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ICSI WIRCICSI WIRC
“Combinations” The Competition Act, 2002
4th May 2013
Surendra U. KanstiyaPractising Company Secretary.
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IMPORTANT
* This presentation is in the nature of a support note for the speaker
* Slides on standalone basis may not be self-explanatory
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COMPETITION AUTHORITIES
Competition Commission of India (CCI)
Competition Appellate Tribunal (COMPAT)
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COMPETITION AUTHORITIESCOMPETITION AUTHORITIES
COMPETITION COMMISISON OF INDIA (CCI) A body corporate Chairperson + 6 membersCOMPETITION APPELLATE TRIBUNAL (COMPAT) A quasi-judicial body Chairperson + 2 members Appeals and compensation
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ENTERPRISE Sec.2(h)ENTERPRISE Sec.2(h)
PERSON OR GOVT. DEPTT. engaged in activity relating to production, supply, distribution, acquisition, control of goods; services, of any kind.
PERSON: individual; firm; HUF; co.; AoP; corporation; body corp.; coop. soc.; local authority; other artificial juridical persons.
MAY BE EXCLUDED: Govt. Deptt. performing sovereign functions: atomic energy, currency, defence; space
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ABUSE OFDOMINANT POSITION
‘No enterprise or group shall abuse its dominant position’
Amendment Bill 2012: Jointly or severally
DOMINANT POSITION
DOMINANCE: Capacity to
- act independent of competitive presence OR
- affect appreciably the relevant market, competition and consumers.
No arithmetic figure for dominanceAAEC Test not needed
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COMBINATIONS
‘Certain combinations are regulated’
The Competition Commission of India (Procedure in regard to the transaction of business relating to
combination) Regulations, 2011 (Amended in 2012 and 2013)
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COMBINATION
Acquisition of enterprise:acquisition of
Control, shares,
Voting rights,assets
Acquiring of Control: over an
enterprise engagedin same line of
Goods or services
Mergeror
amalgamation
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COMBI. : NON-GROUPCOMBI. : NON-GROUP
ASSETSIN INDIA: over Rs.1500 Cr; ORGLOBAL: over US $750 Mn. (including
Indian assets Rs. 750 Cr)TURNOVER
IN INDIA: Rs.4500 Cr; ORGLOBAL:US $2250 Mn. (including Indian
turnover Rs.2250 Cr)
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COMBI. : GROUPCOMBI. : GROUP
ASSETSIN INDIA: over Rs.6000 Cr ; ORGLOBAL: over US $3 Bn. (including
Indian assets Rs.750 Cr)TURNOVER
IN INDIA: over Rs.18000 Cr ; ORGLOBAL: over US $9 Bn. (including
Indian turnover Rs.2250 Cr)
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GROUPGROUP
Means two or more enterprises which, directly or indirectly, are in a position to —
(i) exercise 50 % or more of the voting rights in the other enterprise; or
(ii) appoint more than 50% of the members of the board of directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;
ASSETS
Book value as shown, in the audited books of the enterprise, in the latest completed financial year, as reduced by any depreciation, and
include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout design or similar other commercial rights
TURNOVER
ACT: “Turnover” includes value of sale of goods or services
REGULATIONS: exclude indirect taxes, if any
AMDT BILL 2012: excluding the taxes, if any, levied on sale of such goods or provision of services
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SEC.6(4) EXEMPTIONS SEC.6(4) EXEMPTIONS
Shall not apply to (i) share subscription (ii) financing facility (iii) any acquisition by:
Public financial institutionForeign institutional investorBankVenture capital fund pursuant to any covenant of a loan agreement
or investment agreement MUST FILE DETAILS IN 7 DAYS
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EXEMPTION IN PUBLIC INTERESTEXEMPTION IN PUBLIC INTEREST
Central Government, in public interest, has exempted acquisition of the enterprise, whose control, shares, voting rights or assets are being acquired, if it has assets of the value of not more than Rs.250 crores in India or turnover of not more than Rs.750 crores in India.
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CCI COMBI. REGULATIONSCCI COMBI. REGULATIONS
Categories of combinations that are ordinarily not likely to cause an appreciable adverse effect on competition in India and hence notice need not normally be filed.
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MANDATORYMANDATORY
A notice must be given by enterprise to CCI about combination within 30 days from execution of agreement / resolution
CCI to pass order within 210 (180 days) from the date of notice to CCI failing which combination to be deemed as approved.
FAILURE: Penalty, may extend to 1% of the total turnover or the assets, whichever is higher.
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FORMSFORMS
Form I - Regulation 5(2) combinations Form II - Regulation 5(3) combinations Form III - For exempt acquisition by FII etc Form IV – Advertisement
FILING FEE Form I: Rs.10 Lacs Form II: Rs.40 Lacs NOW CO SECRETARY MAY SIGN FORMS
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FORM II iFORM II i
HORIZONTAL COMBINATION: COMBINED MARKET SHARES : OVER
15% Parties to the combination - are engaged similar or identical or
substitutable goods or provision of similar or identical or substitutable services and
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FORM II iiFORM II ii
VERTICAL COMBINATION: INDIVIDUAL OR COMBINED MARKET
SHARE – MORE THAN 25% IN THE RELEVANT MARKET
The parties to the combination - are engaged at different stages or levels of the production chain in different markets
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VOID COMBINATION
a combination which causes or is likely to cause an
APPRECIABLE ADVERSE EFFECT ON COMPETITION
(AAEC)WITHIN RELAVANT MARKET
IN INDIA
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Relevant Market
Product Market:Close substitutes
Geographic Market:Area where product
is available at same price
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COMPETITION TEST COMPETITION TEST
Competition through imports Entry barriers Countervailing power Availability of substitutes Likely increase in price/profits Risk Innovation Market share Failing business
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CONSULTATION PRIOR TO FILINGCONSULTATION PRIOR TO FILING
The facility of informal and verbal consultation with the staff of CCI prior to the filing of notice to a proposed combination is available at CCI.
The advice would be given as an additional assistance facility, and would not be deemed to be the opinion of the CCI in any manner whatsoever or binding on the CCI.
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INVESTIGATIONINVESTIGATION
Cooling period of 210 days classified in:
(I) Inquiry phase
(II) Decision phase
(III) Modification phase
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ORDERS iORDERS i
CCI to:
a. approve the combination; or
b. reject the combination; or
c. propose modifications to the combination. The parties may propose amendments to
modifications within 30 working days If CCI does not accept amendments, further period
of 30 working days to accept modifications
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ORDERS iiORDERS ii
If not accepted: combination shall be deemed to have appreciable adverse effect on competition
Combination shall not take effectCCI may frame a scheme to implement its
order
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EXTRA-TERRITORIAL JURISDICTIONEXTRA-TERRITORIAL JURISDICTION
Agreements entered into outside India; abuse of dominant position outside India; combinations taking place outside India; if it has or is likely to have appreciable adverse effect on competition in India.
with permission of CG, CCI can enter MOU with foreign competition agency.
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CCI AND STATUTORY CCI AND STATUTORY AUTHORITY (SA)AUTHORITY (SA)
SA may make reference to CCI CCI to give opinion within 60 days
CCI may make reference to SA SA to give opinion within 60 days