December 22, 2022
Good morning. In today’s either/view, we discuss whether the Competition (Amendment) Bill, 2022 is progressive legislation. We also look at the distribution of nutrition kits to pregnant women in Telangana, among other news.
📰 FEATURE STORY
Competition (Amendment) Bill, 2022 – Progressive or Ambiguous?
The Indian Competition Act was passed in 2002, but it wasn’t until seven years later that it actually took effect. Changes became necessary to maintain and foster market competitiveness since the dynamics of the market changed rapidly as a result of technological advancements, artificial intelligence, and the increasing importance of factors other than price. The Parliamentary Standing Committee on Finance has called for a series of clarifications and changes in the proposed Competition (Amendment) Bill 2022, but are they a step in the right direction?
Context
The Competition Act of 2002 was passed in order to promote and sustain market competition, safeguard consumer interests, and guarantee market players’ freedom of trade. It set up the Competition Commission of India (CCI) to do away with business practices that hurt market competition. According to the Act, enterprises are not permitted to enter into anti-competitive arrangements that could seriously harm Indian competition or misuse their dominant position.
Additionally, neither individuals nor businesses are permitted to join forces in a way that significantly lessens competition in the relevant Indian market. Acquisition, merger, or amalgamation of one or more businesses are all considered combinations. For CCI’s approval, combinations that meet specific thresholds depending on their assets or turnover must be notified.
India joins a growing number of jurisdictions that have changed their merger control framework by applying the notion of the transaction value to merger and acquisition deals in order to determine if they have an impact on competition. Transactions worth more than ₹2,000 crores should be reported to the Competition Commission of India (CCI), according to the Competition (Amendment) Bill 2022.
VIEW: The Bill is progressive
Every valued consideration, whether direct, indirect, or deferred, would be included in the transaction value. Importantly, the Bill also suggests that the regulator be notified if either party has “major business operations in India.” According to the Competition Act of 2002, the CCI has previously evaluated mergers, amalgamations, and acquisitions based on “asset” or “turnover.”
The Bill expands the list of organizations that can be found to have participated in anti-competitive agreements. Currently, organizations or individuals operating in related industries may be considered parties to anti-competitive agreements. The Bill expands this to also include businesses or individuals who aren’t operating in related industries. Additionally, it offers a structure for agreement and dedication to hasten the conclusion of inquiries into anti-competitive agreements and misuse of dominant position.
The Competition Act of 2002 initially prohibited two types of behaviour: Section 3 dealt with anti-competitive agreements, and Section 4 dealt with the abuse of a dominating position. The new Bill suggests significant changes to these clauses, urging Section 3 to identify hub-and-spoke cartels or agreements in which market participants trade information indirectly through a third party rather than directly. It accomplishes this by stipulating that entities, including those not engaged in the same or related trade, should also be deemed to be parties to the agreement if they actively contribute to its advancement.
The Bill also aims to speed up all processes, which is crucial. For instance, it is suggested that the total time needed for the CCI to decide on a transaction be reduced from 210 days to 150 days, with a 30-day extension.
COUNTERVIEW: Several red flags
A number of industry and trade bodies have expressed concerns against certain provisions of the Competition (Amendment) Bill, 2022. By stipulating that no appeal against a CCI order shall be considered by the National Company Law Appellate Tribunal (NCLAT) unless the appellant has deposited 25% of that amount, the Bill significantly modifies the current Competition Act. The financial industry has expressed worry about the idea by pointing out that the first appeal is a statutory right and that such a strict pre-deposit requirement undermines the parties’ ability to file an appeal.
The Bill introduces a settlement and commitment mechanism for the Indian competition regime for the first time by allowing parties to offer commitments or otherwise settle the dispute by submitting applications to CCI. The Bill is not clear about whether admitting guilt is a prerequisite for filing such applications, though. This point has been stressed by the industry since any insistence on culpability by CCI may expose the companies to compensation claims that may be brought by the harmed parties. This might not motivate the parties to submit such petitions, and the entire idea will become a non-starter.
The business industry has raised concerns about the Bill’s unclear definition of “significant business operations in India” and its ambiguity over whether it applies to the acquirer or the target. As it has been entirely left to the subjective satisfaction of CCI as to what constitutes major commercial operations, corporations run the possibility of being held accountable for gun jumping by CCI (i.e., for failing to disclose mergers and acquisitions transactions to CCI).
Reference Links:
- Control redefined – Financial Express
- Competition (Amendment) Bill: Panel wants annual review of deal valuations – Business Standard
- The Competition (Amendment) Bill, 2022 – PRS India
- Competition (Amendment) Bill, 2022: Responsive policymaking in action – Times of India
- Competition Amendment Bill has important changes, but needs more clarity – Money Control
- The Competition (Amendment) Bill, 2022 – The Hindu
- India Inc red flags several Competition Bill clauses – Hindu Business Line
- We’re a step closer to an overhaul of our competition law – Mint
What is your opinion on this?
(Only subscribers can participate in polls)
a) The Competition (Amendment) Bill 2022 is progressive.
b) The Competition (Amendment) Bill 2022 is ambiguous.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
The Dangerous Agenda Behind Probing Interfaith Marriages
For the Left:
The pangs in birthing new political leaders
🇮🇳 STATE OF THE STATES
Cement plant deadlock (Himachal Pradesh) – The deadlock at the ACC cement plants at Barmana and Ambuja is far from over. The Adani Group, which owns the facilities, blamed the transporters after they had to suspend operations due to losses incurred by high transport costs. Some see this as a retaliation against the newly-formed Congress government in the state that was looking to cut cement rates.
Why it matters: The company was discussing with transport unions on a way to bring down the costs. The state government also issued show-cause notices to the company for closing the plants. The company’s position is that people deserve fair cement prices, but that wasn’t possible because of high transportation costs. The Bilaspur administration met with the truckers but resulted in no common ground.
KCR Nutrition Kits (Telangana) – The state government will launch KCR Nutrition Kits for pregnant women. They’ll be introduced in nine districts to help improve the nutritional status of pregnant women. The kits will benefit 1.25 lakh women, as the government aims to distribute 2.5 lakh kits. It consists of two kits – one during the second antenatal care checkup and the other during the third checkup between 28-34 weeks.
Why it matters: The districts identified were where anaemia deficiency was most prevalent. The state ranks third in maternal mortality. Chief Minister K Chandrasekhar Rao wants the number to reduce since the kits will help increase haemoglobin percentage with proteins, minerals, and vitamins. Per the Centre’s sample registration survey this month, the maternal mortality rate decreased to 43 from 92 in 2014.
Village merger with Chhattisgarh (Odisha) – Villagers in Jamlipara have gotten basic amenities from the Chhattisgarh government and have threatened to merge with the neighbouring state. According to them, despite repeated requests, the Odisha district administration has failed to provide basic amenities. They returned the ration cards issued as a protest. The village doesn’t have drinking water or power, no road connectivity, and no school.
Why it matters: The village has 18 families and shares a border with Chhattisgarh, about 15 km away. Because it has no electricity, people travel to the other state to charge their phones. Most of the students are enrolled in Chhattisgarh. The Chhattisgarh government has provided them with solar lights for farming.
Alcohol smuggling ahead of new year (Gujarat) – As the new year approaches, smugglers have stepped up their game and are using ambulances, trucks, and other transport methods to transport liquor. In one instance, police seized illicit liquor worth ₹7 lakh in Dahod. Most of it was from Madhya Pradesh. Police officials said they had increased patrols along the border areas.
Why it matters: Despite Gujarat being a dry state, the illicit liquor trade has been thriving. The opposition Congress has previously criticised the ruling BJP government for ignoring the crisis. A few months back, 42 people died in Botad and Ahmedabad districts after consuming illicit liquor. Delhi Chief Minister Arvind Kejriwal said the Prohibition Act is being used as cover for the BJP to earn money through the illegal liquor trade.
Rohini Nayyar prize winner (Nagaland) – Sethrichem Sangtam runs the Better Life Foundation, which works with 1,200 farmers in the state to promote sustainable farming. He won the inaugural Rohini Nayyar Prize for Outstanding Contribution to Rural Development. He helps farmers grow fruits like kiwis and apples. The NGO also helps farmers market their products and promotes cooperative societies.
Why it matters: Sangtam was the winner among 102 entries ranging from government to academia. The prize is named after Rohini Nayyar, an economist with the Planning Commission, who died last year. The NGO works with farmers in the Tuensang and Kiphire districts to help them transition from slash-and-burn to settled cultivation.
🔢 KEY NUMBER
₹376.76 crores – Investment in Jammu & Kashmir for 2021-22 was ₹376.76 crores, down from ₹412.74 crores in 2020-21. Government data showed it’s a 55% decrease from the 2017-18 amount of ₹840.55 crores.