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CONTENTS Competition Act-Main features Overview on regulation of combinations Threshold limits for Notice What combinations are prohibited Merger control in other jurisdictions Industrys concerns Other concerns
ex-ante, except in
amalgamations.
High threshold limits only large combinations subject to regulation.
[Section 5] Mandatory notification regime. Commission to decide in 210 days, else combination is deemed approved. [ Section 6] Commission can take suo moto action within 1 yr after combination. [ Section 20]
China EU
Japan
30 calendar days
US
15 or 30 calendar days
Industrys Concerns
Mandatory notification Too long waiting period 210 days Suspensary merger control regime No initial specific waiting period in First Phase of 30 days like US, EU, China, Japan.- ICNs Recommended Practices suggest that in suspensive jurisdictions, initial waiting periods should expire within a specified period following notification. Biased against Indian Cos. e.g. an Indian Co. with turnover of Rs. 3000 crore cannot acquire another Co. without prior notification and approval of CCI, whereas a Foreign Co. will turnover outside India of more than $ 1.5 billion (or Rs. 4500 crore) may acquire an Indian Co. with sales just short of Rs. 1500 crores. Salami Styled acquisitions by Foreign acquirer who structures the transactions in parts so that each part is acquired separately in a way that acquisition of each part falls below the thresholds Rs. 1500 crores, thereby escaping notification to CCI.
Industrys Concerns
Even Intra-group acquisitions by promoter of listed public Co., including internal reorganizations with in a corporate group, require mandatory notice, though they do not affect competition. Conflict with SEBI Takeover Code Regulation 22 (12) of the SEBI Code makes it compulsory for the acquirer to pay interest to shareholders for delay beyond 15 days required for Statutory approvals if such nonreceipt of the approvals is due to any willful default or neglect. Further Regulation 22(13) of the SEBI Code provides that where the acquirer fails to obtain approvals with in 15 days on account of willful default etc., the entire amount to be deposited in the Escrow account under Regulation 29 will be forfeited and the acquirer will also be liable for penalty. Where CCI after receipt of Notice decides to refer the matter to DG for investigation or after forming the second prima facie opinion decides to invite objections from the public against the proposed acquisition, the clearance cannot be given within 15 days thereby placing the acquirers of listed companies in a disadvantageous position under the SEBI Code. This may lead to conflict between SEBI and CCI also.
Industrys Concerns
What other documents can trigger a notice to CCI u/s 6(2)- Apart from definitive agreements for acquisitions of shares etc., other felicitating documents such as non-binding letters of Intent, agreement in principle, MOU, public announcement, non-disclosure agreement etc. are also executed before mergers. Are such innocuous documents included in other documents for triggering a notice to CCI u/s 6(2)? A notification of such documents is likely to compromise confidentiality of the business deals before they are closed and may be against efficiencies .
Other ConcernsWhy include any acquisition-whether or not effect competition ? [ Section 5(a)] Should acquisition of assets ,say, for pure investment purposes be not exempted? Should it not be confined only to acquisitions where the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly, as in the US? Why should Full Functional Joint Ventures be also not included under merger regulations , as in the EC ? Why only large enterprises above threshold limits included, why cant all mergers be examined regardless of size , as in the US? Should there be exemptions for Banking and Shipping sectors?
DISCLAIMER This presentation provides only an introduction to competition law, and should not be relied on as a substitute for the law itself. Further, this presentation is subject to any amendments which may be made in the competition law at anytime in future.