A. Regulatory

New members appointed to the CCI

The Central Government has appointed Mr. Anil Agarwal, Ms. Sweta Kakkad and Mr. Deepak Anurag as Members to the Competition Commission of India (CCI). The newly appointed Members join the Chairperson, Ms. Ravneet Kaur, to bring some much- needed stability to the CCI, after several months of uncertainty and lack of quorum.

Slew of draft regulations released for comments

The CCI recently released draft regulations to implement the recent amendments to the law: (a) new framework for settlements & commitments, (b) revised Indian merger control regulations including deal value thresholds, and (c) a revised leniency regime which now allows for ‘leniency plus’. These new regulations were published for public consultation with stakeholders (now closed) and are expected to be issued in the coming months.

B. Antitrust Enforcement

NCLAT rules all who hear the case must sign the order

On 10 October 2023, the National Company Law Appellate Tribunal (NCLAT) overturned a penalty of INR 38.05 crores (USD 4.57m) imposed by the CCI on 18 sugar mills and their respective trade associations (OPs) for procedural errors.

The CCI order was reserved for judgment on 22 August 2017 but was issued only on 18 September 2018 – after a delay of almost 13 months. In addition, two out of the five members who had heard the parties’ final arguments did not sign the final order and one of the members who signed the order was absent for some of the final hearings.

The NCLAT accordingly set aside the CCI order, holding that he who hears must decide. The matter has now been remanded back to the CCI for fresh hearing.

The NCLAT decision is not the first instance where the CCI’s decision has been overturned due to procedural lapses.

C. Merger Control

In a first, CCI disqualifies ‘Green Channel’ or fast- track approval

On 8 August 2023, the CCI imposed a penalty of INR 55 lakh (approx. USD 66k) a trust of the Abu Dhabi Investment Authority (Acquirer) and the TPG Group for furnishing false and incorrect information in its ‘green channel’ notification. The transaction involved the acquisition of approx. 5% shares in UPL Sustainable Agri Solutions (UPL SAS / Target).

The CCI noted that the Acquirer (through existing shareholding in an entity belonging to the seller group) and the Target, were present in the business of selling formulated crop protection products (FCCPs) to third parties. This overlap was not disclosed in the notification, and accordingly the CCI noted that false submissions were made in the green channel notification to obtain fast-track approval. The green channel route is a fast-track approval, where parties having no horizontal, vertical or complementary relationships can file a simplified notification for a deemed approval upon filing the notification.

The CCI invalidated its approval in this case and imposed a penalty on the Acquirers. Pursuant to a review of the information submitted by the Acquirers during the pendency of the proceedings, the CCI concurrently approved the transaction.

This is the first instance where the CCI has imposed a penalty and invalided a green channel notification; indicating the strict scrutiny by CCI for transactions filed in the green channel route. Minimal overlaps or a planned/possible exit from a market with overlaps would not allow parties to avail of the green channel route.

CCI approves the Air India / Vistara merger with voluntary modifications

The CCI conditionally approved India’s largest airline merger of Tata owned Vistara Airlines and State carrier Air India Limited (AIL); subject to certain behavioral modifications.

The merger created a duopoly on certain domestic and international routes, and a near- monopoly on some India-Singapore routes. The CCI accordingly required the parties to show cause why a Phase II investigation should not be initiated.

Based on the parties’ responses, the CCI noted that the merger would cause significant network effects resulting in cost efficiencies and financial stability for the merging parties. The merger was approved subject to voluntary commitments offered by the parties to maintain minimum passenger transport capacity on specific routes.

The Vistara/Air India clearance is yet another instance of the CCI accepting behavioral remedies before initiating a Phase-II review. It demonstrates the CCI’s willingness to engage with parties to avoid a protracted review of the transaction. Parties in suitable cases, should therefore, identify reasonable remedy packages at an early stage for discussion with the CCI.

CCI issues slew of penalties for failure to notify

In the past few months, several penalty orders have been issued against parties for failure to notify their transactions. Fines ranging from INR 5 lakhs to INR 1 crore (approx. USD 6k to USD 120k) have been imposed by the CCI. Key take- aways from these orders are below:

• Reiterating its earlier definition for ‘control’, the CCI has held that the acquisition of ‘material influence’ in a target, on the basis of shares, voting rights, contracts or other arrangements, require CCI approval. Such control may be acquired through the right to appoint a director to the board, quorum requirements, veto rights over certain matters, consent on appointment/removal of key managerial personnel, information rights etc. (Bharti Airtel Limited / Lion Meadow Investment Limited)
• In acquisitions of asset management companies, jurisdictional thresholds should be assessed with reference to the assets under management, and not merely the asset and turnover values of the investment business. (Massachusetts Mutual Life Insurance Company / Invesco Limited)
• Acquisition of the right to appoint a board director would disqualify the application of the minority shareholder exemption. Bona fide errors in determining notifiability may only help mitigate the quantum of penalty. (Axis Bank Limited / CSC e-Governance Services India Limited)
• Lack of access to a target’s accurate financial statements does not condone a failure to report a transaction. (Cummins Inc. / Meritor Inc.).

This strict enforcement of jurisdiction by the CCI indicates that it will continue to actively monitor compliance.

Authors: Sonam Mathur and Dinoo Muthappa, Partners; Shubhang Joshi, Managing Associate.