Companies making false M&A disclosures will face heavy penalty: CCI Chief

Companies making incomplete or false disclosures to the Competition Commission of India (CCI) will face aggravated penalties, chairperson Ashok Kumar Gupta told ET. Provisions in the Competition (Amendment) Bill, 2022, for faster approval of mergers and acquisitions (M&As) will work on a trust-based system, he said. Those found exploiting this trust-based regime by making incomplete disclosures will be penalised heavily, he said.

The amendment bill was referred to Parliament’s standing committee on finance after it was introduced in the Lok Sabha in the monsoon session that concluded earlier this month.

Among other key changes, the bill proposes to reduce the overall time limit for approving M&As to 150 days from 210 days.

The bill further mandates the competition watchdog to form a prima facie opinion within 20 days of the receipt of notice. According to Gupta, these tweaks are in line with the antitrust regulator’s current practices as the average number of days to approve M&As that don’t have any adverse competition impact is currently 17 days.

“However, the underlying assumption for a trust-based regime to succeed is that parties will reciprocate by providing complete and full disclosures,” he said. “Analogously, making a false statement or omission to furnish material information will attract aggravated penalties as proposed in the bill, apart from other consequences.”

The bill also proposes to capture overseas M&As by introducing a new mandatory condition for filing a notification with the CCI. All M&A deals will need to be notified to the CCI if the deal value exceeds Rs 2,000 crore and the target company fulfils the local nexus criterion.

Experts have raised concerns that this new condition could bring several global mergers with little India connection under the CCI’s purview. The local nexus criterion is meant to exclude M&A transactions where the target company exclusively operates abroad or has limited business operations in India, Gupta said, seeking to allay worries.

“Let me assure that the commission will deliberate on the issue in great detail and only after wideranging public consultations with stakeholders such regulations will be firmed up,” he said. “We will provide certainty and predictability to stakeholders.”


Another key change proposed in the amendment pertains to a change in the definition of control. Currently, this means control over affairs or management of a company. Once the bill is passed, control will be defined as the ability to exercise material influence over management, or the company’s affairs or strategic commercial decisions.

“It is felt that the concept of control needs to be linked with the ability to influence the strategic commercial decisions, which actually causes the change in market dynamics,” the CCI chairman observed.

Gupta said the CCI has already been using the ‘material influence’ factor while interpreting control in decisional practices. This has been incorporated in the proposed law and is expected to give market participants more clarity and certainty. The bill also proposes a settlement provision in the law to reduce litigation. Until now, those facing CCI action had only two options — comply with CCI orders or challenge them in a judicial forum. But some anti-trust violations can be settled under the proposed amendment.

“An application for settlement can be filed after receipt of the investigation report but prior to such time as may be prescribed by the regulations, before the passing of final order by the CCI,” Gupta said. However, the settlement scheme will not be applicable in cases involving cartels or abuse of market dominance.

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