[The following post is contributed by Karan Singh Chandhiok, Head of
Competition Law and Dispute Resolution, Chandhiok & Associates, Advocates
and Solicitors; and Vikram Sobti,
Senior Associate with the firm. The authors may be contacted at [email protected]
and [email protected]
respectively]
Competition Law and Dispute Resolution, Chandhiok & Associates, Advocates
and Solicitors; and Vikram Sobti,
Senior Associate with the firm. The authors may be contacted at [email protected]
and [email protected]
respectively]
On 28 March 2014, the Competition Commission of India (CCI) issued a notification amending the
existing merger control regulations in India, namely the Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011 (Combination
Regulations).
existing merger control regulations in India, namely the Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011 (Combination
Regulations).
The latest set of amendments is
the result of an annual exercise that is undertaken by the CCI to update the
merger control regulations.
the result of an annual exercise that is undertaken by the CCI to update the
merger control regulations.
Some of the important amendments
introduced are set out below:
introduced are set out below:
a. CCI to look at the substance of transactions: The antitrust regulator in India has tightened the screws on
mergers and acquisitions to ensure that the parties do not avoid seeking
mandatory premerger approval by adopting innovative and complex structures to
their transactions. The amendment clarifies
that the requirement of filing notice with the CCI shall be determined by the “substance of the transaction” and not by
the structure of the transactions.
mergers and acquisitions to ensure that the parties do not avoid seeking
mandatory premerger approval by adopting innovative and complex structures to
their transactions. The amendment clarifies
that the requirement of filing notice with the CCI shall be determined by the “substance of the transaction” and not by
the structure of the transactions.
b. Notification of transactions taking
place outside of India: Schedule I to the Combination
Regulations provides a list of transactions that normally do not require prior
notification and approval from the CCI; and are treated as not having an
appreciable adverse effect on competition in India. Entry 10 to Schedule
I of the Combination Regulations, which exempts transactions that take place “entirely outside India with
insignificant local nexus and effect on markets in India”, has now been
deleted. This follows from the regulator’s practice of requiring parties to
make a premerger notification where the combining parties satisfy the turnover
or assets thresholds set out in the Competition Act, 2002 (the Competition Act) and the transaction
does not benefit from the target based exemption.[1]
place outside of India: Schedule I to the Combination
Regulations provides a list of transactions that normally do not require prior
notification and approval from the CCI; and are treated as not having an
appreciable adverse effect on competition in India. Entry 10 to Schedule
I of the Combination Regulations, which exempts transactions that take place “entirely outside India with
insignificant local nexus and effect on markets in India”, has now been
deleted. This follows from the regulator’s practice of requiring parties to
make a premerger notification where the combining parties satisfy the turnover
or assets thresholds set out in the Competition Act, 2002 (the Competition Act) and the transaction
does not benefit from the target based exemption.[1]
c. Amendment to Form I and Form II:
i. Form I (short form filing): The amended short form filing with the CCI now requires wider
disclosure of any horizontal overlap or vertical relationships between the
business of the parties to the transaction. Previously, this information was
sought only in the context of horizontal overlaps or vertical relationships
that are arising post-merger. Moreover, the parties will now have to provide
details of merger filings made by the parties in other jurisdictions, along
with the status report of such filings.
disclosure of any horizontal overlap or vertical relationships between the
business of the parties to the transaction. Previously, this information was
sought only in the context of horizontal overlaps or vertical relationships
that are arising post-merger. Moreover, the parties will now have to provide
details of merger filings made by the parties in other jurisdictions, along
with the status report of such filings.
ii. Form II
(long form filing) requires the parties to
provide the details, in terms of value of assets and aggregate of turnover, as
per the audited annual accounts of immediately preceding two
financial years, instead of the immediately preceding financial year.
(long form filing) requires the parties to
provide the details, in terms of value of assets and aggregate of turnover, as
per the audited annual accounts of immediately preceding two
financial years, instead of the immediately preceding financial year.
d. Increase in filing fee: The fee for filing Form I under the Combination Regulations has
been increased by 50% from INR 1,000,000 (~USD 16,667) to INR 1,500,000 (~USD
25,000), whereas the fee for filing Form II has been enhanced by 25% from INR
4,000,000 (~USD 66,667) to INR 5,000,000 (~USD 83,000). This is the second
time that the CCI has raised its filing fees and are amongst the highest
charged by any regulator in India.
been increased by 50% from INR 1,000,000 (~USD 16,667) to INR 1,500,000 (~USD
25,000), whereas the fee for filing Form II has been enhanced by 25% from INR
4,000,000 (~USD 66,667) to INR 5,000,000 (~USD 83,000). This is the second
time that the CCI has raised its filing fees and are amongst the highest
charged by any regulator in India.
e. Right of appeal: The CCI has now deleted regulation 29 that allowed parties to the
proceedings before the regulator to prefer an appeal against an order of the
CCI relating to combinations to the Competition Appellate Tribunal. This
regulation was unnecessary given the statutory right to appeal provided under
section 53B of the Competition Act. The statutory right to appeal is not
restricted as the erstwhile regulation 29 to a “party to the proceedings”,
instead, section 53B confers a right on any
person to appeal against an order of the CCI in respect of combinations.
However, the Competition Appellate Tribunal in a recent
appeal has limited the scope of this right by introducing the concept of
‘locus standi’.
proceedings before the regulator to prefer an appeal against an order of the
CCI relating to combinations to the Competition Appellate Tribunal. This
regulation was unnecessary given the statutory right to appeal provided under
section 53B of the Competition Act. The statutory right to appeal is not
restricted as the erstwhile regulation 29 to a “party to the proceedings”,
instead, section 53B confers a right on any
person to appeal against an order of the CCI in respect of combinations.
However, the Competition Appellate Tribunal in a recent
appeal has limited the scope of this right by introducing the concept of
‘locus standi’.
Whilst the
majority of these amendments are on procedural matter, their immediate impact
will be to clear the air on issues that repeatedly caused confusion and may
have led to transactions going unreported with the commission. The ‘substance
over form’ amendment demonstrates this approach of the CCI. In essence, this should
mean that in any transaction where there is a change of control or one party is
able to influence the strategic decisions of the other through contract or
otherwise, such transactions should be notified to the CCI. Another example of
transactions that would be captured by this amendment would be where one party
is acquiring shares over time, but the manner of such a staggered acquisition
has already been documented.
majority of these amendments are on procedural matter, their immediate impact
will be to clear the air on issues that repeatedly caused confusion and may
have led to transactions going unreported with the commission. The ‘substance
over form’ amendment demonstrates this approach of the CCI. In essence, this should
mean that in any transaction where there is a change of control or one party is
able to influence the strategic decisions of the other through contract or
otherwise, such transactions should be notified to the CCI. Another example of
transactions that would be captured by this amendment would be where one party
is acquiring shares over time, but the manner of such a staggered acquisition
has already been documented.
The most important
amendment, however, remains the deletion of entry 10 in schedule I. The “local
nexus” entry had raised false expectations amongst stakeholders on the scope of
the exemption; and it is not unthinkable that several transactions may have
gone unreported to the CCI with the parties being in the mistaken belief that
their transaction could benefit from the exemptions. Given the regulator’s
strict view on compliance and its penchant for imposing high penalties, the
latest set of amendments will lead to better regulatory compliance, even though
they will add to deal timings and cost.
amendment, however, remains the deletion of entry 10 in schedule I. The “local
nexus” entry had raised false expectations amongst stakeholders on the scope of
the exemption; and it is not unthinkable that several transactions may have
gone unreported to the CCI with the parties being in the mistaken belief that
their transaction could benefit from the exemptions. Given the regulator’s
strict view on compliance and its penchant for imposing high penalties, the
latest set of amendments will lead to better regulatory compliance, even though
they will add to deal timings and cost.
– Karan Singh
Chandhiok & Vikram Sobti
[1] In March 2011, the Ministry of Corporate Affairs of the Government
of India introduced a ‘Transaction Based Exemption’ which exempted transactions
where the target whose control, shares, voting rights or assets are being
acquired has either assets of the value of not more than INR 2.5 billion
(~USD 41.5 million) in India; OR turnover of not more
than INR 7.5 billion (~USD 124 million) in India.
of India introduced a ‘Transaction Based Exemption’ which exempted transactions
where the target whose control, shares, voting rights or assets are being
acquired has either assets of the value of not more than INR 2.5 billion
(~USD 41.5 million) in India; OR turnover of not more
than INR 7.5 billion (~USD 124 million) in India.
