INDIA REVAMPS ITS MERGER CONTROL PROVISONS -INTRODUCES DEAL VALUE THRESHOLD
Much has been written about the recent exemption granted by the Government of India, Ministry of Corporate Affairs vide Notification dated 29 June, 2017 (‘Notification’) exempting parties to a “combination” that is mergers and acquisitions, amalgamations between parties having their assets or turnover beyond the prescribed thresholds , from notifying the Competition Commission of India (‘CCI’) within 30 (thirty) days of the (i) approval of the proposal relating to the merger or amalgamation by the board of directors of the enterprises concerned in case of merger/amalgamation; (ii) or the execution of agreement or other document in case of acquisitions including acquisition of control. The exemption is valid for a period of 5 years, up to 28 June, 2022.
These circumstances, which made the filing of prior notification to CCI within 30 days mandatory provided under Section 6(2) of the Competition Act, 2002 (‘Act’) are known as “trigger events” in Competition Law parlance. With the recent Notification dated 29 June, 2017, while the trigger event remains unchanged but the legal requirement of mandatory filing within 30 days of the trigger event has ceased to exist, much to the delight of the large corporates.
Consequently, the parties to the combinations can no longer be penalized by CCI with penalty up to 1% of the total assets or turnover of the combination, whichever is higher, under Section 43A of the Act, provided the combination is notified to CCI before the actual consummation. But will it lead to reduction in cases of “gun jumping”?
It needs to be recalled that till now even in cases where the delay in the notifying the CCI was caused on account of a bona fide error, the CCI has imposed penalty on the parties.[1] This is because, the CCI does not distinguish between “delayed filings” and pure cases of “gun-jumping” (consummating the transaction without approval).
Comments
The Notification is a welcome step as it will eliminate the penalties for “delayed filings” henceforth for a period of 5 years and will bring much relief to the parties. The merger control regime in India in now sync with the international best practices. However, it has to be borne in mind that the merger control regime is still suspensory in nature. The obligations under Section 6(2A) of the Act prohibiting the parties to a combination from consummating a notifiable transaction until the CCI grants approval or the expiry of 210 days from the date of filing of notice continues to apply in full force. Therefore, parties found guilty of “gun jumping” would still be liable for penalty under Section 43A of the Act.
But in my view there is flip side to the Notification. The absence of requirement of filing within 30 days is likely to usher complacency in parties and being off guard some of the parties may end up in falling prey to “gun jumping” that is notifying CCI after the de facto consummation of the transaction.
Therefore, going forward , the parties are advised to be more cautious while ticking off the check lists for regulatory requirements , particularly , for CCI filings.
[1] Combination Registration No. C-2012/11/92
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