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December 31, 2012 8:09 pm

Industry feels CCI demanding too much information on M&A deals

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This article is provided to FT.com readers by PaRR (Policy and Regulatory Report)— a newly launched product of The Mergermarket Group providing proprietary intelligence and research on competition law and sector-specific regulatory changes around the world. www.parr-global.com

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*Negotiations between CCI and industry required to thrash out issue of inadequacy of data submissions

*CCI regulations not consistent with standards of developed nations

Merger review data submission to the Competition Commission of India (CCI) has created much debate in many public forums. While the regulator says that the industry fails to submit sufficient data for the CCI to take an informed decision, antitrust lawyers interviewed by PaRR pointed out that the regulator is not only demanding too much information but it wants the data in a particular format.

A recent merger review application submitted to the CCI was returned because the contact details of concerned parties was not in line with CCI’s “exact” format, said one of the lawyers.

A second lawyer told PaRR that the preference by industry participants in India is to submit as little data as possible lest the CCI question the parties further and demands even more information.

A US-based lawyer told PaRR that antitrust regulators in many developed economies just ask for the basic information in the form of the names of the parties that intend to merge, a copy of the agreement or letter of intent and the turnover of the respective companies and not the market share. “Very little information is actually sought at the initial stage,” he added.

The CCI on the other hand is of the view that limited availability of data makes it difficult to undertake a proper analysis.

“Data submitted by law firms is minimal” and created within a large basket to look into thereby, making it difficult for the regulator to do a proper assessment, P K Purwar, an advisor to CCI’s merger division, previously told PaRR.

As M&A deals across multi-jurisdictions become increasingly common, filing information becomes all the more critical, given the need to close transactions in a timely manner, pointed out Roxann E Henry, a partner with the Global Antitrust Law Practice Group at Morrison & Foerster LLP.

Speaking at the American Bar Association (ABA) Antitrust Law Section’s conference, Antitrust in Asia, held in New Delhi recently, Henry noted that in the United Stated it was possible to file a deal with the antitrust regulator based on a letter of intent, without having the merger agreement in place. In India, a formal agreement approved by the boards of directors of both parties is required when it comes to merger filings with the CCI.

A case in point is Future Group’s initial application seeking CCI approval for the takeover of Pantaloon Retail by Aditya Birla Nuvo.

The deal considered invalid by the regulator as on 16 July, 2012, the proposed deal did not receive approval from the board of directors of the respective companies. The notice was filed with the Indian antitrust regulator pursuant to a Memorandum of Understanding dated 14 June 2012.

The CCI explained that unless the concerned parties to the merger finalise the exact scope of the assets to be acquired and the share entitlement ratio, there was no point in filing with the regulator.

Some US based lawyers told PaRR that the CCI’s regulations were not consistent with standard practices adopted in developed markets, such as the US.

Indian antitrust lawyers felt that the process of merger filing could be facilitated if the CCI followed the practice of the Federal Trade Commission (FTC), which has a special team to field calls and look into merger transactions and advise parties whether or not these have to be notified.

Though commending the CCI for its “light touch” in clearing merger cases, Bharat Vasani, chief legal and group general counsel at Tata Sons Limited, told PaRR that around 50% of 80-odd applications received need not have been filed with the CCI. This is because most pertained to filings of wholly owned subsidiaries with the parent company, which would not trigger any change of control.

Data collection agencies in India agreed that availability of data is a big problem in the country, and can only be overcome by way of negotiations between parties and regulators.

An official from one of the collection agencies did not rule out working with industry associations to facilitate the process. However, at least two CCI officials told PaRR that this is not something the regulator would like to encourage at this stage.

“Not when it is trying to set an example to ensure against antitrust practices,” one of the CCI officials said.

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