On August 03, 2018, CCI passed an order under Section 43(a) of the Competition Act, imposing a penalty on Telenor ASA (‘Telenor’) for consummating a combination without seeking approval by way of a requisite notification.Lakshdeep Investments & Finance Private Limited (‘Lakshdeep’) had filed a notice with CCI for its proposed acquisition of shares of Telewings Communications Services Private Limited (‘Telewings’). Per the transaction, Lakshdeep was to acquire 51% of the equity share capital in Telewings, and ultimately hold 26% of its equity share capital. The transaction involved the following steps: (i) Telewings’ participation in the 2G spectrum auction to be conducted by the Department of Telecommunications from November 12, 2012 with an intention to acquire the necessary spectrum for carrying telecommunication operations in India; (ii) Upon Telewings being declared successful in the 2G spectrum auction, Lakshdeep’s acquisition of 51% of the equity share capital of Telewings (‘Lakshdeep Share Transaction’); (iii) After acquiring the 2G spectrum and requisite licenses necessary for carrying on the business operations in India, Telewings’ acquisition of business of Unitech Wireless (Tamil Nadu) Private Limited (‘Uninor’) on a going concern basis (‘Uninor Business Transaction’); and (iv) On receiving the approval of the Foreign Investment Promotion Board, Telenor was to increase its shareholding to 74% and consequently Lakshdeep to hold 26% of the equity share capital of Telewings (‘Share Transaction 1’).In its review of the transaction, CCI asked Lakshdeep for clarifications with respect to the steps for which the approval of the Commission was being sought including whether the approval was being sought for step (iii) and (iv). Based on Lakshdeep’s response, CCI observed that the transaction was not likely to cause any adverse competition concern in India, and accordingly approved the same by way of an order dated November 29, 2012.CCI further observed that Lakshdeep holding shares in Telewings to the extent of 51%, transfer of business from Uninor to Telewings, and the increase in stake of Telenor in Telewings from 49% to 74 % could not be considered as an intra-group transaction, and therefore the exemption available to intra-group transaction as per Item 8 of Schedule I to the CCI (Procedure in regard to the transaction of Business relating to Combination) Regulations, 2011 (‘Combination Regulations’) were not applicable to these steps. Telewings appealed this finding before the Competition Appellate Tribunal.In the meantime, CCI received a further notice under Section 6(2) of the Competition Act from Bharti Airtel Limited and Telewings concerning a proposed transfer of 100% of the equity share capital of Telewings to Airtel. CCI observed that Telenor had consummated Share Transaction 1, and subsequently increased its shareholding in Telewings from 74% to 100% (‘Share Transaction 2’) without notifying it to CCI. CCI further observed that Telewings had also consummated Uninor Business Transaction without notifying it to CCI.In regard to Share Transaction 2, CCI noted that with 26% shareholding, Lakshdeep still had joint control over Telewings, therefore transfer of the same had the effect of bringing a change in the control of Telewings, from a joint control of Lakshdeep and Telenor to the sole control of Telenor. Thus, Share Transaction 2 was found to not be an intra-group transaction, and therefore not covered under the exemption contained in Item 8 of Schedule I of the Combination Regulations.CCI held, that given the negative control of Lakshdeep over Telewings, and of Unitech Group over Uninor, Uninor Business Transaction and Share Transaction 1 were not intra group acquisition of assets in terms of the erstwhile Item 8 Exemption (which stated that intra-group acquisition of control or shares or voting rights or assets were not ordinarily likely to cause an appreciable adverse effect on competition and are therefore exempted from notification)[1]. CCI further noted that as regards the amended Item 8 Exemption (which exempt from notification acquisition of shares or voting rights or assets within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are not part of the same group), the amendment was only meant as a clarification to the exemption.While deliberating on the mitigating factors, CCI noted that the disclosure of all the steps in the transaction was insufficient to absolve the parties of their obligations to file separate notices in the event the transactions were not inter-connected, or to a composite notice in the event the transactions were interconnected.In light of the above, CCI imposed a penalty of ₹ 0.5 million on Telenor.*Order dated 03.07.2018 in Combination Registration No. C2012/10/87. [1]Amended by Notification F. No. 3-1/Amend/Comb.Regl./2013/CD/CCI, dated April 4, 2013.