The Competition (Amendment) Act, 2023 ("the Act”) was recently passed in India. The Act makes a number of changes to the Competition Act, 2002, which is the country's primary competition law. The amendments aim to strengthen competition regulation, streamline operations, and foster a business-friendly environment.
One of the most significant changes introduced by the amendment is the establishment of a new deal value threshold. Under this provision, transactions involving acquisition, merger, or amalgamation that meet or exceed INR 2,000 Cr and involve entities with substantial business operations in India will necessitate approval from the Competition Commission of India (CCI). This threshold expands the scope of CCI review, ensuring that even transactions that would typically fall under the minimum exemption are subject to scrutiny if their deal value surpasses the prescribed limit.
One important change is the updated definition of "control," which now includes the concept of "material influence." This change acknowledges that having the ability to exert significant influence over the management, affairs, or strategic commercial decisions of an entity or group of entities is a key factor in determining control. The Competition Commission of India (CCI) has the authority to establish additional criteria, through regulations, to clarify what constitutes "material influence." This addition aims to provide clearer guidelines on what control means and reduce uncertainty when determining its extent in various business arrangements
The amendment has also reduced the timeline for the implementation of a combination from 210 days to 150 days. Additionally, the CCI is now required to formulate a prima facie opinion on a combination within 30 days; failure to do so results in the combination being deemed approved. These modifications offer enhanced certainty to businesses by reducing waiting periods and streamlining the review process, thereby enabling timely execution of transactions.
Under the amended legislation, open offers and share acquisitions executed as part of a combination can be implemented via regulated stock exchanges prior to obtaining CCI approval. However, the acquirer may not exercise ownership rights or derive benefits until obtaining the necessary regulatory clearance. This provision grants acquirers more flexibility to initiate open offers or acquire shares from the open market while ensuring that effective control is not transferred until the required regulatory approval is obtained. It fosters smoother transaction execution while upholding the CCI's oversight and regulatory control.
The Competition (Amendment) Act also introduces a three-year limitation period for entertaining information or references regarding alleged contraventions under the Act. The CCI is further empowered to condone delays in filing such information or references if sufficient cause is demonstrated. This limitation period imparts certainty and finality to competition law enforcement, preventing the reopening of cases long after the alleged contravention. It establishes a clear timeframe for parties to file complaints and ensures the timely execution of competition law enforcement.
Finally, the amendment introduces a settlement and commitment mechanism for enterprises under inquiry for abuse of dominance or anti-competitive agreements. This framework provides enterprises with the opportunity to seek resolution through mutually agreed remedies or commitments, thereby promoting cooperation and expediting dispute resolution. The specific procedure for settlements and commitments will be outlined in regulations, aligning Indian competition law with international best practices. This new mechanism aims to reduce the time and resources expended on lengthy investigations and litigation, fostering efficient and compliant business practices.
The Act introduces a number of significant changes to the competition regulatory landscape in India. These amendments strive to establish a clear and efficient competition enforcement framework, which will benefit businesses and consumers alike.
The amendment brings in hope for the budding startups and small businesses that seek to engage in horizontal and vertical linkages with startups in the same industry. Startups engaging in mergers, acquisitions, or combinations need to comply with the competition law provisions, with the amended law the time period of execution of such combinations will significantly reduce.
