Govt rejects panel push for effect-based test in Competition Amendment Bill

Recommendation, made by Jayan Sinha-led Parliamentary Committee in Dec, was cleared by cabinet earlier this week; govt sees difficulty in quantifying impact

Government has not accepted the parliamentary committee's recommendation to introduce the concept of "mandatory effects-based analysis" in the proposed Competition Amendment Bill, according to government sources. The bill was cleared by the cabinet earlier this week.

The parliamentary standing committee on finance in its report tabled on December 13, 2022 had said that the competition commission of India (CCI) should study different factors such as impact on consumers, innovation and competition before adjudicating a conduct as violative of the competition law. The panel had made a series of recommendations in its report, some of which may have been accepted by the government.

The government, however, feels that it is difficult to quantify such effects and conducting such studies may delay any corrective action. "By the time we study the effects, the markets will have suffered," a government source said.

The Competition Amendment Bill is expected to be tabled in Parliament during the upcoming Budget session starting January 31.

At present, the CCI takes action against companies for potential harm and abuse of their dominant position. In some abuse-of-dominance cases, CCI has applied an effects-based analysis, but it has not been built into the law. Instead, CCI follows the approach of “denial of market access in any manner” as mentioned in section 4 of the Competition Act.

The Jayant Sinha-led panel had said that a compulsory effect-based test would eliminate the possibility of over-enforcement in new-age markets and allow parties to legally defend their actions based on pro-competitive effects and efficiencies arising from their conduct.

Other changes sought by the standing committee included review of the deal value threshold every year instead of every two years, and allowing cartels to access settlement mechanisms. The panel had pushed for the removal of the clause on the commitment mechanism that allows objections or suggestions to be submitted by “any other third party” amid stakeholders’ concern that it may compromise secrecy.

The committee said, “Such a mandate must be discretionary and not mandatory.”

The panel had also recommended against shortening merger review timelines as that can be burdensome for an already understaffed commission.  

It had said that the ministry of corporate affairs had not put forth any strong argument on why IPR cannot be used as a defence against abuse of dominant position. It said, “... it would be more desirable for CCI to specifically take into consideration the rights that a party may have in relation to reasonable exercise of its IPR when dealing with abuse of dominance cases to avoid uncertainty.”