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Panel suggests automatic approval of merger deals by CCI
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SME Times News Bureau | 14 Aug, 2019
Suggesting key changes to the competition regulatory framework, a
government committee has recommended a green channel route for automatic
approval by the Competition Commission of India (CCI) of merger and
acquisition (M&A) deals that have little or no adverse effect on
market competition.
It has said such automatic approval should
also be given to combinations arising out of the insolvency resolution
process so that uncertainty about deals struck in the course of the
resolution of stressed assets is removed and the process is
fast-tracked.
Under the current Competition Act, combinations
(mergers and acquisitions) beyond a certain threshold requires clearance
from the fair trade watchdog CCI.
The panel has suggested a "green channel route" for automatic approval of certain combinations.
"A
significant change has been recommended in the form of a 'Green
Channel' for combination of notifications in recognisation of the need
to enable fast paced regulatory approvals for vast majority of mergers
and acquisitions that may have no major concerns regarding appreciable
adverse effects on competitions," the panel report said.
Empirical
evidence shows that most combinations need not be subjected standstill
obligations in the first place, and hence they may simply disclose their
transactions to the CCI and proceed to consummate it."
The aim
is to move to a "disclose and comply" regime with strict consequence for
not providing accurate or complete information, the report noted.
The
Green Channel route should be the de facto route for merger
notification and approval for majority cases. The government can
formulate a detailed eligibility criteria in consultation with the CCI,
it said.
Combinations arising out of the insolvency resolution
process under the Insolvency and Bankruptcy Code (IBC) will also be
eligible for "Green Channel" approvals, the report said.
The
panel also calls for Introducing a dedicated bench in the National
Company Law Appellate Tribunal (NCLAT) for hearing appeals under the
Competition Act.
The mandatory 30-day timeline for completion of
the first phase of review of combination cases should be included in
the Act itself, the report said.
"This timeline would continue to govern combinations that are not eligible for the proposed Green Channel," it added.
The
report also proposes that CCI must be mandated to issue guidelines on
imposition of penalty. The panel notes that majority of penalties
imposed by CCI remain uncovered due to litigation. The is expected to
ensure transparency and more compliance by the businesses.
For
speedier resolution of cases of anti-competitive conduct, the panel also
sought to incorporate additional enforcement mechanism in the form of
settlement and commitments that may be achieved outside the lengthy
enforcecment process.
It also recommended when considering
non-notifiable mergers, additional thresholds be considered for
non-traditional or digital businesses.
"Even if the traditional
asset and turnover thresholds are not met where the transaction value or
deal value of a combination exceeds a certain limit, then it could be
brought within the ambit of merger review", it said.
The
committee has also called for insertion of a new explanation in the Act
to cover hubs in "hub and spoke cartel" to provide clarity on the
liability of hubs while assessing violations regarding anti-competitive
agreements.
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