The promotion of competition is vital to the Indian economy

[srikanthchowhan SIR IASGROUP]

The Competition Act:

The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

Background:

The Ministry of Corporate Affairs in October 2018 had set up the Competition Law Review Committee (CLRC) under chairman of Mr. Injeti Srinivas to comprehensively review the Competition Act and suggest substantive and procedural amendments for a robust competition regime.

The CLRC submitted its report in July 2019, and its recommendations were closely reflected in the recent Draft Competition (Amendment) Bill, 2020.

The Draft Bill proposes several amendments to the Act based on the recommendations of the Committee.

Competition Commission of India (CCI):

Competition Commission of India (CCI) is a statutory body of the Government of India responsible for enforcing the Competition Act, 2002, it was duly constituted in March 2009.

Competition Commission of India aims to establish a robust competitive environment.

The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of Raghavan committee.

Through proactive engagement with all stakeholders, including consumers, industry, government and international jurisdictions.

By being a knowledge intensive organization with high competence level. Through professionalism, transparency, resolve and wisdom in enforcement.

Necessity of Competition Commission of India:

Competition laws have been described as the Magna Carta of free enterprise. Competition is important for the preservation of economic freedom and our free enterprise system.

The need for competition law arises because market can suffer from failures and distortions, and various players can resort to anti- competitive activities such as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer welfare.

Thus, there is a need for competition law to provide a regulative force which establishes effective control over economic activities.

During the era in which the economies are moving from closed economies to open economies, an effective competition commission is essential to ensure the continued viability of domestic industries, carefully balanced with attaining the benefits of foreign investment increased competition.

Need for review:

During the past nine years the size of the Indian Economy has grown immensely and India is today amongst the top five Economies in the World and poised to forge ahead further.

In this context, it is essential that Competition Law is strengthened, and re-calibrated to promote best practices which result in the citizens of this country achieving their aspirations and value for money.

The key recommendations of the Competition Law Review Committee are:

1. Introduction of a ‘Green Channel’ for combination notifications to enable fast-paced regulatory approvals for vast majority of mergers and acquisitions that may have no major concerns regarding appreciable adverse effects on competition.
2. The aim is to move towards disclosure-based regime with strict consequences for not providing accurate or complete information.
3. Combinations arising out of the insolvency resolution process under the Insolvency and Bankruptcy Code will also be eligible for “Green Channel” approvals.
4. Introducing a dedicated bench in NCLAT for hearing appeals under the Competition Act.
5. Introduction of express provisions to identify ‘hub and spoke’ agreements as well as agreements that do not fit within typical horizontal or vertical anti-competitive structures to cover agreements related to business structures and models synonymous with new age markets.
6. Additional enforcement mechanism of ‘Settlement & Commitments” in the interests of speedier resolution of cases of anti-competitive conduct.
7. Enabling provisions to prescribe necessary thresholds, inter alia, deal-value threshold for merger notifications.
8. CCI to issue guidelines on imposition of penalty to ensure more transparency and faster decision making which will encourage compliance by businesses.
9. Strengthening the governance structure of CCI with the introduction of a Governing Board to oversee advocacy and quasi-legislative functions, leaving adjudicatory functions to the Whole-time Members.
10. Merging DG’s Office with CCI as an ‘Investigation Division’ as it aids CCI in discharging an inquisitorial rather than adversarial mandate. However, functional autonomy must be protected.
11. Opening of CCI offices at regional level to carry out non-adjudicatory functions such as research, advocacy etc. and interaction with State Governments and State regulators.

Consider the CCI’s independence:

1. The draft bill proposes an overarching governing board that would have general superintendence, direction and management powers over the CCI.
2. As envisioned, this board would comprise not just commission members, but also secretaries from the Union finance and corporate affairs ministries as ex-officio members, and also four part-time members appointed by the Centre.
3. The rationale: to enable better coordination between the CCI and the government, enable expert external assistance to the commission in undertaking key functions, and have structural consistency with other regulators like the Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI).
4. The Union government has been requested to formulate new thresholds for combinations based on certain factors that should ideally be stated in the Act.
5. An attractive proposition is the contemplation of a new index, similar to the Ease of Doing Business, for states to rank them on the competitiveness of their laws and policies, and an amendment in Section 49 to make a cyclic review of their laws and references to the CCI for the same as something to be done with proclivity.

Conclusion:

Prime Minister Narendra Modi inter alia spoke about working on fair competition as one of the four pillars to achieve India’s target of a $5 trillion economy.

In order to attain such an ambitious goal, it is clear that the government needs to design and adopt laws and policies that deliver economic democracy and competitiveness.

In terms of laws, the government proposed far-reaching amendments to the Competition Act, including critical changes to the scope and functioning of the Competition Commission of India (CCI).

It is hoped that with these proposed changes, the Act will prove to be an effective tool of realising the dream of making India a $5-trillion economy, and protecting the interest of the consumers at large by ensuring healthy competition in the economy, leading to efficiency and sustainable economic growth.