India: CCI Notifies 7th Set Of Amendments To Merger Regulations: Green Channel Now A Reality!

Last Updated: 19 August 2019
Article by Khaitan & Co

Most Read Contributor in India, August 2019

INTRODUCTION

The Competition Commission of India (CCI) has constantly reformed the merger control regulations from 2011. In 2018, the CCI took it upon itself to further streamline the merger control regime to increase the ease of doing business in India. The pro-active effort which the CCI initiated last year has matured as it notified its 7th set of amendments (Amendment Regulations 2019) to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations). In essence, the Amendment Regulations 2019 appear to be a culmination of enduring deliberations with the Ministry of Corporate Affairs (MCA) over the last few months to further ease the approval process for mergers and acquisitions in India. The Amendment Regulations 2019 will be effective from 15 August 2019.

Given the significant shift brought by the Amendment Regulations 2019 in the merger control regime, this update endeavours to highlight the salient features of the latest amendments, including their practical implications on domestic and foreign clients.

KEY FEATURES OF THE AMENDMENT REGULATIONS 2019 ARE SET OUT BELOW:

Introduction of Green Channel

  • A green channel mechanism has been introduced which can be optionally utilized by parties to certain types of transactions set out in the newly added Schedule III to the Combination Regulations (discussed below).
  • Upon receipt of an acknowledgment of a notification filed under the green channel, the transaction will be deemed approved.
  • The notification, which is designed as an automatic approval channel, will need to be accompanied by a declaration set out in Schedule IV of the Combination Regulations.
  • Schedule III stipulates that the green channel route will be available to the parties which do not have any horizontal, vertical or complementary overlaps. While determining overlaps, parties are now formally required to consider all plausible alternative relevant market definitions. The overlaps also need to be evaluated vis-à-vis: (i) the parties themselves, (ii) all the group entities for all the parties, (iii) all entities where the parties directly or indirectly hold shares, and (iv) all entities where the parties directly or indirectly exercise control.
  • If the CCI determines that a transaction does not fall within the scope of Schedule III and the declaration under Schedule IV is found to be incorrect, then the deemed approval shall be void ab initio and the CCI shall deal with the combination in accordance with the provisions of the Competition Act, 2002 (Act).
  • However, prior to deciding if the notification is void ab initio, the CCI will afford the parties an opportunity of being heard.

Comment:

Practical Implications

  • The idea of a green channel mechanism is certainly laudable to further the ease of doing business in India. This will permit the CCI to prioritize its resources. However, there is a danger that the mechanism will be rendered ineffective given its narrow scope of applicability and uncertainties surrounding its structure.
  • Schedule III requires parties to ensure that there are no horizontal, vertical or complementary overlaps in all plausible alterative market definitions. The incorporation of this expression has far reaching ramifications and makes an overlap assessment highly onerous in application. The assessment will now need to be run for all possible alternative market definitions which makes the entire exercise very burdensome and may limit the exercise of this option.
  • Complementary activity is a newly introduced expression and there is no guidance on the import or interpretation of complementary activities. This again places a heavy burden on parties to determine what constitutes complementary activity and may require the parties to effectively seek the CCI's views through informal consultations, on a case by case basis. Further, given the onus imposed on the parties, even assessing suitable horizontal and vertical overlaps to the CCI's satisfaction may turn out to be challenging.
  • The overarching language of Schedule III requires ascertaining overlaps between group entities of both acquirer and target (including all entities in which both the parties directly and indirectly hold shares). Given that the target group outside the "true" target (ie, entity, business or asset actually being acquired) will not be part of the post transaction acquirer group, this requirement seems out of place and onerous.
  • Further in practice, identifying all the entities in which each, the acquirer and the target, have direct or indirect shareholding would be a burdensome task, more specifically for identifying minor shareholding in listed companies. Pure financial investors including private equity funds may be deeply affected by this requirement.
  • The Amendment Regulations 2019 also do not specify the actions that will follow if the merger notification is declared void ab initio. For example, whether another notification would be required, how would the CCI assess the transaction etc. Under the current framework, when a merger notification is invalidated by the CCI, the Combination Regulations set out the way forward. Given the absence of clarity in the Amendment Regulations 2019, parties may be looking at uncertain consequences for making an involuntary misstep.

Potential legislative issues

  • The Act does not contemplate a deemed approval mechanism. As such, Section 6(2A) specifically provides that a combination will not come into effect either before the CCI has approved the same by way of an order, or 210 (two hundred and ten) days have passed from the date the notice was filed.
  • The requirement of an order under Section 31 seems to require the CCI's assessment prior to approval of a transaction. In this regard, risks always remain on whether the deemed approval process will squarely fall under the scope of Section 6(2A).
  • Given that the Act does not contemplate the possibility of a deemed approval unless it is due to lapse of the prescribed timeframe, the validity of the Amendment Regulations 2019 is prone to a challenge as the Combination Regulations being a delegated legislation ought not to expand the scope of the legislative intent under Section 6(2A), particularly when it would appear to be contrary to the parent enactment.

Amendment to the Structure of Form I

  • The Amendment Regulations 2019 have restructured Form I to introduce certain additional items. It now requires details of:
    • (i) inter-connected transactions; (ii) rights acquired by the parties to the combination; (iii) foreign investment as a result of the combination; (iv) information on complementary business activities between the parties, etc.;
    • market-facing data (such as, market size, shares and competitor/customer/supplier information) for the last 3 (three) years as against the current practice of the last 1 (one) year;
    • all plausible alternative relevant markets (including explanations for accepting or rejecting a specific definition); and
    • any proceedings before the CCI or other competition authority(ies) to which they are/were a part of in the last 5 (five) years.
  • Comment:

    • The CCI has further streamlined the structure of Form I based on its learnings over the years.
    • The burden on the parties to choose and justify their choice of relevant market definition is greatly increased. This intent extends to the heavy data-gathering exercise for market information which is now required for the preceding 3 (three) years, regardless of the extent of overlaps.
    • It may be noted that the requisition from the transacting parties for competition law related proceedings for last 5 years is a part of Form II merger notification. The same has now been introduced in the revised Form I and as such, will act as an additional disclosure/ compliance item for the transacting parties.

    Amendment to the Public Summary Mechanism

    • Previously, a merger notification was required to be accompanied with a long summary and a short summary. The short summary was uploaded on the website of the CCI for public access. The Amendment Regulations 2019 have done away with the requirement of 2 (two) summaries.
    • The parties are now required to submit only 1 (one) summary (below 1000 (one thousand) words) with information on: (i) name of the parties, (ii) nature and purpose of the combination, (iii) products/services or businesses of the parties, and (iv) the markets in which the parties operate. This summary will also be published by the CCI on its website.

    Comment:

    This is a welcome step as it simplifies the process of filing the merger notification and eliminates the duplication of effort.

CONCLUSION

The 7th set of amendments to the merger control regulations have far reaching ramifications. These amendments seek to bring about a major shift in the existing merger control landscape in India. We believe that merger transactions will continue to require deep competition assessment with an interdisciplinary expertise in law and economics.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions