Green Channel in Combination Regulations: Legislative Concerns

[Basu Chandola is a Research Assistant at the Jindal Initiative on Research in IP and Competition (JIRICO)]

The Competition Law Review Committee, which was established in 2018 to ensure that competition law is strengthened and re-calibrated to promote best practices, submitted its report in July this year. The Committee has recommended the introduction of a “green channel” mechanism to deal with combinations that are unlikely to result in any appreciable adverse effect on competition (AAEC). The report suggested that the detailed criteria for eligibility under the green channel may be formulated by the Government based on consultation with Competition Commission of India (CCI). Under the green channel, the parties to the combination would self-assess to determine if they would qualify for this mechanism on the basis of specified criteria. If the parties qualify, they will have the option to notify the CCI of the proposed combination under the green channel and consummate it on an automatic approval basis.

The CCI recently introduced the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019 to incorporate this recommendation in the Indian competition law regime. The Amendment Regulations amend the existing Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011. In this post, the author will analyze the legislative concerns with the Amendment Regulations.

Green Channel under the Amendment Regulations

The Amendment Regulations provide for the introduction of regulation 5A, regulation 13(1A), Schedule III and Schedule IV to the Combination Regulations. The Amendment Regulations also alter the form I in Schedule II of the Combination Regulations. Regulation 5A provides that the parties to a combination mentioned in Schedule III may give notice in relevant form with the declaration for approval of combinations under the green channel. Under the green channel, the proposed combination shall be deemed to have been approved by the CCI under sub-section (1) of section 31 of the Act upon acknowledgement of such a filing.  

Existing Framework for Combinations under the Competition Act, 2002

Section 6(2) of the Act provides that the parties to a combination shall give the CCI a notice detailing the proposed combination within thirty days of any of the following:

  • approval of the proposal relating to merger or amalgamation by the board of directors
  • the execution of any agreement or other document for acquisition
  • acquiring of control as defined under the Act

The sub-section also provides that the CCI would determine the form of the notice and the fees under the regulations. Furthermore, section 6(2A) provides that the combination shall not come into effect unless the CCI has passed an order under section 31 of the Act, or if two hundred and ten days have passed from the day on which the notice was given to the CCI. Section 30 of the Act provides that when a notice has been given under section 6(2), the CCI shall examine such notice and give a prima-facie opinion and proceed as per the provision of section 29. Further, section 31 provides that the CCI needs to pass an order or direction regarding the notice. If the CCI does not pass an order within a period of two hundred and ten days from the date of notice given to the CCI, the combination shall be deemed to have been approved by the CCI.[1]

The CCI has also passed the Combination Regulations in pursuance of its powers under section 64 read with sub-sections (2) and (5) of section 6 of the Competition Act, 2002. The Combination Regulations provide the procedure, forms and fees for proceedings related to Combinations.

Delegated Legislation under the Competition Act, 2002

The CCI has the power to make regulations under section 64 of the Act which provides that the CCI may, by notification, make regulations to carry out the purposes of the Act. The section is broadly worded and the power entrusted to the CCI is wide in nature with two limitations, i.e., the regulations must be consistent with the Act and also the rules framed thereunder.[2] It is a well-recognized principle of interpretation of a statutes that conferment of rulemaking power by an Act does not enable the rulemaking authority to make a rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto.[3]

The scope of the regulation making power of the CCI can be assessed by comparing it with section 157 of the Customs Act, 1962. Both these pieces of legislation provide regulation making power to carry out the purpose of the statute. The section reads as follows:

157. General power to make regulations.

(1) Without prejudice to any power to make regulations contained elsewhere, in this Act, the Board may make regulations consistent with this Act and the rules, generally to carry out the purposes of this Act….

In Subhash Photographics v Union of India,[4] the Supreme Court of India made the following observations:

The regulation-making power of the Central Board of Excise & Customs under Customs Act, S. 157 is not confined only to procedural and peripheral matters. This Section gives power to the Board to make Rules/Regulations to carry out the purposes of the Act, the only other limitation being that such Rules should not be contrary to the Rules made under S. 156.

Similarly, the scope of regulation making power of the CCI would not be limited to procedural and peripheral matters. However, the rider is that the Act should not be contrary to the Act or the Rules made there under.

Amendment Regulations: Contrary or not?

It is suggested that though the regulation making powers of the CCI are wide in nature, it is not sufficient to introduce the green channel mechanism. The author has reached this conclusion on the basis of the following:

  • Section 6(2A) expressly provides that the combination shall not come into effect unless the CCI has passed an order under section 31 of the Act, or if two hundred and ten days have passed from the day on which the notice was given to the CCI. Introduction of a deemed approval mechanism without following the 210 days limit is contrary to the spirit of the section.
  • Under section 30, the CCI is required to examine notice filed under sub-section 6(2) and form its prima facie opinion according to section 29 of the Act. An automatic approval mechanism would be contrary to this section.
  • Under section 31(11), a combination is deemed to have been approved by the CCI only on expiry of 210 days and if the CCI has not passed an order or issue direction in accordance with the provisions of sub-section (1) or subsection (2) or subsection (7) of section 31. The introduction of green channel is contrary to this section as the time period of 210 days is reduced for deemed approval.

However, it may be contended that the requirement of section 6(2A) and section 31(11) is being fulfilled as a deemed approval may be treated as an order of the CCI under section 31. The author feels that such a mechanism would be expanding the scope of the Act through a delegated legislation and must be discouraged. Though the introduction of a green channel is a welcome step, the author feels that an amendment in the Act is required to incorporate this mechanism in the Indian competition law regime. The Act must contain a provision which provides for green channel for combinations which do not have AAEC. In furtherance of that provision, the CCI may, by regulations, specify the criteria for qualifying for green channel and the form of notice. To conclude, the author would like to state that being contrary to the provisions of the Act, the Amendment Regulations do not seem tenable in law.

Basu Chandola

[1] The Competition Act, 2002, Section 31(11).

[2] The Competition Act, 2002, section 64.

[3] Addl. District Magistrate v Siri Ram (2000) 5 SCC 451. 

[4] 1993(2)SC ALE909

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