1. 1 ICSI WIRC “Combinations” The Competition Act, 2002 4 th May 2013 Surendra U. Kanstiya Practising Company Secretary.

2. 2 IMPORTANT * This presentation is in the nature of a support note for the speaker * Slides on standalone basis may not be self-explanatory

3. 3 THE COMPETITION ACT, 2002

4. 4 COMPETITION AUTHORITIES Competition Commission of India (CCI) Competition Appellate Tribunal (COMPAT)

5. 55 COMPETITION AUTHORITIES COMPETITION COMMISISON OF INDIA (CCI) A body corporate Chairperson + 6 members COMPETITION APPELLATE TRIBUNAL (COMPAT) A quasi-judicial body Chairperson + 2 members Appeals and compensation

6. 6 ENTERPRISE Sec.2(h) PERSON OR GOVT. DEPTT. engaged in activity relating to production, supply, distribution, acquisition, control of goods; services, of any kind. PERSON: individual; firm; HUF; co.; AoP; corporation; body corp.; coop. soc.; local authority; other artificial juridical persons. MAY BE EXCLUDED: Govt. Deptt. performing sovereign functions: atomic energy, currency, defence; space

7. 7 ANTI COMPETITIVE AGREEMENTS ‘All anti-competitive agreements are void’

8. 8 ANTI COMPETITIVE AGREEMENTS (ACA) HORIZONTAL Rule of Law (4 cases) VERTICAL Rule of reason

9. 9 ABUSE OF DOMINANT POSITION ‘No enterprise or group shall abuse its dominant position’ Amendment Bill 2012: Jointly or severally

10. DOMINANT POSITION DOMINANCE: Capacity to - act independent of competitive presence OR -affect appreciably the relevant market, competition and consumers. No arithmetic figure for dominance AAEC Test not needed

11. 11 Abuse of Dominance Exploitative (Costumers) Exclusionary (Competitors)

12. 12 COMBINATIONS ‘Certain combinations are regulated’ The Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011 (Amended in 2012 and 2013)

13. 13 COMBINATION Acquisition of enterprise: acquisition of Control, shares, Voting rights, assets Acquiring of Control: over an enterprise engaged in same line of Goods or services Merger or amalgamation

14. 14 THRESHOLDS FOR REGULATION Assets / Turnover

15. 15 COMBI. : NON-GROUP ASSETS IN INDIA: over Rs.1500 Cr; OR GLOBAL: over US $750 Mn. (including Indian assets Rs. 750 Cr) TURNOVER IN INDIA: Rs.4500 Cr; OR GLOBAL:US $2250 Mn. (including Indian turnover Rs.2250 Cr)

16. 16 COMBI. : GROUP ASSETS IN INDIA: over Rs.6000 Cr ; OR GLOBAL: over US $3 Bn. (including Indian assets Rs.750 Cr) TURNOVER IN INDIA: over Rs.18000 Cr ; OR GLOBAL: over US $9 Bn. (including Indian turnover Rs.2250 Cr)

17. 17 GROUP Means two or more enterprises which, directly or indirectly, are in a position to — (i) exercise 50 % or more of the voting rights in the other enterprise; or (ii) appoint more than 50% of the members of the board of directors in the other enterprise; or (iii) control the management or affairs of the other enterprise;

18. ASSETS Book value as shown, in the audited books of the enterprise, in the latest completed financial year, as reduced by any depreciation, and include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout design or similar other commercial rights

19. TURNOVER ACT: “Turnover” includes value of sale of goods or services REGULATIONS: exclude indirect taxes, if any AMDT BILL 2012: excluding the taxes, if any, levied on sale of such goods or provision of services

20. 20 SEC.6(4) EXEMPTIONS Shall not apply to (i) share subscription (ii) financing facility (iii) any acquisition by: Public financial institution Foreign institutional investor Bank Venture capital fund pursuant to any covenant of a loan agreement or investment agreement MUST FILE DETAILS IN 7 DAYS

21. 21 EXEMPTION IN PUBLIC INTEREST Central Government, in public interest, has exempted acquisition of the enterprise, whose control, shares, voting rights or assets are being acquired, if it has assets of the value of not more than Rs.250 crores in India or turnover of not more than Rs.750 crores in India.

22. 22 CCI COMBI. REGULATIONS Categories of combinations that are ordinarily not likely to cause an appreciable adverse effect on competition in India and hence notice need not normally be filed.

23. 23 PRIOR NOTIFICATION (Filing of Form)

24. 24 MANDATORY A notice must be given by enterprise to CCI about combination within 30 days from execution of agreement / resolution CCI to pass order within 210 (180 days) from the date of notice to CCI failing which combination to be deemed as approved. FAILURE: Penalty, may extend to 1% of the total turnover or the assets, whichever is higher.

25. 25 FORMS Form I - Regulation 5(2) combinations Form II - Regulation 5(3) combinations Form III - For exempt acquisition by FII etc Form IV – Advertisement FILING FEE Form I: Rs.10 Lacs Form II: Rs.40 Lacs NOW CO SECRETARY MAY SIGN FORMS

26. 26 FORM II REGULATION 5(3) to be notified through Combinations to be notified through Form II

27. 27 FORM II i HORIZONTAL COMBINATION: COMBINED MARKET SHARES : OVER 15% Parties to the combination - are engaged similar or identical or substitutable goods or provision of similar or identical or substitutable services and

28. 28 FORM II ii VERTICAL COMBINATION: INDIVIDUAL OR COMBINED MARKET SHARE – MORE THAN 25% IN THE RELEVANT MARKET The parties to the combination - are engaged at different stages or levels of the production chain in different markets

29. 29 COMBINATIONS MAY BE Pro-competitive Competitively neutral Anti-competitive

30. 30 VOID COMBINATION a combination which causes or is likely to cause an APPRECIABLE ADVERSE EFFECT ON COMPETITION (AAEC) WITHIN RELAVANT MARKET IN INDIA

31. 31 Relevant Market Product Market: Close substitutes Geographic Market: Area where product is available at same price

32. 32 COMPETITION TEST Competition through imports Entry barriers Countervailing power Availability of substitutes Likely increase in price/profits Risk Innovation Market share Failing business

33. 33 CONSULTATION PRIOR TO FILING The facility of informal and verbal consultation with the staff of CCI prior to the filing of notice to a proposed combination is available at CCI. The advice would be given as an additional assistance facility, and would not be deemed to be the opinion of the CCI in any manner whatsoever or binding on the CCI.

34. 34 INVESTIGATION, ORDER AND APPEAL

35. 35 INVESTIGATION Cooling period of 210 days classified in: (I) Inquiry phase (II) Decision phase (III) Modification phase

36. 36 ORDERS i CCI to: a. approve the combination; or b. reject the combination; or c. propose modifications to the combination. The parties may propose amendments to modifications within 30 working days If CCI does not accept amendments, further period of 30 working days to accept modifications

37. 37 ORDERS ii If not accepted: combination shall be deemed to have appreciable adverse effect on competition Combination shall not take effect CCI may frame a scheme to implement its order

38. 38 OTHER PROVISIONS

39. 39 EXTRA-TERRITORIAL JURISDICTION Agreements entered into outside India; abuse of dominant position outside India; combinations taking place outside India; if it has or is likely to have appreciable adverse effect on competition in India. with permission of CG, CCI can enter MOU with foreign competition agency.

40. 40 CCI AND STATUTORY AUTHORITY (SA) SA may make reference to CCI CCI to give opinion within 60 days CCI may make reference to SA SA to give opinion within 60 days

41. 41 THANK YOU ALL kanstiyask@rediffmail.com