India's Made Bold Strides in Its Competition Law – Here’s How to Improve It Further

Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce

Published

October 27, 2022

In early November 2022, as the United States and India will host the U.S.-India Trade Policy Forum (TPF) in Washington, D.C.

India, according to a recent report by the Congressional Research Service, is the United States’ 11th largest bilateral trading partner. But, with an economy that ranks third globally in terms of purchasing power parity, the potential for enhanced growth in trade between the U.S. and India is monumental.

One area likely to be discussed during the upcoming Trade Policy Forum is the potential for growth in trade for digital goods and services between the U.S. and India. However, recent competition policy law changes in India may complicate those discussions.

What’s new

In August 2022, the Lok Sabha, India’s Parliament, took up legislation to amend the country’s Competition Act of 2002. This legislation, the Competition (Amendment) Bill, 2022, represents a mixed bag of positive merger and acquisition process changes coupled with worrisome elements of European-style industrial policy.

Welcome changes

The bill would reduce the timeline for the Competition Commission of India to review large transactions, defined as having a value of more than Rs 2,000 crore, from 210 days to 150 days. The bill also decriminalizes certain offences, including failing to comply with Competition Commission orders, by changing the nature of punishment from imposition of fines to civil penalties. Finally, the bill provides a framework for settlement and commitment for faster resolution of investigations of anti-competitive agreements and abuse of dominant position.

Areas of concern

On the other hand, the bill substantially increases the Competition Commission discretion to review transactions and contracts that most economists would view as pro-competitive. For example, the bill allows the Competition Commission to find certain agreements anti-competitive even if those agreements are between enterprises in different lines of business.

Similarly, the bill defines anti-competitive combinations to include “amalgamation” of enterprises based on the size of the companies and transaction, apparently irrespective of whether those enterprises operate in the same markets. As a result, these provisions could prohibit pro-competitive vertical arrangements or investment into new lines of business.

The bill also raises some troubling procedural problems. For instance, the bill gives the government the power to seek information from legal advisers, which creates tension with lawyer-client confidentiality.

Finally, the bill expands the concept of “abuse of dominance,” a European-style competition theory that does not benefit consumers, that has been used to further protectionist ends, and that often stifles innovation and investment among domestic industries (compare the growth of the U.S. tech sector with that of Europe’s). In particular, the bill defines abusive conduct to include: (i) discriminatory conditions in the purchase or sale of goods or services, (ii) restricting production of goods or services, or (iii) indulging in practices leading to the denial of market access. Depending on the facts, any of these activities can promote competition and lead to greater investment in goods and services. The bill also fails to specify that companies can use intellectual property rights as a defense in cases alleging abuse of dominance.

Bottom line

Given the massive potential for growth, U.S. and Indian policymakers should work to expand a healthy dialogue on trade in digital goods and services between our two nations. On either side of the Pacific, ensuring that competition policy benefits consumers rather than stifling innovation should be of paramount importance.