Member Article

The Competition Commission of India ("CCI") has amended the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations). A notification in respect was issued by the CCI on March 28, 2014.

The Combination Regulations, under Schedule I thereof, provide a list of transactions that normally do not require prior notification and approval from the CCI since the same are treated as not having an appreciable adverse effect on competition in India. One such transaction that is viewed ‘not having an appreciable adverse effect on competition in India’ is a transaction that takes place entirely outside India with insignificant local nexus and effect on markets in India. Per the notification, this clause has been deleted.

The said clause had been a bone of contention for quite a while since both, section 5 of the Competition Act, 2002 (‘Act’) as well as the Target Exemption (introduced by the Central Government vide section 54(a) of the Act), provided for local nexus – i.e. minimum assets or turnover that the parties should have in India before they are subjected to the requirement of prior approval from the CCI. Thus, there was some confusion as to what additional criteria was sought under the (now deleted) clause in the Combination Regulations. In fact, this lack of clarity was a point of contention in the case of Tata Chemicals Limited – Wyoming (Combination Registration No. C-2011/12/12), where the CCI opined that "the parties to the proposed combination meet the thresholds relating to assets and turnover in India as mentioned in Section 5(c) of the Act, and one of the parties to the proposed transaction is in India".

(ii) Form II (long form filing): Per the notification, the CCI will now require the parties to provide the details, in terms of value of assets and aggregate of turnover, as per the audited annual accounts of immediately preceding two (2) financial years, instead of the immediately preceding financial year.

The CCI has now deleted Regulation 29 (of the Combination Regulations). The erstwhile Regulation 29 allowed parties to the proceedings to prefer an appeal against an order of the CCI relating to combinations to the Competition Appellate Tribunal (‘COMPAT’). The CCI has clarified that Regulation 29 was unnecessary given the statutory right to appeal provided under section 53B of the Act.

Whereas Regulation 29 only allowed a "party to the proceedings" to prefer an appeal, Section 53B of the Act confers a right on "any person" to appeal against an order of the CCI in respect of combinations.

Having said that, however, the COMPAT has, vide its Order dated March 27, 20141, reviewed the issue of locus standi in some detail and has limited the scope of this right.

1 Jitender Bhargava v CCI & Ors, Appeal 44 / 2013

The amendments will have significant impact on the manner in which combinations would be structured in India, going forward as the ‘substance over form’ amendment would mean that in any transaction where there is a change of control or one party is able to influence the strategic decisions of the other through contract or otherwise, such transactions will have to be notified to the CCI.

Additionally, with the deletion of the "local nexus" entry, there will be a lesser chance of transactions going unreported to the CCI with the parties being under the mistaken belief that their transaction could benefit from the exemption in relation to the ‘local nexus’ provision.