HOUSE PANEL WANTS REVIEW OF DEAL VALUATIONS ANNUALLY
MULTIPLE CHANGES SOUGHT IN COMPETITION (AMENDMENT) BILL 2022
The Parliamentary Standing Committee on Finance has called for a series of clarifications changes in the proposed Competition (Amendment) 2022. From specifying the method of calculating deal value of transactions and allowing cartels to access settlement mechanisms as a “pragmatic recourse” to introducing effects-based analysis for the Competition Commission of India (CCI) and director general before ascertaining anti-competitive behaviour, the panel has sought more predictability and certainty in the proposed legislation. It has also objected to the proposal of reducing the timeline of acquisitions to 150 days, from the existIng 210 days, saying that the status quo should remain.
The Jayant Sinha-led committee – in its report tabled in the Lok Sabha on Tuesday – has stated that the deal value of transactions should be reviewed every year, instead of every two years. It said the Bill does not provide guidance on how the deal value should be calculated and the meaning of “direct, indirect or deferred consideration”. Agreeing with stakeholders’ view, the committee said: “These terms can poten- tially bring transactions which are unlikely to cause adverse effects on com- petition under the merger control mechanism.
According to the corporate affairs ministry (MCA), a combination (of companies) with a transaction value of more than Rs 2,000 crore, as well as having substantial operations in India or “local nexus”, will have to be notified to the CCI.
The idea, according to the MCA, is to find out combinations where the assets or turnover may be lower than the threshold but there are several intangibles, such as data, in the context of the digital and new age markets.
▶Proposed Settlement and commitment mechanism
Make third-party objections non-mandatory
Include cartels in the scope of settlement
Settelment should not mean admitting guilt
- Deal value of transactions should be reviewed every year instead of every 2 years
- Effect – based analysis suggested for determining anti competitive conduct
“The MCA has clarified that it is intended to apply only to the ‘digital sector’ and is an additional threshold this means that it will apply even if the target meets the small tar- get test,” said Avaantika Kakkar, partner (head-competition law), Cyril Amarchand Mangaldas.
The proposed Bill also seeks to introduce a clause for settlement and commitment which offers any enterprise against which an inquiry is initiated to file an application for settlement. According to the CCI, it may be given the discretion to agree to the settlement proposal which may include a payment or such other terms, or both. The standing committee has also sought the removal of the clause regarding the commitment mechanism that allows objections or suggestions to be submitted by “any other third party” amid stake- holders’ concern that it may compromise secrecy. The committee in the report said: “Such a mandate must be discretionary and not mandatory.”
It has also said the company opting for such proceedings should also be given the option to withdraw, which in the cur- rent Bill rests only with the CCI.
Regarding cartels, the committee has suggested their inclusion in the scope of settlements “as a pragmatic recourse to the whole process”. “A settlement provision for cartels on a case-by-case basis may be for the courts to decide. It does not require emphasis that any matter, cartels or otherwise, that reaches the settlement stage, would have an anticompetitive one,” the report said.
The MCA had carlier clarified in its presentation to the committee that it would issue detailed regulations for the settlement and commitment mechanism to reduce arbitrariness and ensure accountability. The idea behind the amendment proposed is the faster resolution of competition cases and reduced litigation.
The Bill does not state whether opting for settlement or commitment requires admission of guilt by the company, the committee noted. “Primafacie admission of guilt should not be mandated… There should be an enabling provision to allow the applicant to revisit the settlement/commitment after the order of final settlement by the CCI as one last opportunity.”
It has also suggested a pro- vision to provide compensation to the consumer in an appropriate manner.
