Lok Sabha Passes Competition Amendment Bill, Brings Stringer Regulations On MNCs Operating In India

The Lok Sabha on Wednesday (29 March) passed the Competition Amendment Bill, 2022 which updates a two-decade-old market competition law, to reflect the current market realities.

The significant provisions include the change in the definition of the term ‘turnover’ which will now mean the global turnover of a company from all the products and services sold by it.

This would enable Indian authorities to impose penalties on the global turnover of companies that violate competition laws in India, instead of the local or ‘relevant’ turnover of the company, as is done currently.

Notably, in case a company is found guilty of anti-competitive practices and abuse of dominance, the Competition Commission of India (CCI) can impose a penalty of not more than 10 per cent of the average turnover of the company for the preceding three financial years.

The Bill also amends the provisions related to mergers and acquisitions (M&A) regulation. If the M&A has a valuation greater than Rs 2,000 crore and the target entity has substantial business operations in India, the move would require CCI’s approval now.

The CCI, the Indian competition regulator, would be required to present its opinion within 30 days on the likelihood of the proposed M&A having an adverse effect on competition in the market.

The Bill was introduced in the Lok Sabha on 5 August, 2022, and then referred to the Parliamentary Standing Committee of Finance headed by Bharatiya Janata Party (BJP) MP Jayant Sinha.

Subsequently, the Ministry of Corporate Affairs introduced several changes to the bill which was put to the floor yesterday (29 March).

The Bill also expands the scope of who will be covered under the provisions related to anti-competition agreements. The Bill broadens the ambit from those who “actively participate” in such agreements to those “intending to participate” in the anti-competitive behaviour too.

An anti-competition agreement, defined by the Competition Act, 2002, can be any agreement between two or more enterprises that is likely to cause an adverse effect on competition in India.

The Bill is significant at a time when several big-tech companies are under the scanner of anti-trust regulators globally and is likely to step up deterrence and enhance compliance among companies.

On the same day, the National Company Law Tribunal (NCLAT) court in Hyderabad upheld the Rs 1,338 crore ($162 million) fine imposed on Google, by the CCI, for abuse of the dominant market position of its Android mobile operating system.