Analysis of The Competition (Amendment) Bill, 2012 [Part – 1]

The Government on 10th December finally introduced the much awaited (and speculated upon, considering the number of pieces I read in the Economic Times on it) Competition Amendment Bill, 2012.  Obviously, we have been looking forward to write a post on the Bill (and i’m sure the readers have been waiting as well). So, hereunder, is a detailed analysis of the Competition Amendment Bill, 2012.:

1.  Amendment of Section 2

Section 2(y) defines the term “Turnover” . In it, as per the Bill, after the words “goods or services”, the words “excluding the taxes, if any, levied on sale of such goods or provision of services” are to be inserted. This amendment does help to provide a clarification on the turnover threshold for combinations.  However, what is also important is to note that it also reduces the quantum of penalty which can be levied by the Commission under Section 27 of the Act, which relies heavily on this term to ascertain the quantity to be levied. Personally, I do not consider this to be irrelevant as considering the intention of the Competition Act is to take punitive action against violators of the provision of the Act, any amendment whose consequence is to reduce the punitive burden on the violator in case of contravention is not suitable in the long term interest of enforcement of the Act. Some may choose to disagree, but I have always been a firm believer that competition law violators need to be hit hard where it hurts the most (their wallets) in order  to ensure the desired effect.

2. Amendment to Section 3

Section3(4) enumerating the definitions of various vertical restraints to appropriately include “services” wherever necessary. I had noticed this lacunae during my early readings of the Act around two years ago, and in fact, the restrictive definition was also a contention in a moot court competition. While my argument was rejected then, it is nice to find one’s stand partially vindicated. 🙂

3. Amendment to Section 4

In section 4(1), after the words “or group”, the words “jointly or singly” are to be inserted. This will help in enforcing the concept of “collective dominance” under competition law as recognised in the EU and shall provide some much needed clarification on the interpretation of the Act. (See here for one of my previous posts which partially discusses this issue)

4.  Section 5 and the new Section 5A

firstly, just to clarify, the amendment to Section 4 shall ensure that the Commission does not need to rely on the definition of “Group” under Section 5, which may have caused some confusion since the purpose of that definition is to aid Section 5 exclusively. Moving on, in the Explanation, in clause (b), in sub-clause (i), for the words “twenty-six per cent.”, the words “fifty per cent.” shall be substituted as per the bill. It narrows the definition slightly, but it probably will not have a significant impact on it. What is more relevant is the insertion of a new Section 5A which states as follows:

“5A. Notwithstanding anything in section 5, the Central Government may, in
consultation with the Commission, by notification, specify different value of assets
and turnover for any class or classes of enterprise for the purpose of section 5.”.

The insertion of this new section is primarily intended to supplement the power of the Central Government under Sections 54, 55 and 56 of the Act.

5. Amendment to Section 9.

This is a needless Amendment. In intends to formulate two different procedures for the selection of the Chairperson and the other members of the Commission respectively. this would have made sense if the intention of the Government is to try and circumvent the delay which is often accompanied in the appointment of various Tribunal and Regulatory heads by ensuring that the Commission continues to function. However, such a purpose will not be fulfilled by this amendment since the amendment requires that the Selection Committee first recommend the names, which basically brings everybody back to square one !!

(TO BE CONTD.)