Analysis of Draft Competition Bill

Introduction

In today’s environment all the enterprises are in conflict with each other. There is a need for allocative efficiency so that the income can be distributed efficiently. In 1951 when the Industrial Development Regulation Act came there was a problem of distribution of income as some had large amounts of income whereas others failed to earn it. Article 39B and 39C guarantees balance in the economic power. There is a need for Concentration of economic power. Competition Act, 2002 does the same.

In February, 2020 the Draft Competition Amendment Bill came up for the public comments on it. The Amendment suggests in improvement of the working of the Act and aims to fill the gaps within it.

History of Competition Act

Before the implementation of the Competition Act there was Monopolistic and Restrictive Trade Practises Act, 1969 (MRTP Act) that was playing its role. Monopoly Inquiry Commission drafted MRTP Act and came into force on 19, June, 1970. It aimed at social justice with economic growth. By the way of economic growth it meant improvement in GDP, quality of life, and cultural factor. It was also inspired from the Sherman Act, 1890 which was in the United States.

The MRTP Act prohibited restrictive, monopolistic and unfair trade practises. It encouraged fair dealing and healthy competition.

It was the Sachar Committee found that the MRTP Act hasn’t achieved the objective. There was a need to review the MRTP Act. Some recommendations for the same were provided by them. It was recommended that consumer protection was needed and a separate chapter should be there for unfair trade practises.

The Ragman Committee came in next. It recommended that there was a need for a better mechanism for unfair, restrictive, monopolistic trade practises. The aim was to promote and sustain competition. State monopoly and public enterprises under Article 19(6) under the Constitution has an important role to play. There was a need to define domination properly .So the Competition Act was enacted in 2002. All the cases under the MRTP Act were transferred to Consumer Courts or to Commission under Competition Act.

Competition Act, 2002

Due to the globalisation the Indian economy has become open. This means that now the market of India has to face the competition from all around the world. This is why this Act was enacted so that the market could be protected from unfair competition. Competition Commission of India (CCI) was formed to protect from practises creating an appreciable adverse effect on competition. It also promotes and sustains the competition along with the protection of consumers.

It has made the provisions regarding the imposition of various penalties if the provisions of the Act are complied with. CCI promotes the provisions under the Act and aims for general welfare for people. It aims that each of the industries should get the equal opportunity to earn income and no monopoly is created.

Chapter II of the Act is one of the most important Chapters under the Act. Section 3 tells us that about the Anti-Competitive Agreements. It says that no enterprise should enter into a contract having appreciable adverse effect on competition and specifies that what type of contract can be called as Anti-Competitive Contract.

Section 4 tells us that no enterprise should abuse its dominant position in such a way that it limits or restricts the competition in the market. Section 5 tells us about the various requirements regarding the regulation of the combinations. Section 49 tells about another important role which is of Competition Advocacy.

Draft Competition Amendment Bill, 2020

Due to the dynamic environment, there is a change in the working if market as well. So there was a need to review the existing provisions of the Competition Act. A Central Law Review Committee was formed for the same. It started working in 2018 and submitted its report in 2019 August. Chance was given to the public to give their views on the bill for some time.

Some of the changes that are introduced in the bill are-

  1. Structural Changes

The Competition Commission of India has been performing too many functions due to which problems were arising in its functioning. It was performing functions such as adjudication, advocacy, investigation, legislation etc. So the Amendment focuses on the formation of a Governing Body. It consists of-

  1. Chairperson of Competition Commission of India with members
  2. Secretary of Department of Economic Affairs
  3. Ministry of Finance or his nominee
  4. Secretary of the Ministry of Corporate Affairs and his nominee
  5.  four other part-time members nominated by the Central Government

The reason to bring all these members was to divide the work which was allotted to the CCI alone before. This change will make the Commission more accountable and now the only role which it has to play is of adjudication and nothing else. The rest of the work is to be managed by the Governing Body.

One more role played by the bill to make the Director General office the investigation branch of the Commission. Before the bill the director was accountable to the Central Government only. This rule has been adopted by various other countries as well.

  1. Public Views

Another change bill aims to introduce is to give the public a chance to present their views on the provisions formed under the Act. This change is introduced so that people can have more knowledge about the regulations and they can become aware of provisions. Only in case of emergency the public views can be avoided otherwise not.

  1. Provisions relating to Combinations-

The Amendment seeks to bring in the Green Channel Process so that the approval for the combinations can be given without wasting time. The time within which the Commission has to tell whether a combination will have appreciable adverse effect in changed from 30 days to 20 days under the Amendment.

By the Amendment the Commission will be getting more subjects within its authority relating to the merger and acquisitions.  The Central Government can tell about more of the criteria for the mergers and can prescribe that certain other grounds can also constitute merger. At the same time the Central Government can also remove certain grounds that can constitute combination. A proviso can be added to Section 5. The opportunity of hearing will also be given to all the parties from any of the orders passed.

The time period for the deemed approval of the combination which is 210 days, the Amendment seeks to reduce that time to 150 days.

  1. Commitment and Settlement

This enables a person who has violated the provisions under the Act to correct his mistakes so that he can avoid the investigation and legal proceedings. They can pay a certain amount which can be taken in the form of the fine for violating the provisions to settle the matter and have to make sure that they ratify their mistakes. This will settle the matter within less time and avoid complex procedures.

  1. Penalty Guidelines-

Before the Amendment Bill, there was no provision regarding the guidelines for imposing the penalty. The Amendment Bill has the power of Commission to issue the guidelines of imposing the penalty and the way it has to be assessed. But still the time period within which the guidelines has to be issued. The turnover of the companies still is not considered for the penalty but Bill will remove the ambiguity regarding how the penalty has to be imposed under Section 27.

  1. Final Orders Appealable-

Under Section 53A there were only some orders which were expressly provided in it were appealable. Due to this many orders under Section 26 of the Act didn’t go to appeal. Thus the Amendment will cure the defect regarding the same.

  1. Expansion of Scope of Section 3-

The Amendment seeks to expand the scope of Section 3 by making it compliant with the modern market environment which includes technology. Currently Section 3 includes the horizontal agreements and vertical agreements within its scope. The Amendment will bring different agreements within it. Such as-

  1.   Hub and Spoke Cartels- under this agreement the company which is in the dominant position is called as the hub whereas the other company which seeks support of the dominant company is called spoke. This is done so that the competition within the market can be destroyed which can be done by bringing variations in the price level.
  • Buyers Cartel- this was not included under Section 3. However the Amendment seeks to penalise this form of cartel as well which causes an appreciable adverse effect on competition.
  1. Change in Punishments

The Amendment can allow the Director General or the Commission to impose punishment on a person of 6 months of imprisonment or to pay a fine of Rs.1 crore. This punishment can be imposed if a person fails to bring the documents or information needed, do not answer any question etc.

Loopholes under the Amendment

  1. Currently there is no provision under the Act that can allow any party to withdraw the complaint made. This means that the complaint could only end when the proceeding comes to an end with the decision of the Commission. This means that once a complaint is filed then the parties have to go through the complete complex procedure of investigation.  The Amendment didn’t cure this defect by giving an option to the parties to withdraw the complaint.
  2. The Bill is silent about the election process of some of the members under the Governing Body.
  3. The Bill didn’t solve the problem of lack of clarity in the inquiry procedure of the Commission. In some cases questions have been raised about what matters the Commission can conduct the inquiry.
  4. The Commission lacks the power of review which is much needed, however the Amendment failed to take it into consideration.
  5. There should be provision for using an effect based approach while considering whether the enterprise has a dominant position or not. However Bill hasn’t introduced it.

Conclusion

We can conclude that the Amendment has made an effort to cure the defects within the Act and tried to cure the problems that may arise in the future. Attempts have been made to reduce the burden of commission. Penalty action has also been improved. Through commitment and settlement attempts have been made to save time and solve disputes efficiently. Expansion is made of the scope of the Act. However there are some loopholes that still need to be filled.

Questions

Q1. Explain the history of Competition Act, 2002?

Q2. Explain the role of the Competition Act in the modern era?

Q3. Analyse the Draft Competition Amendment Bill, 2020?

Q4. Analyse the change in provisions relating to Combination under the Amendment Bill, 2020?

Q5. Explain the issues Amendment failed to address under the Competition Act? 

References

  1. https://www.barandbench.com/columns/a-look-at-the-draft-competition-amendment-bill-2020-clarity-transparency-robustness-and-bit-more-to-be-desired
  2. https://www.scconline.com/blog/post/2020/05/06/introduction-of-competition-amendment-bill-2020-a-step-towards-revamping-indian-market/
  3. https://www.aspireias.com/daily-news-analysis/National-and-Political-Issues/Competition-Amendment-Bill-2020
  4. https://www.legalbites.in/analysis-draft-competition-amendment-bill-2020/

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