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[Ananya Madhusadan is a Partner at INMACS Law Office, Gurgaon]

On 5th August, 2022, The Competition (Amendment) Bill, 2022 (the “Amendment Bill”) was introduced in the Lok Sabha with the sole purpose of carrying “...out certain essential structural changes in the governing structure of the CCI and changes to substantive provisions to address the needs for new age markets.” Upon a review of the Amendment Bill it is evident that the Amendment Bill aims at multiple amendments to the Competition Act, 2002 (“the Act”). Apart from suggesting substantive amendments to the Act, the Amendment Bill also proposed various procedural amendments to the competition law however, it is pertinent to note that the Amendment Bill was not the first initiative which was taken towards amendment of the Act. In the year 2020, in furtherance to the report of the Competition Law Review Committee (July 2019), the Ministry of Corporate Affairs had invited public comments from stakeholders on the Draft Competition (Amendment) Bill, 2020 (“Draft Bill”). The Amendment Bill is largely on similar lines as that of Draft Bill however, certain points have been excluded in the Amendment Bill from the Draft Bill.

Key Proposed Amendments in the Amendment Bill:

  • Introduction of the Deal Value Threshold for Combinations under Section 5 of the Act:

In terms of the Act, currently, for an acquisition or a merger to be considered a combination and thereby resulting in the mandatory requirement of notifying the Competition Commission of India (“CCI”), the asset and turnover of the parties to the transaction were taken into consideration. It is necessary to note that the abovementioned criteria primarily excluded the transactions in the digital market as the assets and turnover value were below the jurisdictional thresholds. In order to bridge the gap, the Amendment Bill has introduced other criteria to determine whether an acquisition or a merger will be considered a combination under the Act. In terms of the Amendment Bill, any acquisition or merger that exceeds a global deal value of INR 2000 crores and having substantial business operations in India will require an approval from the CCI. It is interesting to note that the Amendment Bill is silent on what constitutes as ‘substantial business operations in India’ and has paved pay for the CCI to clarify the same through Regulations.

  • Deduction in the Time Limit for the Approval of Combinations under Section 6(2A) of the Act:

The existing regime clearly provides that for a combination to be effective, two hundred and ten days should have passed from the date of notice of combination filed by the parties to the CCI or an order being passed by the CCI in this regard, whichever is earlier. The Amendment Bill aims at reducing the review timelines and has proposed to decrease the two hundred- and ten-days period to one hundred and fifty days which can be extended to a maximum of thirty days for furnishing relevant information or to remove any defects by the parties to the transaction. Accordingly, multiple timelines in the Act have been expediated with a view to adjust the overall timeline considering the abovementioned reduction. It is pertinent to note that while this particular amendment will result in speedy clearance of the transaction, it will also burden the CCI as well parties to the transaction.

  • Increase in Penalty under Section 43A and Section 44 of the Act:

As per the existing regime, if the party to the notifiable transaction fails to make the notification to the CCI, then the CCI can impose a penalty of up to one percent of the total turnover or the assets, whichever is higher, of the combination. The Amendment Bill proposed that if any party to a combination fails to make the necessary notification to the CCI or fails to submit the relevant information in furtherance to an inquiry into the combination, the parties to the notifiable transaction may be liable to pay a penalty of up to one percent of the total turnover or assets or the value of transaction of such a combination. Simultaneously, the Amendment Bill has increased the penalty for providing false information or failure to furnish material information with respect to the combination from INR one crore to INR five crore.

It is necessary to note that the Amendment Bill also requires the CCI to publish guidelines regarding the appropriate amount of any penalty for any contravention of the Act. Furthermore, the CCI while imposing any penalty under the Act will have to refer to these guidelines and if the CCI divulges from the same, the reasons for such divergence will also have to be provided.

  • Commitment & Settlement Mechanism:

The Amendment Bill has introduced a new commitment and settlement mechanism for parties under investigation in matters pertaining to cases of anti-competitive vertical agreements and abuse of dominance cases. It is pertinent to note that this mechanism is not available for matters pertaining to cartel cases as they are dealt with under the leniency mechanism.

Commitment can be made by parties after the initiation of investigation but prior to the receipt by the party of the report of the Director General’s Investigation Report. On the other hand, Settlements can be undertaken by the parties to the transaction after the Director General’s Investigation Report is submitted but prior to the passing of final order by the CCI.

It is evident upon review of the amended provisions that the mechanisms will lead to reduction in lengthy litigation process, however, the CCI will be required to bring about Regulations providing details of the working of the Commitment & Settlement Mechanism as the Amendment Bill is silent on multiple factors such as retrospective applicability of the case i.e., whether it will be applicable to current cases or new cases, guidelines on how the abovementioned mechanisms will be adjudicated, guidelines on settlement amount, etc.

  • Leniency Regime:

In the past, majority number of cartel cases have been adjudicated via the leniency regime whereby if a party, in any cartel, has made full disclosure regarding the alleged violations, then the CCI may impose a lesser penalty as it deems fit. The Amendment Bill further aims at strengthening the leniency regime whereby if a party is involved in a cartel investigation, makes a full, true and vital disclosure of another undisclosed cartel, the CCI may grant an additional deduction in the penalty for the party already under investigation and for the newly disclosed cartel.

While the new regime will definitely enable CCI to save time and resources with respect to cartel investigations at the same time, it is pertinent to keep in mind that the party to a cartel are receiving the benefits twice thereby the gains the party to a cartel can make by coming forward voluntarily largely becomes a strategic business move for the party in question as opposed to promoting competition as sought by the Act.

  • Diluting the Standstill Obligation:

It is a known fact that market acquisitions require prompt executions and completion of purchase/ sale order. In all mergers and acquisitions deal which comprises of market acquisitions, the seller and the buyer are required to act instantaneously as in such deals, time is of the very essence and the timeline to complete the transaction is extremely small. At such a time, the parties to a transaction are faced with a conundrum i.e., should the parties enter into the transaction without the prior approval of the CCI and thereby face the penalty or whether the parties to the transaction wait for the CCI’s approval and thereby lose the value of the transaction.

Taking the above factors into consideration, the Amendment Bill permits the parties to a market acquisition to derogate from the standstill obligation subject to: (a) filing of notice of acquisition by the parties (after undertaking the purchase) within such time as prescribed by the CCI through regulations; and (b) the acquirer not exercising any ownership or beneficial rights or voting rights or receive dividends / any other distributions until the CCI approves the transaction.

The proposed amendment is beneficial for market acquisitions as it aims at reaching towards a middle ground between the party to the transaction and the regulator as the parties to market transaction are permitted to enter into market acquisitions at a viable and agreed price and at the same time it does not compromise the power of the CCI to analyse and review the transaction.

Upon a review of the key amendments, it is evident that the Amendment Bill aims to revolutionize the competition law regime in India. The proposed amendments are aligned with the Governments initiative of Ease of Doing Business in India and are business friendly in nature. However, some of the amendments proposed are not effective as it will lead to increase in compliance cost, administrative burden, etc. on the CCI. Simultaneously, various proposed amendments will require introduction of detailed Guidelines and Regulations.

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