The Competition Commission of India has tightened its rules to ensure that companies do not escape its scrutiny through innovative structuring of mergers and acquisitions.
The Competition Commission of India (CCI) has clarified that it will look at the substance of the transaction and not just the structure while approving any merger.
Most of the combinations involving Indian companies or having presence in India have to get CCI nod.
The provisions of the Competition Act, 2002 (“Act”) relating to the regulation of combinations as well as the Combination Regulations have been in force with effect from 1stJune 2011.
The Combination Regulations were amended twice on 23rd February 2012 and 4th April 2013, with a view to relax filing requirements in respect of transactions not likely to raise competition concerns, provide certainty, reduce compliance requirements and make filings simpler.
In continuation of these efforts, the CCI has further amended the Combination Regulations on 28thMarch 2014 to, inter alia, simplify and provide greater clarity on the application of the combination provisions of the Act and the Combination Regulations.
The highlights of the recent amendments in the Combination Regulations are as under:
To provide greater certainty on the requirement of filing notice, it has been clarified that the notification requirement shall be determined with respect to the substance of the transaction and structure of transaction(s) having the effect of avoiding notice shall be disregarded;
Item (10) of Schedule I is deleted with a view to avoid ambiguity and uncertainty regarding insufficient local nexus and effect on markets in India;
Considering the nature of cases and the resources deployed by the Commission, as well as the assistance provided to parties, it has been decided to revise the fee, from INR 10,00,000 to INR 15,00,000 for Form I, and from INR 40,00,000 to INR 50,00,000 for Form II;
It has been decided to delete regulation 29 which was perceived to impose an additional condition in respect of preferring appeal in matters relating to combinations; and
Similar to Form I, now the regulations do not require verification on each page of Form II.
Consistent with the international best practices, CCI has been offering informal pre-notification consultation with its staff on the procedural issues relating to filing of notice.
Considering the experience of more than two and half years of enforcement and the requirements of stakeholders, it has been decided to expand the scope of consultation to include substantive issues regarding filing of notice with CCI.
This measure is expected to benefit the parties with appropriate guidance on the requirements of combination provisions of the Act and the Combination Regulations.
As before, the pre-filing consultation would continue to be informal & verbal and the consultations offered would not be deemed to be the opinion of the Commission in any manner whatsoever or binding on the CCI.
WHAT ARE COMBINATIONS :
Combinations include mergers, amalgamations and acquisition of control, shares, voting rights or assets.
Combinations are classified into horizontal, vertical and conglomerate combinations.
If a proposed combination causes or is likely to cause appreciable adverse effect on competition, it cannot be permitted to take effect.
Horizontal combinations are those that are between rivals and are most likely to cause appreciable adverse effect on competition.
Vertical combinations are those that are between enterprises that are at different stages of the production chain and are less likely to cause appreciable adverse effect on competition.
Conglomerate combinations are those that are between enterprises not in the same line of business or in the same relevant market and are least likely to cause appreciable adverse effect on competition.
The scrutiny of a combination under the Act is usually expected to take place before it comes into effect with an idea of preventing a possible anti-competitive behaviour which may adversely affect the consumers.
Combinations likely to have an anti-competitive effect can be permitted after such effects are removed by modifications.
Combination Amendment Regulations seek to amend certain provisions of The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, which are in force since June 1, 2011; and were introduced to supplement the existing Competition Act, 2002 (“Competition Act”).
Competition Commission of India is a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India.