Noting India Inc's stance for softer merger and acquisition (M&A) norms, CUTS International today said the new competition regime will not be a hurdle to industrial growth but it is necessary to ensure that mergers do not lead to monopoly of big players.
CUTS International is a global research and advocacy organisation, which deals with economic policy issues.
Talking about the industry's apprehensions that the new law, which would require companies to seek Competition Commission's approval for mergers, CUTS said that the norms would ensure that takeovers do not end up creating situations that can lead to abuse of dominance and thus harm consumer and business welfare, and orderly economic growth.
"The business fears are not well founded and the CCI has promised to begin with light-handed regulation which will evolve as they gain experience," CUTS said in a statement.
It added that merger regulations encourage corporate acquisitions and investment flows.
"Merger regulations would help acquiring firms pay a lower price, and thus put lesser burden and impact on foreign investment decisions," it said.
Come June 1, all large companies would require to seek the CCI's approval before going ahead with merger and acquisitions. The CCI has been empowered to do so with the notification of sections 5 and 6 of the Competition Act, 2002.
According to the provisions of the Act, companies with a turnover of over Rs 1,500 crore will have to approach the CCI for approval before merging with another firm.
Besides, only those proposals would need the CCI's nod where the companies have combined assets of Rs 1,000 crore or more, or a combined turnover of Rs 3,000 crore or more.
Also, the target company's net assets have to be a minimum of Rs 200 crore or it should have a turnover of Rs 600 crore for CCI intervention.
