Merger control in India: overview
A Q&A guide to merger control in India.
The Q&A gives a high level overview of merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in India. It also covers notification requirements, procedures and timetables, publicity and confidentiality, third party rights, substantive test, remedies, penalties, appeals, joint ventures and proposals for reform.
For information on restraints of trade, monopolies and abuses of market power in India, visit Restraints of trade and dominance in India: overview.
This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide.
For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.
The Competition Act 2002 (Competition Act) is the principal legislation that regulates combinations (acquisitions, mergers, amalgamations and de-mergers) in India. Sections 5 and 6 of the Competition Act, which deal with the regulation of combinations, have been in force since 1 June 2011.
The procedure for notifying combinations is set out in:
The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations 2011 (as last amended on 7 January 2016) (Combination Regulations).
The Competition Commission of India (General) Regulations 2009 (General Regulations).
The Competition Commission of India (CCI) is the statutory authority responsible for reviewing combinations and assessing whether or not they cause or are likely to cause an appreciable adverse effect on competition within the relevant market(s) in India. CCI approval is required for combinations where the parties involved exceed the assets/turnover thresholds set out in section 5 of the Competition Act.
The Director General (DG) is the investigative wing of the CCI. The DG can conduct a Phase II investigation of combinations when directed by the CCI (see Question 4).
The acquisition of shares, voting rights, assets or control in one or more enterprises, or a merger or amalgamation of enterprises, that meets the following thresholds constitutes a combination that must be pre-notified to, and obtain the approval of, the Competition Commission of India (CCI) before the transaction can be completed:
Where the acquirer and the enterprise whose shares, assets, voting rights or control being acquired have either:
combined assets in India of INR20 billion; or
a combined turnover in India of INR60 billion.
Where the acquirer and the enterprise whose shares assets, voting rights or control being acquired have either:
combined worldwide assets of US$1 billion, including combined assets in India of INR10 billion; or
a combined worldwide turnover of US$3 billion, including a combined turnover in India of INR30 billion.
Where the group to which the target enterprise would belong after the acquisition has either:
assets in India of INR80 billion; or
a turnover in India of INR240 billion.
Where the group to which the target enterprise would belong after the acquisition has either:
worldwide assets of US$4 billion, including assets in India of INR10 billion; or
a worldwide turnover of US$12 billion, including a turnover in India of INR30 billion.
In 2011, the Government of India introduced a de minimis target-based exemption for five years until March 2016, which was renewed for another five years on 4 March 2016. As a result, combinations where the target enterprise has either Indian assets of less than INR3.5 billion or an Indian turnover of less than INR10 billion are exempted from the notification requirement. Additionally, the Combination Regulations also exempt certain combinations that are ordinarily not likely to cause an appreciable adverse effect on competition from the notification requirement.
Types of notifiable transactions
Section 5 of the Competition Act 2002 covers three broad categories of combinations:
The acquisition by one or more persons of control, shares, voting rights or assets of one or more enterprises, where the parties, or the group to which the target will belong post-acquisition, meet the specified assets/turnover thresholds.
The acquisition by a person of control over an enterprise where the person concerned already has direct and indirect control over another enterprise with which it compete, where the parties, or the group to which the target will belong post-acquisition, meet the specified assets/turnover thresholds.
Mergers or amalgamations, where the enterprise remaining, or enterprise created, or the group to which the enterprise will belong after the merger/amalgamation, meets the specified assets/turnover thresholds.
The Combination Regulations provide that the CCI will "endeavour" to pass an order or issue directions within a period of 180 days from the date of notification. The Competition Act provides for a deemed clearance if the CCI does not pass an order within 210 days from the date of notification.
Mandatory or voluntary
If the jurisdictional thresholds are met and exemptions are unavailable, it is mandatory to notify the Competition Commission of India (CCI) of the combination.
A combination must be notified to the CCI within 30 days of either:
Execution of any binding agreement for acquisition.
Passing of the board resolution approving the combination (in the case of a merger/amalgamation).
However, by way of exception, a post facto notification must be filed within seven days from the date of the acquisition for share subscriptions, financing facilities or any acquisition made under an investment agreement or a covenant in a loan agreement by any of the following:
Public financial institution (PFI).
Foreign institutional investor (FII).
Bank or venture capital fund (VCF).
Pre-notification formal/informal guidance
The CCI provides informal, verbal and non-binding pre-notification consultations for seeking clarifications on procedural and substantive issues before filing a notice. It is generally advisable to obtain pre-notification guidance from the CCI on issues that have not been addressed by it. Generally, the CCI completes a pre-notification consultation within a week from the date of request.
Responsibility for notification
For acquisitions, the acquirer must file the notification. For mergers/amalgamations, the parties to the combination must jointly file the notification with the CCI.
All combinations must be notified to the CCI.
Form of notification
The CCI prescribed Form I (short form) or Form II (long form) are used for notification of combinations. Using Form II is optional, but the CCI prefers that this is filed where the parties' combined market share exceeds 15% in the horizontal market or 25% in the vertical market.
A notification in Form III must be made by PFIs, FIIs, banks and VCFs pursuant to an investment agreement or a loan agreement within seven days from the date of acquisition.
Forms I, II and III can be downloaded from the CCI website (see www.cci.gov.in/index.php?option=com_content&task=view&id=23).
The filing fees are INR1.5 million for Form I and INR50 million for Form II. There is no filing fee for Form III.
The acquirer or the parties to a merger/amalgamation, as the case may be, are responsible for paying the filing fees. For joint notifications, the fees are payable jointly or severally (according to the parties' agreement).
Obligation to suspend
The Indian merger control regime is suspensory in nature. Combinations subject to review by the CCI cannot be completed until merger clearance is obtained or a review period of 210 calendar days (as calculated under the legislation) passes, whichever is the earlier.
Procedure and timetable
The investigation into combinations by the Competition Commission of India (CCI) is in two phases, Phase I and Phase II.
The CCI must form its prima facie opinion on whether the combination is likely to cause or has caused an appreciable adverse effect on competition (AAEC) within the relevant market in India within 30 calendar days of receiving the notice.
The CCI can require the parties to clear defects, file additional information or accept modifications offered by the parties, before the CCI has formed a prima facie opinion. The time taken by the parties in clearing defects, furnishing additional information or offering modification(s) is excluded for the purposes of calculating the 30 calendar-day period.
For modifications offered during Phase I, the 30-day review period is extended by 15 additional calendar days.
If the CCI forms a prima facie opinion that a combination is likely to cause, or has caused, an AAEC within the relevant market in India, it issues a show cause notice to the parties asking for an explanation as to why an investigation in the combination should not be conducted. The parties are given 30 days to reply to this notice. After the reply is filed by the parties, the CCI can either direct the Director General (DG) to conduct an investigation or conduct the investigation itself.
Further to the receipt of the parties' response, or the report of the DG, whichever is later, the CCI can direct the parties to publish details of the combination within ten working days. At this stage, the CCI can invite any person or member of the public, affected or likely to be affected by the combination, to file their written objections before the CCI within 15 working days from the date on which the details of the combination are published.
Thereafter, within 15 working days from the expiry of the period, the CCI can ask the parties to the combination to furnish additional information within a further 15 calendar days.
After all information is received, the CCI passes orders either approving or disapproving or suggesting modifications to the combination within a period of 45 working days. The time taken to accept modifications (up to 60 working days) is excluded from the 210-day review period.
To date, the CCI has only initiated three Phase II investigations. In other cases, it had decided to close proceedings after the parties had resolved concerns raised in Phase I.
Either at the end of Phase I or Phase II, the CCI can either:
Unconditionally clear the combination or approve it subject to appropriate modifications (remedies).
Block the transaction if it believes that the combination is likely to cause an AAEC in the relevant markets in India (which cannot be suitably addressed by modifications).
For an overview of the notification process, see flowchart, India: merger notifications.
Publicity and confidentiality
There is no requirement on the Competition Commission of India (CCI) to make any information public at the time of notification and during Phase I.
If the CCI initiates a Phase II investigation, it can direct the parties to publish details to bring the combination to the knowledge of the public and persons affected or likely to be affected (see Question 4).
In either case, the CCI's decision is made public on its website, although it does not contain any confidential information (see box, The regulatory authority).
As a general rule, no information relating to any enterprise is disclosed without the prior written permission of the enterprise concerned (section 57, Competition Act). However, this does not apply to information disclosed in compliance with or for the purposes of the Competition Act (or any other law in force). Parties must therefore request confidential treatment of the information/documents they supply.
Confidentiality on request
Regulation 35 of the General Regulations allows parties to claim confidentiality on commercially sensitive information. The test for the grant of confidentiality by the CCI is to determine if the disclosure of that information will result in the disclosure of trade secrets, or destruction or appreciable diminution of the commercial value of any information, or can be reasonably expected to cause serious injury. If satisfied, the CCI or the Director General passes an order directing that those documents or parts of them be kept confidential for a specified time period.
Rights of third parties
Third parties do not get a formal opportunity to make representations during Phase I of the investigation. However, in more complex cases, the CCI has sometimes contacted third parties (including competitors, customers and suppliers) for comments/clarifications. Any objections filed in Phase II following the publication of the details of the combination must be supported by evidence of harm or likely harm arising out of the combination (see Question 5).
The General Regulations allow third parties to inspect the documents or records submitted during the proceedings on demonstrating a sufficient cause to do so. Third parties can present their opinion and take part in the proceedings where they have a substantial interest in the outcome of the proceedings and there is a public interest involved in the outcome. Separately, any citizen of India can request access to non-confidential information from the CCI under the Right to Information Act 2008.
There is no provision for an oral hearing for the third parties. Third parties can only present their opinions in writing to the CCI.
The substantive test for assessing a combination is whether it has caused or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India.
To determine the effect on competition of a combination, the Competition Commission of India (CCI) can consider all or any of the following factors (section 20(4), Competition Act):
Market share in the relevant market.
Extent of barriers to entry.
Level of combination in the market.
Degree of countervailing power.
Extent to which substitutes are available.
Extent of effective competition likely to sustain in a market.
Actual and potential level of competition through imports.
Likelihood that the combination will result in removal of a vigorous and effective competitor.
Nature and extent of vertical integration.
Possibility of a failing business.
Nature and extent of innovation.
Relative advantage, by way of the contribution to the economic development, of any combination having or likely to have an AAEC.
Whether the benefits of the combination outweigh the adverse impact of the combination, if any.
While determining whether there is an appreciable adverse effect on competition (AAEC) within the relevant market in India, the Competition Commission of India (CCI) can also consider certain positive factors mentioned in section 20(4) of the Competition Act. These factors include the nature and extent of innovation, relative advantage by way of the contribution to economic development and other benefits of the combination outweighing its adverse impact. Additionally parties can submit an economic analysis in support of their claims on efficiencies for the CCI's consideration.
Remedies, penalties and appeal
Provisions relating to remedies
The Competition Commission of India (CCI) can propose both structural and behavioural modifications where it is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition (AAEC), but can be eliminated through suitable modifications to the transaction.
The Combination Regulations provide that the parties can offer remedies during Phase I. If this is the case, the Phase I review period can be extended by 15 days.
In Phase II, the CCI proposes the modifications to the parties. If the parties to the combination do not accept the modifications proposed by the CCI, they can submit amendments to these proposed modifications within the prescribed time limit. If the CCI agrees with the amendments submitted by the parties, it approves the combination. However, if the CCI does not accept these amendments, the parties are given time to accept the modifications proposed by the CCI. If the parties then fail to accept the modifications, the combination is deemed to have an AAEC and is dealt with in accordance with the provisions of the Competition Act.
The CCI can permit the parties to complete the combination before the remedies are complied with or give a conditional approval to the combination subject to compliance with the modifications within the prescribed time.
Compliance with the modifications
Where the agreed modifications need supervision, the CCI can appoint an independent agent to oversee the modifications on terms and conditions as may be decided by the CCI. The appointed agent must submit a report to the CCI when each of the actions required for carrying out the modifications is completed.
Failure to notify correctly
If the parties fail to notify a notifiable combination within 30 days from the triggering event, or at all, the Competition Commission of India (CCI) has the power to impose a penalty of up to 1% of the total turnover or value of assets of the proposed combination, whichever is higher. In addition, if the CCI believes the transaction will have, or is likely to cause an appreciable adverse effect on competition (AAEC) in India, the transaction is treated as void. All actions taken in pursuance of the void transaction are also void. In such a case, the CCI also has the power to restore the transaction, although this has not happened to date.
The CCI also has the power to accept a late notice at its discretion. The CCI accepted all late filings made in the first year of operation of the merger control provisions and did not impose any penalties. However, since then, it has in several cases imposed penalties for failure to notify in time, but has ultimately cleared the combination.
Implementation before approval or after prohibition
The regime is suspensory in nature and a combination cannot be implemented until approval or, in the absence of approval, the expiration of 210 days. In the case of non-compliance, the CCI can impose a penalty of up to 1% of the total turnover or value of assets of the combination, whichever is higher.
Failure to observe
Failure to comply with any proposed remedies can result in the combination being deemed to have an AAEC in the relevant market in India and being blocked from taking effect.
Where a person fails to comply with the CCI's orders or directions, the CCI can impose a fine of up to INR100,000 per day up to a maximum of INR100 million.
In addition, in the case of a failure to comply with the CCI's order or directions, or a failure to pay the above fine, the Chief Metropolitan Magistrate in Delhi can impose fines of up to INR250 million and/or imprisonment of up to three years.
Rights of appeal
Any person or enterprise aggrieved by any direction, decision or order of the Competition Commission of India (CCI) under section 31 of the Competition Act, which includes all orders in respect of combinations, can appeal to the Competition Appellate Tribunal (COMPAT).
To date, three transactions have been appealed and on two occasions the COMPAT did not interfere with the CCI's decision. One appeal was dismissed on the grounds of the prematurity of the subject matter of the dispute (Lakshdeep/Telewings) and the other was dismissed for inability of the appellant to demonstrate how he was aggrieved (Jet Airways/Etihad Airways). The Holcim/Lafarge transaction was challenged on the issue of the CCI's powers to pass supplementary orders when imposing merger remedies; however the appeal was withdrawn by the appellants.
Appeals against any decision or order of the COMPAT can be filed before the Supreme Court of India, which is the apex court in India.
Every appeal against an order passed by the CCI approving or disapproving a combination can be filed within 60 days from receipt of the CCI's order by the parties. However, the COMPAT can entertain an appeal after the expiry of the 60 days if it is satisfied that there was sufficient cause for not filing within that period.
The COMPAT can, after giving the parties to the appeal an opportunity of being heard, pass orders confirming, modifying or setting aside the direction, decision or order appealed against.
Appeals before the Supreme Court of India must be filed within 60 days from the date of communication of the decision or order of the COMPAT to the parties. However, the Supreme Court can, if it is satisfied that the applicant was prevented by sufficient cause from filing the appeal within 60 days, allow it to be filed after the expiry of the 60-day period.
Third party rights of appeal
The Competition Act entitles any person aggrieved by a decision or order of the CCI to appeal to the COMPAT. However, persons must positively demonstrate how they are aggrieved before the appeal is heard on the merits.
Automatic clearance of restrictive provisions
At the time of the substantive assessment of a combination, the Competition Commission of India (CCI) considers the restrictive provisions in the agreements, if any. The CCI can decline to clear a transaction unless identified restrictive provisions, such as unreasonable non-compete covenants, have been removed or amended.
A clearance of a transaction by the CCI does not amount to an automatic clearance of any restrictive provisions, which continue in principle to be governed by the provisions relating to restrictive agreements and abuse of dominance.
Regulation of specific industries
Most transactions are regulated under the Competition Act. Mergers and acquisitions relating to troubled banks (notified under section 45 of the Banking Regulation Act 1949) are exempted from the requirement to notify. However, there are some sector specific regulations for particular industries. Merger/amalgamation for private sector banks and urban co-operative banks are regulated by the guidelines issued by the Reserve Bank of India, which set out various eligibility requirements and essential conditions to be met.
Mergers in the telecommunications sector must, in addition to any requisite Competition Commission of India (CCI) approval, obtain prior approval of the scheme of merger from the Department of Telecommunications according to the sectoral guidelines.
Similarly, the Electricity Act 2003 makes it mandatory for a licensee to gain prior approval from the appropriate Electricity Commission for any proposed acquisition, purchase, takeover or merger with a utility of another licensee. In addition, any requisite CCI approval must be obtained.
In the insurance sector, the Insurance Regulatory and Development Authority of India (IRDA) can regulate any proposed scheme of amalgamation or transfer between insurance companies (IRDA Act 1999 and Insurance Act 1938).
The formation of a joint venture (JV) is not specifically covered by section 5 of the Competition Act.
Section 5 covers the acquisition of an "enterprise" and mergers and amalgamations of "enterprises". The term "enterprise" is defined under the Competition Act. It effectively refers to a "going concern" that is already conducting or has previously conducted business.
A purely "greenfield" JV (that is, a new project with no previous work) is unlikely to be considered as an enterprise, and will therefore not fall within the scope of section 5.
However, setting up a "brownfield" JV (where parents are contributing existing assets or businesses, or conferring control over these assets/businesses to the JV) where the jurisdictional thresholds are met, is notifiable as it relates to the acquisition of an enterprise under the Competition Act.
There is presently very little guidance from the Competition Commission of India in relation to the treatment of JVs or the criteria it applies in determining if a transaction is greenfield or brownfield.
The Competition Commission of India (CCI) has entered into co-operation arrangements with the:
US Federal Trade Commission and Department of Justice.
Russian Federal Antimonopoly Service.
Australian Competition and Consumer Commission.
Commissioner of Competition, Competition Bureau Canada.
European Commission's Directorate-General for Competition.
It also co-operates with competition authorities of the BRICS (Brazil, Russia, China and South Africa) countries and other member states of the International Competition Network (ICN), with whom it engages on a regular basis in terms of training and know-how. In the case of certain global transactions, the CCI has interacted with authorities from other jurisdictions.
In 2015, the Competition Commission of India (CCI) dealt with a few notable combinations dealing with modifications:
In the case of Holcim Limited (Holcim) and Lafarge SA (Lafarge), the CCI approved the proposed combination subject to divestiture of physical assets. However, due to certain regulatory uncertainties, the CCI, through a supplementary order, amended certain parts of its earlier order and approved an alternative proposal envisaging the sale of 100% of the share capital of Lafarge India. The CCI's supplementary order was appealed before the Competition Appellate Tribunal (COMPAT) on the grounds that the Competition Act does not provide for the acceptance of an alternative proposal in a combination case. The COMPAT stayed the CCI's supplementary order; however the appeal was eventually withdrawn by the appellants.
The CCI cleared PVR's acquisition of DT Cinemas after a Phase II inquiry, subject to the divestiture of certains assets of DT Cinemas. This is the first substantive review of a merger in the cinema exhibition industry by the CCI.
The CCI approved the acquisition of Alstom and Alstom Holding's (Alstom) thermal power, renewable power and grid businesses by the General Electric Company (GE). The transaction also involved the creation of a few joint ventures and the acquisition of the signalling business of GE by Alstom.
Proposals for reform
Competition Commission of India (CCI)
Description. This is the CCI's official website, which contains relevant legislation, CCI's orders, Chairman's speeches and other resources (such as guidance).
Competition Appellate Tribunal (COMPAT)
Description. This is the COMPAT's official website, which contains COMPAT's orders.
The regulatory authority
Competition Commission of India (CCI)
Head. Devender Kumar Sikri (Chairperson)
Contact details. Smita Jhingran
Competition Commission of India
The Hindustan Times House
18-20 Kasturba Gandhi Marg
New Delhi 110 001
T +91 11 2370 4651
F +91 11 2370 4652
Outline structure. The CCI consists of a chairperson and six members appointed by the central government.
Responsibilities. The CCI is a statutory body created under the Competition Act, entrusted with a duty to eliminate practices having adverse effects on competition. The CCI is also mandated to promote and sustain competition, protect the interests of consumers and ensure freedom of trade for other market participants in India.
Procedure for obtaining documents. The final orders passed by the CCI can be accessed and downloaded from its website. Additionally, the General Regulations allow for inspection of the documents related to a case by a party to the case or any other person on demonstration of sufficient cause to the CCI.
Shweta Shroff Chopra, Partner
Shardul Amarchand Mangaldas & Co
T +91 11 2692 0500
F +91 11 2692 4900
Professional qualifications. Lawyer, India, 2003
Areas of practice. Competition.
Non-professional qualifications. LLB (Hons), Cardiff Law School, University of Wales; LLM, London School of Economics; Postgraduate Diploma in Law, College of Law, London
- Representing Holcim group companies ACC and Ambuja Cements in the Cement cartel case, JK Tyres in the alleged Tyres cartel case, Tata Chemicals in the alleged Soda Ash cartel case, Vodafone India on an anti-competitive tie-in case, Coal India in abuse of dominance and cartel cases in relation to procurement of explosives.
- Represented Holcim Ltd in its "merger of equals" with Lafarge S.A., which involved negotiating remedies with the CCI.
- Acted for GlaxoSmithKline plc in a transaction with Novartis AG involving an acquisition of Novartis' global human vaccines business, the sale of GSK's oncology products and the formation of a joint venture with Novartis in the global consumer healthcare business.
- Obtaining unconditional clearances from the CCI for: Temasek's proposed acquisition of Olam International, the joint venture between Shriram Polytechnic and Axiall LLC, Synnex Corporation's acquisition of IBM's CRM-BPO business, Nestle's acquisition of Pfizer global nutrition business, the Vedanta group reorganisation, Aditya Birla Group's investment in the Living Media Group, the belated notification by Temasek Holdings for a proposed acquisition of shares in DBS Group Holdings.
Languages. English, Hindi, Gujarati
Professional associations/memberships. Bar Council of Delhi, India; Law Society, England and Wales.
- Co-authored leading guides on the law of Dominance and Merger Control in India as part of the Getting the Deal Through series.
- Regular speaker at various domestic and international forums on competition law in India.
Toshit Shandilya, Associate
Shardul Amarchand Mangaldas & Co
T +91 11 2692 0500
F +91 11 2692 4900
Professional qualifications. Lawyer, India, 2013
Areas of practice. Competition.
Non-professional qualifications. BA LLB (Hons), National Law University, Delhi
- Successfully defended Coal India Limited in various abuse of dominance cases in relation to imposing unfair terms and conditions in their supply agreements with its customers and setting aside of the penalty of US$264 million by the COMPAT.
- Acted for Holcim Ltd in its "merger of equals" with Lafarge S.A. This is the first case where the CCI has ordered structural modifications involving disposal of assets.
- Obtaining unconditional clearances from the Competition Commission of India for Microsoft's acquisition of the mobile handset business of Nokia LLC, setting up the joint venture between Boeing Singapore and SIA Engineering Company in relation to provision of MRO services in the Asia-Pacific region, and the proposed merger between MeadWestvaco Corporation and RockTenn Company.
- Regularly involved in competition compliance for companies and trade associations.
Languages. English, Hindi
Professional associations/memberships. Bar Council of Delhi.