New Delhi, June 10: The government plans to revive the competition commission by an act of Parliament next month.
If the Competition Amendment Bill is passed, the watchdog will vet takeovers and mergers in the country.
Both Indian companies and multinationals will be under the purview of the Competition Commission of India. This means that in the future, takeovers such as the one of Hutch by Vodafone and mergers such as that between Air Sahara and Jet Air will be approved by the commission.
In takeovers, a prior notification from an MNC is required if the combined turnover of the MNC and the target Indian company is more than $1.5 billion and the combined asset base higher than $500 million.
For an Indian company taking over a domestic outfit, the stipulation is that the combined entity has a turnover of Rs 1,500 crore and an asset base of Rs 1,000 crore.
In case of mergers within local companies, prior permission will be needed if the combined entity has a turnover of Rs 12,000 crore and an asset base of Rs 4,000 crore.
For merger with a global player, an approval is required if the combined entity has a turnover of $6 billion and an asset base of $2 billion.
“The criteria for giving the permission is whether this adversely affects the competition in the Indian market,” P.C. Gupta, the minister for corporate affairs, said.
Gupta said the commission must take a decision on the deal within 210 days. “If it can’t come to a conclusion, the M&A or the takeover will be allowed.”
An appellate tribunal will hear the complaints against the rulings of the watchdog. It will be headed by a sitting or a retired judge of the Supreme Court; or a chief justice of a high court. There will also be two experts on the bench.
This separation of the judicial and executive powers of the watchdog was the outcome of a case in the Supreme Court that challenged the setting up of the commission.
Sources said the Prime Minister wanted the watchdog to be up and running by the end of the year.
The proposed changes to the competition bill are before a group of ministers. The bill will come up before the cabinet later this month. If approved by the cabinet, it will be placed in Parliament during the monsoon session.
The commission will also have the powers to investigate suspected cartels. It is authorised to prevent them from raising prices and exercising powers that hurt competition.
Gupta said: “We are introducing the concept of a whistle blower. If an insider working for the cartel gives us information, we will protect him adequately. That is the only way cartels can be broken. Even tough western laws have proven to be ineffective against cartels abroad.”
The government has been wary of rising prices of intermediary goods such as cement. The fear is the rise in the prices is not fully because of escalation of input costs.
The finance minister held discussions with various sectors, including cement and steel, to try and contain the surge in prices.
Although the government did not accuse companies of forming cartels, it seemed to indicate that some of them might have indulged in profiteering.
Officials said profiteering by abusing monopoly or monopolistic power could be investigated by the commission.
“Our guiding principle is monopoly by itself is not bad, but abuse of monopoly powers in the market is bad for the consumer,” said Gupta.