CCI performance: Good start but early days

Author: | Published: 1 Aug 2012
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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 India."

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 these companies."

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).

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