Amendments to the Combination Regulations
– Manav Gupta
The sixth set of amendments to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“Combination Regulations”) were notified by the Competition Commission of India (“CCI”) on 9th October, 2018. This comes at a time when the CCI and competition law in the country are undergoing serious changes. The number of members in the CCI has been reduced to 4, and a “Competition Law Committee” has been formed by the government, with the “objective of ensuring that legislation is in sync with the needs of strong economic fundamentals”. Though a complete upheaval is unlikely, the committee is expected to recommend changes with regard to the thresholds under section 5 of the Competition Act (“the Act”), suggest a framework to ensure synergy between different sectoral regulators and ensure that the Act is in line with the Insolvency and Bankruptcy Code, 2016. The current amendments were preceded by a draft of proposed amendments, which the CCI had released for public comment. The present article seeks to examine the current amendments and the proposed amendments and their likely effects on the merger control regime in India.
- Withdrawal and refilling of notice
The parties can now ‘withdraw’ a notice which has already been filed, before the CCI issues a Show Cause notice (“SCN”), and can refile the notice after making appropriate changes. It has already been clarified that the fees already paid shall be adjusted against the fees payable in respect of the new notice, if the new notification is given within three months from the date of withdrawal. While the CCI has been following this practice in the past, the amendment formalizes the same.
- Voluntary Modifications
The amendment now provides the parties an option to offer voluntary modifications before a SCN is issued by the CCI under section 29(1) of the Act. Even after the SCN is issued, the amendment provides the parties with an option to offer modifications along with the reply to the SCN. The opportunity to offer modifications at this stage ensures that the parties can avoid the in-depth scrutiny under phase-II by allaying any potential concerns of the commission. This practice, similar to the previous one, was already being followed by the CCI.
- Calculation of the Timeline
Section 6(2A) of the Act provides that a proposed combination should not be consummated until 210 days have passed from the day on which the notice was given or the commission approves it. The purpose of the said timeline was to ensure time-bound approval by the CCI. The amendment clarifies that while calculating the 210 day timeline under section 6(2A) of the Act, certain time periods, such as time taken by the CCI for considering the voluntary modifications or the time given to the parties to remove defects from the notice shall be excluded. Again, the amendment merely formalizes a practice which was already taking place.
II. Proposed Amendment targeted at “common shareholding”
A draft of proposed amendments was released by the CCI for public comments on 24 July 2018, partly in response to a CCI order in the case of Meru Travel Solutions Pvt. Ltd. v. M/s ANI Technologies Pvt. Ltd. & Ors wherein concerns were raised over the common shareholding by institutional investors in Ola and Uber. It was argued by the informant that due to common ownership of Ola cabs and Uber, they should be considered as part of the same “group”, and consequently “dominant in the relevant market” due to their combined market share. Though the CCI refused to accept the argument, it briefly discussed the potential competition law concerns arising out of such common ownership.
The proposed amendments (apart from the amendments recently notified) targeted Item 1 Schedule I of the Combination Regulations. The provision exempts acquisitions of shares or voting rights which does not entitle the acquirer to hold twenty five per cent (25%) of shares or voting rights of the company from seeking CCI approval. The proposed amendment, if notified, would have had two consequences.
Firstly, the exemption would not have been available if the acquirer and the target company were to be “directly or indirectly, engaged in identical or similar trade of goods or provision of services or activities at different stages or levels of production”. Essentially, if the target company were to be in the same line of business as the acquirer, as a competitor or a supplier or a distributor, then the proposed amendment would mean that even an acquisition of, say, 10% of shares or voting rights would have to be approved by the CCI.
Secondly, in case of institutional investors such as the Softbank group or the Tiger Global Management LLC, the proposed amendment would have meant that an acquisition of more than 5 % shares of a target company would have to be approved by the CCI, if the acquirer (the investor) already holds shares of another company engaged in similar or identical trade of goods or provision of services (similar to the target company).
The current amendment does not have far reaching effects, as mere procedural changes have been made. Further, some of the amendments made are mere clarifications, and were already being followed by the CCI in practice. Initially, the CCI had proposed other important amendments in a draft document released in July. The proposed amendments targeted common shareholding by institutional investors, and could have had serious consequences, had they been notified. The CCI, it seems, was swayed by the representation made by the stakeholders and ultimately decided not to go ahead with the said proposed amendments. Nevertheless, the current amendment provides important clarifications and will go a long way in easing the filing process. One can also expect CCI to go ahead with the proposed amendments in due time. The Competition Law Review Committee report is also expected to bring about serious, if not drastic changes to the merger control regime in the Indian competition law.
 4th year student, B.A. LL.B. (Hons.), National Law University, Jodhpur (Rajasthan)