Combination Review in India: A Mid-year Review (Part I) - K.K. Sharma

B-312012]
COMPETITION LAW REPORTS ™ FEBRUARY, 2012
Section B
Articles
Combination Review in India: A Mid-year Review (Part I)
K.K. Sharma*
In this two-part article, the first part of which appears here, the author, the chief
architect behind the review format of Merger Review in India, takes a look at the
performance of the Competition Commission of India (CCI) in handling the
regulations of combinations (merger review) in India and how does it compare
with international standards. The stark contrast between the anxious reactions
before the regulations of combinations came into force and the deafening silence,
even after 19 approvals have been given by the CCI, has also been briefly touched
upon. The next part, to follow, shall deal with the lessons arising from the
journey of merger control in India so far.
* Commissioner of Income Tax, Govt of India, Kochi, India. He was Director General & Head
of Merger Control, in CCI till recently. The views in this article are personal. He can be
reached at kksharmairs@gmail.com
93
The thought for this write up has been with
me for quite some time. To succumb or not
to succumb to the temptation of sharing
my thoughts was an extremely difficult
dilemma. “Damn if you do and damn if
you don’t.” Not agreeing to the call from
within would have meant an extremely
important milestone being missed out
without as much as a whimper despite
having such a stormy legacy. At the same
time giving in to my internal desire was
also a really tough call-primarily because
of the apparent conflict of interest or
something which can be alleged to be a
conflict of interest irrespective of the most
neutral viewpoint taken. I wanted to keep
away from this matter for the fear of being
accused of blowing my own trumpet. This
hesitation emanated, essentially, from the
fact that I was entrusted by the Competition
Commission of India (CCI) with the job of
bringing the procedural and analytical
format for combination review (also more
popularly known as “merger review”) into
existence in India. The difficulty in this
assignment was that no such template
existed which could suit the requirements
of the factors of determination given in
Section 20(4) of the Competition Act,
2002(the Act). No doubt, the Act has

Competition Law ReportsB-32 [Vol. 1
attempted to collect nearly all the factors
either given in the laws of developed
jurisdictions or the ones which came to
be recognised as a result of the
development of the competition law
jurisprudence in the jurisdictions which
have been practicing this craft for a longer
time in comparison. Even those
jurisdictions from where some of these
factors have come from either did not have
a documented analytical framework (as
it had evolved over a period of time
without a due documentation of this
evolution) or did not want to share it in
the name of confidentiality. For these
reasons, starting from the first principles,
a procedural and analytical framework
rooted in the ethos and principles
embodied in the Act was developed.
Naturally, any applause, from me, may
have the potential to be viewed as suspect,
as self-praise, despite the fact that I am no
longer with the CCI.
However, completion of a half-year term
with quiet but resounding success is too
big a landmark to be missed. If nobody else,
competition law history of the country will
never forgive someone who, despite having
some germination of ideas, let this historic
moment pass without any record. It is often
said that 100 days is a big time in politics.
May be, borrowing the same analogy, we
can say that 180 days is a long enough
period in the history of a competition
agency to have a look at the performance,
in any chosen area of its functioning, as it
gives an idea of the trends so badly needed
to assess its effectiveness as well as
proclivities, if any, for helping the attorneys
as well as business to navigate the
combination review tunnel with grace and
minimum regulatory burden. After waiting
for nearly a month, despite tremendous
resistance from within, I have gathered
enough courage to put the record straight
and give devil its due.
In the history of competition law in India,
there are four distinct periods. The first
period began from 26th
February, 1999 till
13th
January, 2003 the day the Act was
enacted. This period begins with the
resolve of the nation being reflected in the
declaration, in the parliament, by the then
Finance Minister that the country needed
a new modern competition law and any
further patch work on the then existing
Monopolistic and Restrictive Trade
Practices Act, 1969 (MRTPCA), as had
been done in the past, a number of times,
would not suffice. After going through
various motions, finally, on the
recommendation of the Raghvan
Committee report, the Act was enacted on
13th
January, 2003. The second period
begins from 13th
January, 2003 till
20th
May, 2009. In this period, for various
reasons relating to the background of
litigation, the Act had to be amended in
Sept 2007 so as to fulfil the assurances
given to Hon’ble Supreme Court by the
Government. This ensured that the matter
was not litigated any further. Thereafter,
till 28th
February, 2009, the CCI functioned
as a one Member body till July, 2008 (not
really a Commission in true legal sense
because of the stipulation, in section 8 of
the Act that the Commission shall consist
of one Chairperson and at least two
Members appointed under the Act). From
July, 2008 till 28th
February, 2009, the CCI
only consisted of staff and no Member /
Chairperson was in office. On
28th
February, 2009, one Chairperson and
one Member entered office and, soon
thereafter, on 1st
March, 2009, the second
Member entered the office and the CCI was
duly constituted for the first time. The duly
constituted CCI had a look at the
preparatory material prepared by the
earlier formations and, after due
deliberations, approved the
implementing regulations for various
aspects of the functioning of the CCI.
Simultaneously, the Government also
brought enforcement provisions relating
to the anti-competitive agreements /
cartels and abuse of dominant position
(Sections 3 and 4 of the Act) with effect
from 20th
May, 2009. That is the beginning
of the competition law enforcement in
India—albeit partially. The third period
94

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began from 20th
May, 2009. In this period
the duly constituted CCI started enforcing
the provisions relating to anticompetitive
agreements/cartels and abuse of
dominant position of the Act.
In this third period, the efforts to bring
into force the provisions relating to
regulations of combinations by the CCI
and the Government on the one hand and
equally strong efforts/manoeuvres to stall
them by a wide spectrum of business and
other interest groups, represented through
various formations, continued till as late
as 4th
March, 2011 when the notification
bringing the provisions relating to
regulation of combinations into force, with
effect from 1st
June, 2011, was issued. Not
that the opposition to the provisions
relating to merger control was particularly
subdued even earlier but, after the part
enforcement of the competition law
provisions, it certainly became much more
vociferous. It was nearly at its peak in this
third period ending on 1st
June, 2011. This
was a period of mad cacophony.
Everyone, who was someone, or who
could make him / her heard as someone
before those who matter, questioned the
credibility of the CCI on whichever count
he or she considered feasible. The alleged
reasons, of lack of faith in CCI to handle
review of combinations, ranged from lack
of capacity, resources of material kind,
“sarkari”(read “bureaucratic”) attitude,
the unduly long period of clearance
provided under the law, high fees and
what have you. Actually, some efforts to
get it postponed, preferably indefinitely,
after 4th
March, 2011 and before
1st
June, 2011 also continued in the name
of lack of preparedness as the finalisation
of the implementing regulations by the
CCI took some time not entirely because
of the fault of CCI. The fourth period of
full enforcement of competition law in
India began from 1st
June, 2011.
Surprisingly, in contrast, now after a
passage of more than seven months there
is an unusual lull. Interestingly, it is not
the proverbial lull before the storm but
95
the lull after the storm. For one who has
been at the near centre of this storm before
the lull, nothing can be more surprising
but still satisfying. None of those who
were a part of the chorus, or anyone else
for that matter, is admitting that those
fears and misgivings were wrong, that
the CCI is doing its job very diligently or
whatever. In comparison, the
international press-legal press or
otherwise has been highly appreciative
of the spectacular performance of the CCI
in this area of activity.
If we recall, the concerns of the business,
voiced on different platforms, at various
times were, broadly, as under:
• Mandatory pre-merger notification
is burdensome. Voluntary regime
preferred by industry
• Asset/turnover thresholds are too
low
• The time period for review,210
days, is too long
• No minimum thresholds for
acquisition of shares/assets.
Burden on big enterprises.
• Concept of “group” consisting of
enterprises puts additional burden
on big enterprises
• Likely adverse affect on the growth
of a developing economy by
regulating combinations
• Separate higher thresholds for
telecom, infrastructure, energy,
banking and insurance sectors
• Regulation of combinations be
taken up by CCI only after gaining
experience of several years
• Regulating acquisitions would
deny Indian business the
opportunity to take-over and
reviving failing enterprises
Indeed a look at the track record of CCI in
treading this forbidden territory has been
such that none of the fears has come true.
The following table summarises the salient
aspects of the approvals of combinations
by CCI as of the time of writing:

S.CombinationNoticeUnderIntraFiledDecisionDateofTotalTimeNet
No.RegistrationDescriptionSectionGrouporonOrderDaysOutDays
No.Otherwise(Days)
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
19C-2012/01/25NoticeformergerofNRLandRITL5(c)Intra24/01/2012Approved2/02/20129–9
Group
18C-2012/01/18NoticeformergerofTACOCL5(c)Intra2/1/2012Approved2/2/2012312110
andTACO.Group
17C-2011/12/17NoticeforacquisitionbyIsuzu5(a)22/12/2011Approved2/2/2012422418
MotorsLtd,SMLIsuzuLtdand
SumitomoCorporation.
16C-2012/01/21NoticeformergerofGSSPL5(c)Intra13/01/2012Approved24/01/201211–11
andPIPL.Group
15C-2012/01/20NoticeformergerofSHMPL5(c)Intra10/1/2012Approved17/01/20127–7
andSTFC.Group
14C-2011/12/16NoticeformergerofEAPL5(c)Intra16/12/2011Approved17/01/2012321022
andBBTCL.Group
13C-2011/12/13NoticeformergerofIVRCLLtd.5(c)Intra12/12/2011Approved17/01/2012362313
andIVRCLAssets&HoldingsLtd.Group
12C-2011/12/12NoticeformergerfiledbyTCL5(c)Intra9/12/2012Approved28/12/201119–19
andWyomingIGroup
11C-2011/12/15NoticeforAcquisitionfiled5(a)12/12/2011Approved28/12/201116–16
bySCBIndia
10C-2011/12/11NoticeforMergerfiledby5(c)Intra1/12/2011Approved28/12/201127521
ANIndiaLtd.,ANChemicalsLtd.,Group
96

B-352012]
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
9C-2011/10/07NoticeforMergerfiledbyNippon5(c)14/10/2011Approved27/12/2011746410
SteelCorporationandSumitomo
MetalIndustriesLtd.
8C-2011/11/10NoticeforAcquisitionfiled5(a)25/11/2011Approved13/12/201118810
byKKRFII
7C-2011/11/09NoticeforMergerfiledby5(c)Intra21/11/2011Approved13/12/2011221012
SL,SVAIandMorganGroup
6C-2011/10/05NoticeforAcquisitionfiledby5(a)5/10/2011Approved4/11/201130723
NHKAutomotiveComponents
IndiaPrivateLimitedand
NHKSpringCo.,Limited
5C-2011/10/06NoticeforMergerfiledby5(c)Intra12/10/2011Approved19/10/20117–7
AHILandAPILGroup
AICAKogyoCompanyLimited
andAicaLaminatesIndian
PrivateLimited
G&KBabyCarePrivateLimited
TheWaltDisneyCompany
(SoutheastAsia)Pte.Limited
1C-2011/07/01NoticeforAcquisitionfiled5(a)7/7/2011Approved26/07/201121417
byRILandRIIL
97

The above table analyses the
combinations handled by the CCI as of
the time of this writing. In total, 19
combinations have been approved by
CCI, spread over a period of a little over
seven months from 1st
June, 2011 to
2nd
February, 2012. In the combinations
handled so far by the CCI out of a total
19 matters, 10 cases have involved
intra-group mergers/amalgamations.
In all these cases, the mergers/
amalgamation did not change the control
dynamics of the enterprises on a macro
level except the contours of control
undergoing some change. Had the
notification issued by the Government
on 4th
Mach, 2011,1
as amended later on
27th
May, 2011,2
included the mergers
and amalgamations along with the
acquisitions, perhaps, many of these
notifications would not have come before
the CCI.
Nine cases of notifications, other than
the intra-group combinations, for an
economy of the size of India are not too
many notwithstanding the not too bright
patch which the global economy, in
general, is going through. All the
combinations, including the 10 cases of
intra-group combinations have been
approved by the CCI. This is not to say
that if the situation so requires the CCI
would shy away from asking the parties
to the combinations for modifications
under Section 31(3) of the Act or even
block the combinations under
Section 31(2) of the Act on a case to case
basis as and when the situation so
demands. Nonetheless, the track record,
so far, brings one inference in bold relief
and that is that the CCI is not trigger
happy as would have been the normal
impression if one were to believe the fears
expressed before the provisions relating
to merger control became a reality in
India.
On an average, in the cases of regulations
of combinations approved by the CCI so
far, the time to approve a combination
under Section 31 of the Act has been a
mere 14 (or 14.36 to be exact) calendar
days. This would translate to a little less
than 10 working days if we keep even
the list of scheduled holidays in India in
mind leaving aside the frequent
disruptions of work on many other
counts. This is indeed a rare feat for a
new competition agency.
For a comparison of the numbers, in
nearly the same period, from June 2011
to January, 2012, the EU DG Competition
handled 225 cases. Let us not forget that,
in addition to EU DG Comp, the national
competition authorities, within the
European Union, also clear mergers.
Comparatively, a similar economy, South
Africa Competition Commission passed
judgement in 41 cases in the month of
January, 2012 alone. In the United States
of America, being a different procedure
as no approval order is required to be
passed, the comparison would not be
appropriate. Although the figures of
merger filings in USA for the same period
are much higher bur these are not being
discussed for lack of comparative merit.
These numbers do not indicate that the
capacity of CCI to handle work is less
but the fact that, through various means,
the work load of the CCI under this head
been reduced to a bare minimum because
of the forceful effects of the noise in the
third phase of evolution of competition
law in India as discussed in the
preceding paragraphs.
The performance of the CCI, so far, shows
that neither the requirement of
mandatory pre-merger notification has
dissuaded any business from going
ahead with any transaction nor has any
transaction been killed as a result of the
feared immature, inept and
1 Notification SO 482(E) (No. 412) dated 4th March, 2011
2 Notification SO 1218(E) (Corrigendum No. 1017)
98

B-372012]
unprofessional handling of the
notification by CCI. So the fears about
the lack of professional capacity of CCI
to handle complex merger transactions
remain what they were: fears— that too
imaginary. A minimum threshold for the
acquisition size has been provided by the
Government through executive
notifications.3
The group linkage has also
been relaxed a little more by the
Government through notification.4
The
sectors covered so far include insurance,
media, telecom, infrastructure etc. with
the same thresholds without any
excessive regulatory burden on any
sector. Bringing into force of the
regulations of combinations with effect
from 1st
June, 2011 has not dampened the
spirit of Indian business either to make
acquisitions abroad or take over less
performing/ailing enterprises within its
fold if that makes commercial sense.
Nobody, so far, has experienced the much
maligned 210 days taken in approval by
CCI whereas this is not a very unusual
time, sometimes, taken by enterprises in
the mergers/amalgamations or
acquisitions under the hitherto existing
regulatory mechanism under the
Companies Act, 1956 and SEBI Act,
1992.5
Nobody is having any grievances from
the functioning of CCI in this area of
functioning. The mandatory pre-merger
filing requirement has been truly
accepted by the industry as the
mandatory way of doing transactions
above the thresholds given under the
Act. This goes to the credit of the business
that except for the noises prior to the
regulations coming into force, it has been
accepted as a way of doing business
without much ado. The CCI has been
prompt enough to approve transactions
This would indicate to us the hollowness
of the noises made or the fears expressed
before the merger review became reality
in India. The comparison also shows that
the bogey of the thresholds for
regulations of combinations being too
low was not really based on reality. It
was a claim made with vigorous
forcefulness and, unfortunately, had
adequate impact. The fear that the whole
economy would be adversely impacted
because of the negative impact of merger
control on the economy is nowhere to be
seen. The miniscule transactions being
captured under filing requirement are too
small to make any difference to the
economy even if the handling of the
regulations of combinations by CCI were
not to be as professional and prompt as
it, in reality, is.
Thus, the implementation of the law and
the performance of the regulator have not
created the kind of mayhem as would
have seemed a distinct possibility if the
fears about dangers of the provisions
relating to the regulations of the
combinations being brought into force
were to be believed. However, there are
lessons to be learned in the journey of
regulation of combination so far. These
will be discussed in the (Part II) in the
following issue.
Copyright © K.K. Sharma
3 Notification S.O. No 482(E) dated 4th
March, 2011 read with S.O.1218(E), dated 27th
May, 2011
4 Notification S.O. No 481(E) dated 4th
March, 2011
5 The Securities and Exchange Board of India Act, 1992, No 15 of 1992
99
Nobody is having any
grievances from the
functioning of CCI in this
area of functioning
even before the sector regulators have
cleared some of the transactions where it
was needed.

Combination Review in India: A Mid-year Review (Part I) - K.K. Sharma

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Combination Review in India: A Mid-year Review (Part I) - K.K. Sharma