INTRODUCTION OF THE GREEN CHANNEL BY THE CCI

INTRODUCTION

The merger control regime in India is governed by the provisions of the Competition Act
(“The Act”). Specifically, Sections 51 and 62 of the Act deals with combination regulation. A
combination has been defined as “the acquisition of one or more enterprises by one or more
persons or merger or amalgamation of enterprises shall be a combination of such enterprises
and persons or enterprises.”3

The Act requires the Competition Commission of India (“CCI”) to approve combinations that
meet certain criteria, thus preventing excessive market concentration and is therefore ex-ante
in nature. The Act gives firms the freedom to operate on an even playing field and ensures
that market conditions and signals are not distorted by anti-competitive practices.4

But, before the 2019 amendment to the Act, minuscule combinations were subjected to
modifications by the CCI. The same was highlighted in the 2019 Report of the Competition
Law Review Committee (“CLRC Report”).5 The CLRC report noted the decisional trend of
CCI that no combinations reviewed by it were rejected and it ordered modifications in less
than 2.6% of the notified combinations.6 Thus, it recommended7 voluntary deemed approval
mechanism is known as ‘Green Channel’ for any combination with no adverse effect on
competition (“AAEC”) in the relevant market to avoid any unwanted transactional cost
associated with delayed transactions in the existing regime.

In lieu of the aforesaid, the CCI vide its notification8 dated August 13, 2019, notified the
Amendment Regulations to further reform and amend the CCI (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011 (“Regulations of 2011”),
thus introducing the ‘Green Channel Approval (GCA)’ for specific combinations and also
extends to combinations driven by the Insolvency and Bankruptcy Code, 2016 (“IBC”).9
Interestingly, such introduction of an automatic clearance for mergers makes India the only
1
Section 5, Competition Act, 2002.
2
Section 6, Competition Act, 2002.
3
Section 5, Competition Act, 2002.
4
https://www.ibbi.gov.in/uploads/publication/dc195510e9141a689e41ad181ab66cea.pdf
5
SHRI INJETI SRINIVAS, Report of the Competition Law Review Committee (July, 2019).
6
IBID.
7
IBID.
8
https://www.cci.gov.in/combination/legal-framwork/regulations
9
https://www.scconline.com/blog/post/2021/02/17/green-channel/
competition jurisdiction in the world where a transaction can be filed and approved on the
same day, subject to the fulfilment of certain criteria.10

PROCEDURE AND ELIGIBILITY FOR FILLING A GCA

The success of GCA is largely dependent on the self-assessment meted out by the parties to
ascertain their eligibility for availing of the benefits of GCA. The GCA was introduced by
CCI by inserting Regulation 5A in the 2011 Regulations. The parties are required to give
notice in an amended Form-1 along with certain declarations as envisaged in Schedule IV of
the Amended regulations. Along with that CCI has also amended Regulation 13(1A) to
remove the requirement of a long and a short summary required to be attached along with
merger notification. Now, only a brief 1,000 word summary of the merger is required to be
provided by the parties to the combination.

Furthermore, it clarifies in the newly inserted Schedule III which envisages the eligibility
conditions for GCA that where the transaction concerns a company/companies with either
horizontal, vertical or complementary overlap in all ‘plausible alternative markets’, such
Combination would not be eligible to avail the benefits of GCA. The aforesaid overlaps need
not only be checked between the parties to the combination and their respective related group
entities but also with any other entity in which they may either directly or indirectly, hold
shares and/or control. The phrase, “directly or indirectly hold shares and/or control”,
however, only includes entities where a party has:
i) Direct or indirect shareholding of 10% or more; or
ii) A right or ability to exercise any right that is not available to an ordinary shareholder; or
iii) A right or ability to nominate a director or observer in another enterprise.

If the said approval is granted to the party, it eliminates the statutory 210 days’ time limit
prescribed under the Act for ex-ante examination of combinations by CCI to see if they may
cause an appreciable adverse effect on competition in the relevant market or not before
granting of CCI approval, and enables the parties to implement the transactions immediately
without waiting for CCI approval. The combination is deemed to be approved on the date of
receipt of the acknowledgement of filing of the Notice. Thus, by introducing such regulations
in the act, the CCI has taken a step which will promote M&A transactions in the country as

10
https://lawgazette.com.sg/feature/green-channel-the-next-step-for-indian-merger-control/
well as promote the ease of doing business. 11 But the implementation of the same is
associated with some concerns that arise concerning its implementation which have been
discussed below.

CONCERNS WITH RESPECT TO THE IMPLEMENTATION OF GCA

When we see the legislative scheme of GCA as provided in the Act, there are a few stumbling
blocks concerning its implementation and efficacy which are pertinent in the present
discussion. Following are a few concerns that need to be highlighted for a better
understanding of the issue:

1. Is the idea of GCA at odds with the legislative intent of the M&A regulation as per the
Act?

The Amendment Regulations are a crucial step taken by CCI to streamline, simplify and
expedite the approval process of mergers and acquisitions in India.12 But, the GCA is prone to
challenge on the ground that it may be opposed to the legislative intent of the Act. The CCI is
entrusted with making rules13 and regulations14 for the Act for the purpose and legislative
intent of the Act.
Section 6(2A) of the Act provides that no combination shall come into effect until 210 days
have passed from the date of the notice or the commission has passed an order under section
31, whichever is earlier. The introduction of an automated approval mechanism regardless of
the time limit provided in the act appears to be contrary to these provisions of the Act.
Furthermore, Sec 30 requires CCI to investigate a combination as per Sec 29 once a notice is
received u/s 6(2) of the Act and form a prima facie opinion of the same. The automated
approval mechanism thus appears to be contrary to this provision of the Act as well.

2. Does the GCA in toto increase efficacy for the parties to the combination w.r.t to the time
required for approval & the uncertainty attached to it?

11
https://uk.practicallaw.thomsonreuters.com/0-501-2861?
transitionType=Default&contextData=(sc.Default)&firstPage=true
12
https://www.pioneerlegal.com/the-competition-commission-of-india-cci-introduces-green-channel-for-
mergers-and-acquisitions/
13
Section 63, Competition Act, 2002.
14
Section 64, Competition Act, 2002.
Before the introduction of GCA, the average time of approval of any combination by CCI
was approximately 15 to 20 days.15 If we take the average of the approval time frame of the
CCI by assessing its recent trend and the time required to file for the same and compare it
with the average time required by the parties to the combination for self-assessing their
eligibility for GCA, it is difficult to ascertain the efficacy of GCA at the first place. The huge
burden of filing and self-assessment for availing the benefit of GCA along with the
uncertainty of being declared void ab initio after the consummation of the combination raises
a larger question of the efficacy of GCA. The parties to the combination will certainly
question whether the gains of time (if any) outweigh Damocles' sword of uncertainty over the
approval status of the combination.16

Now, the issue of uncertainty gains even more significance for the firms undergoing
Corporate Insolvency Resolution Process (“CIRP”) which requires approval of CCI as per the
Insolvency and Bankruptcy Code, 2016. The viability of the GCA for combinations arising
out of CIRPs has been discussed in detail in May, 2020, IBBI Research Initiative paper. 17 It
argues that the “theoretical basis for green-channelling IRPs is the failing firm defence”.18
The failing firm defence is an exception to the general norm of merger control. 19 The defence
is based on the pretext that the failure of the firm would be imminent in the absence of the
proposed merger and thus any anti-competitive tendency in the transaction ought to be
overlooked.

Herein, in case a firm under CIRP gets approval through the GCA but its approval is under
the radar of CCI on a later investigation, then two options would be available to the CCI.
Firstly, declare the approved combination as void ab initio. In a situation where merger
control happens after the combination is implemented, the creditors cannot look at other
proposals and renegotiate the plan.20 Thus, Once the merger is implemented, merger control
requires detangling of assets; generally, unwinding mergers (including IRPs) after their
implementation increases legal uncertainty.21 Secondly, give recognition to the ‘falling firm

15
https://iclg.com/practice-areas/merger-control-laws-and-regulations/india
16
https://www.google.com/search?client=safari&rls=en&q=utweigh+the+Damocles
%27+sword+of+uncertainty+over+the+approval+status+of+the+combination%3F&ie=UTF-8&oe=UTF-8
17
https://www.ibbi.gov.in/uploads/publication/dc195510e9141a689e41ad181ab66cea.pdf
18
https://www.ibbi.gov.in/uploads/publication/dc195510e9141a689e41ad181ab66cea.pdf
19
European Commission Guidelines on the assessment of horizontal mergers under the Council Regulation on
the control of concentrations between undertakings, 2004 O.J. (C 31) 3, 12.
20
Int;l Comm. Arb. ICC Recommendations on pre-merger notifications regimes, 225/730
21
Int;l Comm. Arb. ICC Recommendations on pre-merger notifications regimes, 225/730
exception’ to the CIRP and thus approve the said combination. If the CCI moves forward
with the latter, then the larger question that would arise is whether the GCA is a step towards
statutory recognition of the ‘falling firm exception’ in the Indian merger control regime?

CONCLUSION

The GCA is a step expected to go an extra mile in reducing the delays associated with
approval for various mergers. However, the technicalities associated with the filing can
impede its effective implementation. The regulations are marred with a few grey areas that
need to be looked at from a more practical perspective. This will not only help in achieving
the efficacy it intended to achieve but will promote more M&A transactions in the country.
Also, with the CCI taking steps such as the non-binding pre-filling consultation to ensure no
logjam in the GCA, it will go a long way in motivating more parties to opt for this channel
and thus not only saving their time and money but the CCI as well.

It is also imperative to state that with present amendments to the procedure, it moves India
closer to voluntary merger regimes which are in place in jurisdictions such as New Zealand,
the United Kingdom (UK), and Australia. 22 Thus, it needs to be looked as to what is the
attitude of the CCI in the near future toward such approvals and what stance it takes for the
gun-jumping by any party of deemed approved combination under GCA.

22
Christ Boyd, ‘Gun-jumping’ in voluntary merger regimes: The risks keeping global transactions in suspense,
KLUWER COMPETITION LAW BLOG (Oct. 24, 2019).
http://competitionlawblog.kluwercompetitionlaw.com/2019/10/24/gun-jumping-in-voluntary-merger-regimes-
the-risks-keeping-global-transactions-in-