Faster CCI approvals for the IBC cases will help quick revival process for stressed firms: Vaibhav Choukse, JSA

Mumbai: In the time when several industries are expecting consolidation and lenders have taken companies bankruptcy court for resolution process, the role of the Competition Commission of India (CCI) to review such transactions faster will improve the timeline for Corporate Insolvency Resolution Process (CIRP). The antimonopoly regulator CCI has so far expeditiously reviewed and clear 15 insolvency-related transactions and the draft amendment bill proposes further reducing the timeline for prima facie review from 30 working days to 20 calendar days which will also apply to IBC cases and further help the expedite such destress deals, says Vaibhav Choukse – Partner, Competition Practice at J Sagar Associates (JSA). Edited excerpts:

Recently, the government came out with the proposed Competition Amendment Bill, which gives more power to the regulator with regards to M&A in the technology sector. How do you see that changing the way technology sector related M&A transactions?

Under the existing framework, a transaction that breaches specified assets or turnover thresholds requires mandatory notification to the CCI. Like many of its peers, the CCI does not have residuary power to assess a non-notifiable transaction even if such a transaction causes competition concerns.

This is especially relevant for transactions in new-age digital markets where transactions are often driven by the motive to have access to the target’s data. However, such transactions may fall below turnover-based thresholds because the target’s products are offered for free, generating no revenue. In such instances, the target’s value may not best be correlated to its sales – rather a poor indicator of the merger’s significance for competition. Thus, asset/ turnover based notification thresholds may have a ‘blind spot’, if relied on solely.

Accordingly, the Draft Amendment Bill proposes other criteria such as deal value to trigger a notification to the CCI which is especially required since the digital sector is growing rapidly and the consolidation in the market may lead to hampering growth and innovation.

This will certainly lead to increased compliance costs for enterprises, as most high-value deals would require CCI approval. Hence, it is for the Government to ensure that there must be sufficient certainty and quantifiable criteria for computing the deal value under the Competition Act. For example, the introduction of a local nexus test to avoid catching cases that may not actually impact competition in India.

How the proposed amendments will impact on curbing cartel going forward?

Detection of cartels has always been a top enforcement priority of the CCI. Based on the enforcement experience gained over the last decade, the CCI recognized that there are certain new forms of anti-competitive agreements that are not expressly covered under the Competition Act. For instance, a case where a third party, i.e. a hub organizes or facilitates collusion between two or more competitors, i.e. the spokes. While the spokes may be captured in the prohibition against cartels, there is some conjecture that the hub may escape liability under the existing framework – as, currently, only the cartel agreement between the competitors is presumed to harm competition.

By way of the Draft Amendment Bill, this presumption is proposed to be extended to include a cartel facilitator (hub), whether or not such entity is engaged in a similar trade. This is in line with the approach adopted by other mature jurisdictions to cover all forms of hardcore illegal agreements, including hub and spoke arrangements.

The Competition Act has seen several amendments in the last two years. How close or far are we from becoming a mature antitrust regulatory regime?

The amendments were made to strengthen and re-calibrate Indian competition laws in line with international best practices and the changing economic reality. The constitution of the CLRC by the Government was a step towards achieving this objective. With the amendment done in the past 2 years and the one that is in the pipeline, in my view, we are moving closer towards becoming a mature jurisdiction.

Do you think the current regulations need changes in terms of IBC related cases?

In practice, CCI has always been conscious of the time sensitivity involved in the IBC cases and has viewed such cases from a different lens – thereby approving them swiftly. The CCI has reviewed about 15 insolvency transactions, which were expeditiously reviewed and cleared by the CCI. The Draft Amendment Bill proposes to further reduce the timeline for prima facie review from 30 working days to 20 calendar days, which will also apply to IBC related cases. One of the proposals that the Government can consider is to permit IBC related cases through the Green Channel Route (GCR).

What are the key changes do you think the government can bring in the anti-competition regime to clear deals faster in India?

I believe that the Government and the CCI have already taken steps in the right direction to clear the M&A deal in a time-bound manner. In August 2019, the CCI introduced the provision for fast-track approval for certain types of combinations that qualify for the GCR (combination with no overlaps). Such a transaction would be deemed to have been approved, upon filing a Form I (short form). Thus, the parties can consummate the said transaction on receipt of the acknowledgement itself (typically on the date of the filing of the form). Further, as mentioned earlier the Draft Amendment Bill proposes to reduce the timeline for prima facie review from 30 working days to 20 calendar days. It also proposes to reduce the overall timeline for the review of the transaction to 150 days from 210 days. Such changes are broadly in line with the Government’s vision for ease of doing business in India.


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