It has finally been announced that the combination regulations under the Competition Act, 2002 shall come into force on June 1, 2011. It has also been indicated that the latest version of the regulations governing combinations, which contain detailed provisions relating to various aspects of mergers and acquisitions, will be released on May 1, 2011. Following this announcement there has been a persistent request from the industry sources and the legal fraternity alike, calling for deferment of the June 1, 2011 as the date on which combination regulations come into force. This is to present the stakeholders with sufficient time to digest the implications of the new regulations that are to be released and get geared to effectively comply with the requirements of the new regulatory regime.

Though the Competition Act was enacted in 2003, it is only in 2011 that the provisions pertaining to regulation of combinations are being made effective. Mergers, acquisitions, private equity investments and other like transactions which cross the thresholds of assets and turnover prescribed under the Act will require prior approval of the Competition Commission of India. There are a number of factors that led to the delay in implementation of these provisions and there are some concerns emanating out of certain ambiguities which still persist. In order to simplify the procedure and take on board the views of the industry, the Commission had invited comments and suggestions from various stakeholders. Further, to facilitate dialogue and discussions, the Commission is holding consultative meetings in major cities with various stakeholders who include the apex industry bodies and leading law firms dealing with competition law related matters.

So what are the concerns and apprehensions that have remained a constant source of anxiety among the various stakeholders? One of the major grievances of all interested parties has always been the outer limit of, as long as 210 days that the Commission may take to finally approve a combination. Though the Commission has expressed that it will endeavor for an expedited disposal in most cases, the statutory timeframe cannot be ignored. Harmonization of the time taken by the Commission for granting an approval and the statutory timeframe for compliances, for instance under the SEBI takeover code in case of acquisition of shares of a public listed company, remains an area to be addressed.

The possibility of multiple regulatory compliances in areas where there exist statutory regulators, like the RBI which regulate mergers of banks and the IRDA which oversees mergers of insurance companies is a source of some discontentment. Serious concerns have been raised regarding the need to approach the Commission for even routine business activities like buying of stock-in-trade, acquisition of shares/voting rights in small numbers or issue of bonus shares.

Another view expressed, particularly among lawyers, is the need to ensure that notices are required to be filed with the Commission only for transactions with a local nexus. The Act and the draft regulations currently put up on the website of the Commission are silent on this aspect. There have also been suggestions to include transaction thresholds ie only transactions exceeding a prescribed threshold requiring prior approval of the Commission, thus obviating the need to approach the Commission for any and every transaction where the assets and turnover test prescribed under the Act is met.

Maintaining confidentiality of information filed is another major concern of the stakeholders. With the sort of corporate rivalry that India has witnessed in the recent past, the provisions of the Act may be misused by competitors to file frivolous complaints to hamper the growth of competitors by creating impediments in the successful consummation of transactions.

It can only be hoped that some of these areas of concerns will be addressed and anxieties put to rest with the release of the regulations governing combinations on May 1. Whether the effective date of June 1 will be deferred to enable corporates to gear up, mobilize and put in order effective systems internally is left to be seen. The objects of implementing the current anti-trust regime are indeed laudable but the lack of clarity may lead to uncertain results, rendering the law which is in its nascent stage susceptible to public interest litigation. The fact that the Commission has time and again expressed that promotion of competition, keeping in mind the growth of Indian industry is its paramount object is indeed reassuring.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.