With the central government notifying the merger control provisions prescribed under the Competition Act of 2002 last week, the stage has been set for the country’s fair-trade watchdog, Competition Commission of India (CCI), to take up its toughest responsibility — the approval of all high-value mergers and acquisitions (M&As) from June 1. In an interview, CCI Chairman Dhanendra Kumar tells Joe C Mathew about the salient features of the notification and assures that the administration of M&A regulation will not harm the investment climate or economic growth, but will only aid its growth. Excerpts:
Industry has been opposing M&A provisions for a range of reasons. To what extent does the notification addresses their concerns?
All their concerns have been addressed. The asset and turnover thresholds (for bringing an M&A under CCI scrutiny) have been increased by 50 per cent. The definition of a “group entity” has been revised for a five-year period from an entity that holds 26 per cent voting rights to 51 per cent shareholding. The asset and turnover threshold for the target company has been revised. Overall, the government has, and rightly so, addressed all major issues. Industry should feel comfortable now.
The approval timeline (of 210 days) was one of the major concerns of the industry. Do you share the industry view that the issue remains unaddressed, though there is a voluntary commitment to attempt the clearance within 180 days?
The exemptions and the increased thresholds have already put 90-95 per cent of mergers and acquisitions out of such intense scrutiny. All such cases will be cleared within 30 days. That leaves with a handful of large M&A cases for which 210 days is not too much if we go by international practices. European Union takes 90-125 working days or 224 days to clear such major M&A cases. France takes four months with a provision for another month’s extension. China takes 90-150 working days. Here we are trying to clear such proposals in 180 days, or 128 working days. So, the time cap is not very different from major jurisdictions. The industry should realise that wherever competition laws are in place, large M&As have a legal certainty.
Any initial responses?
We are getting several enquiries from overseas corporations asking if they can file M&A applications now. There is no provision for advance filing, though we can informally advise them till the notification comes into effect from June 1. This shows that people are interested in this scrutiny. I can assure that the administration will not decelerate, impede or retard the investment or growth in economy.
How prepared is CCI to take the additional workload?
We are reasonably well prepared; the critical mass is in place. We have recruited some people and trained them within the country and abroad, recruiting more in the coming months. We were only seven people when we started functioning two years ago. Now we are more than 100.
What kind of M&A scrutiny-related workload are you anticipating after June 1?
No predictions. However, from the M&A activities in the recent past, it may not be more than 40 to 50 a year. Even among this list, a majority will be cleared within 30 days. On the overall performance, of the 153 cases that have come to us since May 2009, we have taken decisions on about 50.