COMPETITION LAW AND M&A

The Lifecycle of a Combination before the

CCI
Competition Law and M&A
The Lifecycle of a Combination before the CCI

Learning objectives:
● To understand the procedure of investigation of a combination under the
Competition Act, 2002;
● To study the classification of the investigation into Phase I and Phase II investigation.

How does the Competition Commission of India(CCI)

investigate a combination?
The Competition Commission of India (“Commission”) follows the procedure laid down in
the Competition Act, 2002 (“Act”) and the Competition Commission of India (Procedure in
regard to the Transaction of Business relating to Combinations) Regulations, 2011
(“Combination Regulations”). In order to simplify understanding the procedure, the
investigation is divided into two phases: Phase I and Phase II of investigation. Even with
the two phases, if the Commission does not pass a final order regarding the combination
within 210 days from the date of notice given to the Commission by the notifying parties,
the combination is deemed to be approved by the Commission.

PHASE I OF INVESTIGATION
1. Phase I of the investigation begins with the filing of the notice in FORM I or FORM II
by the parties to the combination before the Commission, under Section 6(2) of the
Act. If a transaction between two parties falls under the definition of a combination
under Section 5 of the Act, the parties have to file a notice, as per the provisions
under Section 6(2) of the Act.

2. The notice filed before the Commission is examined by it under Section 30 of the
Act. Section 30 requires the Commission to form a prima facie opinion on the
combination. This means that on a preliminary basis, the Commission needs to
reach a conclusion on whether the transaction can be approved or whether further
investigation needs to be done. Transactions that involve no significant overlaps and
which raise no anti-competitive concerns and are not likely to have an appreciable
adverse effect on competition (“AAEC”) are immediately approved within 30 working
days period.

3. At the prima facie stage, in case the Commission finds that the combination does
not, or is not likely to, have an AAEC, it approves the combination under Section
31(1) of the Act. On the other hand, if the Commission is of the prima facie opinion
that the combination is likely to cause, or has caused an AAEC within the relevant
market in India, it issues a show-cause notice (“SCN”) to the parties under Section
29(1) of the Act.

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The Lifecycle of a Combination before the CCI

4. In the next step, the parties to the combination provide their responses to the SCN.
The Commission then exercises its discretion in calling for a report (“DG Report”)
from the Director General (DG). The DG has to submit the DG Report as per Section
29(1-A) of the Act. This is not very usual as opposed to enforcement cases.

5. After receiving the DG Report and the responses of the parties to the SCN, if the
Commission finds, on a prima facie basis, the combination has or is likely to have,
AAEC, the Commission’s investigation of the combination enters Phase II of the
investigation.

Please note: Parties are free to provide some voluntary modifications to their transactions
at this stage in order to get the transaction approved by the Commission after the SCN.1

PHASE II OF INVESTIGATION
1. Phase II of the investigation continues from Phase I after the Commission finds
possible AAEC due to the combination on a prima facie basis. The first step of the
Commission in Phase II is to direct the parties to publish the details of the
combination, in accordance with Section 29(2) of the Act.

2. As per Regulation 22(2) of the Combination Regulations, the parties have to publish
the details of the combination in FORM IV under Schedule II of the Combination
Regulations. This is basically a public statement which gets published in all India

1
Regulation 19(2) of the Combination Regulations, introduced by F. No. CCI/CD/Amend/Comb.Regl./2018, dated
9-10-2018.

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Competition Law and M&A
The Lifecycle of a Combination before the CCI

editions of four leading newspapers, including at least two business newspapers2,

and the floor is made open to stakeholders for comments and objections.
3. After the details are published, as per the provisions under Section 29(3) of the Act,
the Commission may invite any person or member of the public affected, or likely to
be affected, by the combination, to file his written objections against the
combination before the Commission. This provides an opportunity to competitors of
the parties, or any other entity, to raise objections against the combination before
the Commission.

4. Next, the Commission may require the parties to produce additional or other
information, so that the Commission can appreciate and assess the objections
raised by the public under Section 29(3) of the Act, to the full extent.

5. After receiving all the responses from the parties, the DG and the public, including
the competitors of the parties and other players in the market, Section 29(6) of the
Act provides that the Commission shall finally move to deal with the case in
accordance to the provisions under Section 31 of the Act.

6. Section 31, primarily, is the final stage in the approval process of the combination
before the Commission. After following the above-mentioned procedure, the
Commission makes an opinion on the combination. If the Commission is of the
opinion that the combination does not or is not likely to, have AAEC, it approves the
combination under Section 31(1) of the Act. On the contrary, if the Commission is of
the opinion that the combination has or is likely to have, AAEC, as per Section 31(2),
it directs that the combination shall not take effect. However, it is interesting to note
that till date the Commission has never blocked any deal under Section 31(2) of the
Act. It rather deliberates with the parties to bring in the required
structural/behavioural modifications.

7. The next possibility is provided under Section 31(3) of the Act, where the
Commission is of the opinion that the combination has, or is likely to have, AAEC, but
such adverse effect can be eliminated by suitable modification to such
combination. This modification is proposed by the Commission to the parties
under Section 31(3).

8. The parties have the option either to accept the modification or not to accept it. If
the parties accept the modification and carry it out as per Section 31(4) of the Act,
the modification will eliminate the AAEC in the combination and will lead to its
approval under Section 31(1).

9. If the parties accept the modification but fail to carry it out as per Section 31(5), such
a combination is deemed to have an AAEC. The Commission deals with such
combinations as per Section 31(2) of the Act. This has not happened to date.

2
Regulation 22(5) of the Combination Regulations;

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10. If the parties do not accept the modification proposed by the Commission, but on
the other hand, submit an amendment to that modification within 30 working
days before the Commission under Section 31(6), the Commission then may either
accept or decline to accept the amendment.
11. If the Commission accepts and agrees with the amendment, it approves the
combination under Section 31(7). On the other hand, if it does not accept the
amendment, it provides another opportunity of 30 working days to the parties to
accept the modification proposed by it. This on a practical level involves multiple
back and forth of negotiations with the Commission after which finally the order is
passed under Section 31(7) of the Act.

12. Thus, the investigation of combination ends with an approval or a barrier to the
combination, but no strict disapproval, which can’t be evaded by any effort.

Conclusion:
⮚ Phase I and Phase II of the investigation show that the Act provides a firm basis for
any combination to get approved by the Commission.

⮚ Phase I ends and Phase II begins when the response of the parties to the SCN does
not convince the Commission.

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⮚ In Phase II, the Commission reaches out to the public for their opinions.

⮚ The Commission has resorted to Phase II investigation in only a handful of cases.

⮚ Combinations deemed to have an AAEC are barred from taking effect, until and
unless the defect due to the adverse effect is eliminated.

Food for thought:

- Assume you are representing your client in a combination investigation
proceedings before the Commission, and the investigation has entered Phase II of
investigation. After details of the combination are published by your client and the
other party, upon the direction of the Commission under Section 29(2) of the Act,
one of your competitors approaches the Commission to file objections against the
combination, stating that the combination will wipe out all the competitors of your
client from the market. Such a representation will be detrimental to your case.

- Your client wants to oppose the representation made by that competitor before
the Commission. The Commission may call for additional information under
Section 29(4) of the Act after receiving the objection from the public, but it is a
discretionary power with the Commission, and the Commission may not call for
such information. If the Commission does not take such a step, how will you
oppose the objections? Which provision will provide you with the remedy to
present your defence to the objections raised by the competitor?

(Hint: Refer Regulation 24 of the Combination Regulations.)

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