The Competition Act, 2002 (“the Act”) was enacted to regulate (a) anti-competitive agreements, (b) abuse of dominance, and (c) Combinations. The provisions relating to regulation of combinations (for instance mergers, acquisitions, amalgamations, takeovers etc.) had been in abeyance for some time. These have now been notified Vide Notification No. S.O. 479(E) dated 4 March, 2011 and shall come into effect from 1 June, 2011. On n May, 2011, the CCI has released The Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011 (“the Regulations”). Consequently, combinations covered by the prescribed monetary thresholds, based on assets or turnover of the parties (or groups) to the combination, shall now require filing and prior approval of the Competition Commission of India (“CCI”) effective 1 June, 2011.
What is a Combination?
Briefly, a Combination is an acquisition of one or more enterprises by one or more persons, or merger or amalgamation of enterprises, if it meets the prescribed monetary thresholds, and involves:
Control includes controlling the affairs or management by (i) one or more enterprises over another enterprise or group; or (ii) one or more groups over another group or enterprise.
Monetary thresholds Prescribed under the Act and enhanced vide Notification No. S.O. 480(E) dated 4 March, 2011 for a combination to be covered by the Act have been prescribed on the basis of the assets or turnover of the parties to the combination jointly, or of the enterprise/group remaining after, or created as a result of, a merger/amalgamation. The same are set out below:
|Parties to the combination jointly have||Acquiring ‘Group’ and target
|In India||In India or Outside India||In India||In India or Outside India|
|Assets over USD 750 million, (of which at least INR 750 crore in India)||Assets over
|Assets over USD 3
billion (of which at least INR 750 crore in India)
|Turnover above INR
|Turnover above USD 2250 million, (of which at least INR 2,250 crore in India).||Turnover
|Turnover above USD 9 billion (of which at least INR 2,250 crore in India)|
To be considered as a Group, two or more enterprises, directly or indirectly, must be in a position to either
*Special Exemptions: For the first 5 years from 1 June, 2011, the following have been exempt from combination regulations under the Act:
In addition to the monetary thresholds and special exemptions, Schedule I of the Regulations lists certain categories of transactions (briefly set out in Appendix A to this note) which ordinarily are not likely to cause an appreciable adverse effect on competition in India. It has thus been clarified that for combinations mentioned in Schedule I, notice need not “normally” be filed.
Transitional provisions – which combinations require filing of notice effective 1 June, 2011?
Combinations which need to be notified to the CCI for its evaluation and approval are:
What is the process for filing notices with the CCI ?
Under the Act, notice is to be filed in the prescribed form with requisite filing fee, within 30 days of the:
The Regulations have clarified the meaning of the board of directors in case of non-corporate entities like sole proprietors, HUF, statutory corporations, association of persons, partnerships, cooperative society, local authorities and other forms.
The Regulations have clarified the term ‘other document’ to mean any binding document conveying an agreement or a decision to make an acquisition. In case of a hostile acquisition, ‘other document’ would mean any executed document conveying a decision to acquire. In a case where no document has been executed but the intention to acquire is communicated to the Central Government or the State Government or to any Statutory Authority, the date of such communication shall be deemed to be the date of execution of the ‘other document’.
Schedule II to the Regulations prescribes the following three forms to file notices with CCI for combinations:
The parties to the combination can elect between Form I and Form II, though “ordinarily” Regulation 5(2) indicates that Form I should be used including for certain instances specified in the said Regulation (briefly set out in Appendix B to this note). The CCI can direct the parties to furnish additional information or file Form II. In case the CCI directs the parties to file Form II, the fees paid for filing Form I can be adjusted against fees payable for Form II.
Forms can be viewed on CCI’s web site. Salient information required under the forms is briefly outlined in Appendix C to this note.
The Regulations have also clarified that where the ultimate intended effect of a business transaction is achieved through smaller individual transactions (interconnected or inter-dependent), one or more of which may amount to a combination, a single notice covering all these transaction may be filed.
Who is obliged to file the form with the CCI?
In case of merger or amalgamation, the obligation is jointly of the parties to the combination.
In case of acquisition, the obligation is of the acquirer. In case of acquisitions, without consent of the enterprise being acquired, the acquirer is to furnish only such information as is available and the CCI can direct the enterprise being acquired to furnish additional information.
What is the timeline and process for evaluation by the CCI ?
The Act prescribes a period of 210 days from the date of filing notice for CCI to pass an order, or issue directions in respect of a combination notified for approval. Till CCI passes an order, the combination cannot take effect. If CCI does not pass any order within 210 days, the combination shall be deemed to have been approved.
The review by the CCI as to whether or not the proposed combination is likely to cause or has caused appreciable adverse effect on competition within the relevant market in India, shall be in two phases (i) CCI is to form a prima facie opinion in 3o days of receipt of the notice; and if such opinion confirms that there is likely to be an appreciable adverse effect on competition in India, then, (ii) to undertake a detailed investigation within 18o days thereafter which would include calling for a report from the Director General, directing parties to publish the details of the combination in the prescribed form (Form W) to invite written objections from any person or member of the public affected or likely to be affected by the said combination and giving such affected parties an opportunity of being heard.
The Regulations specify certain instances where the time taken by the parties will be excluded from the 210 day approval period, or the 30 day period for forming prima facie opinion by the CCI. These instances include- (a) time taken to provide information in case of an incomplete form, (b) time taken to furnish additional information required by the CCI, (c) time taken to file Form II in case so directed by CCI, etc.
What are the factors for evaluation of the Combinations by the CCI ?
To determine whether the combination would have the effect of or is likely to have an appreciable adverse effect on competition in the relevant market, the CCI is to have due regard to certain factors specified under the Act. These factors are briefly set out in Appendix D to this note.
Will information furnished by the parties be kept confidential ?
Any party may submit a written request for confidentiality of information or documents submitted during investigation and such request shall be considered as per the procedure laid down in The Competition Commissions of India (General) Regulations, 2009. The request for confidentiality needs to be accompanied by a statement setting out cogent reasons (viz. making part or whole of the document public would result in disclosure of trade secrets or destruction or appreciable diminution of commercial value of any information or cause serious injury) for such treatment and to the extent possible, the date on which such confidential treatment shall expire. The CCI may determine if, to what extent, and for what period, the request should be granted and direct accordingly. Where request for confidentiality is rejected and the party is still unwilling to make the documents or part thereof public, such documents or parts thereof shall be returned to the party and the information contained therein shall be disregarded. Any person, party or expert appointed or engaged by the CCI, who is privy to the confidential information shall be bound by confidentiality obligations and any breach thereof shall constitute ground for initiation of disciplinary proceedings or for termination of the engagement by the CCI. The right to seek confidentiality extends only to documents submitted and not to the transaction itself.
What orders may CCI pass on Combinations ?
The CCI may (i) order that the combination is approved; or (ii) in case CCI finds that a combination shall have, or is likely to have, an appreciably adverse effect on competition in the relevant market, the CCI may order (a) that the combination should not be given effect to; or (b) suggest suitable modifications to amend the transaction structure and based on the response of the parties, pass further orders.
The CCI can also appoint independent agencies (like accounting firm, management consultancy, law firm, or other professional organisations) to supervise the modifications to combination proposed by the CCI and accepted by the parties if CCI so deems fit.
Any transaction found to be likely to cause, or to have caused, an appreciably adverse effect on competition in the relevant market in India can be declared as void and of no effect by the CCI.
Proposed Combinations for which filing may not be normally required
The following transactions (detailed in Schedule I to the Regulations, only briefly outlined below) have been clarified as ordinarily not likely to have appreciable adverse effect on competition in India and hence notice need not normally be filed with CCI:
Acquisition of control or shares or voting rights or assets by one person or enterprise of another person or enterprise within the same group, (“Group” is defined to mean two or more enterprises which, directly or indirectly, are in a position to either exercise 5o% or more of the voting right in the other enterprise or appoint more than half of the board of directors in the other enterprise or control the management or affairs of the other enterprise);
Some Proposed Combinations for which Form I may be used Combinations (detailed in Regulation 5(2), outlined below) where:
Forms for Notifying Proposed Combination
Forms are specified in Schedule II to the Regulations, the salient aspects of information required are briefly outlined below:
Form I – Part i seeks information including name, registration details, addresses and roles of the parties to the combination.
Form I – Part 2 seeks the following salient information:
Form II is a very exhaustive form and seeks information in detail, some of the salient elements of information are outlined below:
Information about the size of the combination including on monetary thresholds, details about value of assets and aggregate turnover of each of the parties to the combination as per audited annual accounts of the immediately preceding financial year and current financial year, aggregate value of assets and turnover for the proposed combination for the immediately preceding financial year and current financial year. Such values are to be provided for India as well as outside India.
Form III seeks the following salient information:
Factors for evaluation of Proposed Combination
To determine whether the combination would have the effect of or is likely to have an appreciable adverse effect on competition in the relevant market, CCI is to have due regard to certain factors specified under the Act. These factors are briefly set out below:
Relevant market means the relevant product market or relevant geographical market or both.