CCI chief advocates redefining ‘control’

Competition Commission of India (CCI) Chairman Ashok Kumar Gupta said in an interview that there is a need to define more broadly in the law the control exercised by investors in a company to make merger rules with a dynamic market. Is.

Gupta’s suggestion to redefine controls more precisely in the context of corporate mergers and acquisitions (M&A) deals points to a new direction in the CCI rules after Parliament approved the proposed amendments to the law. Will take The Competition Amendment Bill is currently being examined by the Parliamentary Standing Committee on Finance led by Bharatiya Janata Party leader Jayant Sinha, and is expected to be taken up in the winter session of Parliament.

At present, the Competition Act defines it as controlling the affairs or management. It is proposed to be defined as the ability to exercise any material influence on the management or affairs of the company or on strategic commercial decisions.

Gupta explained that competition is a highly dynamic activity and therefore, competition law, if it is to fulfill its mandate, must be equally dynamic. Furthermore, the relationship between shareholders or investors and enterprises is rapidly evolving, and the concept of ‘control’ is needed to enable assessment of such relationships in proper perspective, Gupta said.

“Accordingly, it has been felt that the concept of ‘control’ should be linked to the ability to influence strategic commercial decisions that lead to changes in market dynamics. This approach refers to the control inherent in shareholding or affirmative/veto rights. complements the traditional concept,” Gupta said.

CCI approval is important for businesses to complete the transaction as the regulator can suggest amendments to the transaction to prevent any adverse impact on competition due to the deal. A broader definition, which introduces the concept of ‘material effect’, could bring more deals within the ambit of the CCI’s review.

Gupta said estimating the material impact requires a case-by-case analysis of the overall relationship between the acquirer and the target. “In assessing this, we have to take into account all the circumstances of the case. Material impact may arise through factors such as representation on the board of the target (entity), contractual agreement on consultancy rights/veto rights, voting percentage held by the acquirer, etc.

The new definitions of ‘control’ proposed in the Bill are on the lines of the CCI’s adjudicatory exercise and do not change the practical parameters, but are aimed at bringing more clarity and certainty by clearly specifying the limits of control in the Competition Act itself, Gupta said. . It is expected that the change will make stakeholders more aware of their statutory obligations and prevent any unintended non-compliance, he said.

One of the key proposals in the Bill is to do away with the requirement of prior approval of CCI in case of transactions involving acquisition of shares through open offers or regulated stock exchanges. Gupta said that in case of buying in the market where the prices fluctuate, if a person has to wait for the approval of CCI, he may lose the opportunity to buy the shares at the best price.

Presently, the parties to the M&As are required to notify the CCI and wait for its approval or 210 days before completing the transaction, whichever is earlier.

first article