This article intends to cover the salient features of the CCI (Procedure with regard to the transaction of business relating to combinations) Amendment Regulations, 2019 (“Amendment Regulations”) and our comments and observations in that regard.

The CCI vide its notification dated August 13, 2019 has notified the Amendment Regulations to further reform and amend the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“Regulations of 2011”). The Amendment Regulations are effective from August 15, 2019

APPLICABILITY OF GREEN CHANNEL ROUTE

The CCI has introduced the green channel route by inserting Regulation 5A in the Regulations of 2011 which can be optionally utilized by the parties for certain types of transactions, the descriptions of which are contained in the newly inserted Schedule III of the Amendment Regulations. The green channel route will be available to the parties to the combination and their group entities and/or any entity in which they, (A) directly or indirectly hold shares and/or control that does not produce/provide similar or identical or substitutable products or services (“Horizontal Overlaps”); (B) are not engaged in any activity relating to trade in products or provision of services which are at different stage or level of production chain (“Vertical Overlaps”); and (C) are not engaged in any activity relating to trade in products or provision of services which are complementary to each other (“Complimentary  Overlaps”). Further, parties are now essentially required to consider all plausible alternative relevant market definitions for determining overlaps.

APPROVAL PROCEDURE UNDER GREEN CHANNEL ROUTE

• The parties to the combination, if opting for green channel route will give notice in an amended Form I along with the declaration as set out in newly inserted Schedule IV of the Amendment Regulations.
• Upon receipt of an acknowledgement         of the notification, the           proposed combination will be deemed to have been approved by the CCI.
• Further, if the CCI discovers that the combination does not fall within the ambit of Schedule III and the declaration filed is incorrect, then notice given and approval granted by the CCI shall become void ab initio and CCI shall deal with the combination in accordance with the provisions set out under Competition Act, 2002 (“Act“). Furthermore, the CCI shall give the parties to the combination an opportunity of being heard before arriving at any conclusion.

THE AMENDMENT REGULATIONS RESTRUCTURED FORM I

The Amendment Regulations have introduced the following new items in Form I:

• details of any other inter-connected transactions;
• rights acquired by the parties in connection with the combination or any inter-connected transactions;
• foreign investment as a result of the combination;
• overview of sectors in which the parties to the combination operate and information on complementary business activities between the parties;
• An estimate of market size, sales in value and volume and shares and competitor/ customer/ supplier information for the last 3 years as against the current practice of the last 1 year;
• all plausible alternative relevant markets (including the rationale behind selecting 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 years.

AMENDMENT TO THE PUBLIC SUMMARY MECHANISM

The Amendment Regulations have amended Regulation 13 (1A) to remove the requirement of 2 summaries i.e. long summary and a short summary that was required to be attached with the merger notification, wherein the short summary was uploaded on the CCI website for public access.

The parties to the combination under the amended regulations are now required to file only 1 summary of the combination within 1,000 words for the purpose of publishing the same on the CCI website. The summary to inter alia include the following details:

• name of the parties to the combination;
• the nature and purpose of the combination;
• the product, services and business of the parties to the combination; and
• the respective market in which the parties to the combination operate

OBSERVATION AND COMMENTS

• The Amendment Regulations are a crucial step taken by CCI to streamline, simplify and expedite the approval process of mergers and acquisitions in India. Additionally, the green channel route will play a key role in attracting foreign investors to the Indian market.
• The Amendment Regulations may face certain potential legislative issues. The deemed approval process as set out in the Amendment Regulations is not considered in the Act. As per Section 6 (2A) of the Act, a combination can come into effect only if the said combination has been approved by the CCI or on the expiry of 210 days from the date in which the notice was filed.
• As per the amendments, if CCI discovers that the combination does not fall within the ambit of Schedule III or if the declaration filed is incorrect, then the “deemed approval” shall become void ab initio and CCI shall deal with the combination in accordance with the provisions set out under Competition Act, 2002. This could result in a combination being declared void at an advanced stage of its implementation, even if an inadvertent error has been made by the parties to the combination.
• As per the prescribed procedures, a detailed evaluation by CCI is carried out before a transaction is approved. As a transaction filed under the green channel is not scrutinized by the CCI, the same may not fall within the ambit of the Act. One could even assume that the same could be objected to in the future.
• Further, the burden imposed by the CCI on the parties to the combination of assessing all suitable Horizontal Overlaps, Vertical Overlaps and Complimentary Overlaps considering all plausible alternative market definitions may turn out to be challenging and time-consuming and may limit the exercise of the green channel route.

Reference:

1. The Competition Act, 2002 available at https://www.cci.gov.in/sites/default/files/ccipdf/competitionact2012.pdf
2. The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019 available at https://www.cci.gov.in/sites/default /files/regulationpdf/210553.pdf
3. The CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 available at https://www.cci.gov.in/sites/default/files/regulationpdf/Combination%20Regulations%202016%20-%20FINAL0.pdf
4. https://unsplash.com/search/photos/drone

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