Corporate Affairs Ministry (MCA) is in the process of finalising Rules for operationalising the provisions of the Competition (Amendment) Act, 2023 enacted this year post receipt of Presidential assent on April 11.
This amendment Act was the most comprehensive overhaul of the existing competition law since its original enactment in 2002.
The draft Rules — which were earlier expected to be exposed for public comments in July’s first week—are now likely to be put up for public consultation by the end of this month. The final rules are expected to be notified only in late August.
The proposed Rules will provide for green channel criteria for automatic approval of non-problematic M&As by CCI, the de-minimis exemption in case of M&As where the acquired entity/ target is small in terms of assets/turnover, and the percentage of voting rights higher than 26 per cent for the purpose of defining ‘group’, sources said.
Besides, some HR-related Rules and form for publication of guidelines by CCI, are also likely to be notified, they added.
The proposed Rules will not have anything on the “deal value threshold” provision, which targets offshore digital transactions of high valuation and states that any deal that has a value of more than ₹2,000 crores (about $242 million) needs to get approval of CCI.
Also read: Competition (Amendment) Act: MCA readies rules to implement big provisions
It is only the regulations that will be issued by CCI, which will cover crucial aspects like “India nexus” (business connection with India) for triggering this provision, sources said.
The Competition (Amendment) Act 2023 — which was introduced in Lok Sabha on August 5 last year—got Presidential assent on April 11 this year. Several provisions of this Act were put into effect from May 18.
One of the major substantive provisions, which have come into effect on May 18, includes the hub and spoke cartels, which cover hybrid anti-competitive agreements and facilitators/non-participants who had ‘intended to participate’ in the cartel.
Also, the penalty for false statements/ omissions has now been increased from ₹1 crore to 5 crore to strengthen CCI’s power in ensuring companies furnish true, full and adequate disclosures in their submissions.
Green channel route
The green channel route is already in vogue as a procedure, but now the Competition (Amendment) Act 2023 has formally included this route to the Competition Act.
The introduction of the ‘Green Channel Route’ is another step forward in the ‘Ease of Doing Business’ initiative of the Government.
Where there is a merger or acquisition and there is no horizontal, vertical or complementary overlap between the companies, then deemed approval can be given on the day the application is filed.
MCA is now expected to frame rules on how the two Sections —Section 6(4) and Section 6(5) in the Competition Act—would get operationalised.
Under ‘green channel’ route, certain combinations (M&A) would be eligible for deemed approval in a trust-based framework.
The ‘Green Channel Route’ benefits the Indian and foreign corporations by creating a quick and smooth merger review system, that encourages more cross-border acquisitions, cross-border mergers and amalgamations.
De-minimis exemption
The de minimis or small target exemption is an absolute exemption available to transactions where the asset value in India does not exceed ₹ 350 crore or the revenue from India does not exceed ₹ 1000 crore.
Indications are that MCA’s proposed rules would specify that the de-minimis exemption will not be available where the deal value threshold is breached.