Industry lobby groups have begun interacting with the Competition Commission of India, or CCI, asking for a possible review of parts of the new competition law that deal with mergers and acquisitions (M&As) because the law was drafted five to six years ago when M&As were not very common in India.
The CCI, which will review anti-competitive practices, was recently recently empowered with statutory powers by the government and is in the process of notifying existing provisions in the Competiton Law as rules.
Representatives of the three big industry lobbies, Federation of Indian Chambers of Commerce and Industry (Ficci), Confederation of Indian Industry (CII) and The Associated Chambers of Commerce and Industry of India (Assocham) met Vinod Dhall, the acting chairman of CCI for the first time on Tuesday. The meeting lasted about two-and-a-half hours.
“Industry is apprehensive because a large part of (the) competition law was drafted five to six years back and industry has only moved forward since then. So, any new law should not be retrograde,” said Assocham secretary general D.S. Rawat.
According to Dhall, the chambers discussed many issues including those relating to mergers and acquisitions. “It was felt that regulations pertaining to these combinations have to be very carefully drafted so that unintended outcomes can be avoided.”
He added CCI has given them two weeks to list their concerns, with possible solutions. These will then be taken up by CCI’s advisory committee which meets in January.
CCI officials say the main issues worrying industry include mandatory approval of CCI for M&As; an extended deadline of 210 days within which CCI can approve a merger or acquisition; and a clause which makes it necessary to notify CCI of every cross-border M&A above a threshold, currently set at Rs1,500 crore.
The industry groups have argued that the deadline for approving an M&A is too long and that every cross-border merger need not have a bearing on the domestic competitiveness of the Indian arm.
Dhall says industry’s apprehensions are because of partial understanding of the law’s provisions. “Of the 106 countries having competition laws, only nine have a voluntary notification system. Besides, the companies... have to wait for 210 days only in complex cases,” said Dhall. He added more than 85% of M&As cases the world over get cleared after a first review and in India, too, most cases are expected to be cleared in 30 to 60 days.
Corporate and competition lawyer Anand Pathak said CCI needs to revisit some issues. “For instance, in cross-border mergers, if the target company does not have a presence in India, then the CCI should take a call whether such a M&A needs to be notified,” he said.
CCI has the powers to impose civil penalties such as fines, and pass cease and desist orders. Failure to comply can attract a penalty of Rs1 lakh per day, up to Rs25 crore, or entail an imprisonment for up to three years, or both.