CCI updates the guidance notes to Form I

In August 2019, the Competition Commission of India (CCI) amended the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) to: (i) introduce an automatic approval route for transactions where there is absence of any horizontal, vertical or complementary overlaps between businesses of the parties (Green Channel Route or GCR); and (ii) provide a substantially revised Form I format with incremental queries (Revised Form I). 

In order to clarify the scope of information required to be furnished along with the Revised Form I and illustrate the eligibility criteria for GCR, the CCI published revised guidance notes to Form I on 27 March 2020 (Guidance Note).

The key takeaways from the Guidance Note are set out below:

To avail of GCR, there should be no horizontal, vertical and complementary overlaps between: (i) the parties to the combination; (ii) their respective group entities; and (iii) any entity in which they, directly or indirectly, hold shares and/or control.

It was suspected that inclusion of point (iii) above will materially diminish the effectiveness of GCR considering that based on the bare text of the expression “hold shares and/or control”, holding a single share in a company engaged in overlapping business with the acquirer or target could disqualify the transaction from benefiting from GCR. However, in practice, the CCI was taking a liberal view by allowing transactions to avail GCR despite some shareholding in competing portfolio.

In furtherance of such spirit, the Guidance Note now clarifies the contours that need to be considered for point (iii) above. As such, only those companies where parties:

will need to be considered.

Comment

The Guidance Note is a welcome step as it elucidates the exact scope of information required to be filed for the Revised Form I. In effect, it sets out the expectation of the CCI in a merger filing. This clarity will enable parties to file comprehensive merger applications and consequently avoid invalidations.

However, a few pressure points which may result in hardship for transacting parties would be collation of granular data for assessing overlaps in companies where the acquirer holds rights or commercial advantages or has the ability to appoint an observer. This is an onerous requirement and may also narrow down the scope of eligibility of transactions for GCR which, in reality do not pose any competitive concerns.

It is also interesting to note that the enunciation of the expression “any entity in which they, directly or indirectly, hold shares and/or control” possibly has roots in the concept of “material influence” that has been introduced in the Competition Act (Amendment) Bill, 2020, which seeks to broaden the definition of control under the existing statutory framework.

The Guidance Note can be accessed here.

-          Anisha Chand (Partner), Swati Bala (Senior Associate) and Anmol Awasthi (Associate)

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