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Competitive law: Panel wants ‘disclose and comply regime’ for M&As

FE Bureau
The panel said it was agreed that detailed criteria for eligibility under the Green Channel may be formulated by the government based on consultation with the CCI.

In a development that could brighten up the mergers and acquisitions (M&As) space in the country, a high-level committee, headed by corporate affairs secretary Injeti Srinivas, has recommended creation of a disclosure-based regime with stringent penalties for not providing accurate information.

The recommendation forms part of a report by the Competition Law Review Committee, constituted in October 2018, for reviewing the competition law framework. It has also offered suggestions on the role of Competition Commission of India (CCI), which is the country's fair trade regulator. The report was presented to finance minister Nirmala Sitharaman on Wednesday.

"A significant change has been recommended in the form of a 'Green Channel' for combination notifications, in recognition of the need to enable fast paced regulatory approvals for vast majority of M&As that may have no major concerns regarding appreciable adverse effects on competition. Emperical evidence shows that most combinations need not be subjected to standstill obligations in the first place and hence, they may simply disclose their transaction to the CCI and proceed to consummate it," the panel said in its report.

Besides, the combinations that arise out of the insolvency resolution process under the Insolvency and Bankruptcy Code (IBC) will also be eligible for green channel approvals, it added. "The aim is to move to a disclose and comply regime with strict consequences for not providing accurate or complete information," the report said.

Another issue, which the panel flagged, was that of penalties. It said that certainty in interpretation of law and predictability of outcomes are vital to ensure effective enforcement. "It has been noted that a majority of penalties imposed by the CCI remain unrecovered due to litigation. Apart from addressing the capacity constraints at the appellate stage leading to backlog of appeals regarding penalty. It has been proposed that the CCI must be mandated to issue guidelines on the imposition of penalty. The twin efforts are aimed at ensuring more transparency and faster decision-making with a view to encourage compliance businesses," the report said.

In order to deal with M&As in the digital market, the committee suggested that even if the traditional asset and turnover thresholds are not met, where the transaction value or the deal value of a combination exceeds a certain limit, then it could be brought within the ambit of merger review.

The panel said it was agreed that detailed criteria for eligibility under the Green Channel may be formulated by the government based on consultation with the CCI.

With a view to optimising the competition law framework to meet challenges in the digital markets, the committee agreed that there is merit in exploring the possibility of looking at other thresholds beyond existing asset and turnover thresholds for merger control in India.

It recommended adopting a forward looking approach by enabling the government to formulate new thresholds based on certain broad parameters which may be stated in the Competition Act. Further, to address the present concerns regarding jurisdiction to review combinations in digital markets and drawing from international experience, the panel suggested a 'size of transaction' or 'deal value' threshold may be introduced in due course in the merger control framework in the Act.