Following the recommendations of the Competition Law Review Committee (CLRC), the Competition Commission of India (CCI) has amended the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations). The amended Combination Regulations have been effective since 15 August 2019.
The CLRC reports that since 2011, the CCI has ordered modifications in only 2.6% of combinations and is yet to reject any combination on the ground that it is likely to cause an appreciable adverse effect on competition. The CLRC also notes that merger control increases transaction costs and deal timelines. Accordingly, the CLRC recommended putting in place the 'Green Channel' as an automatic route for approving mergers, while maintaining the CCI's oversight.
In this alert, we discuss the Green Channel approval process put in place by the CCI.
What is the 'Green Channel'?
Green Channel approvals can be availed in combinations where:
The amended Combination Regulations do not provide any threshold for the percentage of shares. In other words, at least – theoretically – even a single share could render the combination illegible under the Green Channel.
How can combining parties apply?
The notifying party should file a short form (Form I) with the CCI along with a declaration in the format set out in the amended Combination Regulations that they are eligible for a Green Channel approval.
What are the fees for a Green Channel approval?
INR 1.5 million (same as the fees for a short-form (Form I) filing).
When are Green Channel combinations approved?
A combination filed under the Green Channel route is deemed to be approved on the date of acknowledgement of filing from the CCI.
Can the CCI reject acknowledging a Green Channel filing?
Yes. A notice is not valid unless it is complete and conforms to the Combination Regulations; and the guidance provided by the CCI.
We recommend parties to engage with the CCI through pre-filing consultations and file a draft form with the CCI prior to filing the complete form.
Can the CCI revoke a Green Channel approval?
Yes. If the CCI finds a combination notified under 'Green Channel' to be ineligible, or finds a declaration filed to be incorrect, then the deemed approval of the CCI shall be void ab initio.
The amended Combination Regulations do not provide any limiting principles for rejecting a combination filed under the 'Green Channel' approval route, except for grant of an oral hearing by the CCI prior to arriving at its decision. This raises some concerns on the efficacy and the expediency of this channel.
What happens if a Green Channel approval is declared void?
Parties will need to re-notify, and the CCI's review process would start afresh. Importantly, the amended Combination Regulations are silent on whether combining parties will be subject to any hold-separate obligations under this re-started process and be liable for gun-jumping.
In addition, the CCI may proceed to impose a fine under the §44 of the Competition Act, which provides for a minimum fine of INR 5 million and a maximum fine of INR 10 million.
Is there any limitation period prescribed for the CCI to declare a Green Channel approval as void?
The amended Combination Regulations do not provide for any time limitation within which the CCI has to declare an approval to be void. However, §20 to the Competition Act prescribes a period of one year from the date on which a combination takes effect (i.e. from the date of closing), for the CCI to inquire into the combination.
Is there any provision for an appeal against the CCI's decision declaring a Green Channel filing to be ineligible?
No. A party aggrieved by the CCI's decision will need to approach a High Court under the writ jurisdiction. However, if the CCI imposes a penalty on the notifying party, an appeal can be filed before the National Company Law Appellate Tribunal.
What is the verdict?
The CLRC acknowledges that the success of this process hinges upon robust pre-filing consultation between parties and the CCI. Pre-filing consultations, in itself, could take time. Moreover, pre-filing consultations are still non-binding and informal. As such, parties may question whether the gains of time (if any) outweigh the Damocles' sword of uncertainty over the approval status of the combination. Nonetheless, the CCI and the CLRC deserve high appreciation for putting in place processes to ease the regulatory burden in India.
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.