Competition law amendments: Of penalties and misses

Source: The post is based on an article “Competition law amendments: Of penalties and misses” published in Live Mint on 14^th February 2023.

Syllabus: GS 2 – Governance

Relevance: proposed amendments in Competition Amendment Bill 2023

News: The government has come up with the proposed amendments to India’s competition law and is set to introduce the Competition Amendment Bill (2023) in Parliament.

What are the proposed amendments in the bill and what are the associated concerns?

Change in the imposition of penalties: The bill proposes that the Competition Commission of India (CCI) can now impose penalties up to 10% of the total global turnover of enterprises which are found to have contravened the competition law.

Currently, penalties are calculated as a percentage of only relevant turnover in India, which excludes sales from products which have no relation to the contravention.

Further, the current law uses the word ‘turnover’ in the penalty provision and does not specify if it is ‘total’ or ‘relevant’.

However, in 2017, the Supreme Court had clarified that turnover for imposing penalty should mean relevant turnover.

The court has also held that when the contravention involves one product, there is no need for including other products for imposing a penalty.

The government has also retained a provision that required the CCI to come out with regulations to ‘determine’ the turnover to be considered for penalties.

Hence, the concern with global turnover for calculating penalties is that it might impose heavy penalties on big multinational companies.

Expansion of the scope of liability of cartel facilitators: The amendment has proposed to codify the liability of cartel facilitators which ‘actively participate’ in the advancement of a cartel.

However, the parliamentary panel recommended that the scope of this proposal must be limited and the CCI must first prove that a facilitator intended to actively participate in a cartel.

But, the 2023 Bill has expanded its scope by removing the word ‘active’. Hence, this might have a negative impact on those entities which may not have in fact participated, but may have only intended to participate in a cartel.

Therefore, a broad provision like this raises over-enforcement risks and may expose certain entities to undue hardship.

What is another concern with the Bill?

The bill has excluded cartels from the proposed settlement regime because there already exists a leniency regime for them.

However, leniency and settlement regimes are designed to secure efficiencies at different stages of a CCI inquiry, and they co-exist in other countries as well. Therefore, the exclusion of cartel settlements seems like a missed opportunity.