Centre to tweak competition law and tune it with new-age digital economy

NITI Aayog Vice-Chairman Rajiv Kumar highlighted the need for the CCI to develop oversight capabilities on data-related businesses, so as to prevent the amassing of power in a single conglomerate

Amendments to the Competition Act, which were long overdue, are finally on the horizon. After close to a decade, the Centre is taking steps to tweak the law in tune with the new-age digital economy, while also easing provisions to reduce the burden of litigation. Together, they should serve to create a more business-friendly regime.

NITI Aayog Vice-Chairman Rajiv Kumar recently highlighted the need for the Competition Commission of India (CCI) to develop oversight capabilities on data-related businesses, so as to prevent the amassing of power in a single conglomerate. 

Though alteration to the threshold of “deal size” — a parameter for deciding whether a case comes under the ambit of the competition law — is one step towards keeping the law in pace with the new-age economy, the CCI is now in the process of identifying highly dynamic and evolving sectors, such as telecom, to study anti-competitive behaviour and how the markets might get distorted. 

“We need to be aware of issues faced by certain sectors. As and when we come across a case, we could take a call,” says Ashok Kumar Gupta, chairman of CCI. From telecom to e-commerce, the CCI is in the process of creating a series of market studies.

The plan to introduce a commitment and settlement clause — high on the wish list of corporate India — is an indicator of things to come. The government felt it was time to give a way out to erring companies that were willing to make market corrections. 

“Some concepts they had missed out on are now being included, after studying global trends. There was a need to fill these gaps,” says Anand Pathak, managing partner at P&A Law Offices.

Over the past few months, the government has been moving towards a corporate governance and oversight regime that allows for faster resolution of violations by companies, through decriminalisation of offences under the Companies Act. 

The objective is to considerably de-clog the National Company Law Tribunal from frivolous litigations. This will also help release regulatory capacity, which could be deployed to improve corporate governance.

In the same spirit, say experts, the CCI is working towards more optimal use of its regulatory capacity. It also aims to deploy its investigative resources better and serve the intention of the law — to preserve competition. 

While industry has cautiously lauded many of the government’s ideas towards revamping the competition law, there are concerns over some of the changes that are being proposed. One such move is the merger of the offices of the Director General and the CCI. 

Experts say the move is worrisome. “The two offices have to be at arm’s length and the DG office cannot be guided by the CCI. Sanctity of the investigation has to be maintained,” says Amitabh Kumar, partner at J Sagar Associates. 

The amendment would effectively mean the appointment for the DG office will fall in the domain of CCI. The antitrust watchdog, however, wants to create single-point accountability for investigations and implement strict timelines, while staying away from the process of investigation. 

The other issue that is high on the to-do list of the Commission is to rise up to challenges faced by policymakers, with the rapid growth and influence of the digital economy. The Competition Act, for the first time, would add a deal value test in its quiver. Deals, such as Facebook’s multi-billion-dollar acquisition of WhatsApp, which fell outside the purview of CCI, will now require government nod following amendments to the Competition Act. 
 

“Bringing deal value is good, but thresholds should not be diluted,” points out Kumar. Some experts, like Kumar, are not happy with the dilution some provisions of the competition law.
 

Kumar says niche companies could create monopolies and thresholds have to be dynamic in certain sectors.  At present, the Commission 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. 
 

However, with data becoming a valuable commodity, the Commi­ssion is also amending its laws to cover this aspect of the new-age economy. It will look into the deal size of any acquisition beyond a certain threshold.

How the competition law deals with data-based businesses is something the Commission is still grappling with, according to experts. 

However, they are not alone. Even competition law regulators in developed economies, including those in Germany, the European Union and the US, are struggling to make sense of new developments in the digital economy.