CCI GREEN CHANNEL ROUTE & ITS ANALYSIS

(Assignment towards the fulfillment of the project in the subject of Competition Law)

SUBMITTED BY: SUBMITTED TO:

Apoorva Singh (1385) Mr. Sarthak Mishra

Jayesh Karnawat (1390) Faculty of Competition Law

VIII Semester

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 TABLE OF CONTENTS

INTRODUCTION.........................................................................................1

THE GREEN CHANNEL CONCEPT...........................................................3

PRIOR TO THE AMENDMENT...................................................................3

PARTICULARS OF THE AMENDMENT......................................................4

ANALYSIS...................................................................................................7

SHORTCOMINGS/RECOMMENDATIONS:..............................................10

CONCLUSION...........................................................................................11

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 INTRODUCTION

The Competition Commission of India (“CCI”), on August 13, 2019,

notified the Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations), Amendment
Regulations 2019.1 It amended its erstwhile merger regulations, i.e. the
Competition Commission of India (Procedure in regard to the transaction
of business relating to combinations) Regulations, 2011. This forms part
of the CCI's efforts to bring speed and efficiency to Merger Regulations.
The need for the same is especially felt given the increasing importance
of combinations of certain levels in India, that are a part of the Merger
Regulations.

Introduction of a ‘Green Channel’ was one of the more important

suggestions in the report of the Competition Law Review Committee in
July 2019. The said report purported to “move to a 'disclose and comply'
regime with strict consequence for not providing accurate or complete
information”.

It is noteworthy that the Combination Regulations came into force on

June 01, 2011 and in these eight years of its existence the Combination
Regulations have already been amended six times, making the 2019
Amendment Regulations the seventh in the line of these amendments.
Apart from the speedier approval of combinations by way of a ‘Green
Channel’, the 2019 Amendment Regulations have also made certain
changes to the short form merger notification or Form I 2 in order to
afford a more thorough scrutiny and assessment of the proposed
combination by the Commission.

1
The Competition Commission of India (Procedure in regard to the transaction of
business relating to
combinations) Amendment Regulations, 2019.
2
Id, at 9.

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Despite the fact that the initiative is laudable, it is still to be seen if the
initiative is able to achieve its objective. This project seeks to analyse the
amendment, possible roadblocks to its effective implementation and few
recommendations.

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 THE GREEN CHANNEL CONCEPT

One of the key regulatory functions of CCI is to make sure that there is
no adverse impact on competition and administration of Mergers and
Acquisitions is a part of the same. To streamline this process and make
approval of M&A applications quicker, the CCI has introduced an
automatic system of approval for combinations under the name of Green
Channel as part of its ongoing and daily efforts. The parties to
Combination that obtain on-site approval from the CCI under this
process, rather than waiting for the 30-day working period. The
combination is, after filing the notice in specified format, deemed
accepted, i.e. FORM 1, together with the statement set out in Schedule
IV. The proposed combination shall be deemed to have been authorized
by the Commission pursuant to section 31(1) of the Competition Act upon
issuance of a notice and approval thereof. Accordingly, this method
significantly reduces transaction time and cost, and contributes to the
dream of facilitating better ease of doing business in India.

PRIOR TO THE AMENDMENT

Under the Act, a combination is defined as the acquisition by one or more

persons or mergers or amalgamation of companies of one or more
enterprises. Under Indian Competition law's afore-functioning rule,
where a joint transaction between parties crossed the threshold of
combined assets / turnover, they were subsequently obliged to inform
CCI of these transactions. All notifiable transactions in either Form I or
Form II used to be reported to the Commission in order to seek consent.
This resulted in a strapping delay in the transaction’s completion.3 Now,
the parties, that fulfill and meet the criteria in the amendment, are not
required to wait for the Commission's approval to complete a notifiable
transaction after the notification of 13th August 2019.
3
CCI Introduces ‘Green Channel’ Notification & Modifies The Short Notification Form,
AZB & Partners, dated August 15, 2019, available at:
https://www.azbpartners.com/bank/cci-introduces-green-channel-notifications-modifies-
the-short-notification-form/.

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On top of that, it was a requirement to send a notification form to the CCI
with a long summary and a short description (short rundown was
published on the CCI website). Nevertheless, the CCI has now removed
the requirement of 2 summaries and now requires only 1 summary to be
published on the CCI website to be submitted by the parties.4

PARTICULARS OF THE AMENDMENT

Criteria for green channel mechanism

The Green Channel system introduced by India's Competition
Commission allows for a fast and open analysis of combination
proceedings, but it strikes a balance between promoting and
implementing the CCI feature by recommending a strict check for what
types of transactions qualify for the Green Channel scheme. Green
Channel Qualification Requires:

Notifying Green Channel Route to CCI 

Pursuant to Regulation 5A, the parties to the combination categories
shall furnish notice pursuant to the amended FORM 1 along with a
declaration pursuant to Schedule IV. In order to have a comprehensive
picture of the combination, the 2019 Amendment Regulations expanded
the definition of Form I and restructured it to include some additional
items.
Additional details which are currently needed relate to:
 Inter-connected transactions, 
 Market-facing data for the last 3 years as against the current
practice of the last 1 year, 
 All plausible alternative relevant markets, 

4
A look at the CCI ‘Green Channel’route, Obhan & Associates, available at:
https://www.obhanandassociates.com/blog/a-look-at-the-cci-green-channelroute/?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original%27.

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  And any proceedings before the CCI or other competition authority
in the last 5 years. 

No risk of any adverse effect on competition

In accordance with Section 6(1) of the Competition Act 5, the Regulation
insinuates that the Proposed Combination ought not raise any risk of any
adverse effect on competition. Additionally, under the green channel
route it is also required that the parties submit that they do not have
any: 
 Horizontal overlaps, which means that the parties should not
produce/provide similar or identical or substitutable products or
services;
 Vertical overlaps, which means that they should not engage in any
activity relating to production, supply, distribution, storage, sale
and service or trade in product or service which are at different
stage or level of production chain; or 
 Have a complementary business to each other.
Such overlaps are generally checked in the sense of ‘relevant market’. A
transaction is most easily qualifying for the Green Channel system
where parties in any feasible relevant market do not overlap. In addition,
at the same time as identifying overlaps, the absence of overlaps must be
verified, not only among the transacting parties, but also among their
respective organizations and the body in which the parties hold shares
and/or exercise control, directly or indirectly.
Once these conditions have been met and the notice has been sent to CCI
via Form I, the transaction will be considered to be accepted after
receiving the CCI approval and the parties will be able to complete the
transaction immediately.

Procedural aspect under Green channel mechanism

In order to take advantage of the Green Channel path, the parties are
required to submit the notice in Form I (typically referred to as the Short

5
Section 6(1), Competition Act, 2002.

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Form notification) together with the declaration stated in Schedule IV. In
accordance to Regulation 9(1) of the Combination Regulations, in the
event of an acquisition or transfer of the company's control, it is the
acquirer who should do what is appropriate Whereas, according to
Regulation 9(3) of the Combination Regulations, the notification shall be
submitted jointly by the parties to the combination in the event of a
merger or amalgamation.

Declaration
In addition, the notifying party must confirm and announce that:
 The notifying party has received all the necessary information and
documentation in Form I as set out in Schedule II.
 The notifying party must also affirm that the proposed combination
falls under Schedule III and is unlikely to adversely affect
competition.
 The notifying party states that it has not made any false statements
in any particular material or that it is false; or that it has omitted
any material information to be published.

Combinations approved under green channel route

A combination submitted under the Green Channel route shall be deemed
to have been accepted as of the date of CCI filing acknowledgement.
Some of the combinations that have been permitted under the Green
Channel system are:
 The Competition Commission of India (CCI) received the first green
channel combination filed pursuant to Section 6(2) of the
Competition Act, read in 2002 under Regulations 5 and 5A of the
Competition Commission of India (CCI) Regulations, 2011 on 03-10-
2019. The mix involved an individual making up a part of the
Sachin Bansal Group purchasing the Essel Mutual Fund.
 On 16 December 2019 Muthoot Finance Limited purchased IDBI
Asset Management Ltd. and IDBI MF Trustee Company Ltd.
 On 19 December 2019 the acquisition by Qatar Holding LLC of

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 Adani Electricity Mumbai Limited and Adani Electricity Mumbai
Services Limited filed.
 Acquisition by Green Rock B 2014 Limited, National Investment
and Infrastructure Fund and Indo-Infra Inc. of GVK Airport
Holdings Limited, submitted on 19 December 2019.
 Acquisition of the equity capital of Star Health and Allied Insurance
Company Limit from Snowdrop Capital PTE Limited by ROC Star
Investment Trust, informed on 10 January 2020

Penalty
In addition, to avoid misadventures, the modifications to the Combination
Regulations propose that if the CCI considers that the activities do not
follow the Green channel route requirements, then the transaction would
be deemed void ab initio at that point. This means that the parties will be
expected to register a new notice under the green channel route to
display the eligibility.
In the event that the parties are found to have completed the transaction,
then those parties are presumed to be guilty of gun-jumping and aware of
it. This will ultimately result in the penalty pursuant to Section 44 of the
Competition Act, 2002, which makes a person liable for a penalty not to
be less than 5 million rupees, but which may extend to 10 million rupees.

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 ANALYSIS

The Commission has cleared a total of 666 cases since 2011 to date. 6 It
took an average of 23 days to grant approval to a combination last year. 7
While this pace of review may be remarkable, more often than not,
parties to a combination have found themselves in circumstances where
they had to complete a transaction as soon as possible due to contractual
or other regulatory reasons. In such situations, the only possible option
with the parties was to contact the Commission and ask them to expedite
the approval process. Hence an urgent need for a ‘Green Channel’ is
present. To answer that problem, the 2019 Amendment Regulations
appear to have been released.

The regulations seem to have the following ambiguity:

(i) Difficulty in meeting the qualifying criteria

The qualifying criteria under the 2019 Amendment Regulations hinge

on the acquirer, its group and their investee companies not
conducting (a) businesses akin to that of the target company, its
group and their investee companies or (b) businesses that are at a
different stage or level of production chain to the business of the
target company, its group and their investee companies and (c)
businesses that are complementary to the business of target
company, its group and their investee companies

The concern lies in testing these criteria against (i) the acquirer (ii)
its group and (iii) investee companies of the acquirer and the
acquirer’s group (including those investee companies in which the
acquirer or its group members hold a single share). While this may
not be difficult for a contained group of companies, this does pose a
problem for financial investors and funds whose business it is to
invest.

6
https://www.cci.gov.in/sites/default/files/press_release/PR82019-20.pdf.
7
Page No 32, CCI’s Annual Report 2017-2018.

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 Large global investors and large MNCs will have to trace the investee
entities of their entire group and undertake an analysis of their
activities of such investee entities as well. Practically, the entire
process will be very time consuming and cumbersome which may
defeat the purpose of the initiative itself. Large global investors
would much rather make a notification and wait for the approval as it
may take the same amount of time to undertake a conclusive
analysis. This way they will also avoid the risk of the approval of the
Commission becoming void ab initio due to any incorrect information,
statement or error in assessment.

(ii) Absence of clear objective criteria and some inconsistencies

Acquirers will only choose to use the Green Channel if there is
absolute clarity about what the acquirer intends before making this
filing. Nevertheless, the clarification is not provided for in the 2019
Amendment Regulations. Another such example is the use of
ambiguous words. The use of the word ' complementary' is evidently
ambiguous, since neither the Competition Act nor the Combination
Regulations provide any objective criteria or instructions on what is'
complementary.' Without any objective criteria, attorneys and parties
will be left to decide whether a company is equivalent to another
business or not all while projecting the possibility of gun jumping by
some yardstick. Preliminary research indicates that practices such as
the service of a bookstore and a coffee shop; gaming consoles and
games manufacturing; electronics and accessories, etc. are examples
of complementary businesses / goods.8
The acquirer must also find all plausible alternative interpretations of
the market when evaluating the Green Stream. It seems to be
intentional to include the word 'alternate.' There is no clarification
however as to what this particular term means. In any case, the
concept of "relevant market" under the Competition Act allows the
parties to include all goods that are considered replaceable or

8
John Spacey, 11 Examples of Complimentary Goods, available at
https://simplicable.com/new/complementary-goods.

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 interchangeable, hence the inclusion of the term ' alternative' is not
at present entirely clear. Relevant market comprises of two
components (i) relevant product market and (ii) relevant
geographical market. For each notifiable transaction, it is against
these two requirements that the determination of 'appreciable
adverse effect of competition' is carried out. The specific
geographical area has so far been either limited to India or to
jurisdiction within India. It is doubtful that on this definition the use
of the words 'alternate' will want to extend. Clearness on this point
would be appreciated though.
Assuming (considering previous jurisprudence) that the' alternate
market' must be limited to India's territory, it is also not entirely
clear what will happen if a large foreign company acquires an equally
large Indian rival in its Indian maiden foray. If the large foreign
company does not overlap with the large Indian competitor in India
according to the qualifying criteria for the Green Channel route, then
the Green Channel route could be used for this acquisition. This
would be counterintuitive as the arrival of a multinational
conglomerate would most likely have an effect on market competition
and therefore should be measured before approval is presumed.

(iii) Onerous penalty provisions

If the Commission considers that the combination filed under the

Green Channel route (after granting the parties due opportunity to
be heard) does not qualify under the eligibility criteria as set out in
Schedule III of the 2019 Amendment Regulations or if the declaration
accompanying the Form I for Green Channel is wrong, then the Form
I filed and the approval considered to be void ab initio would be void.
It means that the parties would need to refile the notice and will be
guilty of "gun-jumping" if they have completed the transaction
meanwhile. However, there is no time limit for the Commission to
make this determination While the 2019 Amendment Regulations
remain silent about the implications, Section 44 of the Competition

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 Act provides that if any party to a combination makes a false
statement or omits to include anything relevant, that person is liable
to a minimum penalty of INR 5,000,0000 (Indian Rupees Fi) This will
act as a deterrent to acquirers wishing to proceed along this path.

Acquirers can be wary of pursuing the Green Channel filing route

despite this context.

Notwithstanding the above, if the parties to a combination decide to

file the Form I on the Green Channel route, the parties may choose to
pursue a pre-filing consultation with the Commission to explain
ambiguities before filing. The Commission also notified this in its
press release under which the 2019 Amendment Regulations were
introduced.9 It should be noted, however, that such pre-filing
consultation is not binding on the Commission.10

Changes to Form I:

The 2019 Amendment Regulations have made several changes to and

extended the definition of Form I, All notifiable transactions must be
reported to the Commission in either Form I or Form II. Form I is the
defacto form and is usually referred to as the short form notification.
Form II is the long-form notice to be issued where the transaction parties
jointly have high market shares in overlapping markets (i.e. > 15% for
horizontal overlap and > 25% for vertical overlap).

9
https://www.cci.gov.in/sites/default/files/press_release/PR82019-20.pdf.
10
https://www.cci.gov.in/sites/default/files/cci_pdf/PFCguidancenote.pdf.

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 SHORTCOMINGS/RECOMMENDATIONS:

1. While the Green Channel route represents a step in the right

direction, as mentioned above, it suffers from several
shortcomings. While the approval is rather automatic under the
Green Channel path, given the onerous requirements required to
qualify for making this filing, there may be few takers, and the
onerous penalties should an inadvertent error occur. A true and
successful Green Channel would have been one that extended this
advantage to standard form combinations (e.g.: private equity
investors with limited rights) where the Commission is of the
opinion that, based on its past knowledge of transactions, these are
not likely to have a major adverse effect on competition.
2. While the 2019 Amendment Regulations included some Form II
questions in Form I, it would have improved if certain percentage
thresholds were used to report overlaps or perform relevant
market research. It could also be limited to non-controlling
investments as control is an all-encompassing term for Commission
purposes, and involves even negative control as per the
Commission's decision-making procedure. It should be noted that
Form I is the preferred notice for transactions involving low market
shares in overlapping markets (i.e., ≤15% for horizontal overlap
and ≤25% for vertical overlap). Therefore, shifting towards a
simplified system for such combinations would have made more
sense than borrowing Form II questions to make the filing for such
combinations more complicated.11
3. Further there are vulnerabilities which circles around its structure.
For instance, Complementary business is a newly introduced
expression and there is no steerage at the interpretation of
complementary activities.12 Clarifications regarding these concepts

11
CCI’S GREEN CHANNEL APPROVAL – MORE GREY THAN GREEN, Cyril Amarchand
Mangaldas, dated August 14, 2019, available at: http://www.cyrilshroff.com/wp-
content/uploads/2019/08/Client-Alert-CCI-Green-Channel.pdf.
12
Roadblocks to CCI’s Green Channel, Indiacorplaw, dated October 29, 2019, available
at: https://indiacorplaw.in/2019/10/roadblocks-ccis-green-channel.html.

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 would be helpful.

CONCLUSION

Under the Competition Commission of India, prior to the green channel

path, any approval under the Act had to seek permission from CCI stating
that the proposal does not adversely affect competition and post that the
parties that execute the proposal. The Green Channel Route primarily
aimed at maintaining and facilitating a rapid, transparent and
accountable analysis of combination cases, striking a balance between
facilitation and enforcement roles, building a compliance culture and
boosting economic growth. Withal, the amended regulation provides for a
simple, single description of the proposed combination to make it easier
and more precise, compared to previous times, when both a short and a
long summary were to be given, significantly reducing transaction time
and cost. It suffers from numerous deficiencies, however, and there is
always the possibility of grey areas which contribute to the absence of
the meaning or clarification for the term complementary overlap, which
can make the term ambiguous. Likewise, the amending regulations
remain silent about which parties are to be evaluated when pursuing the
Green Channel Path. In addition, there is no requirement for retaining or
curbing parties or their respective party bodies to disqualify the
combinations to be taken under the Green Channel Route either. As far
as the truth is concerned, it is true that the amending regulations were
recipient in less time and money wasted, but it certainly raised some
practical problems and red flags that cannot be avoided.

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