposed by Commission [provision effective from 18-5-2023].

Penalty for contraventions in relation to furnishing of information [Section 45] – The term ‘fine’ has been replaced by penalty, which can be imposed by Commission [provision effective from 18-5-2023].

Lesser Penalty [Section 46] – The section has been recast. Provision has been made to allow party to withdraw its application for lesser penalty [section 46(2)]. Any other evidence can be used to impose lesser penalty [section 46(3)]. If party discloses another cartel, then penalty of first party can be reduced [section 46(4)].

Contravention by companies and firms [Section 48] – The section has been recast to include provisions relating to cartel.

4.21 Settlement in respect of certain Anti-competitive agreements or Abuse of dominant position

Settlement is a new concept introduced in Competition Act by introducing section 48A. Another concept of commitment has also been introduced by introducing section 48B. Distinction between sections 48A and 48B is that application for settlement is to be made after receipt of report of Director General under section 26(4) by the party (but before final order of Commission), while application for commitment is required to be made after order for inquiry by Director General has been passed by Commission under section 26(1), but before receipt of report of Director General under section 26(4) by the party.

A party can submit application for settlement with specified fees in respect of any inquiry initiated in respect of Anti-competitive agreements specified in section 3(4) or Abuse of dominant position as specified in section 4 [section 48A(1)].

Such offer for settlement is not permissible in respect of cartel under section 3(3) or anti-competitive agreements other than those specified in section 3(4).

Application can be submitted after receipt of report of Director General under section 26(4), but before order is passed by Commission under section 27 or section 28 [section 48A(2)].

The Commission can agree to proposal of settlement on payment of specified amount and on specified terms, considering nature and gravity of contravention [section 48A(3)].

Hearing shall be given to party and Director General and others [section 48A(4)].

Competition Commission of India (CCI) may reject the offer of settlement and proceed with inquiry under section 26 [section 48A(5)].

Procedure for settlement will be as specified by regulations [section 48A(6)].

Appeal cannot be filed before NCLAT under section 53B against order of settlement passed under section 48A [section 48A(7)].

All settlement amounts will be credited to Consolidated Fund of India [section 48A(8)].

If party fails to comply with order under section 48A or 48B or if full details were not disclosed, the order passed under section 48A or 48B stands revoked. Party shall be liable to pay legal costs and inquiry will be restored or initiated [section 48C].

4.22 Commitment in respect of certain Anti-competitive agreements or Abuse of dominant position

Commitment is a new concept introduced in Competition Act by introducing section 48B. Another concept of settlement has also been introduced by introducing section 48A. Distinction between sections 48A and 48B is that application for settlement is after receipt of report of Director General under section 26(4) by the party (but before final order by Commission), while application for commitment is required to be made after order for inquiry by Director General has been passed by Commission under section 26(1), but before receipt of report of Director General under section 26(4) by the party.

A party can submit application with specified fees for commitment in respect of any inquiry initiated in respect of Anti-competitive agreements specified in section 3(4) or Abuse of dominant position as specified in section 4 [section 48B(1)].

Such offer for commitment is not permissible in respect of cartel under section 3(3) or anti-competitive agreements other than those specified in section 3(4).

Application can be submitted any time after order to conduct inquiry by Director General is issued by Commission under section 26(1), but before report of Director General is received by party under section 26(4) [section 48B(2)].

The Competition Commission of India (CCI) can agree to proposal of commitment on specified terms, considering nature and gravity of contravention [section 48B(3)].

Hearing shall be given to party and Director General [section 48B(4)].

Competition Commission of India (CCI) may reject the offer of commitment and proceed with inquiry under section 26 of Competition Act [section 48B(5)].

Procedure for commitment will be as specified by regulations [section 48B(6)]

Appeal cannot be filed before NCLAT under section 53B against order of commitment passed under section 48B [section 48B(7)].

If party fails to comply with order under section 48A or 48B or if full details were not disclosed, the order passed under section 48A or 48B stands revoked. Party shall be liable to pay legal costs and inquiry will be restored or initiated [section 48C].

4.23 Mandatory pre-deposit before filing appeal before NCLAT

No appeal by a person shall be entertained by the Appellate Tribunal (NCLAT) unless the appellant has deposited 25% of that amount in the manner as directed by NCLAT [proviso to section 53B(2)] [provision effective from 18-5-2023].

4.24 Contempt proceedings if order of NCLAT are violated

If any person violates order of Appellate Tribunal (NCLAT), he is liable for contempt proceedings under section 53U of Competition Act [section 53Q] [provision effective from 18-5-2023].

4.25 Compounding of Offences

Any offence punishable under the Competition Act, not being an offence punishable with imprisonment only or imprisonment and also with fine, may either before or after the institution of any proceeding, be compounded by the Appellate Tribunal or a court before which such proceeding is pending [Section 59A] [Provision effective from 18-5-2023].

Compounding of offence under section 42(3) – Section 42(3) of Competition Act provides for imprisonment or fine or both if orders or directions of CCI are not complied with. Thus, violation of provisions of section 42(3) can be compounded under section 59A of Competition Act, inserted w.e.f. 18-5-2023.

4.26 Procedure for issue of Regulations by Commission

Competition Commission of India (CCI) is empowered to issue Regulations under section 64 of Competition Act. Before issuing Regulations, Commission shall issue draft regulations for a specified period. General statement shall be issued on respect of comments received. Commission shall periodically review its Regulations [section 64A] [provision effective from 18-5-2023].

In emergent situations or for internal functioning of the Commission, aforesaid procedure need not be followed, after recording reasons [proviso to section 64A] [provision effective from 18-5-2023].

4.27 Commission to issue Guidelines

Competition Commission of India (CCI) can issue guidelines on provisions of Act, Rules and Regulations [section 64B(1)].

These will not be taken as determination of any question of fact or law by Commission and shall not be binding on Commission [section 64B(2)].

Commission shall publish guidelines as to appropriate amount of penalty for contravention of any provision of Competition Act [section 64B(3)].

The guidelines should be considered while imposing penalty and of any deviation is made, reasons should be recorded for such deviation [section 64B(4)].

The guidelines issued by Competition Commission of India (CCI) shall be published in prescribed form [section 64B(5)].

Section 64B of Competition Act has been notified and made effective on 26-10-2023. Competition (Form of Publication of Guidelines) Rules, 2023 have been notified.