CCI, competition law likely to be overhauled soon
NEW DELHI: The government is set to overhaul the Competition Act in the monsoon session of the parliament and revamp the anti-trust watchdog Competition Commission of India (CCI) to regulate India’s booming digital economy better.
The ministry of corporate affairs has prepared the amendments, and inter-ministerial consultations are on before moving a bill to the cabinet for its clearance, a person familiar with the development said.
The Parliament begins its monsoon session in July.
The proposed revamp will consider the disruption caused by the digital economy, which warrants new ways of examining tie-ups and marketing arrangements that did not exist when the Competition Act was enacted two decades ago, the person said on condition of anonymity. “The emergence of newage tech companies has led to a different type of competition in the market. Large e-commerce players were not there when the competition law was enacted, and it requires a legislative update. It is going to be a massive overhaul,” the person cited above said. Emails sent to a spokesperson for the ministry of corporate affairs and to CCI on Thursday remained unanswered till press time.
The bill to amend the Competition Act, which will be tabled in the monsoon session, envisages restructuring of CCI’S administrative functioning in addition to legislative changes that include the introduction of new criteria for merger regulation and the deal value, which is not in the current formula.
This will bring mergers and acquisitions of startups with smaller sales and asset bases but with a huge valuation under CCI’S ambit.
Another key change would be the specific prohibition of ‘hub and spoke’ type cartels, in which a market entity such as a supplier to several competing parties in the market acts as a medium for price communication among them and effectively acts as a cartel.
Currently, the Competition Act only recognizes two types of cartels—those among competitors and those among parties at different stages in the value chain. The amendments would also allow quick clearance of mergers and acquisitions being executed under the Insolvency and Bankruptcy Code.
Experts said the introduction of deal value as a criterion for merger regulation was the need of the hour.
At present, asset size and revenue are the only criteria for clearing M&A deals. This excludes some transactions involving unicorns or highly valued startups that could become targets for acquisition but do not come under CCI review because they have a thin physical asset base or sales. Experts said mandating CCI approval for such acquisitions would help protect competition in the market, especially in the digital economy.
According to Subodh Prasad Deo, a partner at law firm Saikrishna and Associates and former additional director general at CCI, startups may have a propensity to get acquired given the financial constraints in which they work and such acquisitions even before these startups mature enough to be able to challenge the established market players to deserve the attention of the CCI.