This article was first published in The Practical Lawyer
Within a short span of about six years, the Competition Commission of India (Commission) has steadily emerged as an effective merger control regulator. Since 2011, the Commission has approved over 430 transactions in diverse sectors. An overwhelming majority of the approvals have been unconditional in nature; only three transactions have been examined and cleared post a detailed Phase II investigation; and not a single one has been blocked.
Recently, the Commission approved a transaction with structural remedies in Phase I (prima facie investigation stage) itself. While conditionally approving the proposed transaction between Abbott Laboratories and St. Jude Medical, Inc. in the medical devices sector, the Commission noted that the market for small-hole Vascular Closure Devices (VCDs) was highly concentrated, with the combined market share of the parties being in the range of 90-100 percent and the market share of Cardinal Health, the only other competitor, being in the range of 0-5 percent. The Commission accepted a voluntary divestiture offered by Abbott and St. Jude Medical of the entire small hole VCD segment of St. Jude Medical on a worldwide basis to a third party, observing that such modification would eliminate the overlap in the Indian market and enable fair competition.
The Commission’s approach deserves consideration in light of the fact that this case involves a voluntary divestment of assets in Phase I against the ordinary trend of Phase II divestments. Prior to this, the Commission had accepted voluntary modifications on several occasions (such as in Orchid/Hospira, Mylan/Agila and Torrent/Elder) where it conditionally approved those transactions, subject to modifications which were predominantly in the scope of non-compete obligations. A shift in the Commission’s approach from such behavioural to structural modifications in Phase I was first witnessed in the case involving ZF Friedrichshafen (ZF) and TRW Automotive (TRW), where the Commission accepted ZF’s commitment to exit (through divestment of shares) from a joint venture operating in steering system products thereby significantly diluting the horizontal overlap between ZF and TRW. A key difference between the ZF and Abbott cases is that while ZF had already decided to terminate the joint venture prior to notifying the Commission, in the Abbott case, the parties appear to have proposed the divestiture post the Commission identifying concerns over the significant overlap in the relevant market.