Hostile Takeover Cannot be a Defence to CCI Notification Requirements

[Mohsin Rahim is a 5th Year B.B.A. L.L.B. (Hons.) Student at Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana]

On May 17, 2022, the Competition Commission of India (“CCI”) passed an order imposing a penalty of INR 1 crore on Veolia Environment S.A. under section 43A of the Competition Act 2002 (“Act”) for violating section 6(2) and section 6(2A) of the Act, as Veolia partially consummated the acquisition of Suez S.A. prior to submitting a notification to the CCI and obtaining its approval. Due to the non-availability of authentic information, and because of the nature of a hostile takeover, Veolia was under a bona fide belief that the transaction was eligible for target exemption. This post aims to analyse this order in light of the objective of the merger control regime in India.

Brief Facts of the Case

Veolia and Suez are companies headquartered in France and listed on the Euronext Stock Exchange in Paris. Veolia provides optimized resource management along with water, waste, and energy management solutions, whereas Suez only provides water and waste management solutions. Both companies operate through their subsidiaries in India. The CCI on September 17, 2020, received an application from Suez under section 20(1) and section 33 of the Act wherein Suez stated that Veolia proposed to carry out its takeover in two steps: (i) acquisition of 29.9% shares of Suez from Engie S.A. who is an existing public shareholder and, subsequently, (ii) the acquisition of the remaining shares via a public takeover bid i.e., a public offer. This was the largest public M&A transaction in 2021 in France with the transaction value being EUR 13 billion.

In its application, Suez stated that the proposed takeover is notifiable to the CCI along with an acquisition of control over thirteen Suez India entities. Suez informed the CCI that the transaction was notifiable as the Indian turnover and assets of Suez exceeded the INR 1000 crore and INR 350 crore respectively for the financial year (“FY”) ending March 31, 2019 and that the de minimis exemption shall not be applicable. The jurisdictional thresholds as specified under section 5 of the Act exceeded solely via the combined value of the assets of Suez and Veolia.  Suez also raised issues regarding market concentration and substantial lessening of competitive constraints via the proposed takeover.

In its submissions, Veolia accepted that the threshold specified in SECTION 5(A) of the Act regarding the value of the worldwide assets exceeded solely by the value of assets of Veolia (both worldwide and in India). However, due to the hostile nature of the acquisition, Veolia incorrectly assessed the applicability of the de minimis exemption for the Engie block transaction as Veolia only had publicly available information regarding the turnover of Suez. Veolia was under a bona fide belief that the acquisition was not a notifiable ‘combination’ under the Act. The CCI determined that Veolia failed to arrive at a reasonable estimation of Suez’s indirect turnover in India and violated sections 6 and 6(2A) of the Act as it did not notify the transaction before the CCI.

Issues Involved

Whether the unavailability of accurate data due to a hostile takeover can be a defence against gun-jumping?


The objective of merger control is to restrict mergers that shall have an appreciable adverse effect on competition (“AAEC”) either by way of increasing the price of goods and services or by restraining the entry of new players in the market. It is a mechanism to ensure that a particular enterprise does not have the market power to operate independently of the market forces, which might hamper the consumers as well as the competition in the market. Under the Act, the term merger has been used broadly to include amalgamations as well as the acquisition of shares and control over the assets and managerial decisions of an enterprise. The merger control regime in India is mandatory and suspensory in nature. The criteria to determine which acquisitions of assets, voting rights, control, shares or mergers shall amount to a combination have been specified under section 5 of the Act. Mergers and acquisitions that form a combination are mandatorily notifiable to the CCI and cannot be consummated, either entirely or in part, without the CCI’s approval (unless such combinations fall under Schedule 1 of the Combination Regulations or they are exempted via notification by the Government of India).  Furthermore, in the combination regarding Intellect Design Arena Limited, it was held that a mandatory regime for notifying a proposed combination is applicable whether the combination causes any AAEC in India or not.

The Act does not discriminate between the type of mergers, and its provisions are applicable to every kind of merger. Given the adversarial and unsolicited nature of a hostile takeover, the acquirer relies on publicly available information about the target to a great extent, although every piece of such information might not be authentic. The Act does not grant leeway to such acquisitions and imposes a mandatory notification requirement. An enterprise cannot be exempted merely because it did not possess accurate data. The CCI provides pre-filing consultation (“PFC”) to assist enterprises to comply with the requirements of the Act. Thus, enterprises cannot take the defence that they did not comply with notification requirements due to insufficient or incorrect data as the CCI, itself provides PFC to enterprises which would lead to obtaining authentic data along with subsequently complying with the requirements of the Act.

Veolia did not make a conscious effort to undertake satisfactory due diligence as it consummated the Engie block transaction under the alleged bona fide belief that the transaction is entitled to target exemption, whereas the CCI had shared data regarding the Suez India entities as well as their turnover and assets for the FY ending March 31, 2019 a week before the transaction was consummated. The communication from the CCI should have halted the transaction if Veolia was acting under a bona fide belief, as it would have sought clarifications from the CCI regarding the applicability of the target exemption. Furthermore, the bona fide belief of Veolia is further suspect, as it approached the CCI for PFC subsequent to the completion of the Engie block transaction.  

As the enterprises have a global presence, concerns related to merger control surfaced in different jurisdictions. Veolia requested the CCI to take a lenient approach as the European Commission did not find Veolia liable for gun-jumping as there exists an exemption to the standstill obligation in the case of two-step acquisitions encompassing a public bid, which is in consonance with the Competition Law Review Committee Report. However, on the contrary, Brazil imposed the highest possible gun-jumping fine on Veolia. The CCI did not place reliance on the decisions of other competition authorities as their decisions are specific to their regulatory reforms and also held that a contravention needs to be assessed on the basis of the existing laws.

Although the CCI approved the combination, in SCM Solifert Ltd. v. CCI it was held that the CCI has the power to impose a penalty under section 43A, subsequent to approval, for the failure to file a notice under section 6(2) of the Act. Even if the conduct of Veolia is considered to be bona fide, in CCI v. Thomas Cook (India) Limited, the Supreme Court held that for the imposition of penalty due to the breach of sections 6(2) and 6(2A) mens rea is not an essential element. Thus, the CCI imposed a monetary penalty on Veolia for consummating the Engie transaction without filing a notice before the CCI whilst it had the resources to obtain correct data regarding the assets and turnover of Suez in India.


The CCI rightly imposed a penalty on Veolia as it would have otherwise set a precedent for enterprises to claim a bona fide belief of being eligible for target exemption whenever there would be a violation of sections 6(2) of the Act. In light of the legal framework, enterprises cannot assume that they are entitled to a target exemption due to the non-availability of accurate data. A hostile takeover cannot be given special treatment simply because the target did not share its data with the acquirer; it cannot be an excuse to neglect filing requirements seeking approval from the CCI. However, since the Act does not distinguish between the kind of mergers, acquirers always have an option to avail PFC with the CCI to ensure that it obtains accurate data whilst completing filing requirements for approval from the CCI.

Mohsin Rahim

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