Competition (Amendment) Bill and its Impact on Big Tech

What’s in today’s article?

• Why in news?
• Competition Commission of India (CCI): 
• What is Competition Commission of India (CCI)?
• What are the Functions of CCI?
• What are the Powers of CCI? 
• News Summary: Competition (Amendment) Bill and its Impact on Big Tech
• Why global turnover provision could spell trouble for the Big Tech?
• The jurisprudence on the definition of ‘turnover’ in India
• What are the other amendments to the bill?

 

Why in news?

• Recently, the lower house of Parliament passed the Competition (Amendment) Bill, 2022, which seeks to amend the Competition Act, 2002.
• This legislation could pose a new frontier of challenges for Google and other global technology companies.

 

Competition Commission of India (CCI): 

What is Competition Commission of India (CCI)?

• The Competition Commission of India (CCI) is a statutory body established in March 2009 under the Competition Act, 2002.
• Objectives:
  • Eliminate practices having adverse effect on competition
  • Promote and sustain competition
  • Protect the interests of consumers
  • Ensure freedom of trade in the markets of India

• The Commission consists of one Chairperson and six members who shall be appointed by the Central Government.

 

What are the Functions of CCI?

• The commission is a quasi-judicial body who also gives opinions to statutory authorities.
  • It is also mandated to undertake competition advocacy, create public awareness and impart training on competition issues.
• In order to fulfil its objectives, the commission may: 
  • conduct an enquiry into certain kinds of agreements and dominant position of enterprise,
  • determine whether an agreement has AAEC (appreciable adverse effects on competition).

 

What are the Powers of CCI? 

• The Competition Commission of India has the power to inquire into a certain agreement as well as the dominant position of enterprises.
• It has the power to inquire into any acquisition or combination if it determines that such acquisition or combination may adversely affect competition in the Indian market.
• It has the power to regulate its own procedures.
• It has the power to impose monetary penalties upon violation of the Competition Act, 2002.
• It has the power to pass an interim order for any act where there has been anti-competition agreements or abuse of position by dominant parties which adversely affects the competition in the market.

 

News Summary: Competition (Amendment) Bill and its Impact on Big Tech

• Recently, the Lok Sabha passed a piece of competition-related legislation that empowers Competition Commission of India (CCI) to penalise entities found engaging in anti-competitive behaviour based on their global turnover.
• So far, the penalties were decided as a percentage of erring entities’ “relevant” turnover, which typically means their annual domestic turnover.
  • The relevant turnover refers to the turnover generated by the entity from the products or services that are related to the anti-competitive behaviour.

 

Why global turnover provision could spell trouble for the Big Tech?

• Nature of the business of Big Tech which cuts across geographies
  • While the new provision on global turnover will not be exclusively applicable to tech companies, they are likely to be the most aggrieved.
  • This is due to the nature of their business which cuts across geographies. 
  • Typically, the revenue these businesses earn from their India operations is much smaller than their income in other regions such as the US and Europe.
• From a business’ point of view
  • From a business’ point of view, the consideration of total turnover may lead to unfair and punitive outcomes.
  • It would also lead to discrimination between enterprises who commit a similar contravention but are penalised differently depending on the expanse of their business.

 

The jurisprudence on the definition of ‘turnover’ in India

• The definition of turnover had been a widely debated subject in the competition law landscape.
• It was in 2017 when the Supreme Court had fixed how it should be determined in such cases.
• In May 2017, in a landmark judgement, the top court had upheld the principle of relevant turnover for determination of penalties in competition law contraventions.
  • In this case, SC held that the turnover will have to be “relevant” turnover, which is turnover derived from the sales of goods or services.

 

What are the other amendments to the bill?

• Greater power to CCI
  • The amendment gives the CCI a greater say in mergers and acquisitions as entities will have to seek its approval in case a deal value is worth more than Rs 2,000 crore.
  • The CCI could also incentivise parties in ongoing cartel investigations in terms of lesser penalty to disclose information regarding other cartels.
• Reduced the time limit for approval of mergers and acquisitions
  • The bill has also reduced the time limit for approval of mergers and acquisitions from the existing 210 days to 150 days.

 

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Q1) What is turnover of a company? 

Turnover of a company refers to the total revenue generated from the sale of goods or services during a specific period of time.

 

Q2) What is Competition Act, 2002?

The Competition Act, 2002 is an Indian legislation that was enacted to promote competition in the Indian market and to prevent practices that have an adverse effect on competition. The act replaced the Monopolies and Restrictive Trade Practices Act, 1969 and came into effect on May 20, 2009. The Competition Act, 2002 prohibits anti-competitive agreements, abuse of dominant position by enterprises, and regulates combinations (mergers and acquisitions) that may have an adverse effect on competition. It also establishes the Competition Commission of India (CCI), which is responsible for enforcing the provisions of the act and promoting competition advocacy.

 

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Source: Competition (Amendment) Bill passed in Lok Sabha: How it affects Big Tech | Ministry of Corporate Affairs | Business Standard