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Parliament Panel Suggests Including Cartel In Settlement Scheme


As part of efforts to make the Competition Act more “pragmatic”, the parliamentary panel—in its report tabled on Tuesday—has recommended the inclusion of cartels as part of the settlement scheme in the Competition Amendment Bill, 2022.

According to the committee, every case including cartels need not necessarily be anti-competitive, and courts must decide it on a case-to-case basis. This is in line with the recommendation made by FICCI as the exclusion of cartels would defeat the primary objective of the settlement mechanism.

This is indeed a pragmatic move, said Avaantika Kakkar, partner at Cyril Amarchand Mangaldas.

In the amendment bill introduced in parliament in August, the government introduced a settlement facility for certain minor offences where parties by submitting an application to the commission, in such form and upon payment of such fees as may be specified by the regulations, can seek settlement of the case. 

Besides suggesting the inclusion of cartels under the settlement mechanism, the committee has also observed that there is no clarity on whether the admission of guilt is a prerequisite to settlement. The committee recommended that ‘admission of guilt’ should not be mandated.

Other key changes proposed by the panel include:

In addition to existing turnover/asset threshold criteria, the present bill proposes the inclusion of a “deal value threshold” as a criterion to determine the existence of combinations.

According to the bill, any transaction whose deal value exceeds Rs 2,000 crore shall come under the scrutiny of the commission and therefore, permission in prior would have to be obtained to complete the deal.

According to Competition Law Review Committee, this has been proposed as an additional criterion to capture certain combinations that have assets/turnovers lower than the thresholds under the Act.

However, according to the parliamentary committee, there is no clarity on the manner in which deal value should be calculated.

These uncertainties potentially bring transactions that are unlikely to have anti-competitive effects under the radar of the merger control mechanism. Also, the manner of calculation must not be left to delegated legislation and must be provided in the Act itself, the report read.

These changes, according to Kakkar, were always intended to be dynamic.

A reduction of various procedural timelines, including the timeline for consummating any combination from 210 days to 150 days, is part of the bill.

According to the Ministry of Corporate Affairs, this will provide regulatory certainty to businesses, and will make combinations timebound and swift.

However, according to the stakeholders and CCI, this will only increase the burden of an already understaffed commission.

The committee, in concurrence with the view of stakeholders and CCI, has proposed that the present timelines remain unchanged.

Kakkar, too, concurred with the view of the committee in terms of timelines. The thresholds in India are among the highest in the world and the CCI has a generally good record with timelines in spite of the fact that they are understaffed, she said.

The proposed amendment to the act allowed the Director General to examine agents of parties under investigation, including legal advisers. Stakeholders were of the view that this was in violation of attorney-client privilege.

The committee has concurred with the stakeholders and has noted that this is in violation of the Evidence Act, 1872, as well as Bar Council of India Rules, which apply to advocates.

Hub and spoke cartels refer to an agreement with parties placed in a similar position in the market, which are implemented vertically through restrictions placed on suppliers or retailers without any direct contract between similarly placed parties.

The proposed amendment brings under its radar any person who is actively engaged in the furtherance of an anti-competitive agreement, even though they are not engaged in similar trade or business.

The stakeholders have pointed out that this provision not only affects hub and spoke cartels but all sorts of agreements between parties placed horizontally in the market.

The committee has observed that there is no clarity on what constitutes ‘active participation’ and therefore, has proposed ‘intention to active participation’ as a necessary element under the provision.  

However, intention is going to be difficult to prove, according to Kakkar. The investigator will rely on circumstantial and direct evidence to prove intent but this will allow for complex arguments that would aid in appeals in the long run, she said.

In addition to the above recommendations, the committee has also proposed inclusion of IPR as a defence to cases involving allegations of abuse of dominance.


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