Review of the CCI ‘Green Channel’ – Automatic Approval Route for Certain Combinations

  • Dr Jayendra Kasture
  • Show Author Details
  • Dr Jayendra Kasture

    Senior Assistant Professor at VIT School of Law, VIT University, Chennai, India

Abstract

The Government of India set up the Competition Law Review Committee in the year 2018 to review the Competition law framework in India. The Committee recommended the advent of a ‘Green channel’ route that would provide a mechanism to deal with Combinations which are not likely to result in any appreciable adverse effect on competition. The Competition Commission of India through ‘Green channel’ introduced the route for deemed approval of Combination filings in India. The CCI implemented the recommendations made in the report of the Competition Law Review Committee pertaining to approval of Combinations under the ‘Green channel’ route, amended the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011 (Amended Combination Regulations) vide a Gazette notification dated 13 August 2019. The ‘Green Channel’ route provides for automatic approval of certain combinations under the Competition Act 2002. The ‘Green channel’ route provides a mechanism whereby the parties desiring to take this route of deemed approval are supposed to self-access and scrutinise their Combination transaction if they qualify for accessing this route of deemed approval of Combination. The parties availing this route will be able to skip or eliminate the statutory prescribed 210 days’ time limit for ex ante examination of combinations by Competition Commission of India. The article seeks to highlight the eligibility criteria for green channel notification. Further the article also attempts to explore all the possible issues that need to be considered when conducting a self-assessment for the availability of the 'Green Channel' route by the parties. The article also attempts to understand the consequences in case the Competition Commission of India subsequently holds that the Combination transaction did not qualify for approval through the Green channel route. The ‘Green channel’ route is in its nascent stage as more companies will resort to the route then there will be more clarity in understanding and interpreting the provisions.

Type

Article

Information

International Journal of Law Managment and Humanities,
Volume 4, Issue 2, Page 2615 - 2620

DOI: http://doi.one/10.1732/IJLMH.26604

Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Copyright © IJLMH 2021

I. Introduction

Every economy aims to grow and tries to operate in the most efficient manner for all its actors. Markets are the very backbone of any economy, and they can suffer from distortions due to players resorting to anti- competitive activities therefore there is a need for a robust competition law. Now this will surely have adverse impact on the economic efficiency, healthy and fair competition in the market. The Competition Act[2], 2002, provides for a composite term ‘Combination’, a combination is an umbrella term for anything that involves a change in control it would include within its fold any acquisition of control, shares, voting rights or assets, merger, amalgamation. However, not all combinations are healthy and make the market more efficient. If a combination leads to more profitability due to market power concentration and increased prices, the net effect on welfare can be negative[3].

Competition law is the law that tries to maintain and promote competition in the market by regulating the anti-competitive behaviour by companies. In the US the competition law is known as Antitrust laws whereas in the European Union, it is referred to as both antitrust and competition law. In the wake of liberalization and privatization and India opening up its economy a need was felt to have a robust competition law as the existing Monopolistic and Restrictive Trade Practices Act, 1969 (MRTP Act 1969) was not equipped adequately enough to tackle the competition aspect of the Indian economy. Due to globalisation and India opening up its economy, the Indian enterprises started witnessing the heat of competition from within and outside. As a fall out of this, a need arose with regard to shift the focus from curbing monopolies to promoting competition. This could be achieved by encouraging companies to invest and grow while preventing any abuse of market power.

MRTP Act 1969 has become obsolete in certain areas in the light of international economic developments relating to competition laws. Government appointed a High Level Committee on Competition Policy and Law under chairmanship of Mr. Raghavan. The Committee recommended replacement of the MRTP Act with a modern competition law for fostering competition and for eliminating anti-competitive practices in the economy and eventually the Parliament enacted the Competition Act, 2002.

Competition is beneficial to all, be it the consumers, the businesses and the economy. Economy benefits through efficient allocation of scarce resources which fosters innovation leading to dynamic efficiency. This in turn increases productivity and leads to high economic growth rate. Contrary to this, when there is a lack of competition, for any reason whatsoever, both the economy and consumers suffer on a long term. Competition Law is codification of rules designed to promote and sustain market competition. The practice of competition law varies from jurisdiction to jurisdiction but the substance of these laws is primarily the same.

The Competition Act 2002 having its objectives to check anti-competitive practices, to prohibit abuse of dominance, the regulation of combinations and to provide for the establishment of a Commission to prevent practices having adverse effect on competition.

II. Combinations

The Competition Act is designed to regulate the operation and activities of combinations’, a term, which contemplates mergers, amalgamations of companies or acquisitions of control, shares, voting rights or assets of one company by another company or group. Combination review is based on age-old dictum, ‘Prevention is better than cure’ and therefore ex-ante in nature. Combination that exceeds the threshold limits specified in the Act in terms of assets or turnover, which causes or is likely to cause an appreciable adverse impact on competition within the relevant market in India, can be scrutinized by the Competition Commission of India (CCI).

The Competition Act provides for mandatory filing of notice with CCI regarding the combination based on asset / turnover. In case there is a failure on the part of the parties to the Combination to notify and obtain required approval from CCI the parties attract penalties. Moreover if the CCI subsequently determines that the combination has an ‘appreciable adverse effect on competition in India’ then the transaction would be rendered void.

The Competition Act provides for a mechanism to screen mergers for potential anti-competitive effects. The Commission decides whether the combination should be approved, prohibited or needs to be approved with modifications to the combination. The Competition Act provides a timeline of 210 days to CCI to take a decision on a Combination filing.

III. Automatic Approval Route – Green Channel

The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 has been amended by CCI[4] vide notification[5] dated 13th August, 2019. The amended Combination Regulations came into effect on 15 August 2019.

The amendment has inserted Regulation 5A and Schedule III & IV into the Combination Regulation.

The parties desirous of taking this deemed approval route are required to self-access the transactions to check if they will qualify for the Green Channel route or not. This eliminates the statutory 210 days’ time limit prescribed under the Act for ex-ante examination of combinations by CCI to see if they may cause appreciable adverse effect on competition in the relevant market or not before grant of CCI approval, and enables the parties to implement the transactions immediately without waiting for CCI approval.

Now regulation 5A provides for a mechanism wherein if a combination falls under the category of combination as mentioned in Schedule III, then the parties to such combination, if they so desire may give notice in Form I according to regulation 5. The said notice must also be accompanied with the declaration as specified in Schedule IV. When the parties have filed the notice and on its acceptance the proposed combination shall be deemed to have been approved by the Competition Commission of India under the Act.[6] Further the said notice must also have a non- confidential summary of the combination, in not more than 1000 words and it should provide the details like name of the parties to the combination, the products, services and businesses of the parties to the combination, the respective markets in which the parties to the combination operate and also the nature and purpose of the combination, needs to be filed so that this information is published on the website of the Competition Commission of India.

IV. Transaction – Green Channel

The CCI has introduced a green channel route for speedier approval of clearing certain categories of Combinations. It permits and allows the qualifying transactions to be approved immediately upon filing the notification with the CCI, this would mean that the qualifying or the eligible transaction will no longer wait for a CCI approval and can avoid the waiting period of 210 days. This ‘Green Channel’ route provides for automatic approval of certain combinations. Combinations qualifying for the Green Channel are deemed to be approved on the date of receipt of the acknowledgment of filing of the Notice.

Now this newly inserted Schedule III of the Amended Combination Regulations provides that Green Channel transactions are those where, “Considering all plausible alternative market definitions, the parties to the combination, their respective group entities and/or any entity in which they, directly or indirectly, hold shares and/or control-

  1. do not produce/provide similar or identical or substitutable product(s) or service(s);
  2. are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in product(s) or provision of service(s) which are at different stages or levels of the production chain; and
  3. are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in product(s) or provision of service(s) which are complementary to each other[7]”.

On scrutiny of the Schedule III, Combinations will get approval, subject to the condition that, there are no ‘overlap’ transactions i.e the parties to the combinations which have no horizontal, vertical or complementary overlaps either between the parties of their respective group entities and/or any entity in which they, directly or indirectly, hold shares and/or control, shall get approval on providing full disclosure, according to Form I.

However, this new regulation 5A also stipulates that in the event Competition Commission of India finds that the combination does not fall under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect, the notice given and the approval granted under this regulation shall be void ab initio and the Commission shall deal with the combination in accordance with the provisions contained in the Act[8].

V. Declaration

Furthermore, the notifying party needs to confirm and declare that

  1. “The notifying party confirms that it has furnished all the information and documents as required in Form I, as specified in Schedule II.
  2. The notifying party confirms that the proposed combination falls under Schedule III and is not likely to cause adverse effect on competition.
  3. The notifying party confirms that it has not made any statement which is false in any material particular or knowing it to be false; or omitted to state any material particular knowing it to be material.[9]

The notifying party understands that if any of the above statements is found to be incorrect, the notice given and the approval granted, under regulation 5A, shall be void ab initio. It also provides further that the Competition Commission of India shall give to the parties to the combination an opportunity of being heard before arriving at a finding that the combination does not fall under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect.

To restrict misadventures, if the Competition Commission of India, in the wake of acknowledging the notice, finds that the events do not fit the criteria for the Green channel route, then, at that point, the transaction would be considered void ab initio. It implies that the parties will be required to document a new notification to show the eligibility under the green channel route.

VI. Conclusion

It is pertinent that the ‘green channel’ route is still in its nascent stage and that as more companies line up to avail this route, there will be greater clarity regarding the manner in which the green channel provisions are being interpreted by the Competition Commission of India. It is equally important to note that the first Combination under the green channel route to be notified and approved by the Competition Commission of India was the acquisition by Sachin Bansal owned BAC Acquisitions Private Limited (BACQ) of Essel Mutual Fund on 07 October 2019. We need to wait for some time, as more companies will resort to the route then there will be more clarity in understanding and interpreting the provisions.

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[2] Competition Act, 2002, Sec 5, No 12, Acts of Parliament 2003 (India)

[3] Maurice E. Stucke, Is Competition Always Good? 1(1) Journal of Antitrust Enforcement, 162 (2013).

[4] Competition Act, 2002, Sec 64, No 12, Acts of Parliament 2003 (India)

[5] F.No CCI/CD/Amend/Comb. Regl./2019

[6] Competition Act, 2002, Sec 31 (1), No 12, Acts of Parliament 2003 (India)

[7] Schedule III, The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019, F.No. CCI/CD/Amend/Comb. Regl./2019

[8] Regulation 5A, The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019, F.No. CCI/CD/Amend/Comb. Regl./201

[9] Regulation 5A, The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019, F.No. CCI/CD/Amend/Comb. Regl./2019

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