On March 12, 2020, NCLAT set aside CCI’s order imposing a penalty on M/s Eli Lilly & Company (‘Eli Lilly’) under Section 43A of the Act for failure to notify its acquisition of Novartis AG’s animal health business in India (‘NAH India’) (‘NAH Acquisition’) to the CCI in compliance with provisions of Section 6(2) of the Act (‘CCI Order’)[1].

In April 2014, Eli Lilly agreed to acquire the global animal health business of Novartis AG. This was notified to, and cleared by antitrust regulators across the world. The acquisition of NAH India, which was entered into by way of a separate agreement between the parties, was not notified to CCI on account of the fact that the NAH Acquisition would have benefited from the ‘de minimis’ exemption. After issuing a show cause notice seeking an explanation as to why the NAH Acquisition was not notified in India, CCI concluded that the benefit of the ‘de minimis’ exemption could not be taken by NAH India which was an unincorporated business. CCI held that for the purpose of determining whether the NAH Acquisition was exempt, the value of assets and turnover of Novartis India Limited (in which NAH India was based) were to be taken.

Upon appeal, NCLAT noted that under Section 54 of the Act, CCI is mandated to determine the applicability of the available exemptions to a party before requiring filing of a notification or commencing proceedings under Section 43A of the Act. NCLAT further referred to the clarifications provided by the Ministry of Corporate Affairs via a press release on the Press Information Bureau’s website in relation to the ‘de minimis exemption’, which explicitly mentions that the ‘de minimis exemption’ was issued in order to promote the ease of doing business in the country and make India a more attractive destination for foreign investment. NCLAT noted that Eli Lilly was correct in applying the test of ‘de minimis’ to NAH India, which was the actual business being acquired, and set aside the CCI Order. Interestingly, NCLAT also held that the provision in the Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011, which places the obligation to file a notification upon the acquirer to be contrary to the provisions of the parent Act.

[1] Competition Appeal (AT) No. 3 of 2016