ICSI WIRC
“Combinations”
The Competition Act, 2002
4th May 2013
Surendra U. Kanstiya
Practising Company Secretary.
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IMPORTANT
* This presentation is in the nature of a
support note for the speaker
* Slides on standalone basis may not be
self-explanatory
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THE COMPETITION
ACT, 2002
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COMPETITION AUTHORITIES
Competition Commission of India (CCI)
Competition Appellate Tribunal (COMPAT)
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COMPETITION AUTHORITIES
COMPETITION COMMISISON OF INDIA (CCI)

A body corporate

Chairperson + 6 members
COMPETITION APPELLATE TRIBUNAL (COMPAT)

A quasi-judicial body

Chairperson + 2 members
 Appeals and compensation
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ENTERPRISE Sec.2(h)

PERSON OR GOVT. DEPTT.
engaged in
activity
relating
to
production,
supply,
distribution, acquisition, control of goods;
services, of any kind.
 PERSON: individual; firm; HUF; co.; AoP;
corporation; body corp.; coop. soc.; local
authority; other artificial juridical persons.
 MAY BE EXCLUDED: Govt. Deptt. performing
sovereign functions: atomic energy, currency,
defence; space
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ANTI COMPETITIVE AGREEMENTS
‘All anti-competitive agreements are void’
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ANTI COMPETITIVE
AGREEMENTS (ACA)
HORIZONTAL
Rule of Law (4 cases)
VERTICAL
Rule of reason
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ABUSE OF
DOMINANT POSITION
‘No enterprise or group shall abuse
its dominant position’
Amendment Bill 2012: Jointly or severally
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DOMINANT POSITION

DOMINANCE: Capacity to
- act independent of competitive presence
OR
- affect appreciably the relevant
market, competition and consumers.
 No arithmetic figure for dominance
 AAEC Test not needed
Abuse of
Dominance
Exploitative
(Costumers)
Exclusionary
(Competitors)
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COMBINATIONS
‘Certain combinations are regulated’
The Competition Commission of India (Procedure
in regard to the transaction of business relating to
combination) Regulations, 2011 (Amended in 2012
and 2013)
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COMBINATION
Acquisition
of enterprise:
acquisition of
Control,
shares,
Voting rights,
assets
Acquiring of
Control: over an
enterprise engaged
in same line of
Goods or services
Merger
or
amalgamation
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THRESHOLDS FOR
REGULATION
Assets / Turnover
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COMBI. : NON-GROUP
ASSETS
 IN INDIA: over Rs.1500 Cr; OR
 GLOBAL: over US $750 Mn. (including
Indian assets Rs. 750 Cr)
TURNOVER
 IN INDIA: Rs.4500 Cr; OR
 GLOBAL:US $2250 Mn. (including Indian
turnover Rs.2250 Cr)
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COMBI. : GROUP
ASSETS
 IN INDIA: over Rs.6000 Cr ; OR
 GLOBAL: over US $3 Bn. (including
Indian assets Rs.750 Cr)
TURNOVER
 IN INDIA: over Rs.18000 Cr ; OR
 GLOBAL: over US $9 Bn. (including
Indian turnover Rs.2250 Cr)
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GROUP
Means two or more enterprises which, directly or
indirectly, are in a position to —
 (i) exercise 50 % or more of the voting rights in
the other enterprise; or
 (ii) appoint more than 50% of the members of the
board of directors in the other enterprise; or
 (iii) control the management or affairs of the other
enterprise;
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ASSETS

Book value as shown, in the audited books of the
enterprise, in the latest completed financial year,
as reduced by any depreciation, and
 include the brand value, value of goodwill, or
value of copyright, patent, permitted use,
collective mark, registered proprietor, registered
trade mark, registered user, homonymous
geographical indication, geographical indications,
design or layout design or similar other
commercial rights
TURNOVER
ACT: “Turnover” includes value of sale of
goods or services
 REGULATIONS: exclude indirect taxes, if
any
 AMDT BILL 2012: excluding the taxes, if
any, levied on sale of such goods or
provision of services

SEC.6(4) EXEMPTIONS
Shall not apply to (i) share subscription (ii)
financing facility (iii) any acquisition by:
 Public financial institution
 Foreign institutional investor
 Bank
 Venture capital fund
pursuant to any covenant of a loan
agreement or investment agreement
MUST FILE DETAILS IN 7 DAYS
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EXEMPTION IN PUBLIC INTEREST

Central Government, in public interest, has
exempted acquisition of the enterprise,
whose control, shares, voting rights or
assets are being acquired, if it has assets of
the value of not more than Rs.250 crores in
India or turnover of not more than Rs.750
crores in India.
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CCI COMBI. REGULATIONS

Categories of combinations that are
ordinarily not likely to cause an
appreciable adverse effect on competition in
India and hence notice need not normally
be filed.
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PRIOR
NOTIFICATION
(Filing of Form)
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MANDATORY

A notice must be given by enterprise to
CCI about combination within 30 days
from execution of agreement / resolution
 CCI to pass order within 210 (180 days)
from the date of notice to CCI failing
which combination to be deemed as
approved.
 FAILURE: Penalty, may extend to 1% of
the total turnover or the assets, whichever is
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higher.
FORMS







Form I - Regulation 5(2) combinations
Form II - Regulation 5(3) combinations
Form III - For exempt acquisition by FII etc
Form IV – Advertisement
FILING FEE
Form I: Rs.10 Lacs
Form II: Rs.40 Lacs
NOW CO SECRETARY MAY SIGN FORMS
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FORM II
REGULATION 5(3)
Combinations to be
notified through
Form II
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FORM II
i

HORIZONTAL COMBINATION:
COMBINED MARKET SHARES : OVER
15%
 Parties to the combination
- are engaged similar or identical or
substitutable goods or provision of similar
or identical or substitutable services and
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FORM II
ii

VERTICAL COMBINATION:
INDIVIDUAL OR COMBINED MARKET
SHARE – MORE THAN 25% IN THE
RELEVANT MARKET
 The parties to the combination
- are engaged at different stages or levels of
the production chain in different markets
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COMBINATIONS MAY BE

Pro-competitive
 Competitively neutral
 Anti-competitive
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VOID COMBINATION
a combination which causes or is likely to
cause an
APPRECIABLE ADVERSE
EFFECT ON COMPETITION
(AAEC)
WITHIN RELAVANT MARKET
IN INDIA
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Relevant Market
Product Market:
Close substitutes
Geographic Market:
Area where product
is available at
same price
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COMPETITION TEST









Competition through imports
Entry barriers
Countervailing power
Availability of substitutes
Likely increase in price/profits
Risk
Innovation
Market share
Failing business
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CONSULTATION PRIOR TO FILING

The facility of informal and verbal
consultation with the staff of CCI prior to
the filing of notice to a proposed
combination is available at CCI.
 The advice would be given as an additional
assistance facility, and would not be
deemed to be the opinion of the CCI in any
manner whatsoever or binding on the CCI.
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INVESTIGATION, ORDER
AND APPEAL
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INVESTIGATION

Cooling period of 210 days classified in:
(I) Inquiry phase
(II) Decision phase
(III) Modification phase
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ORDERS i

CCI to:
a. approve the combination; or
b. reject the combination; or
c. propose modifications to the combination.
 The parties may propose amendments to
modifications within 30 working days
 If CCI does not accept amendments, further period
of 30 working days to accept modifications
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ORDERS ii

If not accepted: combination shall be
deemed to have appreciable adverse effect
on competition
 Combination shall not take effect
 CCI may frame a scheme to implement its
order
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OTHER PROVISIONS
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EXTRA-TERRITORIAL JURISDICTION

Agreements entered into outside India;
abuse of dominant position outside India;
combinations taking place outside India; if
it has or is likely to have appreciable
adverse effect on competition in India.
 with permission of CG, CCI can enter MOU
with foreign competition agency.
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CCI AND STATUTORY
AUTHORITY (SA)

SA may make reference to CCI
 CCI to give opinion within 60 days

CCI may make reference to SA
 SA to give opinion within 60 days
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THANK YOU ALL
[email protected]
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