Make M&A disclosures mandatory, says panel
Businesses going in for mergers and acquisitions must seek the Competition Commission of India’s approval before they make their moves. This has been suggested by a parliamentary standing committee, fearing that the recent spate of M&As might adversely affect competition.
The Standing Committee on Finance has expressed surprise over the company affairs ministry’s contention that this has not been done because seeking approvals for M&A’s can cause delays and lead to “unjustified interventions”.
“They (the ministry) are unable to understand why an expert body like the CCI cannot address problems like delays and interventions, if such a clause is made mandatory for enterprises entering into mergers and combinations,” the committee said.
The committee felt if companies had the option of making such disclosures voluntarily, the CCI was likely to miss out on some key developments.
This, the panel said, “can hamper its (CCI’s) functioning as a regulatory body”. Therefore, the committee has recommended suitable amendments to Clause 6(2) of the Competition Act to provide for mandatory notification of combinations/mergers.
Noting that cartels are difficult to break, the committee said incentives like lesser penalty and complete amnesty be extended to those inside cliques willing to provide information to the authorities.
It added that such incentives be structured in a way so that each cartel member rushes to give crucial information before the other, resulting in destabilising of a pack.
“Since the CCI has not been given powers to search and seize, this arrangement would go a long way towards discouraging cartels,” the committee said, asking the government to make suitable changes in the Competition (Amendment) Bill.
Interestingly, in a note of dissent, Rajya Sabha MP Chittabrata Majumdar said the Competition Act must not allow large firms with to sustain losses to drive out more efficient rivals that are using predatory pricing technique.
He also stressed that currently, there is no provision that helps employees, who are the major stakeholders, to submit their opinions to the CCI during mergers. “The government should consider this aspect to allow trade unions to present their views to the CCI,” he said.
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