Come Wednesday, India will join the league of countries that have merger control regimes. With the merger and acquisition norms under Competition Law taking effect from June 1, all big ticket buyouts that meet the stipulated criteria will mandatorily require the Competition Commission's approval.
At present, countries such as China, Brazil, Russia and South Africa have merger control requirements in some shape or form.
“With the introduction of merger control…CCI will be called upon to administer these rules in line with best practices being followed by global competition regulators. It will need to use rigorous economic analysis to ensure that only those deals that adversely affect competitive conditions are scrutinised in detail,” said Mr Samir R Gandhi, partner at Economic Laws Practice.
Mr Gandhi hoped that the routine transactions will be cleared within the 30 days, as has been indicated by the Commission. CCI will have 180-210 days to scrutinise the more complex deals — those which have implications on the market. It will approve, reject or give conditional nod to such high value deals within this timeframe.
CCI has made it clear that routine transactions — those involving acquisition of shares up to 15 per cent solely as an investment, acquisition where an acquirer already holds over 50 per cent shares (of target company), acquisition of assets in the ordinary course, acquisition of stock in trade, bonus issues or stock splits (not leading to a change in control) — have all been exempted from applying to the commission.
According to the norms, combinations in India (non-group) that result in assets of Rs 1,500 crore and turnover of Rs 4,500 crore will come under CCI's scanner. If the acquirer is part of a larger group, the asset and turnover thresholds are higher - Rs 6,000 crore and Rs 18,000 crore, respectively.
In case of cross-border deals, the CCI will scrutinise combinations resulting in assets of $750 million globally, including Rs 750 crore assets in India itself. Similarly, the global turnover criteria for cross-border takeovers has been pegged at $2.25 billion, including Rs 2,250 crore within India.
The commission has also given a breather of sorts to companies by excluding deals where the target company has assets of up to Rs 250 crore in India or turnover of up to Rs 750 crore.