Draft M&A regulations peeve CII

COMPETITION ACT UNDER FIRE

Days after the Competition Commission of India (CCI) put up the draft regulations of the Competition Act, 2007, on its website, the Confederation of Indian Industry (CII) has expressed reservations on Sections 5 and 6 of the Act.

"The industry has serious reservations on Sections 5 and 6 of the Competition Act, and the proposed combination and the determination of cost of production regulations. The provisions are not suitable for the country at the current stage of our economic development, and accordingly, we recommend that the Act be amended," CII said.

The Act, which was passed by Parliament in September 2007, is yet to be notified. After the Act was passed, Corporate Affairs Minister Prem Chand Gupta had announced the CCI would be fully functional by mid-2008. However, the Cabinet is yet to approve the manpower requirement for the commission.

Under Section 5 of the Act, any company with assets of Rs 1,000 crore or more and a turnover of Rs 3,000 crore or more has to mandatorily seek the CCI's approval for any "combination" (merger, acquisition or amalgamation) within 30 days of inking the deal.

Any company of a smaller size, if it belongs to a group with assets of Rs 4,000 crore or a turnover of Rs 12,000 crore will also have to go through the same process if it decides to do a merger or an acquisition.

While under Section 6, the Commission on receipt of a notice or suo motu can inquire whether the combination has caused or is likely to cause an appreciable adverse effect on competition in India. The CCI will give its verdict within 210 days, which can be extended by another 60 days, failing which the application will be deemed approved.

India Inc had earlier said that enforcement of Sections 5 and 6 should be deferred till 2012 to enable the CCI to focus on the abuse of dominance, and also to enable it to overcome lack of scale economies through local and global mergers and acquisitions activities.

"These two Sections would also result in unnecessary delays and, consequently, increase the transaction cost for the parties," industry sources said.

CCI Acting Chairman and Member Vinod Dhall said, "The draft regulations have been prepared after consultation with the industry and the Commission is waiting for specific comments and suggestions on the regulations from all stakeholders and the industry."

CII has further said it shall make appropriate representation to the Ministry of Corporate Affairs and the CCI on the matter.