On August 20, 2019, CCI approved the acquisition of 51.20% of the total equity shareholding of Apollo Munich Health Insurance Company Limited ('Apollo Munich') by Housing Development Finance Corporation Limited ('HDFC'), and the subsequent merger of Apollo Munich into HDFC ERGO General Insurance Company Limited ('HDFC ERGO'). 1
HDFC is a financial conglomerate based in Mumbai, India engaged in housing finance, home loans, loans against property, etc. HDFC ERGO is a joint venture between HDFC and ERGO International AG, a Germany-based company. Its activities include providing health insurance services. Apollo Munich is a joint venture between the Apollo Hospitals Group and Munich Health, and is also engaged in providing health insurance services.
In its assessment, CCI noted that health insurance in India includes personal accident and travel insurance, and both Apollo Munich and HDFC Group are active in this market in India. It stated that there are several public and private general insurance companies in these segments. Further, it noted that there was only an incremental increase in the market share as a result of the transaction, which had no significant effect on the broader market segment of health insurance or the narrower segments of personal accident, travel and other insurances.
CCI also noted that an affiliate of HDFC, HDFC Bank, is inter alia engaged in the distribution of insurance products. Further, Gruh Finance Limited, another HDFC affiliate, is in the process of merger with Bandhan Bank, which is also engaged in the distribution of insurance products. CCI noted that these activities were vertically linked to Apollo Munich's insurance business. However, it observed that only 8% (in value) of the insurance services were distributed through banks. Additionally, Apollo Munich's presence in the distribution of personal accident and travel insurance products was not significant.
In light of the above, CCI held that the transaction was not likely to have an appreciable adverse effect on competition in India, and approved it. The approval order of CCI also notes that the scope the non-compete agreements entered into as a result of the transaction, is not ancillary to the combination – an increasingly common observation in cases where the scope of the non-compete does not fully comply with CCI's 'Guidance Note on Non Compete Restrictions'. While the implication of such an observation is yet to be seen, it appears that observations of this nature in CCI's approval order is to enable CCI to review such non-compete clauses under behavioural provisions of the Act.
Originally published October 2019
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