The merger regulations under the Competition Act 2002 will
finally come into effect from June 1, 2011. This was done after a
long wait and amidst opposition from various factions of the
industry. Though the Competition Act was enacted in 2002, the
provisions relating to anti competitive agreements and abuse of
dominance were notified to take effect only in May 2009 and finally
in March 2011 it has been finally announced that the provisions of
the Act dealing with combination regulation will be brought into
Mergers, acquisitions, private equity investments and other like
transactions which cross the prescribed thresholds of assets and
turnover as provided under the Act will require prior approval of
the Competition Commission of India. This includes transactions
which are in progress but are yet to be completed. The thresholds
of assets and turnover have been enhanced by 50%. However, the
general impression that the thresholds prescribed are perhaps on
the lower side continues. In order to further facilitate the
process, it has been decided that enterprises whose shares, assets
or voting rights are being acquired, having assets and turnover of
less than Rs 250 crores and Rs 750 crores respectively are exempted
from the requirement of obtaining the prior approval of the
The draft combination regulations which prescribe the details
relating to filings for approvals and the forms to be filled at the
time of filing have been uploaded on the website of the Commission.
It has been announced that these regulations may soon be amended.
Comments and suggestions from various stakeholders have been
invited and are being considered by the Commission. Further, to
widen the scope of the consultative process, the Commission is in
the process of organizing consultative meetings with various
stakeholders which include the apex industry bodies and leading law
firms dealing with competition law related matters. This is a step
in the right direction which will enable the Commission to get on
board the views of all concerned and address the concerns of all
those who will be directly affected by the regulations coming into
force. The process may also throw light on some of the prevailing
ambiguities in the interpretation of the law.
One of the major grievances of all interested parties has always
been the outer limit of, as long as 210 days, that the Commission
may take to finally approve a combination. Though the Commission
has expressed that it will endeavor for an expedited disposal in
most cases, the statutory timeframe cannot be ignored. Other areas
of concern include the calculation of assets and turnover which act
as a triggering event for Commission to exercise discretion and the
treatment of joint ventures. Further, the draft regulations provide
for certain transactions which require the filing to be made with
the Commission in terms of Form 1. These include acquisition of
shares upto 15%, acquisition of shares where the acquirer already
controls the target enterprise, acquisitions made solely as
investments and intra group acquisitions. All other transactions
not covered in the category above are to be filed in terms of Form
II which is more detailed. However it appears that Form I, in
itself is much too detailed and calls for information which is
substantially more than what is called upon for similar
transactions in other jurisdictions. All these issues may be
brought up at the time of the consultation process and hopefully a
mutually acceptable solution is devised.
The draft regulations also provide for informal verbal
consultations seeking clarifications about filing of notices. Such
consultations shall be kept confidential and the views expressed
during the consultation process shall not be binding on the
commission. This process may indeed facilitate resolution of
uncertainties of filing in certain cases and avoid unnecessary cost
and expense. A similar process has been prescribed even for other
regulators like the Securities and Exchange Board of India, the
countries securities market regulator.
All that can be said is that the law is in its nascent stage and
will continue to develop with experience and judicial precedents
interpreting the various provisions of law. The right approach
would be for the industry and the regulator to work closely and
coordinate with each other to fill in every lacuna that presents
itself and to jointly face the challenges that lay ahead in an
effort to give effect the laudable objects that underline the anti
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In the wake of liberalization and privatization that was triggered in India in early nineties, a realization gathered momentum that the existing Monopolistic and Restrictive Trade Practices Act, 1969 was not equipped adequately enough to tackle the competition aspect of the Indian economy.
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