The Competition Act, 2002 (the “Act”) which came into force in 2003, seeks to regulate (a) Anti-competitive agreements; (b) Abuse of dominance; and (c) Combinations. While the provisions relating to anti-competitive agreements and abuse of dominance were notified in May 2009, the provisions relating to Combinations have been pending notification. Under the Act, a Combination occurs through (i) acquisition; (ii) acquisition of control; and (iii) merger or amalgamation.
On 1 March, 2011, the Competition Commission of India (“CCI”) published new draft regulations, The Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011. Some key features of the draft regulations are:
- Consultation prior to filing notice of proposed combination: Parties to a proposed combination may make written request seeking informal and verbal consultation with the CCI about filing notices. However, CCI would not be bound by any opinion or view expressed during consultation.
- Forms of notice: The draft regulations prescribe 3 formats of pre- merger notification Forms for obtaining approval.
Form I – for categories of following combinations:
- Acquisition of not more than 15% of the total shares or voting rights of the target company, solely as investment or in the ordinary course of business, not leading to control;
- Acquisition of shares or voting rights of the target company where the acquirer is already in control;
- Acquisition of assets not directly related to the business activity of the acquirer or made solely as investment or in the ordinary course of business not leading to control of the enterprise except where the assets being acquired represent the entire business operations of the target company in a particular location or particular product or services, irrespective of whether such assets are organised as a separate legal entity or not;
- Acquisition or acquiring of control or merger or amalgamation where not more than one party to the combination has in India assets of more than INR 2.5 billion or turnover of more than INR 7.5 billion;
- Acquisition of stock-in-trade, raw materials, stores and spares in the ordinary course of business;
- Amended or renewed tender offer where a notice has been filed by the party making the offer prior to such amendment or renewal of the offer, provided that prior intimation of such change has been duly made;
- Acquisition of shares or voting rights by a securities underwriter, in the ordinary course of business and in the process of underwriting;
- Acquisition of shares or voting rights pursuant to a bonus issue or sub-division of shares; and
- Acquisition of control or shares or voting rights or assets by one person or enterprise of another person or enterprise within the same group.
Form II– for combinations other than those listed above in Form I.
Form III– for public financial institutions, foreign institutional investors, banks and venture capital funds in respect of share subscription or financing facility or any acquisition made by them pursuant to any covenant of a loan agreement or investment agreement.
- Liability to file notice: In case of merger or amalgamation, the liability to file pre-merger notifications is on the parties to jointly file notice. In case of acquisition or acquiring of control, the liability is on the acquirer.
- Filing Fees: In case of merger or amalgamation or acquiring of control over an enterprise, the fees for filing Form I or Form II is INR 4 million . In case of acquisition of shares, voting rights or assets of the target company, the fees shall depend upon the value of the acquisition as under:
| Value of Acquisition | Fee |
| Less than INR 5 billion | INR 1 million |
| From INR 5 billion to less than INR 10 billion | INR 2 million |
| INR 10 billion and above | INR 4 million |
- Prima facie view: Upon filing of the pre-merger notification, the CCI shall form its prima facie opinion on the proposed combination within 3o days of filing of notice.
- Time period for review: The draft regulations provide that CCI shall endeavour to pass an order or issue directions within 18o days of filing of the notice. The Act however currently prescribes a period of 210 days within which the CCI has to pass order or issue directions, otherwise the combination would be deemed as having been approved.
- Appointment of independent agencies to oversee modifications: The draft regulations give power to CCI to appoint independent agencies if it is of the opinion that modifications proposed by it and accepted by the parties needs supervision. Such independent agencies may include an accounting firm, management consultancy, any professional organisation or independent practitioner of repute.
- Request for confidentiality: Any party may submit a written request for confidentiality of documents submitted during investigation on the basis of 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 which would be subject to consideration by CCI. The right to seek confidentiality extends only to documents submitted and not to the transaction itself.
