'File, Smile & Go': Competition Commission of India

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India Inc has been waiting nervously for the notification of merger control regulations. These regulations will decide which deals have to file with the Competition Commission of India and how long the Commission can take to scrutinise whether a deal is anti-competitive or not?

The previous draft regulations were met with lots of negative comments from industry on how the thresholds are too low and the time available for scrutiny to long. The big fear is once activated merger control regulations could slam the brakes on M&A activity. An unwarranted fear says the Chairman of Competition Commission of India, Dhanendra Kumar as he prepares to release a new set of draft regulations. I met him at the recently concluded IBA M&A conference.

"I can say that we are almost in a situation at the moment that we are geared up to meet the mandate given to us under the act. Section 3 and 4 which would relate to anti competitive agreements and 4 which relate to the Abuse of Dominance they have been notified already on May 20, 2009, and already we are receiving lot of references-almost two dozen of them are under consideration with us. Section 5 and 6 which related to combinations, acquisitions, mergers, consolidations-those notifications are with the government and we hope they will be coming soon," Kumar said.

"We are finalizing our regulations very-very soon and we will be ready for implementations of these provisions as soon as these are notified. But I would like to add a dimension here that sometimes there are some misgivings about section 5 and 6 but section 3 and 4 and 5 and 6 they are an integrated whole of the Competition Act because even if section 5 and 6 are not notified nothing debars from a potential competition or business rival or a third person to file a reference before the Competition Commission under section 3 that this combination which is likely to come is anti-competitive agreement or section 4 that it is creating a situation where there could be potential abuse of dominance and the Competition Commission would have to look at it under the act and under section 28, can look at the possibility of division even if its required, I hope it doesn't happen," he added.

Q: I get what you are saying that even though 5 and 6 are yet to be notified. The fact is that any combination merger, acquisition was to result in either in an anti competition situation or an abuse of dominance you still already are vested with a power to investigate that. You spoke of timelines for the notification and the draft regulations-will the draft regulation precede the notification?

A: No, it will follow the notifications but almost instantaneously.

Q: So when is the notification expected, do you have a word from the Ministry and when can we expect the draft regulations?

A: Not really. We do not know yet when the Ministry is going to notify but we expect that it would be coming soon. As and when this notification comes then the draft would be ready. What we are doing is that this draft regulations they are being placed on the website soon, after these are discussed and finalized in the commission and then we would invite comments from all stake holders possibly in two to three weeks and after these comments are received then we will take them into account. It is fairly transparent and consultative process, and then we will notify them or keep them ready for notification. But they will be notified only when 5 and 6 have been notified not before that.

Q: The draft regulation should be on your website in another week or 10 days?

A: About two weeks.

Q: And the notification or regulation 5 and 6, when is that likely to happen?

A: I do not know. Its upto the government but we hope it will happen soon.

Q: Would soon mean a month or two?

A: I should presume as much.

Q: Going back to the staffing issue-can you take us through how many people you have manning the commission because one of the bigger concerns was that do India's regulatory bodies have enough people to process deal flow at the pace with which the economy has been growing over the last three to four years and if that requirement was not met then the concerns of 210 days etc become even more heightened and hyper, so take us through you people position right now?

A: We are in the process of building up our capacity. We have already recruited a few dozen people through deputation and so on. Almost 50 of them so far are various professionals, either joined or on the way. The total sanction strength is 185 and we insert advertisement for direct recruitment, the written test have been conducted, interviews are to be held soon and those people should also be in position in the next month, month and half (30-45 days) and then we will train them.

So we hope that our recruitment and capacity building process would match the requirement of our processing. But taking advantage of this particular thing about the expectation of industry, let me mention in our regulations which will be on the website hopefully soon, we intend to introduce a system for two-track mechanism for processing and there would be fast track mechanism process, whereby some of the routine stuff which is not causing appreciable adverse effect on competition within India, could be cleared on fast track, the time limit would be given 30 days but we will try to clear it almost across the table within a week or whatever.

If prima-facie it appears there is no appreciable adverse effect. Almost 90-95% cases we hope could be cleared through this process and the remaining which would need detail scrutiny could go in for the other route which at the most can take up to 210 days but the moment we don't expect we will do that. The forms would also be simplified for the fast track clearances that route and the fees would be lower. That is what we are contemplating but I cannot see anything at this stage but the regulations are under finalization. So let us hope, wait to see them.

Q: You have to yet to reach that 185 strength sanctioned by the government? That was the main cause of worry that if we don't have enough people in the commission as has been the case often with India's regulatory bodies, then therefore the fault rarely lies in the regulations or the rules, it often lies in the fact that there are just not enough people to process those cases in a speedy manner-so when will you reach the 185 staff strength?

A: As I said, that we hope in the next 30-45 days we would have most of our people in position then we will expose them to training both within India and outside. So by the time we are asked upon to take processing of these cases, we hope all these people would be in position.

Q: One of the key issues that was the issue of 210-day time line which you already told me you are going to fast track some cases but there is also criticism coming in that have you cast the net too wide-are too many transactions going to be required to go through CCI approval and in that case even them having fast track mechanism will not be efficient enough. Do you believe that there is a case for more exemptions? Do you believe there is a case for strengthening the de minimis requirements of any sorts to weed out a lot of the transactions that would not require CCI approval?

A: I would suggest that you have a look at our regulations once they are out because they would list out various categories which would be put on the fast track mechanism. We do not think that there is need or possibly it would be in the interest of industry also to have an exemption under the act at this stage, so if all those cases are notified to the Competition Commission of India and we could just look at it and there is also provision which we are introducing for pre-merger consultation and in that process it will be possible informally for the people concerned to come and talk to our experts and then we would guide them about the procedures that this falls and this doesn't fall.

There would be variety of cases where we feel that there is not need of going in for detailed scrutiny, that does not cause any appreciable adverse effect, they could be like acquisition of shares below a certain shareholding-could be 15% or whatever, or acquisition arising out of succession or will and things like this. Variety of acquisition or acquisition of assets which is necessary in the normal course of business; suppose a large company were to acquire assets like cars or typewrites, it is not required to be processed.

So those are the kind of cases which can be straight away cleared, I am not saying the routine stuff but the buying out of investments and the shares and so on upto a limit, and I don't think that it is going to hurt anybody, on the contrary it would be useful for the people to have this clearance given to them straight away across the table by Competition Commission of India that they don't need a scrutiny.

Q: Why should they even come to you?

A: They would be provision for de minimis also. So, not all kind of transactions will have to come to us. But altogether I can assure you that the implementation of this regime would be found to be in line with what is existing in the rest of the world.

Q: So you are confident that the new draft regulations which will come out in a couple of weeks from now will put to rest fears of this net being cast too wide?

A: I hope so.

Q: The other broad concern that did come up in the conference, in the session that you were chairing was the issue of what is the trigger event, how do you determine what the trigger event is and in some cases the trigger event if defined thus by the CCI not even lead to a transaction. So how early do you have to inform the CCI?

A: On the trigger even I would request you to just wait for the draft notifications.

Q: There is strong likelihood that the draft regulations will take care of this worry as well. But what is dominance in the sense that many of the participants in this conference were also asking the question that can you define certain areas that you believe or certain parameters that you believe will constitute the trigger of dominance. So that companies know in advance that if they are going to cross those parameters by way of transaction of any nature that they are then going to fall foul of your rules and laws-is that something that has been dealt with in the draft regulations as well?

A: If you wish to define dominance, you have to first define what is irrelevant market, and within that relevant market there could be situations of dominance. So every case has to be viewed on a case-by-case basis but the intention is very clear that unless there is a situation there is an undertaking which can abuse its dominance to the detriment with the market we won't like to step in. But again I would say that at this stage just wait for our regulations.

Danenedra Kumar's Moto: File, Smile and Go.