role of competition commission of india in governance of combination

Academic Associate – IIM Academic Associate – IIM AhmedabadAhmedabad

KALPESHKUMAR L. KALPESHKUMAR L. GUPTAGUPTA

LL.M., MBL (NLSIU), M.Phil. (Law)LL.M., MBL (NLSIU), M.Phil. (Law)

GICTL – 2012, GNLU - March 2-3, 2013GICTL – 2012, GNLU - March 2-3, 2013

(C) K L GUPTA(C) K L GUPTA

Outline of the presentation :-

1. Introduction2.An Overview of CCI3.Regulation on Combination4.Latest Orders of CCI on

Combination5.Conclusion 6.Video on CCI ON M&A

Regulation7.Q & A


MRTP ACT, 1969For Prohibition of Monopolistic, Unfair & Restrictive Trade Practice

Liberalization – 1991After this – difficulty arose to administer present market

Competition Act, 2002 to meet the requirement of the highly competitive market

1. Anti-Competitive Agreements2. Abuse of Dominance3. Combinations4. Competition Advocacy


An Act to provide, keeping in view of the economic development of the country for the establishment of a Commission to

-prevent practices having adverse effect on competition, -to promote and sustain competition in markets, -to protect interest of the consumer and -to ensure freedom of trade carried on by other participants in markets


Regulation on Combinations (Section 64) :-

The CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Notified on May 11, 2011)


Combination (Section 5) :-

The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if—Acquirer or Acquiree or Jointly have

either in India assets of >1000 Crore or turn over >3000 Crore or

in India or Outside India, in aggregate, the assets of >$500 Million, including at least Rs. 500 crore in India or turn over >$1500 Million including at least Rs. 1500 Crore in India or

Cont..



After acquisition, jointly have

either in India assets >4000 crore or turn over >Rs. 12000 Crores or

In India or outside India, in aggregate the assets >$2 Billion including at least Rs. 500 Crores in India or turnover >$6 Billion including at least Rs. 1500 Crores in India or

Cont..

Cont..



Any merger or amalgamation in which-

the enterprise remaining after merger or the enterprise created as a result of the amalgamation have

either in India, the assets of the value of >Rs. 1000 Crores or turn over >3000 Crores or

in India or outside, In aggregate, the assets of the value of >>$500 Million including at least Rs. 500 Crores in India or turnover >$1500 including at least Rs. 1500 Crores in India

Cont..



The value of assets shall be determined by taking the book value of the assets as shown, in the audited books of account of the enterprise, in the financial year immediately preceding the financial year in which the date of proposed merger falls…..

………as reduced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, registered trade mark, registered user, geographical indication, design or layout, etc.


Regulation of Combinations (Section 6) :-

-No Person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition and such a combination shall be void.

-Notice to the Commission within 30 days from execution of agreement / approval of the proposal relating to mergers or amalgamation by the Board of Directors of the Co. concerned.

-No Combination shall come into effect until 210 days have passed from day on which notice has been given to Commission.

Cont..


Regulation of Combinations (Section 6) :-

-The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.

-Above financial organizations shall within 7 days from the days of the acquisition file in Form III with the Commission the details of acquisition.


Notice for the proposed combination :-

-Form I with Fees of Rs. 10 lakhs (Schedule II)

-Where parties are engaged in production, supply, distribution sale etc. of similar or identical product with specified share market then Form II with Fees of Rs. 40 lakhs (Schedule II)

-In case of public financial institutions, FIIs, bank or venture loan or any investment agreement without fees in Form III


Failure to file notice (Regulation 8):-

Where the parties to a combination fail to file notice, then Commission upon its own knowledge or information relating to such combination, inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on competition within India and direct the parties to the combination to file notice in Form II within 30 days of the receipt of the notice.


Obligation to file notice (Regulation 9):-

-In case of Acquisition, the Acquirer shall file the notice.

-In case of merger parties to the combination shall jointly file notice.


Procedure for investigation of combinations (Section 29) :-

-Commission is of the prima facie opinion that a combinations is likely to cause or has causes an appreciable adverse effect on competition, it will issue notice to the parties to combination calling upon them to respond within 30 days of the receipt of the notice as why investigation in respect of such combination should not be conducted.

-After receiving reply Commission may call for report from DG.

-Commission will ask for publication of agreement if there is prima facie case of appreciable adverse effect


Orders of Commission on certain combinations (Section 31) :-

-Where Commission is of the opinion that any combination does not or is not likely to have an appreciable adverse effect on competition it shall by order approve the combination.

-If yes then it shall direct that combination shall not take effect.

-Commission may propose to modify combination make it lawful.

-If parties accept modification then it will be approved.

-If parties do not accept modification, such combination shall be deemed to have an appreciable adverse effect on competition.

Cont.


Orders of Commission on certain combinations (Section 31) :-

If the Commission does not on the expiry of a period of 210 days from the date of notice given to the Commission under sub-section (2) of section 6, pass an order or issue direction in accordance with the provisions of sub-section (1) or sub-section (7), the combination shall be deemed to have been approved by the Commission.

Cont.


Acts taking place outside India but having an effect on competition in India (Section 32) :-

The Commission shall, notwithstanding that, an agreement referred to in Section 3 has been entered into outside India;

a.Any party to such agreement is outside India; or

b.Any enterprise abusing the dominant position is outside India or

c.A combination has taken place outside India or

d.Any other mater matter or practice or action arising out of such agreement or dominant position or combination is outside India,

Have power to inquire into such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has or is likely to have an appreciable adverse effect on competition, pass such orders as it may deem fit.

CCI Approved Acquisition of the Pantaloons Format Business by Aditya Birla Group

Aditya Birla Nuvo Ltd. (ABNL), Peter England Fashions Ltd (PEFRL), Indigold Trade & Service Ltd. (ITSL) and Pantaloon Retail (I) Ltd. (PRIL) filed a notice under Section 6(2) of the Competition Act, 2002 regarding the proposed acquisition of the Pantaloons Format Business (PFB) of PRIL.

The Commission concluded that the proposed acquisition of PFB by ABG would not give rise to appreciable adverse effect on competition in India and approved it under Section 31(1) of the Act

Competition panel clears News Corp acquisition of Star Sports

Star India’s parent firm News Corporation’s proposal to acquire ESPN Star Sports has got a green signal from the Competition Commission of India (CCI).

Considering the presence of other sports channels in India, such as DD Sports, TEN Action Plus, Ten Sports, Ten Cricket, Ten Golf, Sony Six, Neo Sports Plus, Neo Prime etc, the proposed combination is not likely to give rise to any adverse competition concern in India,” the CCI said.


Smooth Approval Procedure :-

-CCI can curb the malpractice of Combination under Section 3 of Competition Act providing for Anticompetitive Agreement but this regulation will cause more fair market practice.

-It has completed one year, during this period the Commission received 61 notices out of which 56 notices have been cleared.

-These notices were cleared within the self-imposed limit of 30 days.


For Market to be just…….

……..Competition is must

For Market to be just…….

……..Competition is must

Kalpeshkumar L GuptaAcademic Associate IIM [email protected]@gmail.com

(c) K L Gupta