EASING NORMS FOR CERTAIN M&A ACTIVITY – CCI

EASING NORMS FOR CERTAIN M&A ACTIVITY  – COMPETITION COMMISSION OF INDIA (CCI)

The Competition Commission of India (“CCI”) amended the CCI (Procedure in regard to transaction of business relating to combination) Regulations, 2011 (“Merger Control Regulations”) easing norms for certain M&A activity. Regulation 4 exempts certain transactions from the radar of CCI. These transactions are listed in Schedule I of the Merger Control Regulations and are “ordinarily not likely to cause an appreciable adverse effect on competition in India.” The April 2013 amendments have brought more clarity to Schedule I and will facilitate internal reorganization and restructuring of companies and additional stake acquisition without notifying the CCI. The major changes are:

ADDITIONAL ACQUISITION OF STAKE: 

If a company already holds 25% equity stake in an enterprise, it can acquire additional shares/voting rights up to 5% in a financial year without notifying CCI, provided this does not lead to acquisition of control over the enterprise. This amendment is in line with the creeping acquisition allowed under the SEBI Takeover Code.

INTRA-GROUP ACQUISITION: Any acquisition of shares/voting rights within a group is exempted and does not require the approval of CCI. However, in such a case the acquired enterprise shall not be jointly controlled by enterprises which are not part of the same group. This change will ease compliance requirements for intra-group restructuring and consolidation of holdings.

INTRA-GROUP REORGANIZATION: A merger or amalgamation between two enterprises, where one of them holds more than 50% shares/voting rights in the other is now outside the ambit of CCI- no approval required. The exemption also extends to mergers between two enterprises of a group where more than 50% shares in each of them are held by enterprises in the same group. However, this exemption is subject to the condition that transaction does not result in transfer from joint to sole control. Let us take an illustration: There is a company X, where company Y holds 58% equity and the rest 42% is held by company Z. X is under the sole “control” of Y. Now, X and Y merge. If the control of the merged entity is with the same shareholder(s), no clearance is required from CCI. However, in the same facts, if X is under the joint control of Y and Z, and the amalgamation of X and Y will result in sole control of a shareholder, then the transaction will have to be notified to the CCI. This change will facilitate merger of a subsidiary into its parent. Before the amendment, the exemption was only provided to merger of wholly-owned subsidiaries with its parent.

The amendments will reduce the number of filings before the CCI, but highlights the commitment of the government to give impetus to the M&A activity at large.

Digital Competition Act: 

• Digital Competition Act Bill prohibits large digital platforms, identified as Systemically Significant Digital Enterprises, from engaging in self-preferencing, restricting third-party apps, misusing the data of business users, imposing anti-steering policies, & bundling products and services.
• A government-appointed group has suggested that the Digital Competition Act be passed in order to provide the Competition Commission the authority to keep an eye on big internet businesses and take action before instances of anti-competitive behaviour occur. The change is intended to address companies like Amazon, Facebook, and Google.
• Digital Competition Act” that was universally recognized or implemented across jurisdictions. However, many countries have been actively discussing and enacting legislation aimed at regulating digital markets and addressing competition concerns related to tech giants and online platforms.For example, in the European Union, there’s been discussion and implementation of various regulations and directives aimed at regulating digital markets and addressing competition issues. One significant piece of legislation in this realm is the Digital Markets Act (DMA), proposed by the European Commission in December 2020. The DMA aims to create a fair and competitive digital market by introducing new rules for large online platforms considered to be “gatekeepers.”

  Similarly, in the United States, there have been ongoing debates and discussions about regulating big tech companies and addressing competition concerns. While there isn’t a single “Digital Competition Act,” there have been proposals for legislation targeting antitrust issues and market dominance of certain tech firms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

**********************************************************

If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.

Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.