resists Competition Act changes
Live Mint, January 20, 2012
A high-level committee
constituted for drafting a national competition policy has
suggested scores of amendments in the Competition Act, aimed at
making it simpler to interpret and widening the ambit of
investigations against cartelization and mergers and acquisitions
The ministry of
corporate affairs (MCA) is, however, reluctant to make such
sweeping changes so soon after the establishment of the antitrust
watchdog, the Competition Commission of India (CCI), which was set
up in 2009 with a chairman and five members.
A proposed amendment
would widen the ambit of cartels to include buyers’ cartels and
trade associations, which are currently not subject to
investigation. Besides, the committee has suggested the inclusion
of joint ventures (currently a grey area) while notifying CCI
before any M&A is executed.
It has also suggested
tightening a definition. In M&As, change in control would be one
that leads to “decisive influence” by the acquirer. Currently, the
term is loosely defined.
A copy of the
proposals submitted to MCA has been reviewed by Mint.
The panel also
proposed giving CCI the power of defining turnover for the purpose
of deciding threshold limits that will require the watchdog’s
clearance. It can, therefore, set appropriate thresholds for
different sectors, besides revising these limits from time to
powers rest with MCA.
This is particularly
significant as in October, at a meeting chaired by Prime Minister
Manmohan Singh, it was decided to make antitrust rules tighter for
deals in the pharma sector, thereby bringing more pharma M&As
within CCI’s ambit.
The committee, headed
by former CCI chairman Dhanendra Kumar, includes competition law
experts such as Amitabh Kumar, senior adviser (regulatory,
competition and tax) at J Sagar Associates; Supreme Court lawyer
Anand Pathak; Pallavi S. Shroff, senior partner at Amarchand
Mangaldas; G.R. Bhatia, partner at Luthra and Luthra Law Offices;
and Manas Kumar Chaudhuri, partner at law firm Khaitan and Co.
“The committee has
submitted the draft national competition policy to MCA. As far as
amendments are concerned, a presentation was made to the minister
(corporate affairs minister M. Veerappa Moily). It’s for the
ministry to take a call on what to include and what not to,” said
MCA on its part is
reluctant to accept all changes.
“The Act is still
young and to bring in several changes will create confusion both
within the CCI and the corporate world,” said a senior MCA
official, who did not want to be identified.
A senior CCI official
agreed with the MCA official. “Although it is up to MCA to accept
amendments, the proposals are not such that they will take the
Competition Act to a different plane in terms of its
effectiveness,” said this official, who also didn’t want to be
So far, over 80 cases
have come before CCI, but the commission has disposed of only a
dozen of them.
amendments would also empower the CCI chairman to allocate cases
to members. Currently, all members have to hear all cases with a
majority view prevailing.
Besides, the CCI
chairman would be empowered to authorize its director general for
search and seizure of documents of companies being investigated.
Currently, the same authority has to be obtained from a
magistrate, which according to the presentation made by the
committee to Moily, defeats the purpose of confidentiality as the
process has to go through a regular court.
Similar provisions are
present in the income-tax and customs Acts, according to notes
prepared by the panel.
“The basic objective
of any change in law should be to make it more effective. It is,
therefore, important that the changes should empower the
authorities mandated with the task of implementing the law and
remove ambiguity in the provisions,” said Amitabh Kumar of J Sagar
changes, if accepted by the government, will need to be cleared
first by the cabinet and then by Parliament and, therefore, will
take a couple of years, said most people associated with the
“There is also a need
to include professionals at CCI,” said Pradeep S. Mehta, secretary
general of CUTS International, a think tank in the area of
competition law. “We have also proposed that the number of members
from judiciary and civil services should not be more than half the
strength of the commission at any point of time,” added Mehta,
also a member of the committee. Currently, this is at the
discretion of the Centre.
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