Amendment to Competition Act on cards to rein in digital companies

The Narendra Modi government in its second stint is planning to amend the Competition Act to regulate acquisitions by digital companies that don’t have large assets in India such as Facebook and escape scrutiny by the Competition Commission of India (CCI). 

The de-minimis clause in the Act, which exempts companies without assets in the country from the purview of the CCI, is being examined, officials said.  Now the deal size of the acquisition will be looked into and any acquisition crossing a threshold would draw the CCI’s scrutiny. Currently, the CCI looks into a deal when an acquired company has a turnover of at least Rs 1,000 crore and assets worth Rs 350 crore or more. 

According to the sources, this threshold is also being reviewed. “We feel that the deal value should be a clause in the takeover transactions to allow scrutiny by the commission. De-minimis should not be a hindrance for the competition commission in taking up scrutiny of digital companies when they acquire companies in India,” said a senior official involved in the discussion on the amendments to the Act.

He said Germany and other jurisdictions have the clause of deal value.

The competition commission is currently studying big data companies to understand their functioning.  

Manas Kumar Chaudhuri, partner at Khaitan & Co, said: “In view of the competition in the digital economy, including e-commerce, the government may like to come up with suitable policies balancing the traditional and new-age digital economies.”

The government has set up a high-level committee to review the Competition Act. The target is to finalise the report as part of the agenda for the first 100 days of the new government.

The panel is also deliberating on having multiple branches of the commission on the lines of the National Company Law Tribunal (NCLT). Not just that, it is being planned that there would be a separate bench for mergers and a separate one for anti-trust cases. 

The plan is to make the commission an advisory body as well to help state governments understand where competition is being affected. 

Under consideration are also changes in the definitions of ‘relevant market’ and ‘enterprise’ in the Act, among others. The commission decides the penalty on companies based on these definitions. 

The Competition Act was legislated in 2002 but the CCI became fully operational in 2009.