INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...
HEFTY FINE IF MEGA MERGERS DO NOT NOTIFY CCI
IT WOULD soon become mandatory for corporates to notify the Competition Commission of India (CCI) about the mega mergers they go for, or they will be slapped with a hefty penalty. The government is introducing a penalty of 1% of the turnover or assets-whichever is higher-of the combined entity if the companies involved fail to inform the commission soon after their boards of directors approves an acquisition, merger or amalgamation.
CCI would have jurisdiction over a deal if the combined entity has assets worth at least Rs 1,000 crore or a turnover of Rs 3,000 crore or more in India. It will also investigate combinations having assets worth $500 million or turnover of $1,500 million in India and outside put together, in the case of cross-border mergers.
After the notification, CCI would get 210 days to complete its inquiry as to whether the deal would affect competition in the sector. These are the modifications to the Competition (Amendment) Bill the company affairs ministry has made after a parliamentary panel recently gave its views.
While some experts believe mandatory notification to CCI would remove the element of uncertainty and is good for companies, some leading lawyers say it's good for the consumer as well. "This would ensure that no deal which has the potential to result in monopolies and could eventually affect consumer interest escapes the attention of the CCI," said Som Mandal, managing partner of Fox Mandal.
The ministry, which originally had not favored a mandatory notification to the CCI due to concerns about delay and "unjustified interventions" in mega deals, has changed its view after parliamentarians expressed confidence that the "high ranking expert body" would behave itself.
The law has strict timelines and any M&A deal would be deemed to be approved if CCI does not pass an order or issue a direction within 90 working days from the date the entity publishes its details for public knowledge.
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