Indian companies to pass through CCI for mergers and acquistions

From today, all mergers and acquisitions by companies in India will also have to pass muster at the Competition Commission of India (CCI) —an additional layer of compliance.

Experts say the new law was long overdue, as almost 85 countries in the world, ranging from developed economies to the BRIC nations (excluding India), have instituted regulators to prevent monopolistic combinations from joining forces.

On May 11, the competition regulator had announced the regulations, diluting several of its earlier key proposals in a bid to assuage industry concerns that the competition law was bureaucratic and could delay crucial moves by corporates where timing was the essence.

CCI’s promulgation of new rules earlier this month exempted a host of transactions from scrutiny and sought much lower merger notification fees than proposed before. The commission had also, in a placatory move, deemed that the rules would take effect from June 1 and not apply retrospectively. This meant they will not cover mergers and acquisitions approved by the boards of companies before this date.

Following the announcement, many Indian companies going for acquisitions have rushed through with their deals before the new laws could take effect.

But, going by experts tracking M&A deals, their fears may be unfounded as the main objective of the CCI is to safeguard the interest of consumers and ensure freedom of trade. Countries such as Russia, Brazil and South Africa have similar laws that have worked well.

It doesn’t worry me. The new rules have been diluted a lot on the demand from the industry,” said Girish Vanvari, executive director of KPMG Advisory Services Ltd.

Still, some apprehension may be warranted until the commission has processed a couple of M&A deals.

“We have to see how it is administered. It will certainly add another layer of regulation, and one more compliance box to be filled for M&A transactions. However, with the introduction, India is falling in line with other regulatory regimes across the globe,” said Samir R Gandhi, a partner at Economic Laws Practice.
Corporates will watch how the machinery works and how much time the commission takes to execute the deals that come up for scrutiny.

“The regulations should not hamper legitimate corporate activity, if the competition commission stands by its assurance that it will administer the regulations with a light hand,” Gandhi added.
CCI chairman Dhanendra Kumar was earlier quoted as saying the commission has “exempted routine merger and acquisition deals from seeking their nod.

Kumar also promised to clear 95% of merger and acquisition proposals within 30 days. He said only transactions that could impact competition in India would be retained for a second round of scrutiny. The commission would clear these transactions within 210 days.