CombinationRegulationsUnder

IndianCompetitionLaw
(2012Doceffectivetime)
The Competition Commission of India (the "CCI") has on 11 May, 2011 notified the
Competition Commission of India (Procedure in regard to the transaction of business relating to
combination) Regulations, 2011 (No 3 of 2011) ("Combination Regulations") under the
Competition Act, 2002 (the Competition Act).
Background
The Competition Act was partially enforced on 20 May, 2009 whereby the provisions relating to
anti-competitive agreements and abuse of dominant position were notified. Sections 5 and 6 of
the Competition Act (the combination provisions) will regulate 'combinations', requiring prior
notification and approval where such provisions are applicable. These provisions and the
Combination Regulations are scheduled to come into effect on June 1, 2011. With the
enforcement of the combination provisions and the notification of the Combination Regulations,
all mergers, amalgamations and/or acquisitions falling within the thresholds indicated in section
5 of the Competition Act will require prior approval of the CCI. This post sets out the highlights
of the Combination Regulations.
Salient features
I.Meaningofcombination
Theterm 'combination' forthepurposes ofthe Competition Actisdefined verybroadly,to
includeanyacquisitionofshares,votingrights,controlorassetsormergeroramalgamationof
enterprises,wherethepartiestotheacquisition,mergeroramalgamationsatisfytheprescribed
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monetarythresholdsinrelationtothesizeoftheacquiredenterpriseandthecombinedsizeofthe
acquiring and acquired enterprises[1]with regard to the assets and turnover of such
enterprises.
(a)Thresholdforsizeofacquiredenterprises
A transaction will be a combination for the purposes of the Competition Act and attract
CombinationRegulationsonlyifthesizeoftheacquiredenterpriseisatleastINR250Croresin
terms of assets or INR 750 Crores in terms of turnover.[2]In other words, if the acquired
enterprisehasassetsoflessthanINR250CroresorturnoveroflessthanINR750Crores,based
onthemostrecentauditedfinancialstatementsoftheentitiesinvolved,notificationandapproval
requirementsunderthecombinationprovisionsoftheCompetitionActwouldnotbeattracted.
(b)Thresholdforcombinedsizeofacquiringandacquiredenterprises
AtransactionattractsthecombinationprovisionsoftheCompetitionActonlyifthecombined
size of acquiring and an acquired enterprise, upon completion of the transaction, meets the
followingthresholds:

ASSETS

TURNOVER

In

No

INR 1,500 Crores (approximately USD 330INR

India

Group

million)

Group INR

4,500

Crores

(approximately USD 1 billion)

6,000

Crores (approximately USDINR

1,320 million)

18,000

Crores(approximately USD

billion)
In

ASSETS

India
or
outside

Total
No

USD

Group million

Group USD
billion

TURNOVER
India

Total

750INR

750USD

India
2.25INR

2,250

Crores

Crores (approximately USD billion

(approximately USD

165 million)

500 million)

3INR

750

CroresUSD

(approximately USD
million)

165billion

9INR

2,250

Crores

(approximately USD
500 million)

(c)Meaningofassetsandturnover
TheCombinationRegulationsclarifythetermassetstomeantotalassets.TheCompetition
Actdoesnotdefineassetsbutprovidesfordeterminationofvalueofassetstobebasedupon
thebookvalueoftheassetsasshownintheauditedbooksofaccountoftheenterprise,inthe
financialyearimmediatelyprecedingthedateoftransaction.UndertheCompetitionAct,value
ofassetsincludesbrandvalue,goodwill,valueofintellectualpropertybutexcludesdepreciation.
Further,whiletheCompetitionActdefinesturnovertoincludethevalueofsaleofgoodsor
services, the Combination Regulations clarify that indirect taxes will be excluded from the
computationofturnover.

II. Transitory Transactions

Under the Combination Regulations, the transactions agreed pursuant to definitive
documentation prior to June 1, 2011 have been exempted.
(a) Acquisition/acquisition of control
For any acquisition of shares or control (resulting into combination), the CCI is required to be
notified only if the binding document(s) (i.e. a document conveying a decision to acquire
control, shares or voting rights) in relation to such acquisition is executed on or after June 1,
2011.
(b) Merger/amalgamation
For any merger or amalgamation (resulting into combination), the CCI is required to be notified
only if the date of approval (i.e. final decision taken by the board of directors) of proposals is on
or after June 1, 2011.
III. Trigger Events
The requirement to file notice at the CCI is based upon certain trigger events.
(a) Acquisition/acquisition of control
The CCI is required to be notified within 30 days of the execution of any agreement or other
document for acquisition or acquiring of control.
The phrase other document has been clarified under the Combination Regulations to mean any
binding document conveying an agreement or decision to acquire control, shares, voting rights
or assets. In the context of hostile takeover, other documentmeans any document executed by
the acquirer which conveys a decision to acquire control, shares or voting rights. Where no
document has been executed but the intention to acquire has been communicated to the Central
Government or State Government or any statutory authority, the date of communication will be
deemed to be the date of execution of the other document for acquisition.

(b) Merger and amalgamation

The CCI is required to be notified within 30 days of the approval of the proposal relating to
merger or amalgamation by the board of directors of the enterprises concerned with such merger
or amalgamation. The approval of the board of directors has been clarified under Combination
Regulations to refer to the final decision of the board of directors.
(c) PFI, FII, bank and venture capital fund
Any share subscription or financing facility or any acquisition by a public financial institution,
foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan
agreement or investment agreement are exempted from merger control provisions under the
Competition Act. However, the CCI is required to be notified within 7 days of such share
subscription or financing facility or acquisition by a public financial institution, foreign
institutional investor, bank or venture capital fund in Form III.

IV. Obligation to Notify

(a) Acquisition/acquisition of control
The acquirer has the obligation to file the notice in Form I or Form II (see V below), as the case
may be.
(b) Hostile takeovers
Where the enterprise is being acquired without its consent, the acquirer has the obligation to file
the notice in Form I or Form II, as the case may be.
(c) Merger/amalgamation
Parties to the combination are required to jointly file the notice in Form I or II, as the case may
be.
(d) Transaction in tranches

Parties to the combination may file a single notice covering all the transactions where the
ultimate intended effect of a business transaction is achieved by way of a series of steps or
smaller individual transactions which are inter-connected or inter-dependant on each other, one
or more of which may amount to a combination.
V. Notification to CCI
In cases where the prior notification and approval requirements under the combination provisions
of the Competition Act are attracted, a notification in the prescribed form must be filed with the
CCI and the combination cannot be effected unless prior approval is obtained from the CCI.
(a) Forms
1. Form I
The notice under the provisions of the Competition Act shall ordinarily be filed in Form I as
specified in Schedule II of the Combination Regulations.
The instances where Form I is required to be filed include:
(i) where the parties to the combination are conglomerates (i.e. neither horizontally nor vertically
situated);
(ii) where the parties to the combination are predominantly engaged in exports of goods or
services from India (i.e. at least 75% of the turnover of the parties to the combination is derived
from exports out of India) and the market share of the combined entity is less than 15% in the
relevant market in India;
(iii) where the acquisition or acquisition of control is by a liquidator, administrator or receiver
through court proceedings or through a scheme approved under the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
or under the Sick Industrial Companies (Special Provisions) Act, 1985;
(iv) where an acquisition results from a gift or inheritance;

(v) where an acquisition is of a trustee company or arises from a change of trustees of a mutual
fund established under the Securities and Exchange Board of India (Mutual Fund) Regulations
1996;
(vi) where the parties to the combination are horizontally situated and the combined market share
is less than 15% in the relevant market;
(vii) where the parties to the combination are vertically situated and their individual or combined
market share is less than 25% in the relevant market
Form I is fairly simple and requires information such as the products/services of the enterprise
and the relevant market in which the enterprise operates. Form I is sub-divided into two parts
Part I and Part II. Part I of Form I is to be filled by each combination. Part II of Form I is
required to be filled under (vi) and (vii) above.
2. Form II
Though the Combination Regulations categorize Form II to be filed at the option of the parties, it
is reasonable to infer that all other cases where the pre-requisites for Form I are not fulfilled,
Form II will be required to be filed. Further, where the parties to the combination have filed
Form I and the CCI requires information in Form II to form prima facie opinion whether the
combination is likely to cause or has caused appreciable adverse effect on competition within the
relevant market, CCI will direct the parties to file notice in Form II. Form II is a very detailed
form and besides basic information such as products/services of the enterprise and relevant
market of operation of the enterprise requires information about the market structure, demand
and supply structure, entry and exit conditions, innovation etc.
3. Form III
Form III is required to be filed for acquisition by a public financial institution, foreign
institutional investor, bank or venture capital fund. Form III is a relatively straight forward and
requires information about relevant product market, relevant geographic market, exercise of
control etc.

(b) Filing fee

The following table summarizes the filing fees:

Notice

Fee

Form I

INR 50,000

Form II

INR 1,000,000

Form III

No fee

VI. CCIs Review

(a) Combination Stopwatch
The combination stopwatch starts ticking from the date of receipt of notice by the CCI. The
clock stops if the parties to the combination are required to file any additional information or
rectify any information or carry out modification pursuant to the CCIs direction.
(b) Timelines and fast track endeavour
Under the Combination Regulations, the CCI has committed that it shall endeavour to pass an
order or issue direction within 180 days even though under the provisions of the Competition
Act, a combination is deemed to be approved only in the absence of a decision from the CCI
within 210 days (excluding time taken in responding to clarifications sought by the
Commission). Further, under the Combination Regulations, the CCI shall, within 30 days of
valid and complete notice, formulate prima facieopinion whether the combination is likely to
cause or has caused an appreciable adverse effect on competition within the relevant market in
India.
The following table summarizes the timelines for the CCI:
Nature of the timeline

# of days from receipt of valid

and complete notice
8

Stage 0

Combination stopwatch starts ticking

Stage I

Formulation of prima facie opinion

30 days

Stage II

Endeavour to pass a final order or180 days

issue direction

Stage III

Final

deadline

beyond

which
210ys

combination will be deemed to be

approved

VII. Transactions where notice need not be filed

Schedule I of the Combination Regulations enumerates categories of combinations that are
unlikely to cause an appreciable adverse effect on competition and therefore need not ordinarily
require notification:
(a) an acquisition of shares or voting rights solely as an investment or in the ordinary course of
business (in so far as the total shares or voting rights held by the acquirer, directly or indirectly,
do not exceed 15% and does not lead to acquisition of control);
(b) an acquisition of shares or voting rights, where the acquirer, prior to the acquisition, has 50%
or more of share or voting rights (except where the transaction results in change from joint
control to sole control);
(c) an acquisition of assets, not directly related to the business activity of the acquirer or made
solely as an investment or in the ordinary course of business, not leading to the control of the
enterprise (except where assets being acquired represent substantial business operations in a
particular location or for a particular product or service of the enterprise)
(d) an amended or renewed tender offer where a notice to CCI is filed by the party making the
offer, prior to such amendment or renewal of the offer;
(e) an acquisition of stock-in-trade, raw materials, stores and spares in the ordinary course of
business;

(f) an acquisition of shares or voting rights pursuant to a bonus issue or stock splits or
consolidation of face value of shares or subscription to rights issue (not leading to acquisition of
control);
(g) any acquisition of shares or voting rights by a person acting as a securities underwriter or a
registered stock broker;
(h) an acquisition of control or shares or voting rights or assets by one enterprise of another
within the same group;
(i) an acquisition of current assets[3] in the ordinary course of business; and
(j) A combination taking place entirely outside India with insignificant local nexus and effects on
markets in India[4].
However, the notification of such transactions will be necessary where they are likely to cause
appreciable adverse effect on competition.
VIII. Independent Monitoring Agencies
Where the CCI is of the opinion that the modifications proposed by it and accepted by the parties
to the combination require supervision, the CCI may appoint independent agencies (i.e.
accounting firm, management consultancy, law firm, professional organization or independent
practitioners of repute) who/which have no conflict of interest. These agencies shall submit their
report to the CCI and will be paid by the parties.
IX. Compliance Report
Where the CCI is of the opinion that combination has or is likely to have appreciable adverse
effect on competition but such adverse effect can be eliminated by suitable modification to such
combination, it may propose appropriate modification to the combination to the parties to the
combination. The modifications shall be carried out by the parties to the combination within the
period specified by the CCI. The parties to the combination shall, upon completion of
modification, file a compliance report with the CCI.

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X. Confidentiality
The CCI is obligated under the Competition Act to maintain confidentiality. The parties to the
combination requesting confidentiality are required to clearly state the reasons, justifications and
implications for the business so that CCI may consider the request for confidentiality.
XI. Cooperation with other agencies or statutory authorities
The CCI may seek the opinion of any other agency or statutory authority in relation to a
combination.
Concludingobservations
FromJune1,2011,withthenotificationoftheCombinationRegulations,theCCIwillhavefull
power to review acquisition, acquisition of control, mergers and amalgamation under the
CompetitionAct.WherethepartiestothecombinationfailtonotifytheCCI(inspiteofan
obligationtodoso)andtheCCIinitiatesinvestigationonitsown,theCCIshalldirecttheparties
tothecombinationtofilenoticeinFormII.Further,thefailuretonotifyandobtainrequired
approvalattractspenalties(upto1%oftotalturnoverortheassets,whicheverishigher)under
theCompetitionAct,andinsuchcases,thetransaction wouldberenderedvoid,iftheCCI
subsequentlydeterminesthatthecombinationhasan'appreciableadverseeffectoncompetition
inIndia'.

[1]

An enterprise for the purposes of the Competition Act includes all entities

within a group, defined to mean controlling entities, controlled entities and

entities under common control. In this context, 'control' means exercising at
least 50% of voting rights, appointing at least 50% of directors or
management control.

11

[2]

This threshold is prescribed by government notification dated March 4,

2011. Presently, this threshold is not restricted in its express terms to

assets/turnover in India. However, the Central Government is considering a
proposal to restrict the assets/turnover of the acquired enterprise to India.
[3]

Schedule VI, Companies Act, 1956 defines current assets to include (i)

interest accrued on investments; (ii) stores and spare parts; (iii) loose tools;
(iv) stock-in-trade; (v) works-in-progress and (vi) sundry debtors.
[4]

The Competition Act prescribes the monetary thresholds of INR 750

Crores (approx. USD 165 million) of assets or INR 2,250 Crores (approx. USD
500 million) of turnover in India as local nexus requirement for a combination
taking place outside India.

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Case on combination
Competition Commission of India
Indian Kanoon - http://indiankanoon.org/doc/165899231/

Competition Commission of India

Notice Given By Spvc Newco ... vs Unknown on 6 February, 2014
Fair Competition
For Greater Good
COMPETITION COMMISSION OF INDIA
(Combination Registration No. C-2013/12/147)
06.02.2014
Notice u/s 6 (2) of the Competition Act, 2002 given by SPVC NewCo Limited
Order under Section 31(1) of the Competition Act, 2002
1. On 27th December 2013, the Competition Commission of India (hereinafter referred
to as the "Commission") received a notice under sub-section (2) of Section 6 of the
Competition Act, 2002 (hereinafter referred to as the "Act") given by SPVC NewCo
Limited (hereinafter referred to as "SPVC" or "J.V."). The notice was filed pursuant to a
Shareholders Agreement dated 5th December, 2013 between INEOS Group Investments
Limited (hereinafter referred to as "INEOS"), Solvay S.A./N.V. (hereinafter referred to
as "Solvay") and SPVC (hereinafter referred to as the "Shareholders' Agreement"). As
per the Shareholders' Agreement, Solvay and INEOS will form a 50-50 joint venture in
SPVC by combining their chlorvinyls and related businesses present in the European
Economic Area (hereinafter referred to as "EEA") only.
2. As stated, the proposed combination relates to the creation of a joint venture by
Solvay and INEOS through a series of inter-related steps, to combine their chlorvinyls
13

and related businesses in the EEA. After the proposed combination takes effect, SPVC
will be jointly held and controlled, directly or indirectly, in equal shares, by Solvay and
INEOS. As stated in the notice, Solvay and INEOS would contribute to the J.V.,
substantially all of their chlorvinyls and related businesses in the EEA. Whereas the
contribution of Solvay in the J.V. would be by way of transferring its share capital in
certain subsidiaries, including NewCo BE, a newly incorporated subsidiary which is
proposed to be acquired by SPVC, as well as the assets, spread across seven fully
integrated production units in Europe; INEOS would contribute to the J. V.
substantially all of its chlorvinyls chemical business which is operated through Kerling
plc., a subsidiary of INEOS. Post combination, SPVC will, therefore, own and operate
the combined chlorvinyls and related businesses as transferred to it by Solvay and
INEOS.
Page 1 of 4
Fair Competition
For Greater Good
COMPETITION COMMISSION OF INDIA
(Combination Registration No. C-2013/12/147)
As stated in the notice, no later than six years after its creation, the J. V. will pass under
the sole control of INEOS.
3. Further, as stated in the notice, no local Indian subsidiaries of Solvay and INEOS,
operating in India, will be contributed to the J. V. It has also been stated in the notice
that none of the Indian subsidiaries of Solvay and INEOS are engaged in any activity
related to the chlorvinyls and related products.
4. In terms of Regulation 14 of Competition Commission of India (Procedure in regard
to the transaction of business relating to combinations) Regulations, 2011 (hereinafter
referred to as "Combination Regulations"), vide letter dated 3rd January, 2014, the
parties were required to remove certain defects and provide information / document (s)
latest by 15th January, 2014. The parties filed their response on 22nd January, 2014
after seeking extension of time for filing their response.
14

5. The proposed combination falls under Section 5(a) of the Act.

6. SPVC, incorporated as a wholly-owned subsidiary of INEOS, is currently not engaged
in any business. However, as stated, after the proposed combination takes effect, the
J.V. would be engaged in the business of polyvinyl chloride ('PVC') and related products
in the EEA. INEOS is a global manufacturer of petrochemicals, speciality chemicals and
oil products and operates in many countries across the world. Solvay is also a global
manufacturer of chemicals and plastics and has operations in many countries.
7. It has been stated in the notice that the subsidiaries and assets to be contributed by
Solvay and INEOS to the J.V. are currently engaged in the manufacture and sale of
various chlorvinyls and related products worldwide, such as suspension polyvinyl
chloride (S-PVC), emulsion polyvinyl chloride (E-PVC), liquid and solid caustic soda,
methylene chloride, chloroform, carbon tetrachloride, sodium hypochlorite,
hydrochloric acid, ethylene butadiene, chlorine, vinyl chloride monomer, propylene,
ethylene dichloride (EDC), allyl chloride (CAL), epichlorhydrin (ECH), perchlorethylene
(PCE) and polyglycerine. However, as per the information provided in the notice,
INEOS, through the subsidiaries which are proposed to be contributed to the J. V., sells
S-PVC, E-PVC, Methylene Chloride and other products such as Chloroform, Chlorinated
Paraffin, to India only through exports. Similarly, the
Page 2 of 4
Fair Competition
For Greater Good
COMPETITION COMMISSION OF INDIA
(Combination Registration No. C-2013/12/147)
subsidiaries of Solvay which are proposed to be contributed to the J. V., sell S-PVC, EPVC and other products such as PCE, CAL, ECH, and EDC, only through exports, to
India.
8. As observed earlier, currently the sales of Solvay and INEOS of the chlorvinyls and
related products to India, is through exports only, as neither Solvay nor INEOS, has
been engaged in the production of chlorvinyls and related products in India.
15

9. It is noted on the basis of information in the public domain that PVC is the third most
widely used plastic in the world. There are two main types of PVCs, produced through
different processes and used for different applications, i.e. S-PVC and E-PVC. Further,
S-PVC is the most commonly used form, which accounts for about ninety five per cent of
the world's total PVC production.
10. According to information available in the public domain, for the financial year 201213, the total domestic consumption of PVC in India was approximately 2.22 MMTA,
which was contributed by the domestic capacity of approximately 1.3 MMTA and the
rest was imported. The imports, thus, constitute around forty per cent of the total
domestic consumption of PVC. It is further observed from information available in the
public domain that for the financial year 2012-13, with the presence and contribution of
the major domestic producers of PVC in India, the J. V. would have a market share of
only around seven per cent, entirely on the basis of volume of PVC exported to India by
Solvay and INEOS.
11. As regards the rest of the chlorvinyls related products other than PVC, which are
exported by Solvay and INEOS to India, it has been stated in the notice that there are no
overlaps of any nature between these products.
12. Considering the facts on record and the details provided in the notice given under
sub- section (2) of Section 6 of the Act and the assessment of the proposed combination
after considering the relevant factors mentioned in sub-section (4) of Section 20 of the
Act, the Commission is of the opinion that the proposed combination is not likely to
have an appreciable adverse effect on competition in India and therefore, the
Commission hereby approves the proposed combination under sub-section (1) of
Section 31 of the Act.
Page 3 of 4
Fair Competition
For Greater Good
COMPETITION COMMISSION OF INDIA
(Combination Registration No. C-2013/12/147)
16

13. This approval is without prejudice to any other legal/statutory obligations as

applicable.
14. This order shall stand revoked if, at any time, the information provided by the
parties to the combination is found to be incorrect.
15. The Secretary is directed to communicate to the SPVC accordingly.
(Geeta Gouri)
Member
(Anurag Goel)
Member
(M.L. Tayal)
Member
(S.L. Bunker)
Member
Page 4 of 4

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