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Notify the CCI if Considering Intra-group Mergers
The Competition Commission of India recently granted approval to the proposed merger of an offshore subsidiary into its Indian parent under section 31(1) of the Competition Act, 2002 holding that such a merger was not likely to have an appreciable adverse effect on competition in India. In its ruling, the CCI also considered specific exemptions provided for in the recently notified Competition Commission of India Regulations, 2011 and held that merger of group companies would require CCI approval and that such mergers would not be eligible for the exemption available to "acquisitions" within the group under the Combination Regulations. Taxand India discusses the full facts surrounding the CCI's decision and how it reached the ruling.
Ruling of the CCI
- The CCI rejected the plea of the Parties that the proposed combination does not require notification to the CCI on the following basis:
The term enterprise has been defined under section 2(h) of the Act as:
"enterprise" means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries..."
The ultimate control over the activities of TCL and Wyoming 1 before and after the proposed combination remains with TCL.
In its ruling the CCI clarifies that the provisions of the Act do not automatically exempt any combination between group companies and hence, notification to the CCI is required even in case of combinations involving a parent and its wholly owned subsidiary provided the combination breaches the prescribed thresholds with respect to assets and turnover under section 5 of the Act. CCI has further clarified that the specific exemption provided under Clause 8 of Schedule 1 of the Combination Regulations from notifying CCI would not be applicable to intra group mergers.