INTRODUCTION

The Competition Act, 2002, since its enforcement in the year 2009, has been backbone of the
regime as far the regulation of competition in the market is considered. However, being a rather
nascent legislation, there are several loopholes that have already been bought forward and dealt
with effectively, with some of them yet to be ironed out. One of such issue arose with respect
to the Combination Regulations, 2011, which made the filing a notice for the composite
combinations optional.1 Also, another recent change that has been bought about in the
regulatory regime is with regard to the Joint Ventures, where it has mandated the filing of
notice for a joint venture, which involves transfer of assets.2
The current document would be focusing on these two recent changes, as the potential
implications of these changes could not be stressed upon enough.

A. COMPOSITE COMBINATION

The term "composite combination" is a creature of decisional practice, rather than a legislative
fashioning. Neither the Competition Act, 2002 ('Act'), nor the Combination Regulations, use
any such phrase. Typically, a business transaction is considered as a composite transaction
when it is given effect by way of a series of individual transactions which are inter-dependent
and inter-connected to each other, and all the steps or individual transactions combine together
to give effect to the ultimate intended effect of the business transaction.

Individually, some of these transactions may amount to a combination within the terms of
Section 5 of the Act and hence need approval of the CCI before consummation while others
may not qualify to be a combination or may be exempted/excluded from being notified. One
would normally expect exempted transactions not requiring the approval of the CCI before
consummation. However, that is not the case if such transactions are part of a ‘composite
combination’. All individual transactions constituting a ‘composite combination’ ought to be
filed as a composite scheme of combination, notwithstanding the fact that some of these
transactions on a standalone basis may not ordinarily be required to be filed.

1
Combination Regulations, 2011, Regulation 9(4) – “the phrase ‘may’ has been substituted by ‘shall’ vide the
Competition Commission of India (Procedure in regard to the transaction of business relating to
Combinations) Regulations, 2016”.
2
Competition Commission of India, Frequently Asked Questions, FAQ No. 7; Mumbai International Airport
Private Ltd.; Indian Oil Corporation Ltd.; Bharat Petroleum Corporation Ltd.; Hindustan Petroleum
Corporation Ltd. & Mumbai Aviation Fuel Farm Facility Ltd., Case No. C-2014/04/164 on 29.09.2014 ,
Johnson and Johnson Innovation, Ethicon Endo-surgery Inc. & Google Inc., Case No. C-2015/06/283 on
10.07.2015.

1
If the statutory provision concerning the above discussion is to be analysed, then there two
different phases to it: Pre-Amendment and Post-Amendment. Prior to the amendment, the
regulation under scrutiny, facilitated the filing of a single notice. This applied where the
ultimate intended effect of a business transaction is achieved by way of a series of steps or
smaller individual transactions, which are inter-connected or inter-dependent on each other,
one or more of which may amount to a combination.3

IMPLICATION OF THOMAS COOK ON TREATMENT OF COMPOSITE MERGERS

The above mentioned regulation contained the phrase ‘may’ which essentially made the entire
process of filing a single subject to the discretion of the parties to the combination. Inevitably,
this was mis-utilized by Thomas Cook,4 which constituted in violations of the provision of the
Act, as well as of the provisions contained under the Combination Regulations. 5
The Commission while interpreting the ‘may’ clause, suggested that, given the context of the
provision of Regulation 9(4), literal interpretation of ‘may’ would defeat the legislative intent
behind the provision. Hence, they interpreted the same to the effect of a ‘shall’ clause.
Consequently, CCI imposed a penalty of INR 1 crore on the parties. 6 The order however, on
being appealed was reversed by COMPAT, which considered the literal interpretation of the
clause and resultantly, held the interpretation of the CCI as erroneous.
The implication of the COMPAT’s order were two-fold. Firstly, as a necessary reaction, the
order was challenged by the Commission in the Hon’ble Supreme Court of India. Secondly, a
necessity with regards to clearing of the ambiguity was felt. The second implication led to the
subsequent amendment of 2016.7 Resultantly, the phrase ‘may’ was substituted by ‘shall’.
Additionally, the phrase ‘…or inter-dependent on each other’ have been omitted so as to avoid
a repeat of the present chaos.

3
Combination Regulations, 2011, Regulation 9(4).
4
Thomas Cook (India) Ltd., Thomas Cook Insurance Services (India) Ltd. & Sterling Holiday Resorts (India)
Ltd., Combination Registration No. C-2014/02/153, Order dated – 21.05.2014.
5
Competition Act, 2002, § 6(2) r/w Combination Regulations, 2011, Regulation 9(4).
6
Ibid at ¶ 11.
7
Competition Commission of India (Procedure in regard to the transaction of business relating to Combinations)
Amendment Regulations, 2016.

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The Hon’ble Court while restoring the penalty imposed by the Commission made the following
observations with respect to the nature of the power accorded under § 43A,
“The imposition of penalty was permissible and it was rightly imposed. There was no
requirement of mens rea under section 43A or intentional breach as an essential element
for levy of penalty. Section 43A of the Act does not use the expression "the failure has to
be wilful or mala fide" for the purpose of imposition of penalty. The breach of the
provision is punishable and considering the nature of the breach, it is open to impose the
penalty”.8

COMPOSITE COMBINATION: PRESENT STATUS QUO

Given the judicial precedent set by the SC’s judgement along with the recent amendments
bought about by the legislature, a lot of confusions pertaining to the obligations with respect to
composite combinations has been put to rest. In the current regime, notification of the
composite merger to the Commission is a mandate, with no element of discretion as was the
case prior to the amendments.

B. JOINT VENTURE: IS IT ‘COMBINATION’ UNDER THE COMPETITION ACT?

The Competition Commission of India (CCI) regulates combinations i.e. acquisitions, mergers
and amalgamations that cross certain assets and turnover thresholds prescribed in the
Competition Act, 2002 (Competition Act). Such combinations are required to obtain prior
approval of the CCI in the manner provided under the Competition Act and the Competition
Commission of India (Procedure in regard to the transaction of business relating to
combinations) Regulations, 2011 (Combination Regulations). Since the definition of
combinations under the Competition Act does not refer to joint ventures, the circumstances in
which joint ventures were required to be notified to the CCI under the Combination Regulations
was unclear. Even in CCI orders pertaining to combinations involving joint ventures, this
question remained largely unanswered. Given this lack of clarity, market participants have been
notifying the CCI only where a joint venture is formed by transfer of ‘revenue generating’
assets from the parents to the joint venture i.e. a brownfield joint venture.

8
Competition Commission of India v. Thomas Cook India Lt. & Anr., Civil Appeal No.13578 of 2015, ¶ 32.

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CCI FAQS – A MUCH NEEDED CLARIFICATION

The CCI has recently published FAQs clarifying various aspects relating to combinations. One
of the key clarifications released under these FAQs is in relation to filing requirements under
the Combination Regulations for joint ventures.9 The FAQs clarify that if the creation of a joint
venture involves a transfer of 'assets', then subject to prescribed thresholds being met, prior
approval of the CCI will have to be sought by making the requisite filings under the
Combination Regulations. The FAQs do not draw any distinction between transfer of 'revenue'
and 'non-revenue' generating assets, thereby removing the distinction between brownfield and
greenfield joint ventures for the purposes of notifying the CCI.

JOINT VENTURES UNDER COMPETITION ACT - PRESENT STATUS-QUO

Under the Indian Competition regime, any JV would have to be notified under Combinations
regulation if it meets the requisite thresholds given under the Act. CCI has cleared JVs under
Combinations and in certain cases given reasons for doing so, which include low market share
of JV,10 no horizontal overlap between parents or JV,11 parents not being close competitors
etc.12 In the recent APGDC/Shell JV,13 CCI also considered the efficiencies being brought to
the market because of the JV. The treatment of JVs under substantive provisions requires
special mention to presumption provided under Section 3(3) of the Act, which doesn’t give
blanket immunity to a JV but does raise a presumption in its favour.14

However, one needs to be careful that this presumption only applies to Section 3 and thus JVs
don’t have any special treatment accorded to them in Section 4 cases. CCI has considered the
pro-competitive efficiencies provided by JVs in broadcasting sector on two separate occasions.
In the Zee-Star case,15 CCI said that there was no foreclosure on account of the JV and also
considered market specific feature of a highly regulated market like broadcasting and media.
Similarly in K Sera Sera,16 CCI considered the complaint of the informant regarding DCI, a JV

9
Competition Commission of India, Frequently Asked Questions, FAQ No. 7.
10
Mitsubishi Heavy Industries Ltd. & Hitachi Ltd., CCI Combination Registration No. C-2013/07/126 on
06.11.2013.
11
Denso Corporation & Pricol Ltd., CCI Combination Registration No. C-2013/02/110 on 19.03.2013.
12
General Electric Company, GE Industrial France SAS, Alstom, & Alstom Holdings, CCI Combination
Registration No. C-2015/01/241 on 05.05.2015.
13
Andhra Pradesh Gas Distribution Corporation Ltd., GDF Suez Energy International Global Developments
B.V., Shell Gas B.V. & GAIL (India) Ltd., CCI Combination Registration No. C-2015/10/333 on 04.02.2016.
14
Competition Act, 2002, § 3(3) Proviso.
15
Shri Yogesh Ganeshlaji Somani v. Zee Turner Ltd. & Anr., CCI Case No. 31 of 2011 on 21.03.2013.
16
M/s. K Sera Sera Digital Cinema Pvt. Ltd. v. Digital Cinema Initiatives. LLC. & Ors., CCI Case No. 30 of
2015 on 08.06.2016.

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between six Hollywood enterprises regarding release of their movies in Indian theatres. Giving
various reasons concerning the scope of market, piracy, IP protection and efficiencies, CCI
rejected the allegations against DCI. Perhaps the most comprehensive analysis of a JV was
recently done in HIPTA JV case,17 where CCI examined efficiencies achieved by a TPA formed
by the four PSU insurance companies. CCI accepted the PSUs arguments regarding the
efficiency enhancement brought in the public insurance sector by a JV TPA leading to overall
consumer benefits.

However, despite the current situation, not all the bases have been covered with respect to JVs.
There exists questions that are yet to be solved. It would be interesting development to observe
how CCI deals with “single economic entity” doctrine concerning JVs. If JVs and its parents
are not considered single group, they can be liable under Section 3 violations but in cases where
a JV and its parents act like a group, they can escape Section 3 liabilities. Whether CCI would
follow the EU approach or carve out a different interpretation remains to be seen.

17
Association of Third Party Administrators v. General Insurers’ (Public Sector) Association of India & Ors.,
CCI Case No. 107 of 2013 on 04.01.2016.