The Competition Commission of India (CCI) released the Final Combination Regulations relating to implementation of merger control provisions which are to be effective from June 1. Earlier, in March 2011, Section 5 & 6 of the Competition Act, 2002 (act) were notified (relating to Combinations) effective from June 1, 2011.
The combination regulations have been finalised by the Commission after going through a two-month consultative process which involved inviting suggestions from various stakeholders, having open houses in major cities where experts from Industry, Government departments, trade associations, law firms and international anti-trust experts were invited to share their thoughts and concerns.
The Final Regulations clearly suggest that most of the concerns raised by the stakeholders have finally been considered but certain ambiguities and interpretation issues still persist.
The routine transactions in the form of acquisitions of shares or voting rights within the Group or with no change in control, capital reorganisations, acquisition of assets in the ordinary course of business/stock-in-trade, or global transactions with insignificant local nexus and effects on Indian market etc., in the view of the Commission are not likely to cause an appreciable adverse effect but the Commission while providing the exemption has put the onus back on the Industry to determine the same.
The Internal restructurings not likely to have a bearing on the competition are also not exempted in a blanket way and the definition of ?Group? in the Act is required to be adhered.
Taking the pending transactions as on June 1, 2011, out of the purview of the Act is a welcome step but the look back provisions available to the Commission still provide them powers to scrutinize the transactions within one year of its execution. Similarly, the endeavor of the Commission is to provide speedy approvals but the maximum statutory period provided in the Act is 210 days.
Further acquisitions of shares or voting rights solely for investment purposes upto 15% not leading to control of business are exempted, however Private Equity Investors /Financial Institutional Investors generally have veto rights or tag-along rights etc., attached to gain strategic control of the business and applicability of exemptions on these transactions may need to be further evaluated.
Another aspect would be how the provisions of the Act and SEBI regulations will be aligned as the two enactments will get triggered simultaneously however the difference in time-frame under both enactments may slow down the speed of the transactions and lengthen the closure process. Global combinations with insignificant India nexus have been exempted but the regulations need to clarify the mechanism or determination of such transaction since the word ?insignificant? is not defined.
Apart from the above, there are also other areas in the Act and Regulations where interpretation is required and once the new regime is effective some of the ambiguities may be resolved
* The author is Director, KPMG
(with inputs from Jasreet Kaur, assistant manager, KPMG)