The Competition Act, 2002 To Get A Facelift

• Published date: 10 August 2022
• Subject Matter: Corporate/Commercial Law, Anti-trust/Competition Law, M&A/Private Equity, Corporate and Company Law, Antitrust, EU Competition , Cartels, Monopolies
• Law Firm: IndusLaw
• Author: Mr Avimukt Dar, Unnati Agrawal, Parth Sehan and Hrishav Kumar

1. BACKGROUND

1.1. After a long wait, on August 05, 2022, the Central Government introduced the Competition (Amendment) Bill, 2022 ("Bill") amending the current provisions of the Competition Act, 2002 ("Competition Act") in the lower house of the Parliament i.e., the Lok Sabha. The Bill is a culmination of the amendments recommended by: (i) the Competition Law Review Committee in 2019; and (ii) public stakeholders' feedback on the draft Competition Amendment Bill, 2020, in early 2020, to inter-alia overhaul the merger control and antitrust provisions of the Competition Act. This is a laudatory development as upon passing, the Bill will update the Competition Act by providing it with more teeth and flexibility, in line with the changing economic and business reality. Some of the key proposed amendments of the Bill are set out in detail below.

2. KEY PROPOSED AMENDMENTS OF THE BILL

I. Merger control provisions:

A. Introduction of deal-value based thresholds

2.1. The Bill proposes to introduce a new criterion to determine whether any acquisition or merger will require mandatory notification to the Competition Commission of India ("CCI"), i.e., a 'deal value' threshold. As such, the CCI will now be able to review transactions where: (i) the global deal value is in excess of INR 2,000 crore (approximately USD 250 million¹ ); and (ii) either party has 'substantial business operations in India'; provided no exemption is available. The test to determine whether a party has 'substantial business operations in India' will be laid down in the regulations to be issued under the Competition Act. Further, it is unlikely that the small target exemption will be available for transactions notifiable under the 'deal value' threshold.

2.2. As such, the current framework prescribes only asset value and turnover based thresholds for mandatory notification to the CCI, hence, many transactions in the digital markets have escaped the CCI's scrutiny owing to the low turnover generated by the target company. The introduction of 'deal value' threshold is in line with the international best practices and will bring a number of such transactions involving 'asset lite' and 'low revenue' technology start-ups under the CCI's scrutiny.

2.3. However, in order to prevent benign transactions (especially in the traditional markets) from being caught under this criteria (as the proposed monetary threshold is fairly low), it is important that the regulations, in addition to laying down test to determine 'substantial business operations in India', also specify: (i) the sectors/industries to which it will apply; and (ii) methodology for computation of 'deal value' (especially for transactions which involve share swap).

B. Reduction in the timeline to approve a notifiable transaction

2.4. The Bill proposes to expedite the merger review timelines by reducing the timeline for CCI's: (i) formation of prima facie view, i.e., whether a transaction raises competition law concerns or not (from 30 working days to 20 calendar days); and (ii) formation of final view, i.e., approving/ modifying/ disapproving a transaction (from 210 calendar days to 150 calendar days, extendable by 30 calendar days). While this proposal appears to be a business-friendly approach and in line with the Government of India's motto of 'ease of doing business', it may increase the pressure on the CCI which in turn may result in an added burden on the parties. It is likely that the CCI will now only accept merger notifications that are complete and accurate to...