One such concern is that the current proposals would attract even transactions that are very small in size, and thereby unnecessary add costs and complexities to the system. However, as the Business Standard reports, the Competition Commission is considering the introduction of de minimis provisions that will let small transactions get by without scrutiny:
“Vinod K Dhall, the acting chairman of the Competition Commission of India (CCI), is putting several provisions in its draft regulations to address industry’s fears that the commission will stall mergers and acquisitions.At a more general level, Mr. Vinod Dhall, member and acting chairman of the Competition Commission of India, writes in the Economic Times to assuage concerns of the industry with respect to merger control regulations. He says:
The fears have mounted since Parliament cleared the Competition Act, 2002, under which the government set up the commission five years ago.
Acutely aware of the concerns, Dhall is putting in de minimis (of minimum importance) provisions in the commission’s draft regulations so that not all M&As have to come to the commission.
Already, in the case of cross-border mergers, there is no need to notify the commission unless the merged entity has Rs 500 crore in assets or Rs 1,500 crore in turnover in India.
The commission is likely to incorporate a de minimis provision that both the merging entities should have a threshold of assets or turnover in India for the CCI to come into the picture. So if an Indian company overtakes a foreign company, which is very big but has no turnover in India, there will be no need to notify the commission.
Dhall plans to put in another de minimis provision pertaining to the size of the transaction. The thinking in the commission is that a deal should come to it only if at least 15 per cent equity changes hands, which is also the kick-off point for the Securities & Exchange Board of India’s takeover regulations.”
“The MRTP Act and the Competition Act are as different as chalk and cheese. The former, over time, emerged as an arm of the 'command and control regime', while the Competition Act is an essential ingredient of a market based economy, seeking proactively to promote and preserve competition and its benefits in markets. The Competition Commission is also unlike a sector regulator. For the Commission, the market is the best regulator, rewarding the efficient and punishing the inefficient enterprises. The Commission's role is like a referee's, allowing rivals to compete vigorously and stepping in only when a foul is committed, the fouls being only the prohibited acts in the Act.”The Government’s position with respect to merger regulation will become clear once the draft regulations are issued. The draft regulations are expected anytime now as the website of the Competition Commission indicates that they would be hosted on the site by January 18, 2008.
(Update - January 18, 2008: The draft regulations are now available on the Competition Commission's website hyperlinked above)