India's first merger approval completed in 14 days
By Phil Taylor
India's competition regulator has taken just two weeks to clear the first transaction to be filed under the country's new merger-control regulations.
Reliance Industries' deal to buy-out Bharti Group's 74 per cent stake in an insurance joint-venture with AXA was filed with the Competition Commission of India (CCI) on 8 July and was cleared on 26 July.
Kaushal Kumar Sharma
'We cleared the transaction in 14 days flat,' said Kaushal Kumar Sharma, outgoing legal adviser to the CCI's combinations division.
As reported in June, lawyers had expressed concern over the length of time that the regulations give the CCI to scrutinise notified transactions. Up to 210 days is theoretically available, although the regulator has said it will take only 30 days in most cases.
'Initially when the regulations were framed and announced, [lawyers] welcomed it, but they always had the tendency to doubt whether we could really clear transactions in 30 days,' said Sharma.
'But we proved it,' he continues. 'The reaction I have got is one of great and pleasant surprise that the CCI could do what it claimed … and is doing it very competently.'
In an interview with IBA Global Insight, Sharma (who has just announced that he is leaving the CCI on 12 August after more than five years' service) responded to other criticisms aimed at the new regulations.
International counsel have been uncertain whether a merger or acquisition taking place entirely outside the country will need to be notified in India. The regulations state that transactions with insignificant local nexus and effect on markets in India do not normally require notification to the CCI; 'insignificant' is not defined, however.
'The reaction I have got is one of great and pleasant surprise that the CCI could do what it claimed … and is doing it very competently.'
Kaushal Kumar Sharma
Competition Commission of India
When asked to clarify, Sharma said that during the development of the regulations, and despite pressure from various groups, the CCI had felt it was too early to predict if some acquisitions should be exempted.
'People thought there should be some mention of foreign-to-foreign transactions, but it was difficult to arrive at some definition [of a threshold] to make sure things weren't blocked indefinitely,' he said.
When pressed, Sharma was unwilling to put a figure on the word 'insignificant', instead advising companies: 'If there is the slightest doubt, they should file.'
Confidentiality is another area of importance for companies who do not wish their proprietary information to pass into the public domain during the filing process. Clause 30 of the merger-control regulations states that the CCI will duly consider any request for confidentiality of information or documents submitted during an investigation.
Some commentators have nevertheless expressed concern over the way in which the inexperienced regulator would approach such requests. Seeking to ease this concern, Sharma explained that the CCI will handle these issues in accordance with international standards, and had in fact already dealt with the question during its first merger-review case.
'We had a document which was seen by only one member of the review team, the case manager. In the end we found that this information was not necessary for the merger review. We kept it for posterity, but no one has seen it nor will ever see it.'
Sharma also further clarified the question of informal pre-merger consultations. (Although an early draft contained provisions for this kind of discussion, they did not appear in the final regulations, but were later covered by a notice on the CCI's website.)
'We looked at all countries' acts and regulations and we found that in, for example, the UK and EU, these things come from notices, clarifications and guidelines – not from the main regulations. We decided it was not really appropriate for a young regulator to issue [this rule] in regulations which have the force of law.'
Sharma added that such provisions may re-appear in formal regulations at a later date.
'The idea was it would evolve, and that when we had more understanding from experience in about a year, we may be able to put it in the regulations themselves; it is a more flexible approach.'
The CCI regards cooperation with other bodies around the world as an essential part of its development, and Sharma said membership of the International Competition Network has been 'fantastic'.
'We have trained ourselves [to be familiar] with all its documentation; we drew heavily on that while drafting our regulations, especially the merger regulations,' he said.
The CCI cooperates with other national competition agencies, and has participated in various exchanges and delegations including sending around 25 staff to the European Commission's Directorate-General for Competition. Sharma makes it clear, though, that these exercises have been academic in nature, and the CCI is keen to develop its operations and enforcement independently.
'We cannot transport or transpose any other laws onto our country,' he said.
As the Indian merger-control regime matures, the CCI will only get busier. Sharma is expecting between six and eight cases to come his way each month, and is aware that the world is watching his organisation closely.
The experience of Mofcom, China's equivalent of the CCI, has been that negative treatment of transactions involving international companies can attract a great deal of media attention – the blocked Coca Cola/Huiyuan Juice takeover being a good example.
When the Indian regulator eventually feels the need to block or restrict a similar deal, it is certain to make international headlines.
Phil Taylor is a freelance writer and editor. He can be contacted at firstname.lastname@example.org