Notes of caution on merger control

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Anand Pathak sheds light on the regulatory pitfalls that remain for parties looking to enter into combinations

Merger control was introduced for the first time in India by sections 5 and 6 of the Competition Act, 2002. Thereafter, regulations, government notifications and guidance notes were issued to implement the act. Some significant changes were recently made by the government for streamlining the merger review process to enhance ease of doing business. For example, while notifiable transactions (known as “combinations”) continue to remain subject to the suspension provisions of the act and cannot be implemented unless approved by the Competition Commission of India (CCI) or the expiry of the 210-day review period following notification, the 30-day deadline for notifying a proposed transaction has been eliminated. All forms of transactions now benefit from the de minimis exemption, which was earlier available only to transactions structured as acquisitions. While determining the availability of the de minimis exemption, only the value of assets of/and turnover attributable to the target’s division or business being transferred will be taken into account and not the entire assets or turnover of the seller. The CCI has also been generally faithful to the self-imposed time limit of 30 working days (excluding the “clock-stops”) to clear notified transactions that do not raise competitive concerns.

While the CCI has made great strides in rationalizing merger enforcement, a few concerns for unwary transacting parties still remain, which are discussed below.

Anand PathakManaging partnerP&A Law Offices
Anand Pathak
Managing partner
P&A Law Offices

Foreign-to-foreign transactions

All so-called ‘foreign-to-foreign’ transactions satisfying the notification thresholds of the act (based on the assets and turnover of the combining parties), and not benefitting from any exemption, must be notified to the CCI even in the absence of local nexus and competitive effects on markets in India. In the Titan International Inc/Titan Europe PLC combination, notwithstanding that the transaction was a ‘foreign-to-foreign’ acquisition and the parties were based outside India, the CCI imposed a penalty of ₹10 million (US$154,000) for notifying the combination after consummation.

More recently, in the Baxter/Baxalta combination, the CCI imposed a penalty of ₹10 million on the parties for closing the global (non-Indian) limb of the transaction before receiving clearance in India. The CCI held that the global transaction triggered notification and that the global transaction could not be given effect despite the fact that the transfer of the Indian entities was the subject matter of a separate local implementation agreement.

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Anand Pathak is the managing partner of P&A Law Offices.

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