Jurisdiction - India
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India – Merger Control: Blurring the Edges?

4 August, 2014

Legal News & Analysis – Asia Pacific – India – Competition & Antitrust



The Indian merger control regime under the Competition Act, 2002 (‘Act’) mandates the compulsory notification of all ‘combinations’, i.e. acquisitions, mergers, or amalgamations that cross certain statutorily prescribed jurisdictional thresholds. Procedure demands that such combinations may not come into effect for a period of 210 days from notifying the Competition Commission of India (‘CCI’), unless CCI approves the transaction earlier. Failure or delays in notification can attract hefty penalties of up to 1% of the total assets or turnover of the combination, whichever is higher. While seemingly straightforward, two recent decisions of CCI have brought the events that mark the start and finish of the merger control process into focus.


Merger Control Trigger: When Does The Process Begin?

Ordinarily, a notification is triggered by: (i) the execution of a definitive agreement or other document for acquisition; or (ii) the final board approval for the scheme of merger or amalgamation. The trigger for notification could also be a communication of the intent to acquire, to any statutory authority or the Central or State Governments in India1. The underlying rationale is that combinations ought to be notified only when the contours of the deal are relatively well defined, with little room for material change. This helps CCI accurately assess the effects of a combination on competition in India.

In Tesco Overseas Investments Limited /Trent Hypermarket Limited2 (‘Tesco Case’), CCI penalized parties for filing a belated notification, holding that the notification requirement was triggered by the parties’ application to the Foreign Investment Promotion Board (‘FIPB’) and the Department of Industrial Policy and Promotion. This was despite the application being filed three months prior to the execution of the actual definitive agreements for the acquisition by Tesco Overseas Investments Limited (‘Tesco’) of a stake in Trent Hypermarket Limited.

The parties’ arguments that firstly, the FIPB application did not communicate any intention to acquire, and secondly and more importantly, they would not have been able to provide CCIwith sufficient information had the trigger been the FIPB filing, did not find favour. The deal itself, while approved, was at the cost of a penalty of INR 30m to Tesco.

CCI’s strict interpretation of the trigger event appears to overshadow the primary reason for filing merger notifications, i.e. to evaluate the effects of a combination. In the aftermath of the Tesco Case, parties will need to focus more on the timing of their merger filings, which could as a result, even be premature, in order to avoid liability3. Equally, they face the risk of having their filings returned if there are changes to the transaction structures or the underlying commercial understanding4. From a business perspective, this leaves parties with little room to negotiate deals if merger filings are triggered before the documents are even drawn up. In such cases, CCI itself would not be in a position to comprehensively determine the effects of the combination, and may have to prolong the review process with multiple ‘clock stops’ to fill information gaps simply because it was not possible for parties to provide the required information at the time of filing.

Merger Approval: When Does The Process End?

In addition to the trigger event that sparks the merger control process, recent developments also call into question the conclusion of this process, since notifications, once made, must then await CCI clearance before the transactions may be completed.

The Indian merger control regime, in theory, restricts itself to the review of transactions that cross the statutory thresholds and cannot avail of any applicable exemptions. Ordinarily, this would mean that exempt transactions do not have to wait for CCI approval for completion. However, the hitherto bright-line test for determining what is subject to the suspensory obligation appears to have been blurred by: (i) a recent amendment to the merger regulations that determines notifiability on the basis of the ‘substance’ of the transaction; and (ii) CCI’s decision in Thomas Cook (India) Limited/Thomas Cook Insurance Services (India) Limited/Sterling Holi-day Resorts (India) Limited5 (‘Thomas Cook Case’), which introduces the concept of ‘composite combinations’.

In the Thomas Cook Case, CCI was notified of a proposed merger scheme involving (i) the de-merger of the resorts and timeshare business of Sterling Holiday Resorts (India) Limited (‘SHRIL’) into Thomas Cook Insurance Services (India) Limited (‘TCISIL’); and (ii) the amalgamation of the residual business of SHRIL into Thomas Cook (India) Limited (‘Scheme’). As an aside, the merger notification also provided details of certain other proposed transactions, all of which were exempt from notification, including the completion of the acquisition by TCISIL of 9.93% in SHRIL through open market purchases, before the merger notification was filed with CCI (‘Market Purchases’). In keeping with the merger regulations, which grant notifying parties the facility to file a single merger notification, covering multiple inter-connected or interdependent transactions, one or more of which may be notifiable, the parties filed a single notice and contended that all the transactions, apart from the Scheme, were exempt from the notification requirement.

CCI had a different perspective, and once again, despite approving the notified transaction, it penalized the parties for having completed the Market Purchases without its approval. CCI felt that it was incorrect and against the spirit of the Act to view parts of a composite transaction in isolation (and determine that they are exempt), and that instead, the ‘substance’ of the entire ‘composite combination’ ought to be assessed.

CCI did set out a somewhat subjective test to determine whether two transactions form part of the same composite combination. With the caveat that this is to be determined on the facts and circumstances of every case, CCI identified the following factors as being relevant: (i) the business and parties involved; (ii) [simultaneity] in undertaking transactions; and (iii) whether it is practical and reasonable to isolate and view the transactions separately. CCI also noted that ‘mutual interdependence’ of transactions6 was not the only test to determine whether transactions are inter-connected and inter-dependent.


Despite the professed intent of the new ‘substance’ test, CCI’s latest stance appears to favour form over substance. For transacting parties and legal advisors, the fallout of the Thomas Cook Case is a tussle between the two. Transactions that could have earlier been safely excluded from the purview of Indian merger control, will now perhaps have to be re-examined, given that CCI can suo motu review transactions for up to one year from their completion. Going forward, it is likely that parties have to suspend completion of even non-notifiable steps until receipt of CCI approval. Further, the test set out in the Thomas Cook Case is far from bright line, and any series of transactions involving a merger in one step could be excluded from eligibility for otherwise available exemptions.

The interpretational can of worms opened by the Thomas Cook and Tesco Cases could prove expensive for parties who could unwittingly fall afoul of the law, despite their best efforts and intentions to comply. The uncertainty caused in the aftermath of these decisions can only be resolved by some much needed clarity from CCI, which has thus far, maintained an industry friendly track record, either through clarificatory regulation or open dialogue with industry stakeholders.


End Notes:


1 This is provided for under the second proviso to Regulation 5(8) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (‘Combination Regulations’).


2 Tesco Overseas Investments Limited/Trent Hypermarkets Limited, Combination Registration Number C-2014/03/162.

3 See Aditya Birla Nuvo Limited/Pantaloons (Retail) India Limited, Combination Registration Number C-2012/07/69, where CCI returned the merger notification as not valid, as the binding memorandum of understanding was held to be merely a step towards negotiation of the transaction. CCI noted that details such as the exact scope of assets to be acquired, valuation, share swap ratio, etc. were yet to be finalized by parties.

4 WBSP/WBBS (Delhi)/WBBS (Kerala)/WBBS (Haryana), Combination Registration Number C-2012/05/55.


5 Thomas Cook (India) Limited/Thomas Cook Insurance Services (India) Limited/Sterling Holiday Resorts (India) Limited, Combination Registration Number C-2014/02/153.

6 Sterling Industries (India) Limited/Madras Aluminium Company/Sesa Goa, Combination Registration Number C-2012/03/45), Tech Mahindra/Satyam Computer Services/C&S System Technologies, Combination Registration Number C-2012/03/48 and Etihad Airways PJSC/Jet Airways (India) Limited, Combination Registration Number C-2013/05/122.




For further information, please contact:


Zia Mody, AZB & Partners
[email protected]


Abhijit Joshi, AZB & Partners 
[email protected]

Shuva Mandal, AZB & Partners 
[email protected]


Samir Gandhi, AZB & Partners
[email protected]

Percy Billimoria, AZB & Partners 
[email protected]


Aditya Bhat, AZB & Partners 
[email protected]

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