Tuesday, March 8, 2011

Notification of Merger Review Provisions under Competition Law

(The following post has been contributed by Rahul Singh, Assistant Professor, National Law School of India University, Bangalore (on leave) and Senior Associate, Trilegal)
The Ministry of Corporate Affairs (MCA), Government of India has recently notified the provisions for regulation of combination (commonly known as “merger review provisions”) under the Competition Act, 2002.

The Competition Act, 2002 was partially enforced on 20 May, 2009 whereby the provisions relating to anti-competitive agreements and abuse of dominant position were notified (and yet merger control provisions were not notified). The Ministry of Corporate Affairs, Government of India has now notified that sections 5, 6, 20, 29, 30 and 31, dealing with merger control, will come into force on 1 June, 2011. With the enforcement of these sections, all mergers, amalgamations and/or acquisitions falling within the thresholds indicated in section 5 of the Competition Act, 2002 (“Combination”) will require prior approval of the Competition Commission of India.

Four separate notifications relating to different aspects of merger control have been issued. The salient features of the notification are the following:
I. Effective Date:

Appointment of June 1, 2011 as the date on which sections 5, 6, 20, 29, 30 and 31 of the Competition Act, 2002 will come into force;

II. Monetary Threshold Requirements:

Enhancement, on the basis of the wholesale price index, of the value of assets and the value of turnover, by 50% for the purposes of section 5 of the Competition Act, 2002;

III. Target entity:

Exemption for an enterprise, whose control, shares, voting rights or assets are being acquired has assets of the value of not more than Rs 250 crores (USD 55 million approx) or turnover of not more than Rs 750 crores (USD 165 million approx) from the provisions of section 5 of the Competition Act, 2002 for a period of five years;

IV. Group:

Exemption for the ‘group’ exercising less than 50% of voting rights in other enterprise from the provisions of section 5 of the Competition Act, 2002 for a period of five years.
The notifications are available on MCA website. The notifications issued by MCA, however, are unsigned and undated. Hence there is a prevailing confusion about the exact legal status of the notification. The notifications have also been uploaded on CCI website.

- Rahul Singh

4 comments:

vswami said...

As pointed out, none of the new notifications are seen have been signed or dated. What is all the more intriguing (or ‘confusing’) are the facts that, - A) none of them bear any – ‘S.O. .. (E)’ number; and B) on top – it is super scribed with the words –“TO BE PUBLISHED” in the GOI (E). Undoubtedly, the whole ‘episode’ is extremely mind boggling and brain teasing.
Not doubting for the nonce that they have nonetheless come from the concerned responsible high powered ministry - the MAC, in a ‘common man’s thinking’, there are only two possibilities to be guessed:
1) they have come to be posted on the official website by a grave mistake, singularly of its kind, prematurely; and/or
2) in today’s context, in the opinion of the government / its ministries, compliance or otherwise with all these or like conventional but serious formalities do not have to be, any longer, attached any real legal significance – for after all, what is more important but inherently riddled with practical problems is the –implementation part of such matters.
Anyway, no lawyer /or law student needs to be confused (as wondered) – for, even as one’s common sense should tell, - the subject notifications are ‘non-est.’; And cannot be taken to have come into effect anterior to any date on which they are published in the GOI, after all the left out ‘blanks’ have been completed.

Is there room for any contrary view?!

vswami said...

'MAC' - to be read 'MCA'

Anonymous said...

Rahul,
Could you please clarify the legal status of this notification as far as possible?

chubbs said...

There's case law to support this, but I can't seem to remember it at the moment...the law as it currently stands is that as long as the Section under which the notification is promulgated is mentioned in the notification itself, and an "effective" date is mentioned from which point it comes into play, the notification stands, notwithstanding other procedural irregularities such as a missing date or serial number.