The Corporate Affairs Ministry ( MCA ) has introduced the new Competition Regulations for Combination Exemptions with effect from 10th September 2024. These regulations may be called the Competition Commission of India ( Combinations ) Regulations, 2024.
In a situation not provided for in these regulations or the Competition Commission of India ( General ) Regulations, 2024, the Commission may determine the procedure, in such matters, if so required.
The regulation also comprises the 3 schedules and also contains 4 forms.
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The regulation defines how the “value of transaction” and “substantial business operations” in India are calculated for the purposes of combination exemptions under the Competition Act.
The “value of transaction” under Section 5(d) of the Competition Act includes all forms of valuable consideration, whether direct, indirect, immediate, deferred, or otherwise. This includes payments for covenants, undertakings, inter-connected steps, call options, future outcomes, and transactions payable within two years, among others.
Foreign currency transactions are converted based on the Reserve Bank of India’s average spot rate for the past six months. Transaction value also includes acquisitions made within two years before the transaction date but excludes costs like legal or regulatory fees.
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In cases where the transaction value is unclear or unrecorded, the best estimate determined by the board of directors or approving authority will be used. If this estimate cannot be reasonably established, the transaction is assumed to exceed the specified value in the Act.
For mergers and amalgamations, if the value isn’t recorded, the value determined by the board is applied.
An enterprise is considered to have substantial business operations in India if, for digital services, 10% or more of its users are in India, or its gross merchandise value ( GMV ) in India exceeds ₹500 crores and 10% of its global GMV. Similarly, it must meet the turnover threshold of ₹500 crores in India and 10% of its global turnover.
However, the ₹500 crore threshold does not apply to digital services. The regulations also provide detailed definitions of terms like GMV, digital services, business users, and end users to ensure clarity in assessing substantial business operations.
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A notice under Section 6(2) or Section 6A(a) of the Competition Act must be filed in Form I, as specified in the regulations, along with the requisite fee. However, parties may opt to file Form II, especially when their combined market share exceeds 15% in relevant markets for similar goods or services, or 25% if they operate at different levels of the production chain. Notices must be filed within 30 days of the first acquisition of shares in open offers or acquisitions involving multiple sellers on a regulated stock exchange, accompanied by the necessary declarations and fee.
If Form I is initially filed and the Commission requires further details to assess competition concerns, the party may be directed to submit Form II within 45 days, with the previously paid fee adjusted. The term “board of directors” extends to various entities, including sole proprietors, Hindu Undivided Families ( HUFs ), corporations, partnerships, and other legal entities, empowering the appropriate individuals to act on behalf of the entity in filing the notice.
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In cases where an acquisition requires notice under Section 6A(a) of the Competition Act, the acquirer may enjoy certain economic benefits such as dividends, participation in rights issues, bonus shares, stock splits, and share buybacks. However, the acquirer may only exercise voting rights in matters related to liquidation or insolvency proceedings. The acquirer, along with its group entities and affiliates, is strictly prohibited from directly or indirectly influencing the enterprise being acquired or any of its affiliates in any way.
Requests for confidentiality of information or documents submitted during an inquiry will be reviewed by the Commission according to the procedures outlined in the Competition Commission of India ( General ) Regulations, 2024. Such requests must provide clear reasons, justifications, and potential business implications for the parties involved, ensuring the Commission can fully consider all relevant factors in its decision-making process.
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If parties to a combination fail to file the required notice under Sections 6(2) or (4), Section 6A(a), or Section 43A of the Competition Act, the Commission may initiate an inquiry under Section 20(1) based on its own information to assess whether the combination has caused or is likely to cause significant competition concerns in India. If the Commission decides to investigate, it will instruct the parties to file the necessary notice in Form I or Form II, as specified, within 30 days of receiving the Commission’s communication. This action is separate from any penalties or prosecutions that may arise under the Act.
For an acquisition or control of an enterprise, the acquirer must file a notice in Form I or Form II, signed by authorized individuals as outlined in the Competition Commission of India ( General ) Regulations, 2024. In the case of a company, the notice can also be signed by a person authorized by the company.
If the acquisition occurs without the enterprise’s consent, the acquirer must provide available information about the enterprise within ten days of filing the notice. If not all information can be provided, the Commission may direct the acquired enterprise to supply it, with the time taken for this being excluded from specific statutory deadlines.
For mergers or amalgamations, the notice must be jointly filed by the parties, and similarly signed. If the transaction involves a series of interconnected steps, a single notice covering all steps must be filed. The notice requirement is based on the substance of the transaction, disregarding any structure intended to avoid or fragment the notice requirement.
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A person filing a notice under Regulation 5 or Regulation 8 of these regulations must pay the applicable fee as outlined in Regulation 11. If the notice is filed jointly by multiple parties, the fee can be paid either jointly or individually by any of the parties involved.
The fee payable when filing a notice in Form I or Form II, as specified in Schedule I of these regulations, is as follows: for notices filed in Form I, the fee is ₹30 lakh, and for notices filed in Form II, the fee is ₹90 lakh.
The fee can be paid by submitting a demand draft, pay order, or banker’s cheque made payable to the Competition Commission of India ( Competition Fund ), New Delhi. Alternatively, payment can be made through Electronic Clearance Service ( ECS ) via direct remittance to the Competition Commission of India ( Competition Fund ), Account No. 1988002100187687 at Punjab National Bank, Bhikaji Cama Place, New Delhi-110066.
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The notice, as required under regulation 5 or regulation 8, along with one copy and an electronic version, must be delivered to the Competition Commission of India ( CCI ) at the address available on its official website. If confidentiality is requested for any information or documents under regulation 7(1), the request must follow the procedure in the CCI ( General ) Regulations, 2024, and be submitted along with a public version of the notice and an electronic version.
A summary of the combination, excluding confidential details and limited to 1000 words, must also be provided, including the names of the parties, the nature and purpose of the combination, details of their products or services, and the relevant markets they operate in, for publication on the Commission’s website.
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The Secretary will acknowledge receipt of the notice, and any further documents required after the notice filing must follow the same submission process. The Secretary may modify the procedure for electronic filing or adjust the number of copies required through a public announcement. Notices under relevant sections may be filed electronically when the facility becomes available.
The notice filed under regulation 5 or 8 will only be valid if it is complete and conforms to these regulations. If any information or documents in the notice appear incomplete, the parties may be required to provide the missing information or correct the defects within ten working days.
The notice is deemed to be filed only once these issues are resolved. The Commission may also request additional information, and the time taken to comply with such requests will be excluded from certain statutory timelines under the Act.
If the parties fail to remove defects or provide required information within the specified time, the notice will not be treated as valid. The Commission may invalidate a notice after giving the parties an opportunity to be heard, and if a notice is invalidated, the fee can be adjusted against a new notice filed within 45 days.
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Additionally, the Commission may seek information from other persons to assess whether the combination is likely to adversely affect competition, and the time taken for this will also be excluded from statutory timelines. All communications and compliance-related activities will be recorded by the Secretary.
After receiving a response to the notice to show cause under section 29(1) of the Act, the Commission may decide to request a report from the Director General within a specified timeframe. The Secretary will convey this directive to the Director General, along with all relevant documents, materials, affidavits, and statements related to the notice and the show-cause response.
The Director General’s report must include the conclusions reached, supported by evidence, documents, or statements collected during the investigation. Two signed copies of the report, along with an electronic version, will be sent to the Secretary, with the option for adjustments in the number of copies or electronic transmission.
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When the Commission forms a prima facie opinion under section 29(2) of the Act that a combination has caused or may cause an appreciable adverse effect on competition in the relevant market in India, the Secretary will notify the party that submitted the notice to publish details of the combination within seven days. These details must be published in Form III, as specified in Schedule I of the regulations.
The parties must submit the details to the Commission for review before publication, and the Commission may also host them on its website. Additionally, the parties are required to post the details on their own websites and publish them in all-India editions of four leading daily newspapers, including at least two business newspapers, within the specified timeframe.
If the Commission decides to provide an opportunity for the parties involved in a combination to be heard during an inquiry, the Secretary will issue a notice conveying the Commission’s directions for the parties to appear at a specified date and time. The time between the issuance of the notice and the scheduled hearing, up to a maximum of ten days, will be excluded from the timeframes stipulated under sections 6(2A), 29(1B), and 31(6) of the Act. Additionally, if the parties request more time to appear before the Commission, this period will also be excluded from the specified time limits under those sections.
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When the Commission proposes modifications to a combination under section 29(7) of the Act or the proviso to section 29A(3), the Secretary will communicate the proposal to the notifying party within seven days. The party must accept or reject the proposal in writing within five days of receipt. The time taken for this communication, up to seven days, will be excluded from the period under section 29(1B) of the Act.
Additionally, the time taken by the notifying party to respond will be excluded from the timelines under sections 6(2A), 29(1B), and 31(6) of the Act. Modifications offered by the parties under section 29(7) or sections 29A(2) and 29A(3) must be submitted in Form IV.
These modifications should be filed within ten working days from the acknowledgment date or in response to the communication under regulation 14(2), whichever is later. If modifications are proposed within fifteen days of receiving a notice under section 29(1) to address concerns, the Commission may approve the combination under section 31(1).
If the Commission approves the combination with modifications under section 31(3), the parties must implement the changes as per the specified conditions and timeline. Failure to do so will result in the Commission passing an order under section 31(5)(b) within thirty days from determining the failure to comply with the modifications.
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Upon completing the modification as per the Commission’s order under section 31 of the Act, the parties to the combination must file a report along with an affidavit of compliance with the Secretary within seven days. If the modification requires periodic compliance, the parties must submit a report to the Commission in accordance with its order. In the event of failure to submit the required reports, the Secretary will present the matter of non-compliance to the Commission for further directions.
If the Commission believes that implementing modifications to a proposed combination requires oversight, it may appoint agencies to monitor these changes. This supervision will be governed by the Competition Commission of India ( General ) Regulations, 2024, and will adhere to the terms and conditions specified by the Commission.
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When the Commission issues an order under sections 31(1), 31(2), 31(3), or 31(5) of the Act, the Secretary will notify the person who filed the notice within seven days. Additionally, in accordance with section 57 of the Act and regulation 31, the Commission will publish these orders on its website.
Regardless of the relevant date, the provisions of sections 6(2), 6(4), and 6A of the Act apply to acquisitions of control, shares, voting rights, or assets of an enterprise, as well as mergers or amalgamations, that take effect wholly or partly on or after the date these regulations come into force. This is provided that such transactions meet the requirements of section 5 of the Act and are not exempt under applicable provisions or rules, and were not previously required to be notified to the Commission. However, section 43A of the Act does not apply to any part of a transaction that took effect before these regulations came into force, provided it was not previously required to be notified.
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