On 14 June 2017, the Competition Commission of India (CCI) imposed a penalty of INR 87 crore (approx. USD 13.54 million) on Hyundai Motor India Limited (HMIL), which is engaged in the sale and distribution of Hyundai cars and its parts in India. This was for engaging in the practices of resale price maintenance (RPM) and tying in, in contravention of the provisions of Sections 3(4)(e) and 3(4)(a) read with Section 3(1) of the Competition Act, 2002 (Act).
Partner in the Competition Practice at the Mumbai office of Cyril Amarchand Mangaldas. Bharat advises on the full range of competition matters, including cartel enforcement, abuse of dominance, merger control and competition audit and compliance. He can be reached at email@example.com
In a judgment that has far reaching consequences, the Delhi High Court (Delhi HC) has adjudicated upon the constitutional validity of various regulations formulated under the Competition Act, 2002 (Act) addressing confidentiality of sensitive information that is submitted to the Competition Commission of India (CCI).[i]
The petitioners in the Writ Petitions are opposite parties in a suo moto investigation by the CCI for alleged participation in a bid-rigging cartel in the conveyor belt sector in India. The CCI found prima facie evidence of violation of the provisions of the Act and directed its investigative arm, i.e., the office of the Director General (DG), to commence an investigation against the petitioners, amongst others.
In the course of the investigation, the petitioners filed an application before the CCI for inspecting the information relied upon by the CCI to arrive at its prima facie view and procure copies under Regulation 37 of the Competition Commission of India (General) Regulations, 2009 (General Regulations). The above application by the petitioners was denied by the CCI on the grounds that the information/documents requested by the petitioners formed part of the confidential records of the CCI and accordingly could not be disclosed to the petitioners at this stage of the investigation.
In one of the most significant amendments to the merger control regime in India, the Government of India, by way of a notification published on March 29, 2017 (Notification), has enhanced the scope of the de minimis or the small target exemption to include transactions structured as mergers or amalgamations. Further, in transactions involving the acquisition/merger of only a business, division or portion of an enterprise, the Notification stipulates that only the asset and turnover value of such business/division will need to be considered.
We examine these sweeping changes introduced by the Notification and their ramifications in detail below:
A. Applicability of Target Exemption
An important exemption granted to acquisitions was the small-target or the de minimis exemption, which excluded a transaction from the mandatory requirement to obtain the Competition Commission of India’s (CCI) prior approval (Target Exemption), if structured as an ‘acquisition’ of shares, control, voting rights and assets of an enterprise that has assets of not more than INR 350 crores (approximately USD 54 million) in India or turnover of not more than INR 1,000 crores (approximately USD 154 million) in India.
The language of the Target Exemption notified by the Government of India, first in 2011 and then in a revised form in 2016, meant that it only applied to acquisitions. The Notification now increases the scope of the Target Exemption to include mergers and amalgamations.
The effects of this inclusion are far ranging. In the previous iteration, the structure of transactions gained significance, i.e., while an acquisition of majority stake or even 100% shareholding of an enterprise with assets or turnover less than the Target Exemption thresholds was exempt, a merger of such an enterprise (likely to have the same effect on the market) was unable to avail itself of this benefit. However, with this revision, the legislative intention behind the ‘small-target’ exemption may be realised to its fullest.
There is no increase in the Target Exemption thresholds which were revised last in 2016 and the applicability of the Notification is for a period of five years, i.e. until 28 March 2022.
On March 22nd, 2017, nearly seven years since the introduction of the leniency regime in India, the Competition Commission of India (CCI) has proposed the first set of amendments to the Competition Commission of India (Lesser Penalty) Regulations, 2009 (Leniency Regulations) and invited comments from stakeholders.
In line with most developed competition law regimes, the Competition Act, 2002 (Competition Act) also provides for establishment of a leniency regime in India. Section 46 of the Competition Act, supplemented by the Leniency Regulations, draws up the leniency regime in India. The regime enables enterprises to come forward and provide information on cartel arrangements and, in return, avail themselves of up to 100% reduction in penalties.[i]
In view of the CCI’s powers and increasing awareness of the Competition Act, the past few years have seen a number of enterprises come forward to gain benefit of the leniency provisions. In fact, in January this year, the CCI passed its first ever order in a leniency matter[ii] and a glance at the proposed amendments indicates that the CCI is seeking to clarify issues relating to procedures in such matters.
On 7 March 2017, the Supreme Court of India (SC) upheld an appeal by the Competition Commission of India (CCI) against an order of the Competition Appellate Tribunal (COMPAT) in a case of alleged cartelisation by members of a film and television artists’ trade union in the state of West Bengal. This order of the SC (Order) is arguably the first of the apex court on substantive issues arising under the provisions relating to anti-competitive agreements under the Competition Act, 2002 (Competition Act).
The matter arose out of information filed by a distributor and telecaster of regional serials in Eastern India, including the state of West Bengal (Informant). The Informant alleged that he had been assigned the rights to dub and telecast the television serial ‘Mahabharat’ in Bengali and had entered into agreements to telecast it on two television channels. However, under opposition and pressure from two associations, namely the Eastern India Motion Picture Association (EIMPA) and the Committee of Artists and Technicians of West Bengal Film and Television Investors (Co-ordination Committee), one of the two channels decided to not proceed with the telecast.
The Co-ordination Committee is a joint platform comprising the Federation of Cine Technicians and Workers of Eastern India, and West Bengal Motion Pictures Artists Forum. Upon one channel deciding to not telecast the dubbed serial, the Informant decided to approach the CCI and filed an information alleging that the restrictive acts of EIMPA and the Co-ordination Committee were in violation of the provisions of the Competition Act.
The Indian merger control regime is a suspensory one which means that, any acquisition, merger or amalgamation that is notifiable to the Competition Commission of India (CCI) may be consummated only after the CCI grants approval, or until a certain waiting period has lapsed.
Section 6(2) of the Competition Act (Act), provides that when an enterprise proposes to enter into a combination, it is required to give a notice to the CCI, disclosing the details of the proposed combination, within 30 days of executing the ‘trigger document’. Further, Section 6(2A) of the Act provides that no combination shall come into effect until 210 days have passed from the day on which the notice has been given or unless the CCI passes orders under Section 31 of the Act, whichever is earlier. In sum, the suspensory regime is an absolute one. Combinations cannot be consummated, in part or full, before either the CCI grants approval or until 210 days post the notification. Continue Reading Part Consummation of M&A Transactions: The Rhetoric of Gun Jumping
In August of 2016, the Competition Commission of India (CCI) passed an order in the case of Builder’s Association of India (2016 Order) predominantly re-affirming its earlier order of June 2012 in the same matter (2012 Order).
By way of a brief background, the case originated from a complaint filed in 2010 by the Builders Association of India (BAI) against the Cement Manufacturers’ Association (CMA) and 11 Indian cement manufacturing companies (collectively, the Opposite Parties). In June 2012, based on an inquiry conducted by it, the CCI imposed a penalty of INR 63.17 billion (approximately USD 933.68 million) on the Opposite Parties. This penalty was imposed for using the platform provided by the CMA to fix cement prices as well as limit and control production and supply of cement in the market, thereby contravening the relevant provisions the Competition Act, 2002 (Act). This 2012 Order was challenged before the Competition Appellate Tribunal (COMPAT), primarily on grounds of due process and violations of principles of natural justice and was set aside on these grounds. The matter was remanded to the CCI for fresh adjudication. Consequently, the CCI re-heard the Opposite Parties and passed the 2016 Order. Continue Reading The Curious Case of the Cement Cartel
The Office of the Director General (DG), being the investigative arm of the Competition Commission of India (CCI), has conducted two search and seizure operations thus far. The first of these, more popularly known as dawn raids, was on the offices of JCB India Limited (JCB India) on 22 September 2014. More recently, the DG carried out a dawn raid on the premises of Eveready Industries Limited (Eveready), a leading dry cell manufacturer.
Dawn raids such as these signify the resolve of the CCI to actively conduct intrusive operations to enforce the provisions of the Competition Act, 2002 (Competition Act). In light of such a pro-active approach, and given that the DG enjoys wide (and mostly untested) powers whilst conducting such operations, companies in India must be aware of what they should do in the course of a dawn raid to contain the consequences and fallout. Continue Reading CCI Dawn Raids – How to Act and Contain Operations
On 31 August 2016, the Competition Commission of India (CCI) dismissed an information under Section 26(2) filed against M/s ANI Technologies Private Limited (Ola Cabs) in the case of Mr. Vilakshan Kr. Yadav and Ors v. M/s ANI Technologies Private Limited alleging abuse of dominance, in contravention of Section 4 of the Competition Act, 2002 (Competition Act).
The information was filed with the CCI by a group of auto rickshaw and taxi drivers plying their trade in Delhi and the National Capital Region (NCR). The informants argued that the relevant product market should be defined as “paratransit services” comprising auto rickshaws, black-yellow taxis and city taxis given that all of these are used for point-to-point travel by passengers and, thus, compete within the same space. Further, according to the informants, the drivers for all these modes of transportation are drawn from the same pool. The informants asserted the relevant geographical market to be the NCR comprising Delhi and certain districts of three states namely, Haryana, Uttar Pradesh and Rajasthan. This was based on an agreement that was signed by the respective governments of these four states to issue permits for auto rickshaws and taxis providing unrestricted movement within the NCR. Continue Reading “Smooth” Driving For Ola – CCI Closes Investigation Under 26(2)
We take a look at recent re-notification and revised merger control thresholds to the Competition Act, 2002, and how they will reduce regulatory hurdles for smaller transactions and facilitate ease of doing business in India.
The Competition Act, 2002 (Act), requires mandatory notification to and prior approval of the Competition Commission of India (CCI) for transactions wherecertain prescribed asset or turnover thresholds (Jurisdictional Thresholds) are exceeded. By way of a notification dated 4 March 2011 (2011 Notification), the Ministry of Corporate Affairs (MCA) enhanced the value of asset and turnover as provided in Section 5 of the Act by 50 per cent. In addition to the above, the MCA by way of notification on the same date (including a corrigendum dated 27 May 2011) also introduced a de minimis exemption in case of an acquisition. The said notifications contained a validity period of five years and were set to expire on 3 March 2016.