[Analysis] Decoding the CCI (Combinations) Regulations 2024 – Recent Amendments | Impact | Implications

The CCI (Combinations) Regulations, 2024 were introduced by the Competition Commission of India to provide a more stringent framework for overseeing mergers and acquisitions, particularly targeting significant transactions in the digital sector. These regulations came into effect on September 10, 2024, under the newly amended competition law. These regulations signify a significant shift towards a more comprehensive regulatory approach, particularly concerning high-value and influential transactions in the digital arena, enhancing the CCI's ability to oversee and maintain fair competition in the market

Table of Contents

1. Introduction
2. Broader Definition of ‘Transaction Value’ u/s 5(d) of the Competition Act, 2002
3. Criteria for Assessing ‘Substantial Business Operations in India’ u/s 5(d) of the Act
4. Streamlining Notice Requirements u/s 6 and Section 6A of the Competition Act for ‘Combinations’
5. Restrictions on Acquirer’s Influence and Rights During Acquisition under Section 6A(a)
6. Commission to Carefully Assess Confidentiality Requests During Inquiries
7. Obligations for Filing ‘Combination’ Notices
8. Amendment to Fee Structure for Filing Notice
9. Scrutiny and Validating Notices of ‘Combinations’ Form
10. Notice Requirements for ‘Combinations’
11. Hearing Procedures and Statutory Timelines in ‘Combination Inquiries’
12. Modification to the Proposed ‘Combination’
13. Compliance and Monitoring Requirements for Combination Modifications
14. Conclusion

1. Introduction

A “combination” refers to mergers, acquisitions, and amalgamations between enterprises, which have the potential to significantly affect market competition. To manage these combinations and avoid any appreciable adverse effects on competition (AAEC), the Competition Commission of India (CCI) oversees such activities. Recently, the CCI introduced the Competition Commission of India (Combinations) Regulations, 2024, on September 9, 2024. These regulations are set to be implemented starting September 10, 2024. Key highlights of the newly announced Combination Regulations include:

2. Broader Definition of ‘Transaction Value’ u/s 5(d) of the Competition Act, 2002

Under Section 5(a) of the Competition Act, 2002, an acquisition, merger, or amalgamation qualifies as a combination if the transaction involving control, shares, voting rights, or assets exceeds a value of Rs. 2,000 crore. For the purposes of Section 5(d) of the Act, the transaction value now includes all valuable considerations, not limited to:

• Considerations for covenants, undertakings, or restrictions imposed on the seller or others, agreed upon separately.
• Considerations for all interconnected steps and transactions.
• Payments due within two years related to technology, intellectual property rights, usage, supply, branding, and marketing arrangements.
• Considerations for call options and shares, assuming full exercise.
• Payments are based on specified future outcomes as detailed in transaction documents.

3. Criteria for Assessing ‘Substantial Business Operations in India’ u/s 5(d) of the Act

According to the proviso to Section 5(d) of the Act, an enterprise undergoing acquisition, merger, or amalgamation must have significant business operations in India, as outlined by specific regulations. An enterprise is considered to have significant operations in India if:

• For digital services, at least 10% of its global business or end users are located in India.
• Its gross merchandise value (GMV) in India for the preceding 12 months constitutes at least 10% of its global GMV and exceeds Rs. 500 crores.
• Its revenue from Indian operations during the previous financial year accounts for at least 10% of its global turnover and surpasses Rs. 500 crores.

4. Streamlining Notice Requirements u/s 6 and Section 6A of the Competition Act for ‘Combinations’

A notice for entering into ‘Combinations’ under Section 6(2) or Section 6A(a) must be submitted using Form I, accompanied by proof of fee payment. Alternatively, if:

• The combined market share of the entities involved exceeds 15% in any relevant market, or
• The entities control more than 25% of the market share at different stages of the production chain.

Further, notices must be filed using Form II. Additionally, all notices must adhere to the guidelines set by the Commission, available on its website. For transactions under Section 6A(a), notices must be submitted within 30 days of the acquisition of shares or securities, along with the necessary fee proof.

Notices under Section 6(4) should also be filed using Form I, including the required declaration and fee. If a notice is initially submitted in Form I but the Commission later requires details available in Form II, the Commission will direct the submission of Form II. Any fee paid for Form I will be adjusted if Form II is filed within 45 days.

5. Restrictions on Acquirer’s Influence and Rights During Acquisition under Section 6A(a)

• When an acquisition falls under Section 6A(a) of the Act, the acquirer is permitted to: (a) Receive economic benefits, including dividends, distributions, rights issues, bonus shares, stock splits, and buy-backs.
• Exercise voting rights solely concerning liquidation or insolvency issues.

However, the acquirer, along with its group entities and affiliates, is prohibited from exerting direct or indirect influence over the enterprise whose shares or securities are being acquired.

6. Commission to Carefully Assess Confidentiality Requests During Inquiries

The Commission will meticulously review any requests for confidentiality concerning information or documents provided during an inquiry. These requests must explicitly outline the reasons, justifications, and potential business impacts for the involved parties. This thorough detailing enables the Commission to consider all pertinent factors before making a decision.

7. Obligations for Filing ‘Combination’ Notices

The obligations associated with filing ‘Combination’ notices are outlined below:

• Acquisition or Control – The acquirer is required to submit the notice using either Form I or Form II, duly signed by the authorized person(s). In the case of companies, any authorized signatory may also sign the form.
• Without Consent – If an enterprise is acquired without consent, the acquirer must submit all available information within ten days of filing. Should complete information not be available at the time of filing, the Commission may request additional details directly from the acquired enterprise. The time taken to gather this information will not be included in the statutory deadlines.
• Merger or Amalgamation – Parties involved in a merger or amalgamation must jointly submit the notice using either Form I or Form II, signed by the authorized person(s). For companies, any authorized signatory may fulfil this requirement.
• Series of Transactions – A single notice should be filed for interconnected steps or a series of smaller transactions that together constitute a combination.
• Substance over Structure – The obligation to file a notice is determined by the substance of the transaction rather than any structural configurations aimed at circumventing the filing requirements.

8. Amendment to Fee Structure for Filing Notice

The fee structure for filing notices under the regulations has been updated. The new fee for notices filed using Form I is Rs 30 lakh, an increase from the previous fee of Rs 20 lakh. For notices filed using Form II, the fee is now set at Rs 90 lakh. The fee structure for Form II has been adjusted to reflect this change.

9. Scrutiny and Validating Notices of ‘Combinations’Form

The current regulations introduce significant updates to the process of scrutinizing and validating notices of combinations, with the goal of improving clarity and efficiency in regulatory compliance:

• Completeness and Compliance – Notices filed for proposed combinations must be complete and compliant. Incomplete notices will be returned with a request for missing information, which will be communicated within ten working days.
• Addressing Defects – Parties must correct any defects or provide additional information as directed by the Commission within the specified timeframe. A notice is considered valid only upon full compliance.
• Request for Additional Information – Should additional information be required, the Commission will instruct the parties to provide it. The time taken to submit this information will not count towards statutory deadlines.
• Documentation of Communications – All communications related to defects and additional requests for information must be properly documented.
• Consequences of Non-Compliance – Failure to address defects or to provide the required information will result in the invalidation of the notice. However, parties may be given an opportunity to be heard before the notice is invalidated. The Commission will inform the parties of its decision within seven days.
• Resubmission of Notice – If a notice is resubmitted after being invalidated, the original fee will be adjusted against the new fee if the resubmission occurs within 45 days.
• External Information Gathering – The Commission may seek information from external sources about the impact of the combination on competition. The time spent gathering this information is excluded from statutory deadlines.

10. Notice Requirements for ‘Combinations’

The recent amendments have brought substantial updates to the notice requirements for ‘Combinations’. According to the new regulations, any party that has submitted a notice must notify the Commission of any changes in the information within ten working days following receipt of an acknowledgement from the Secretary.

Previously, parties were obligated to inform the Commission of any changes ‘at the earliest’ while proceedings under the Act were ongoing. Additionally, the rules concerning invalid notices remain consistent; parties are permitted to refile without incurring additional fees if they do so within 30 days of receiving communication from the Commission.

11. Hearing Procedures and Statutory Timelines in ‘Combination Inquiries’

Under the new regulations, if the Commission opts to grant the parties an opportunity to be heard during the inquiry, the Secretary must issue a notice detailing the date and time for the appearance as directed by the Commission. Importantly, the period from when the notice is issued to the scheduled hearing date, up to a maximum of ten days, will not count towards the statutory time limits set under Sections 6(2A), 29(1B), and 31(6) of the Act. Additionally, if the parties request an extension of time to prepare for their appearance, this extended period will also be excluded from the statutory timeframes.

12. Modification to the Proposed ‘Combination’

The recent amendments bring crucial enhancements to the procedure for managing modifications to proposed combinations, providing greater clarity and improving procedural efficiency:

• Communication of Modifications – The Secretary is now required to convey the Commission’s modification proposal within seven days. The notified party must respond within five days of receiving this proposal. Both communication and response periods are excluded from statutory deadlines.
• Filing Modifications – Any modifications must be submitted using Form IV within ten working days following the Secretary’s acknowledgement or simultaneously with the response to the communication.
• Timing for Modifications – Parties are permitted to propose modifications in Form IV when responding to the notice within 15 days of its receipt. This allows for addressing any initial concerns raised by the Commission and can facilitate a quicker approval under Section 31(1).
• Approval and Compliance – Combinations approved with modifications must be implemented according to the Commission’s specified terms and timelines. Any failure to comply within the designated period will lead to an enforcement order under Section 31(5)(b) within 30 days following the Commission’s determination of non-compliance.

13. Compliance and Monitoring Requirements for Combination Modifications

Under the new regulations, parties involved in a combination are required to file a compliance report and affidavit with the Secretary within seven days of implementing any mandated modifications, ensuring adherence to the Commission’s directives. For modifications that require ongoing compliance, parties must submit periodic reports according to the schedule outlined in the Commission’s order.

If the parties do not submit the necessary reports, it is the Secretary’s responsibility to report the non-compliance to the Commission for further action. This procedure ensures that modifications are executed as prescribed and that continued compliance is monitored effectively.

14. Conclusion

In conclusion, the recent updates to the Competition Commission of India (Combinations) Regulations, 2024 mark a significant enhancement in the regulatory framework governing mergers, acquisitions, and amalgamations. By expanding the definition of transaction value, refining criteria for substantial business operations, and improving procedural efficiency in handling notice requirements and modifications, these amendments provide a robust mechanism to deter anti-competitive practices.

The establishment of clear deadlines for compliance and reporting facilitates effective monitoring and enforcement, strengthening the Commission’s capacity to preserve market competition and ensure procedural fairness. These modifications aim to streamline regulatory procedures and increase transparency and accountability in the oversight of combinations.