Under the Indian merger control regime, a ‘combination’ (i.e., an acquisition, merger or amalgamation (collectively, ‘Combination’), must be notified to and approved by the Indian competition law authority, Competition Commission of India (‘CCI’), if it breaches the prescribed asset and turnover thresholds and does not qualify for any statutory exemptions. The requirement to notify CCI is mandatory and such Combinations are subject to a standstill or suspensory obligation, until approved by CCI. There are some cases where CCI has reprimanded parties for violating provisions under the Competition Act, 2002 (‘CA02’) relating to Combination. This article analyses CCI’s decisional practice in such cases.

Types of Penalties that CCI can Impose in Combination Cases

CA02 prescribes various types of penalties in Combination cases on individuals and companies such as: (i) gun-jumping and/or failure to notify: consummation of a notifiable transaction before CCI’s approval or failure to notify a notifiable transaction may attract a penalty of up to 1% of the worldwide turnover or value of assets of the parties to the proposed Combination, whichever is higher; (ii) material omission by enterprises/individuals: where the parties/individuals make material false statements (knowing it to be false) or omit to disclose material facts in the notification, penalties between ₹ 50 lakhs (approx. USD 0.06 million) to ₹ 1 crore (approx. USD 0.135 million) can be imposed; and (iii) non-compliance: failure to pay penalties prescribed at (i) above, may result in additional penalties and/or imprisonment of up to three years.

CCI’s Decisional Practice

On a review of CCI’s decisional practice in Combination cases, the following trend emerges:

As of last week, CCI had passed 51 orders in Combination cases and found a contravention in all but one case^[1]. Out of the 50 orders where CCI found a contravention, it imposed penalties in 39 cases. In the remaining 11 cases, CCI: (i) did not impose a penalty in 10 cases^[2] as it was the first year of implementation of the enforcement provisions relating to Combinations; and (ii) decided not to impose a penalty under CA02 in one case, after hearing the explanation provided by the parties.^[3]

i.    Quantum: The lowest penalty imposed by CCI till date is ₹ 1 lakh (approx. USD 1,357), imposed in four cases^[4] and the highest is ₹ 5 crores (approx. USD 0.67 million), imposed in two cases^[5].

ii.   Gun Jumping: In five cases^[6], CCI imposed penalties for gun jumping on parties who made pre-payment of consideration or advanced a loan, which had the effect of consummating a part of the Combination before CCI’s approval. The penalties in these cases vary from ₹ 5 lakhs (approx. USD 6,788) to ₹ 10 lakhs (approx. USD 13,575) Pertinently, CCI did not take into account the amount of pre-payment or loan advanced by the parties as an aggravating/mitigating factor while imposing a penalty, which varied from ₹ 7 crores (approx. USD 0.23 million) to ₹ 2502 crores (approx. USD 339.66 million) in these cases.

iii.  Change in Law: There have also been few instances where CCI imposed penalties for ‘technical’ contraventions. For instance:

•     Removal of the requirement to notify within 30 days of the trigger event: CCI imposed penalties in four instances^[7] ranging from ₹ 5 lakhs (approx. USD 6,788) to ₹ 5 crores (approx. USD 0.67 million ) for not notifying a notifiable Combination within 30 days of the trigger event, as earlier required under CA02. The requirement to notify within a period of 30 days was later made inapplicable on June 29, 2017 for a period of five years.

•     Acquisition of a business division under the De Minimis Exemption^[8]: CCI imposed penalties in six^[9] cases ranging from ₹ 2 lakhs (approx. USD 2,715) to ₹ 1 crore (approx. USD 0.135 million) for failing to notify transactions where the value of assets and turnover attributable to the relevant asset(s) or business being acquired was below the de minimis thresholds. In these cases, CCI was of the view that for the assessment of de minimis thresholds, the value of the entire assets and turnover of the target enterprise (and not just the relevant assets or business being acquired) were to be considered. On March 29, 2017, a Government of India notification clarified that where a portion of an enterprise or division or business is being acquired, only the relevant assets and turnover attributable to that portion of enterprise or division or business is to be considered when considering the De Minimis Exemption.

•     Sector- specific exemptions: CCI passed two orders^[10] against various Rural Regional Banks (‘RRB’) imposing nominal penalties of ₹ 1 lakh (approx. USD 1,357) in each order. On August 10, 2017, the Government of India through a notification exempted RRB from the application of the relevant provisions of CA02.

iv.   Material Omission by Enterprises/Individuals: CCI has passed only one order^[11] for material omissions by enterprises/individuals, where after hearing the explanation provided by the parties decided not to impose any penalty.

v.    Appeals: Based on publicly available information, there are a total of seven cases^[12] where CCI imposed penalties and the parties appealed this decision. Out of these, so far two cases^[13] have been appealed to the Supreme Court of India (‘SC’), which upheld CCI’s orders. Only in one case^[14], the appellate court has set aside the findings and the penalty imposed by CCI in Combination cases.

Conclusion

CCI has the power to impose severe penalties for breach of provisions relating to Combinations. However, the trends suggest that CCI has rightly shown great self-restraint in exercising their powers in Combination cases and has only imposed nominal penalties after giving due consideration to mitigating factors.

[1] Sundaram Finance Limited/ Royal & Sun Alliance Insurance plcC-2015/03/257

[2]Uttam Galva Steels Limited/Shree Uttam Steel and Power Limited, C-2013/11/140; Infosys Limited/Infosys Consulting India Limited, C- 2012/03/44; Reckitt Benckiser Investments India Private Limited/Paras Pharmaceuticals Limited, C-2012/02/39; Siemens Limited/Siemens Power Engineering Private Limited, C- 2014/02/43; Thesys Technologies Private Limited/Capgemini India Private Limited, C-2012/02/36; Sterlite Opportunities and Ventures Limited/Sterlite Industries (India) Limited, C-2012/02/30; Sasan Power Infrastructure Limited/Reliance Power Limited, C-2012/02/29; Alok Industries Ltd/Grabal Alok Impex Ltd, C-2012/01/28; Viscount Management Services (Alpha) Ltd/Reliance Capital Ltd, C-2012/01/24; Electromags Automotive Products Private Limited/The Bombay Burmah Trading Corporation Limited, C-2011/02/26

[3] Sumitomo Mitsui Trust Bank Ltd/ Reliance Capital Limited, C- 2014/12/235

[4]Claridges Hospitality/Akira Marketing, C-2017/05/508; Gurgaon Gramin Bank/Haryana Gramin Bank, C-2015/12/344; Marudhara Gramin Bank/Mewar Anchalik Bank, C-2016/02/377; Clariant Chemical/Laxness India, C-2016/02/373

[5] Piramal Enterprise/Shriram Transport, C-2015/02/249; and GE Energy BV/General Electric, C-2014/01/241

[6] Chhatwal Group /Dilip Buildcon, C-2018/01/544; Adani Transmission / Reliance Infrastructure, C-2018/01/547; LT Foods / LT Foods Middle East, C-2016/04/387; UltraTech Cement / Jaiprakash Associates, C-2015/02/246; Hindustan Colas / Shell India Markets, C-2015/08/299

[7]Sundaram Finance/Royal&Sun Insurance, C-2015/03/257,GE Energy BV/General Electric, C-2014/01/241, Google/Ethicon, C-2015/06/283, Trent Hypermarket, C-2014/03/162

[8] De-Minimis Exemption exempts acquisitions of shares, voting rights, assets or control of enterprises which: (i) holds assets of less than ₹ 350 Crore in India; or (ii) generates a turnover of less than ₹ 1000 Crore in India from the mandatory pre-notification requirement.

[9] ITC/Johnson, C-2017/02/485, Future Group/Grasim, C-2016/03/384, Shulke India, C-2015/12/349, Diasys Diagnostic/Piramal, C-2015/09/313, SRF Limited/Dupont, C-2015/15/347, Eli Lilly/Novartis AG, C-2015/07/289

[10] Gurgaon Gramin Bank/Haryana Gramin Bank, C-2015/12/344, Marudhara Gramin Bank/Mewar Anchalik Bank, C-2016/02/377

[11] Sumitomo Mitsui Trust Bank Ltd/ Reliance Capital Limited, C- 2014/12/235

[12] Ultratech Limited, C-2015/02/246 (order under Section 43A); ITC/Johnson & Johnson, C-2017/02/485; Eli Lilly/Novartis AG, C- 2015/07/289; Piramal Enterprise/Shriram Transport, C-2015/02/249; SCM Solifert Limited/Deepak Fertilizers and Petrochemicals Corporation Limited/Mangalore Fertilizers and Chemicals Limited C-2014/05/175; Thomas Cook (India) Limited/ Thomas Cook Insurance Services (India) Limited/Sterling Holiday Resorts (India) Limited C-2014/02/153 and Ultratech Limited, C-2015/02/246 (order under Section 44)

[13] SCM Solifert Limited & Anr. v. Competition Commission of India (2018) 6 Supreme Court Cases 631; Competition Commission of India v. Thomas Cook (India) Limited & Anr. (2018) 6 Supreme Court Cases 549

[14] Eli Lilly & Novartis AG,Competition Appeal (AT) No. 3 of 2016