[By Aisha Singh]
The author is a student of Chanakya National Law University (CNLU), Patna.
Introduction
The Indian President’s approval of the Competition (Amendment) Act, 2023, is set to bring significant changes to the merger review procedure employed by the Competition Commission of India (CCI). With amendments aimed at simplifying the notification process, establishing deal value thresholds, and shortening the review window, this new legislation promises to reshape the landscape of mergers and acquisitions (M&As) in the country.
One of the ground-breaking features introduced by the Amendment Act is the concept of “deemed approval”. According to this provision, the acquisition would be deemed authorised if the CCI fails to reach a prima facie conclusion within 30 calendar days (as opposed to the prior 30 working days) about whether an M&A transaction is likely to raise competition issues in India. This means that parties involved in the transaction can proceed with closing it without waiting for a formal CCI approval order. Furthermore, the overall review period has been reduced from 210 calendar days to 150 calendar days, further streamlining the process.
This move has been widely hailed as a positive step forward for M&As in India, addressing a long-standing gap in the Competition Act, 2002, which did not provide any implications or consequences if the CCI failed to provide its view within the prescribed timeline. With the introduction of the “deemed approval” provision, the Amendment Act seeks to fill this legal vacuum, bringing clarity and certainty to the merger review process.
Benefit to Global Deals
The adoption of a 30-calendar day review timeline aligns India’s merger review process with more mature jurisdictions, such as that of the European Union (EU), USA & Canada. This harmonization fosters a more efficient and consistent approach to M&A transactions. The streamlined timeline reduces uncertainty, enhances deal certainty, and expedites transaction closures. It creates a favourable investment environment, attracting foreign investors and stimulating economic growth. Additionally, the accelerated pace of transactions benefits global deals involving multiple jurisdictions, ensuring timely completion. Overall, this strategic alignment positions India as an attractive destination for domestic and international mergers and acquisitions. Thus, this strategic move is expected to yield substantial benefits for global deals, fostering a harmonized and efficient approach to M&A transactions.
This progressive step demonstrates the Indian competition watchdog’s commitment to aligning its practices with those of mature jurisdictions such as the EU. In the European Union, the European Commission operates under a 25-working day timeline to conduct the Phase I review of a transaction and make a decision. Similarly, in both the United States and Canada, merger transactions typically undergo an initial waiting period of 30 calendar days. This waiting period serves as a crucial window for regulatory authorities to review proposed mergers and evaluate potential competition concerns.
The streamlined review timeline holds particular significance for global deals, where coordination of approval timelines across borders and jurisdictions plays a crucial role. Failure to meet this timeline results in the transaction being deemed unconditionally approved. India’s adoption of similar timelines signifies its dedication to enhancing efficiency and aligning with global best practices. By aligning with international standards, India enhances its competitiveness and attractiveness as a destination for M&A activities, providing greater certainty and expediting the approval process for transacting parties.
Comprehensive Notifications
With the introduction of the “deemed approval” provision, there is an increased expectation that transacting parties will file more comprehensive notifications, providing greater emphasis on the details and potential competition concerns. This change encourages parties to conduct a thorough assessment of potential anti-competitive effects before submitting their notifications, ensuring a more robust review process.
Invalidation of Notices
The Amendment Act may also lead to an increase in the invalidation of notices filed by parties due to the absence of substantive pre-filing consultation (PFC) with the CCI. Parties are now required to engage in meaningful consultations with the CCI prior to filing, ensuring that the necessary information and details are provided. Failure to do so may result in notices being invalidated, leading to delays and potential disruptions in the transaction process.
The reduction in timelines and the introduction of deemed approval in the Competition (Amendment) Act, 2023, bring welcomed changes. However, these adjustments also bring additional pressures on the CCI and M&A parties to expedite processes and provide necessary information promptly. As a consequence, there may be an increase in invalidated notices due to the absence of substantive pre-filing consultation (PFC) with the CCI. Furthermore, an increase in information requests from the CCI may disrupt the review timeline.
Increase in Information Requests
To address the challenges posed by accelerated approval, stakeholders are likely to proactively engage in PFC meetings and collaborate with CCI case officers before formal filings. Another effect of these new deadlines might be an increase in the amount of information requests made by the CCI, which would halt the review timeline. These requests aim to gather additional data and insights to aid in the competition assessment. Parties’ response times to information requests made by the CCI are not included in (and may remain thus) the review deadlines that have been established.
It is important to note that the implications discussed here are based on the anticipated effects of the Competition (Amendment) Act, 2023. The true impact will only become clear as the new legislation is put into practice and the CCI adapts to the changes. As with any new legal framework, challenges and adjustments may arise, and stakeholders will need to closely monitor the implementation and enforcement of the Amendment Act.
Potential Clock Stops
The CCI’s merger control division will now need to keep a watchful eye on the review clock as M&A deals will be automatically cleared post 30 calendar days.
The introduction of new regulations resulting from the amendments raises questions about potential “clock stops” during the review process. It remains to be seen if these regulations will permit additional grounds for halting the review timelines. Additionally, it is worth exploring whether the new regulations will allow for extra time if parties involved in an M&A deal propose modifications or if the CCI suggests modifications to address competition concerns before the CCI forms its prima facie opinion. At present, the existing regulations allow for a 15-day extension to the Phase I review period when parties submit modifications to mitigate competition concerns. The forthcoming regulations will clarify these aspects and their impact on the overall review process.
Way Forward
The Competition (Amendment) Act, 2023, marks a significant step forward in streamlining India’s merger review process. The introduction of a 30-calendar day review period aligned with international standards enhances efficiency and attracts global deals, while the provision for deemed approval and shorter overall review period bring certainty and expedite M&A transactions. These changes align India’s regulatory framework with global practices, creating a favourable environment for domestic and international stakeholders.
The Act’s emphasis on comprehensive notifications promotes transparency and robust assessments, allowing parties to proactively address potential antitrust concerns. However, challenges may arise from the requirement for substantive pre-filing consultation and increased information requests by the CCI, which could potentially impact the timeline efficiency. Parties involved in M&A transactions must engage proactively and respond promptly to mitigate any adverse effects.
Overall, the Competition (Amendment) Act, 2023, holds the promise of fostering a competitive business environment that attracts investments in India. By streamlining the merger review process and aligning with international practices, India becomes an attractive destination for M&A activities, benefiting both domestic and global stakeholders. Monitoring the Act’s implementation will be crucial to ensure its objectives are effectively realized, and stakeholders should assess its implications in practice.
The 2023 Amendment streamlines India’s merger review process, creating efficiency, certainty, and transparency. With its international alignment, the Act enhances India’s competitiveness in attracting global deals, while challenges regarding pre-filing consultation and information requests should be carefully managed. As India embraces these changes, it emerges as an appealing destination for M&A activities, benefiting stakeholders and promoting growth in the country.