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A Glimpse into the Provisions under the Competition (Amendment) Act, 2023

Legacy > Laws Of Surveillance  > A Glimpse into the Provisions under the Competition (Amendment) Act, 2023

A Glimpse into the Provisions under the Competition (Amendment) Act, 2023

To read the article on Mondaq, click here.

The Competition Act, 2002, (hereinafter referred to as ‘Principal Act’) came into force on March 31, 2003, and has since undergone few amendments, thus leaving a wide scope for the progressive ways in which the anti-trust regime in India can be enforced.

In lieu of such a dire need felt by the legislature, the Competition (Amendment) Act, 2023 (hereinafter referred to as ‘Act of 2023’) was published in the Indian Gazette after receiving the President’s assent on April 11, 2023. Through the enactment, robust reforms were brought within the law in order to bring it within the present economic sphere of the Nation. 

Some of the most significant changes introduced within the Act of 2023 pertained to the manner of regulation of ‘combinations’ within the Principal Act and the prescribed penalties, while others pertained to an incorporation of pre-existing concepts within the legal hemisphere. Even though, the efficiency of the Act of 2023 can only be judged in the coming time it is essential to understand these major amendments to the Principal Act, which has now been in force since April 2023.

Amendments to Section 5 of the Principal Act

Section 5 of the Principal Act may be considered to be amongst the most important provisions. This may be one of the reasons why this Section has been a recipient to substantial changes. One such amendment has been the substitution of the definition of ‘control’ under explanation (a), wherein the term ‘material influence’ has been added.

Through the insertion of this term, the legislature has brought a significant change to the previously provided meaning of ‘control’. However, it is also pertinent to note that while an explanation over what factors would constitute ‘material influence’ has not been defined by the present Act, the same has been defined by the Competition Commission of India as the ‘lowest level of control’ in comparison to de facto and de jure control. The Commission has specified that having ‘material influence’ implies 

the presence of factors that give an enterprise/person the ability to influence the affairs and management of the other enterprise, including factors such as shareholding, special rights, status and expertise of an enterprise or person, board representation, structural/financial  arrangements, etc.”

Another amendment made to the Section pertains to the change in the ‘deal value thresholds’, wherein, in addition to the threshold limits prescribed by the Principal Act, the Act of 2023 has included a clause (d) under Section 5 of the Principal Act, which seeks to add the ‘value of any transaction’, in connection with in connection with acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation exceeding INR 2,000 crores under the purview of regulation by the authority. Such transactions will, thus require prior approval of the Commission. 

A newly added proviso to this section restricts its applicability to those entities which have ‘substantial business operations’ in India, wherein the meaning of the term, business operations will be notified through the implementing regulations of the Competition Act.

Not only this, but through the Act of 2023, the Legislature has also substituted the Explanation (C) of the Section and has added a clause (f) within such explanation, which states that, in a case where a portion of the business/ enterprise/ division is undergoing either of the three aforementioned combinations (merger, amalgamation, or acquisition), only such value of the assets or transactions or turnover, as may be applicable, shall be relevant, which is attributable to the portion. 

The inclusion of this clause may be considered to be a relief for those businesses, which were earlier subjected to seeking approval for acquisition of a portion or product, where, while the relevant turnover of such portion did not qualify the limits, the company’s total turnover did.

Provisions pertaining to Open Offers

As per Section 6 of the Principal Act, combinations without the prior approval of the Commission were prohibited and liable to a penalty under Section 43A. Such limitation may have led to losses to the businesses having standstill obligations. 

This underlying issue has been resolved by the insertion of Section 6A, which provides a leniency in terms of such open offers and allows the companies to have an opportunity to notify the Commission, after such acquisition may have been undertaken, provided that such companies do not exercise their ownership or beneficial rights over the acquired shares or convertible securities. 

Furthermore, a significant reduction has been brought to the time limit within which the combination was prescribed to come into force. While the Principal Act set the limit to a period of 210 days from the date on which a notice was served to the Commission, the Act of 2023 has reduced this period to only 150 days.

Provisions Pertaining to Cartels: Anti – Competitive Agreements

A cartel under the Principal Act was defined to be 

An association of producers, sellers, distributors, traders, or service providers, who, by agreement amongst themselves, limit, control or attempt to control, the production, distribution, sale or price of, or, trade in goods or provision of services.”

This definition held an indispensable meaning in terms of Section 3 of the Principal Act, which provided for anti-competitive agreements and prohibited any agreements between enterprises, persons, or associations, which 

Causes or is likely to cause an ‘appreciable adverse effect’ on competition within India. These agreement, further classified under sub-sections (3) and (4) were also termed to be void, by sub-section (2).”

While the aforementioned provisions covered the actions of cartels formed by identical companies or enterprises, the Act of 2023 has broadened the ambit of this provision by inserting another proviso under sub-section (3), by bringing those enterprises or associations within the ambit of the practice, which may not be engaged in an identical or similar trade, if such enterprise participates in the furtherance of the, otherwise void agreement.

The aforementioned insertion seeks to give an indirect recognition and regulation to the arrangements which are popularly known as ‘hubs and spoke’, and which may refer to indirect agreements / collusions between known competitors, implemented through indirect communication made via an unrelated party.

A leading case for such arrangement may be considered to be Fx Enterprise Solutions India Pvt Ltd. vs. Hyundai Motor India Pvt Ltd, wherein the Applicant / Informant had alleged a contravention of Section 3 by the Opposing Party. In their application, Fx Enterprise Solutions India Pvt Ltd had specified that the Opposing Party was guilty of perpetuating hubs and spoke arrangements between the suppliers as well as the dealers, thereby mitigating price collusions. The Opposing Party was also alleged to have been liable for controlling the sources of supply of the dealers’ products. After conducting a detailed enquiry and investigation, the Competition Commission of India (CCI) found Hyundai Motors Pvt Ltd, to be guilty of anti-competitive practices and imposed a penalty of Rs.87 crores on the Opposing Party, where the penalty was calculated on the basis of their total turnover.

It is pertinent to note that the aforementioned case, being decided in the year 2014, gives a reasonable inference to the presence of hubs and spoke arrangements way before the Act recognized them. Thus, such addition has amounted to a statutory recognition of the arrangement.

Imposition of Penalties – A Legislative Overruling of the Excel Judgment

One of the major amendments brought in by the Act of 2023 is the change to the definition of a ‘turnover’, in relation to Section 27 of the Principal Act. The term ‘turnover’ shall include the ‘global turnover derived from all the products and services by a person or an enterprise’.

This addition, will have an overriding effect on the decision of the Hon’ble Supreme Court of India as in the case of Excel Crop Care Ltd. v. Competition Commission of India & Ors., wherein the term ‘relevant turnover’ was defined to include the entity’s turnover pertaining to products and services that have been affected by such contravention.

The Hon’ble Court, in this case had further held that,

The starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter the tribunal should calculate appropriate percentage of penalty based on facts and circumstances of the case taking into consideration various factors while determining the quantum. But such penalty should not be more than the overall cap of 10% of the entity’s relevant turnover. Such interpretation of Section 27 (b) of the Act, wherein the discretion of the commission is guided by principles established by law would sub-serve the intention of the enactment.”

Thus, in lieu of the newly added definition, the decision of the Hon’ble Supreme Court, may lose its prospective applicability.


As previously stated, the Act of 2023, was a much needed and anticipated amendment to the Anti-Trust regime of India. This was due to a significant lag in the adaptation of our law to the ongoing practices of conglomerates. On account of such substantial necessity, the enforcement of the Act was a celebratory move. Not to mention the fact, that the provisions enshrined within the enactment may be claimed to have aptly accommodated the recommendations made by the 2022 report of the Parliamentary Standing Committee on Finance and the ongoing legal practices within the global sphere.

Within the various additions, substitutions and omissions made in the Principal Act, the Act of 2023 has sought to strike a proper balance by taking a stringent as well as a lenient view, wherever the same was felt necessary. While some may classify certain portions to be extravagant, it is only their implementation, which will provide us with a better picture as to the actual need of the provisions. After all, the only fundamental objective for either of the provisions within the Competition Act is the prevention of practices which have an adverse effect on competition, and to promote and sustain competition in markets, while protecting the interests of consumers and ensuring the freedom of trade carried on by other participants in markets.

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