Working Group on the Indian Competition (Amendment) Bill, 2006

Antitrust Committee Working Group submits comments to the Competition Commission of India regarding aspects of the draft Competition Commission of India (Combination) Regulations 200­­­_ that relate to India’s proposed merger notification regime. 

Following the release of the draft Competition Commission of India (Combination) Regulations 200_ (“Regulations”) which are to apply to the underlying Competition Act, 2002, No. 12 of 2003, the Antitrust Committee’s Working Group on India’s proposed merger notification regime has submitted comments on the Regulations to the Competition Commission of India (“Commission”).

The IBA welcomed the opportunity to examine the Regulations and has delivered an analysis of numerous aspects of the Regulations, which addresses the following areas: 

• certain categories of transactions not likely to have appreciable adverse effects on competition in India - whilst the Working Group considers that the Regulations provide greater clarity to the merger control notification scheme it identified various areas that are still unclear and recommended further attention.  These recommendations include specifying that transactions not likely to have an appreciable adverse effect on competition in India  are not required to be notified to the Commission; re-wording the de minimis share and de minimis asset acquisitions to confirm which exceptions the notion of “control” applies to; ensuring the “local nexus” issue is not open to misinterpretation; ensuring foreign companies cannot avoid notification by slicing their transaction into a series of smaller ones; and providing for a specific exclusion for intra-group transactions;

timing of notification - currently the Regulations require notification of a proposed combination within 30 days of, amongst other things, the signing of an agreement or “other document”.  The Working Group submits that “other document” is very wide and should be clarified by  specifically excluding documents that merely represent an intention to acquire such as letters of intent or memorandums of understanding .  It is also proposed that the Regulations should follow the Recommended Practice V.C and provide parties with the opportunity, if necessary, of attending confidential pre-notification consultations to discuss proposed transactions in advance to facilitate timely submission and review of the formal notification;

waiting periods - The Working Group submits that the Commission adopt the rationale behind the notification forms (and information requirements) of  most relevant jurisdictions in that the amount of information required should correlate with the likelihood of competition concerns being raised.  Moreover, the Working Group submits that a clearance decision should be available within 30 days on the basis of a short form, such as Form 2;

information requirements in Notification Forms - under the Regulations both Notification Forms require the provision of any order/judgment issued in relation to the combining enterprises on any competition issue by any competition Authority/Court/Tribunal/Government in the last 5 years [I do not have the draft forms in front of me. Please check if it is both forms that require this].  The Working Group submits that this information is excessive and this requirement should be excluded or limited to orders/judgments which are directly relevant to the competitive assessment of the transaction currently being notified in India.  Further, the Working Group proposes that the requirement to disclose the total Indian capacity for all group enterprises of the parties be reduced to the provision of capacity information for products that are relevant to the competitive assessment of a transaction.  The Working Group also submits that the necessary disclosure for Form 1 should be limited to information on products which are, in the opinion of the notifying parties, overlapping;

filing fees to be lowered - the Working Group considers that the filing fees proposed in the regulations, amounting to INR 20 lakhs (approximately USD 51,000) with the possibility of additional fees, should be aligned with other jurisdictions by either eliminating or reducing the filing fee and/or providing for a single fee to be paid; 

• mandatory right to a hearing - the Working Group proposes that the Regulations should provide for a mandatory right to a hearing for the notifying parties before any adverse final decision is made.  It is also recommended that the Commission provide for so-called state of play meetings at other key stages of the review process, similar to the approach adopted by European Commission;
  
• additional definitions - the notion of “control” is not defined within the Regulations and the Working Group considers it would be helpful for the Commission to provide a more detailed explanation of how it tends to apply it. The Regulations exempt from notification transactions which are, amongst other things, “solely for the purpose of investment.”  The Working Group submits that this notion has been particularly difficult to apply and creates uncertainty at the pre-notification stage.  The Working Group therefore proposes that the terms be deleted from the relevant clause in favour of simply using the 26% share threshold already contained in that clause.

The IBA Submission is available here.

A full list of Working Group Members is available here. 

Antitrust Committee Working Group submits further comments to the Ministry of Finance, Ministry of Corporate Affairs, Ministry of Commerce and Industry and the Competition Commission of India on the proposed changes to the Competition Act, 2002 by the Competition (Amendment) Bill, 2006

Additional comments focus on the urgent need for procedural issues, including the local nexus requirement and the length of merger reviews, to be addressed in Competition Commission of India (“CCI”) guidelines and working practices.

Building on the Working Group’s earlier submission to the Ministry of Company Affairs in India (see below), the Working Group has submitted further comments on certain critical procedural matters in merger reviews.  In particular, the Working Group submission highlights that:

•  there should be increased clarity on the appropriate local nexus for transactions – the combined asset and turnover thresholds for triggering mandatory merger filing could potentially catch acquisitions where one party has no presence whatsoever in India.  The Working Group recommends that CCI guidelines or regulations clarify that mandatory filing will not be triggered if one party has no Indian assets or turnover and that a de minimis rule be introduced.  This would be consistent with the CCI’s powers under the Competition Act, and align the thresholds with the substantive competition test for Indian merger reviews, which asks whether the acquisition would have, or be likely to have, an “appreciable adverse effect on competition in the relevant market in India” (emphasis added);
  
  
• there should be increased clarity on the structure and length of the merger review – the 210 day “no close” waiting period after filing is exceptionally long by international standards, and could impact adversely on international transaction timetables.  The Working Group recommends the establishment, by way of CCI guidelines or regulations, of a dual track system, which differentiates between potentially problematic transactions (where in-depth investigations may be necessary) and transactions that pose no real risk of an appreciable adverse effect on competition (where a truncated time for a CCI decision would be appropriate).  A similar differentiation would be appropriate in the kinds of information submitted to the CCI, and the Group recommends that a “short form” notification be available for non-problematic transactions; and
   
• there should be increased clarity on the timing of the notification – notifications must be filed within 30 days of the execution of “any agreement or other document for acquisition”.  Potentially, this may mean that preliminary transaction documents, which do not reflect a definitive deal, would trigger the notification requirement.  The Working Group recommends that CCI guidelines or regulations clarify that only final, binding agreements between parties (or any other documents, such as announcement of a public tender offer, which precludes the notifying party from unilaterally withdrawing) trigger the obligation to file within 30 days, and that the filing of a "courtesy letter" would comply with the deadline when a full notification cannot be submitted in time. The Working Group has also proposed that it should be possible for parties to notify on the basis of documentation which demonstrates a good faith intention to consummate the transaction.

Down Load the IBA Submission  

For more information, please contact Leslie Alekel

IBA Antitrust Committee Working Group

Co-chairs:

Lalit Bhasin, Bhasin and Co, New Delhi
Tony Reeves, Clifford Chance, Brussels
Dave Poddar, Mallesons Stephen Jaques, Sydney

Members:
Kei Amemiya, Morrison & Foerster, Tokyo
Anuradha R V, Amarchand Mangaldas, New Delhi
Christy Baker, Freshfields Bruckhaus Deringer, London
Ajay Bhargava, Khaitan & Co, New Delhi
A. Neil Campbell, McMillan Binch Mendelsohn LLP, Toronto
Manjula Chawla, Kochar & Co, New Delhi
Paul Coester, Brink Cohen Le Roux, Johannesburg
Timothy Cohen, BT plc, London
Ankhi Das, Microsoft Corporation India, Gurgaon~
Simon Deeble, Clifford Chance, Brussels
Andrea Gomes de Silva, Freshfields Bruckhas Deringer, London
Jonas Koponen, Linklaters, Brussels
Nicholas Lingard, Mallesons Stephen Jaques, Sydney
James W Lowe, Wilmer Cutler Pickering Hale and Dorr LLP, Washington DC
Gordon Moir, BT Global Service, London
Saanjh Purohit, Amarchand Mangaldas, New Delhi
Michael Reynolds, Allen & Overy, Brussels
William Rowley QC, McMillan Binch Mendelsohn, Toronto
Vijaya Sampath, Bharti Enterprises, New Delhi
Shardul Shroff, Amarchand Mangaldas, New Delhi
Ryan Thomas, Jones Day, Washington DC
Rachel Trindade, Melbourne Law School, University of Melbourne (formerly with Clayton Utz), Melbourne
Harumichi Uchida, Mori Hamada and Matsumoto, Tokyo
Prof. David Unterhalter, University of the Witwatersrand School of Law, Johannesburg
Omar K Wakil, McMillan Binch Medelsohn, Toronto
Kimitoshi Yabuki, Yabuki Law Offices, Tokyo

The IBA Working Group of the Antitrust Committee recently submitted comments to the Ministry of Company Affairs in India. The submission is directed against the proposed changes to the Competition Act, 2002 by the Competition (Amendment) Bill, 2006, which seeks to establish a mandatory merger notification regime. 

The Working Group submission highlights the following. 

• India does not need to adopt a mandatory merger notification regime in order to protect the country’s level of competition. Experience gained over time in several jurisdictions shows that voluntary merger notification systems work successfully and more effectively. A voluntary notification system allows for a better allocation of resources, and is beneficial for both the economy as well as the relevant competition authority, which can concentrate its often scarce resources on mergers that are likely to raise substantive issues or abuses of dominant position.
   
• Another alternative could be for the Act to initially provide for a voluntary merger notification regime during a preliminary period of five or ten years, after which a further review of India’s need for a mandatory system could be profitably undertaken, with a better assessment of the costs and benefits involved in both of the systems.

Even if India does adopt a mandatory merger notification regime, the Working Group recommends further amendments to include, inter alia, an effective local nexus requirement and a merger review timetable following international recommended best practice. Amendments have been suggested for the following:

• The current legal situation subjects a very large number of mergers, with little or no connection to India, to review by the new Competition Commission. Therefore, the requirement for an effective local nexus should be satisfied and attention should be focused only on those transactions that have a real and close connection to their local jurisdiction.
   
• Currently, the time period provided by the Act for notification is seven days, which is not commercially realistic and constitutes an unreasonably short period in which to effect notification. Hence, it is suggested that a more reasonable period of time be arrived at in which transactions should be notified, and a clearer indication should be given of when that period should begin to run.  

Click here to download the IBA’s submission to the Ministry of Company Affairs in India.