Recent CCI orders clarify facets of Competition Law

By Suchitra Chitale, Chitale & Chitale Partners
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The past few months have seen a flurry of activity with the Competition Commission of India (CCI) ruling on important issues and with the passing of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2012, on 23 February. This column seeks to throw light on these.

Intragroup combinations

By an order dated 28 December 2011, approving the combination of Tata Chemicals Limited (TCL) and Wyoming Mauritius (Private) Limited, a subsidiary of TCL, the CCI held that for any transaction between a holding and subsidiary company, a notice under section 6(2) of the Competition Act, 2002, must be filed. The CCI examined the definition of enterprise under section 2(h) of the act, and held that a subsidiary, being a separate legal entity, constitutes an enterprise separate from the holding enterprise. The order has clarified the definition of enterprise.

The CCI also clarified that the exemption under the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, applies only in cases of acquisition of shares, control or assets within the same group and not to amalgamations among group companies. However, under the new amendment regulations, category 8A has been inserted in Schedule I, exempting intragroup mergers or amalgamations from filing under section 6(2).

Market & market share

On 27 December, the CCI approved the notification filed by Japanese steel majors Nippon Steel Corporation and Sumitomo Metal Industries for the merger of their businesses. The notification stated that the parties had eight similar and substitutable products in India and each of the products constituted a separate relevant market in India.

Suchitra Chitale Managing partner Chitale & Chitale Partners
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The CCI analysed the nature of the steel industry in India and came to the conclusion that for the purposes of competitive assessment in this particular case, it was not necessary to define the relevant markets. Noting that there are adequate suitable alternatives for all the products in India, the CCI refused to delineate the relevant market for each of the eight products and observed that in India the combined sales volume of the parties, in terms of both the consumption and import volume, in respect of each of the eight products, ranged from negligible to low.

In another significant decision, the CCI gave its go-ahead to a notice filed by Standard Chartered Bank, India (SCB), and Barclays Bank, India (Barclays), for the acquisition of the credit card business of Barclays by SCB. Throwing light on the applicability of section 20(4)(h) of the act, which provides that one of the factors to be considered for determining appreciable adverse effect is the market share of the parties to the combination in the relevant market, the CCI held that since the aggregate share of the parties taken together, both in terms of number of credit cards and total value of sales, was in single digits, the combination does not have any adverse competition concern.

Statutory time limit

On 17 January, the CCI took another step towards timely adjudication of combination notifications, in deciding the first case in which the notice under section 6(2) of the act was filed beyond the specified time limit of 30 days. Before allowing the notice for the merger of Electromags Automotive into Bombay Burmah Trading Corporation, the CCI in its ordinary meeting decided the application for condoning the delay, and admitted the belated notice with effect from 22 December 2011. The CCI also decided to initiate separate proceedings under section 43A, which empowers it to impose a penalty on any enterprise which fails to give due notice under section 6(2).

Joint ventures

In an order dated 31 January, approving the subscription of 49% of the diluted share capital of Navyug Special Steel Private Limited, a wholly owned subsidiary of Mahindra Ugine Steel Co (Musco), by Sanyo Special Steel Co and Mitsui & Co, the CCI observed that the proposed combination resulted in Navyug becoming a joint venture between Musco, Sanyo and Mitsui.

Navyug, the target company, was incorporated in November 2011 and being a new company it did not meet the required turnover threshold for filing of notice. However, by accepting and treating the notice as valid, the CCI has sent a clear message for other transactions which may adopt a similar structure to circumvent the filing requirement.

Honouring its commitment to clear combinations expeditiously, the CCI has passed 11 orders in just two months, giving the much needed assurance to the corporate world.

Suchitra Chitale, the managing partner of Chitale & Chitale Partners, heads the competition team of the firm, which advises and acts on the behalf of clients in Indian competition law matters. She has been in practice for more than 24 years.

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