CCI chief pitches for redefining ‘control’

  • ‘Control must consider evolving relationship between shareholders, firms’
  • The Competition Act currently defines ‘control’ as controlling the affairs or management

Gireesh Chandra Prasad
Updated23 Aug 2022, 04:59 PM IST
Competition Commission of India chairperson Ashok Kumar Gupta.
Competition Commission of India chairperson Ashok Kumar Gupta.

The control exercised by investors in a company needs to be redefined more broadly in the law to make merger regulations in sync with a dynamic market, Competition Commission of India (CCI) chairperson Ashok Kumar Gupta said in an interview.

Gupta’s suggestion for a more nuanced redefining of control in the context of corporate mergers and acquisition (M&A) deals points to the new direction that CCI’s regulations will take once the Parliament approves the proposed amendments to the law. The Competition Amendment Bill is currently being examined by the Parliamentary standing committee on finance led by Bharatiya Janata Party leader Jayant Sinha, and is expected to be taken up in the winter session of Parliament.

Currently, Competition Act defines it as controlling the affairs or management. The proposal is to define it as the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions of the company.

Gupta explained that competition is a highly dynamic activity and, therefore, competition law, if it is to fulfil its mandate, has to be equally dynamic. Moreover, the relationship between shareholders or investors and enterprises is fast evolving, and the concept of ‘control’, therefore, needs to enable the assessment of such relationship in the proper perspective, Gupta said.

“Accordingly, it is felt that the concept of ‘control’ needs to be linked with the ability to influence the strategic commercial decisions which cause the change in market dynamics. This approach complements the conventional concept of control rooted in shareholding or affirmative/veto rights,” Gupta said.

CCI’s approval is vital for businesses to complete transactions as the regulator can suggest modifications to transactions to prevent any adverse effect on competition due to the deal. A broader definition, which introduces the concept of ‘material influence’, could bring more deals into the ambit of CCI’s review.

Assessing material influence requires a case-by-case analysis of the overall relationship between the acquirer and the target, Gupta said. “In making its assessment, we will have regard to all circumstances of the case. Material influence may arise through factors such as representation on the board of the target (entity), contractually agreed on consultation rights/veto rights, the voting percentage held by acquirer, etc.,” the chairperson said.

The new definition of ‘control’ proposed in the bill is on the lines of the CCI’s decisional practice and does not change the practical parameters followed, but they aim to bring more clarity and certainty by clearly specifying the control threshold in the Competition Act itself, Gupta said. It is expected that the change will make stakeholders more aware of their statutory obligations and prevent any unintended non-compliance, he said.

One of the key proposals in the bill is to do away with the requirement of prior approval of CCI in case of transactions involving open offers or acquisition of shares through regulated stock exchanges. Gupta said that in case of market purchases where prices are volatile, if a person is required to wait for CCI approval, he might lose the opportunity to buy the shares at the best price.

Presently, parties to M&As are required to notify CCI and wait for its approval or 210 days before consummating the transaction, whichever is earlier.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
First Published:23 Aug 2022, 04:59 PM IST
HomeNewsIndiaCCI chief pitches for redefining ‘control’

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Tata Steel

    157.75
    03:43 PM | 19 JUL 2024
    -8.6 (-5.17%)

    Tata Power

    414.15
    03:59 PM | 19 JUL 2024
    -15.85 (-3.69%)

    Bharat Electronics

    306.30
    03:45 PM | 19 JUL 2024
    -7.2 (-2.3%)

    Zee Entertainment Enterprises

    137.55
    03:57 PM | 19 JUL 2024
    -4.9 (-3.44%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Tata Teleservices Maharashtra

    102.11
    03:59 PM | 19 JUL 2024
    4.68 (4.8%)

    Rail Vikas Nigam

    614.00
    03:59 PM | 19 JUL 2024
    27.65 (4.72%)

    Jubilant Pharmova

    752.25
    03:43 PM | 19 JUL 2024
    25.3 (3.48%)

    One 97 Communications

    458.70
    03:55 PM | 19 JUL 2024
    13.65 (3.07%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      75,217.00292.00
      Chennai
      75,657.001,099.00
      Delhi
      74,485.00-659.00
      Kolkata
      74,485.00-73.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      102.86/L0.00
      Chennai
      100.75/L0.00
      Kolkata
      104.95/L0.00
      New Delhi
      94.72/L0.00
      OPEN IN APP
      HomeMarketsPremiumInstant LoanBudget