Ankita Goel De Mallik, Vijaya Sampath, Apr 15, 2011
The Utilitarianism concept of the “greater public good” is the underlying basis of many laws in a developing country like India. This “greater good of many” is seen as one side of a fine balance, with profit motive, liberalization, and economic growth as the other side of the coin. The recently notified Indian merger control regulations titled “The Competition Commission of India (Procedure in regard to the transaction of business relating to combination)” (“Draft Regulations”) seems to be an attempt to balance these sometimes conflicting principles.
The “greater good” is clearly visible in the very fact that scrutiny of “combinations” (which term is quite widely defined under section 5 of the Competition Act, 2002 (“Act”), and includes mergers, amalgamations, acquisitions, control etc. by the Commission is designed to ensure that there is no “appreciable adverse effect on competition” (“AAEC”). And the proposal of increased application fees ranging from INR 1 million to 4 million required to be submitted with the form for a notice of proposed combination will bring in more revenues to the public exchequer. At the same time, industry’s interests seem to be the reason behind the higher thresholds (but with disregard to transaction size), the proposal of pre-merger consultations, and the prescribed period of 210 days within which the Commission is required to give a decision on a case, after which it is deemed approved.
However, an overview of the merger regulations indicates that certain important factors, such as the milestones which Indian industries have lately been achieving through global acquisitions (like Tata’s acquisition of Corus or Bharti Airtel’s acquisition of Zain’s Africa business), were over-looked while drafting the framework within which these merger regulations will work, as the merger regulations seem to be divorced from the practices and precedents within which global transactions (acquisitions or mergers) take place. Without complete details and specifics, below are just a few arguments in support of this proposition that the perspective of Indian industries endeavoring to make global acquisitions needs to be better taken into account.