One year on, CCI still doesn’t cover mergers, acquisitions

One year on, CCI still doesn’t cover mergers, acquisitions
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First Published: Wed, May 19 2010. 11 26 PM IST
Updated: Wed, May 19 2010. 11 26 PM IST
New Delhi: Ayear after it began operating, the Competition Commission of India (CCI) is still waiting for the government to notify sections relating to mergers and acquisitions (M&A) of the Competition Act 2007.
The commission, mandated to oversee cartelization and abuse of dominant market position, and the ministry of corporate affairs (MCA) had earlier said the M&A norms were not notified because the competition regulator did not have enough staff.
“Staffing is not so much of an issue now as we have around 35 professional staff who can look into cases of M&As as well, although we were expecting to hire around 185 professionals in the first year,” CCI chairman Dhanendra Kumar said on Tuesday.
Kumar added that CCI has given the final draft regulations, the set of rules around which the agency will function, to its parent ministry. These have been revised since the Act was passed in Parliament, he said.
MCA, which is considering a set of new proposals made by the Confederation of Indian Industry, is yet to take a call on changes.
“We are looking at both the draft regulations sent by CCI as also the industry,” a ministry official said on condition of anonymity. “We cannot yet say when the provisions will be notified.”
Cartelization and abuse of dominance under sections 3 and 4 of the Act were notified on 20 May 2009. Sections five and six will deal with M&As.
Competition law experts said rules relating to M&As are integral to competition law and should be notified soon.
M.M. Sharma, head of competition law practice at Vaish Associates, Advocates, a corporate tax and business advisory law firm, said some kind of lobbying is happening, which is why the M&A provisions are not being notified.
CCI is only functioning partially without dealing with M&As, he said. “After 1990, whichever country has adopted competition law has notified M&A norms along with other notifications,” Sharma said. These include Singapore, Brazil, Mexico, China, Indonesia, Mexico and Russia, according to him.
India needs to notify the provisions quickly because if M&As are not regulated, companies will take the route to a dominant position rather than cartelization, making things more difficult for CCI to examine, said G.R. Bhatia, partner at Luthra and Luthra Law Offices. “The anti-competitive agreements and abuse of dominance are enforced ex-post, while M&As are to be regulated exante, which rests on the maxim prevention is better than cure,” Bhatia said. “So prudence suggests that for an effective competition regime, M&A provisions are also notified.”
Under the Act, any M&A that results in combined revenue above certain thresholds must be cleared by CCI.
The thresholds are a combined turnover of Rs3,000 crore for a domestic firm, Rs6,000 crore for domestic firms with overseas presence and Rs24,000 crore for a conglomerate with local presence.
Firms and conglomerates will also have to approach CCI for approval if the combined revenue of the Indian operations of the acquirer and the acquired are at least Rs1,500 crore, with the smaller operation having at least Rs600 crore in revenue.
sangeeta.s@livemint.com
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First Published: Wed, May 19 2010. 11 26 PM IST