Jurisdiction - India
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India – Parliamentary Standing Committee Makes Recommendation On The Competition Bill, 2012 To Lok Sabha.

24 March, 2014

 

 
On December 10, 2012, the Competition (Amendment) Bill, 2012 (‘Bill’) was introduced in the Lok Sabha and was subsequently referred to the Parliamentary Standing Committee on Finance (‘Committee’) on December 21, 2012. The Committee laid down its recommendations before the Lok Sabha on February 17, 2014. The Committee obtained views/comments from CCI, Ministry of Corporate Affairs (‘MCA’) and various other stakeholders such as Federation of Indian Chambers of Commerce and Industry (FICCI), Confederation of Indian Industry (CII) and Associated Chambers of Commerce and Industry (ASSOCHAM). The Committee’s recommendations touch upon a wide variety of issues which are briefly discussed below:

Turnover: The Committee noted that the existing definition of the term ‘turnover’ was unclear on the inclusion or exclusion of indirect taxes, and recommended that such taxes be excluded from the computation of ‘turnover’. Further, the Committee suggested that MCA may consider aligning the definition of ‘turnover’ with international laws/practices.

Assessment: With respect to the assessment carried out by CCI to determine if a given agreement or arrangement caused or was likely to cause an Adverse Effect, the Committee was of the view that practices of the European Union (‘EU’) such as ‘safe harbours’ may be incorporated into the Act. In this regard, the Committee also recommended that suitable amendments be made to the provisions of the Act such that the time period within which CCI has to make its final determination regarding any Adverse Affect in the relevant market in India is reduced from the present 210 days to 180 days.

Definition of ‘Group’: The Committee recommended that since the definition of ‘group’ with regard to enterprise is applicable to all the relevant sections in the Act (i.e. Section 4, 5 and 27), such basic definitions be incorporated under the definitions clause of the Act. The Committee recommended that such a basic definition should not be dispersed amongst other substantive sections.

Collective Dominance: The introduction of the concept of ‘collective dominance’ is an often debated issue in the Bill. The Committee has recommended that ‘collective dominance’ be suitably incorporated into the provisions of the Act, since it would give CCI more teeth to curb anti-competitive practices. However, the Committee stated it would expect MCA to bring in suitable amendments to avoid any ambiguities in the proposed legislation.

Search and Seizure: One of the most controversial changes sought to be introduced by the Bill was to grant the Chairman of CCI the power to approve ‘search & seizure’ operations or ‘dawn raids’. Presently, this power resides with the Chief Metropolitan Magistrate, Delhi. In this regard, the Committee recommended that given the fact that such powers have not been exercised till date and those adequate checks and balances do exist in the present regime, GoI should maintain status quo.

Sector Specific Thresholds: Another important amendment sought to be introduced by the Bill was the introduction of sector-specific thresholds – enabling GoI to specify, in consultation with CCI, different asset and turnover thresholds for different classes of enterprises. The Committee has recommended that such sector-specific thresholds be incorporated into the Act only after building in suitable safeguards like quantifiable criteria and mandatory consultations with stakeholders.

Statutory Reference: The Committee recommended that it be made mandatory for CCI to make a reference to a statutory authority while adjudicating on an issue under any legislation whose implementation is entrusted to such statutory authority.

 

Powers of CCI: One of the major lacunae of the Act at present is that the existing provisions of the Act do not explicitly allow CCI to pass orders contrary to the findings of DG, even though CCI has, on many occasions, done just that. The Committee recommended that the appropriate sections of the Act be amended to provide such enabling powers to CCI. Interestingly, the Committee also recommended that as a principle of natural justice, all parties aggrieved by this lacuna be allowed to get relief of appeal within 60 days of such amendment.


Penalty Guidelines: CCI has significant powers of imposing penalties and has imposed around INR 8000 crores in penalties so far. The Committee expressed concern that no specific regulations laying down the criterion for determination of such penalties exists at present and recommended that the same be framed at the earliest. Further, the Committee was also of the view that all parties must be afforded the opportunity of a hearing before any penalties are imposed on them under the provisions of the Act.
Apart from the recommendations, with respect to the substantive sections of the Act, the Committee also made recommendations on the day to day workings of CCI and related policy issues. The Committee urged GoI to finalize the National Competition Policy as expeditiously as possible.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com


Shuva Mandal, AZB & Partners 

shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com


Percy Billimoria, AZB & Partners 

percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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