Since the Competition Act came
into effect on June 1 2011, any significant acquisition
activity that involves the transaction of Indian assets now
needs prior approval from the Competition Commission of India
(CCI) before coming into effect. Legal practitioners have
expressed satisfaction with the CCI's efficiency in responding
to filings, as well as the manner in which the increasingly
sophisticated merger control regime has been developing in
India. But it is early days, and they warn against complacency.
The now effective Competition Act aims to regulate
combinations that have caused or are likely to cause adverse
effects on competition in India. The Act states that the CCI
has 30 days to form a prima facie opinion following the date of
filing of the relevant forms. The CCI is allowed up to 210 days
to pass its final order, while the combination regulations
state that the CCI must endeavour to pass an order or issue
directions within 180 days from the date of filing (for details
of the Act, please see the M&A chapter).
Amarchand Mangaldas senior partner Pallavi Shroff says: "The
responses we have got have been good so far. The CCI has been
surprisingly effective and companies normally get approvals for
their mergers within 30 days. Some companies found difficulties
in filing applications for CCI's approval because they were not
previously required to follow such regulatory procedures. When
they ask for further information from the CCI, the regulator
has given out information in a very efficient manner."
The Competition Act allows the regulators up to 210 days to
come up with a decision, "but so far we have received feedback
within one week," says AZB & Partners' CEO Abhijit Joshi.
"The amount of filing is building up substantially and it
remains to be seen whether the capacity of the Commission will
be able to accommodate increasing demands in the future," he
adds. "The system still need time to stabilise. Over the past
few months, we have seen the responses of the CCI become
faster. The regulators have been quite proactive in ensuring
the introduction of a comprehensive competition regime in
Legal commentators say that the smooth transition, since
merger control was introduced, can also be attributed to
companies' improving mindset when coping with the increasingly
complicated regulatory environment.
Shroff says: "Companies now realise what the impact will be
if they do not change the way that they deal with the
regulators. They have become more proactive and preventive in
complying with the regulators."
She adds: "The acquirers are also more aware of the
regulatory risks, and have started to request that they carry
out competition due diligence before acquisition activities
take place. Previously, many domestic companies would take
compliance actions only after transactions took place. This
greatly increased regulatory risks for these transactions and
also caused problems for foreign investors who invested in
The competition regime in India has become increasing
comprehensive and sophisticated over time as merger control
regulations have been implemented and businesses adopt more of
a competition mindset.
Prem Rajani, partner of Rajani Associates, says: "The CCI
has been proactive in dealing with cases and has been quite
strict on giving approvals. We have seen high penalties being
imposed by the CCI in various cases. This reflects the fact
that the regulators are getting really serious about
implementing a competition regime."
One example of this was the case between the MCX Stock
Exchange and the National Stock Exchange (NSE). In 2009, the
MCX accused the NSE of abusing its dominant market position to
prevent competition in the currency derivatives market. After
two years of investigation, the CCI found the NSE guilty and
levied a penalty of Rs 555 million (US$10 million).
to return to IFLR supplements