CCI introduces a Green Channel Category

Under the authority of the Competition Act, 2002 (“Act”), the Competition Commission of India (“CCI”) has brought into effect the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2019 (“Amendment”)[1] from 15^th August 2019. It pertains to all mergers or acquisitions, which exceed the monetary thresholds prescribed under the Act (“Combination(s)”). It creates a new category of Combinations aimed at accelerating the regulatory process for approval of Combinations (“Green Channel Category”). By virtue of this amendment, parties are automatically granted approval upon furnishing a notice detailing the Combination along with a declaration of authenticity. To be eligible for this category, the parties should not have any horizontal, vertical or complementary overlaps with each other, their respective group entities or any entity in which they, directly or indirectly, hold shares or control. The scope of what constitutes a horizontal, vertical or complementary overlap is detailed below.

• Horizontal: A horizontal overlap exists if the parties produce or provide similar, identical or substitutable products or services.

• Vertical: A vertical overlap exists if the parties are engaged in any activity relating to production, supply, distribution, storage, sale, and service or trade-in products or provision of services that are at different stages or levels of the production chain.

• Complementary: A complimentary overlap exists if the parties are engaged in any activity relating to production, supply, distribution, storage, sale, and service or trade-in products or provision of services that are complementary to each other.

If the parties to the Combination are eligible under the Green Channel Category, they are required to file the prescribed forms, a self-assessment report demonstrating the non-adverse effect on competition and a declaration of authenticity. Their Combination shall be deemed to be approved upon receiving an acknowledgment for filing the above-mentioned documents under the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011. However, if the CCI subsequently arrives at a finding that the Combination does not fall under the Green Channel Category or the declaration submitted is incorrect, an opportunity of being heard is granted. If the CCI is not satisfied as to their eligibility, the notice given by the parties and the approval granted is rendered void ab initio and further steps may be undertaken by the CCI in accordance with the Act.

Implications of the Amendment

While it may be a well-intentioned move, the Green Channel Category sets fairly narrow criteria that might exclude the majority of proposed Combinations. The criteria exclude all overlaps with any group entities or where any shareholding or control is owned, even to the least possible degree. This might alienate most parties including private equity and venture capital funds owing to their generally far-reaching investment footprints.

The nature of what is complementary has not been defined and such ambiguity may lead to confusion. Unwarranted instances of the approval being rendered void ab initio is a high possibility.

The Amendment attempts to shift the burden of determining the relevant product and geographical market on the parties. It remains to be seen if the CCI will view such subjective private party interpretations in a favorable eye.

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Footnotes:

[1] Available at: https://www.cci.gov.in/sites/default/files/notification/210553.pdf.

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