Investors could get fast-tracked clearance from the Competition Commission of India (CCI) for mergers and acquisitions within 20 days of being informed of the deal, if the watchdog does not form an adverse first impression.
Equally, they could face stiff penalty for suppressing information, according to proposals making their way through the legislative process.
These two proposals, which are part of a bill to amend the Competition Act that is being reviewed by a parliamentary panel, will change the regime for regulating corporate transactions in a big way, according to officials and experts. However, experts differ on the likely impact. As per the proposal, CCI will have to take a call—based on first impressions —on whether a deal will affect competition in the market. If no such prima facie negative opinion is formed within 20 days, a deal will get ‘deemed’ approval—the approval will be taken as granted and no further order has to be issued.
“Businesses need certainty. It is only a prima facie opinion that CCI has to make within 20 days. For example, if a liquor producer is acquiring a cement manufacturer and there is no overlap in their respective markets, making a prima facie opinion on the impact of the deal on market competition will not take long. Mandating a 20-day deemed approval process by law will improve ease-of-doing-business,” said a person privy to discussions in the government.
With the quick deemed approval mandated by law bringing more certainty, businesses may not have to rely heavily on consultants, said the person, who spoke on condition of anonymity.
A second person, who has knowledge of the regulatory process, said that legally mandating a 20-day deadline on deemed approvals could infuse “regulatory scepticism” about a deal during the approval process, and companies will face stiff penalties for not giving full information about a deal. The bill proposes to raise the penalty for false statements and omission of material details to ₹5 crore from ₹1 crore now. The average time taken for CCI to clear M&As has come down to 17 working days.
According to Neelambera Sandeepan, partner, Lakshmikumaran and Sridharan Attorneys, the proposed amendments are likely to increase pre-notification consultation with the CCI to ensure that the notice (informing the transaction) is comprehensive and complete at the time of filing. “Forms which are not drafted to the satisfaction of the CCI could risk invalidation or penalty proceedings for filing incorrect or incomplete information in the notice,” said Sandeepan.
Increased penalties would have financial and reputational repercussions on companies, said Sandeepan.
However, a section of experts preferred the existing provisions. According to Avaantika Kakkar, partner and head, competition, at Cyril Amarchand Mangaldas, the proposed timeline revision for merger approval process will make it burdensome for the CCI as well as parties to comply with. “Earlier timelines were practical, and served us well for a decade. The proposed timelines could adversely impact the current flexibility and integrity of the process in the presentation of each case to the CCI,” Kakkar said, adding the proposed change merits a relook.
Queries mailed to the corporate affairs ministry and the CCI on 11 August did not elicit a response.
Currently, the CCI has 210 days to clear a deal. There is also a green channel approval process where automatic approval is given on the same day. In the new bill, the 210 days normal approval process is proposed to be lowered to 150 days.
