In Media : May 2009

India’s tough new anti-monopoly laws finally came in to force on Wednesday after years of wrangling, giving authorities wide-ranging powers to tackle cartels and abuses of dominance involving domestic and international companies.

The controversial provision to control mergers and acquisitions, however, was not enacted after the government decided that the Competition Commission of India did not have sufficient staffing numbers to sensibly administer the laws. It is expected to be enacted within six months.

The CCI is now empowered to conduct “dawn raids” of company offices, fine and imprison individuals and to levy fines on turnover. The new laws, which are not retrospective, are expected to lead to major changes in the country’s business environment.

Competition experts in India predict that CCI will face difficulties with its legislation cutting across existing rules exercised on a sector-by-sector basis by different government ministries and warn of possible turf battles. They also say the new watchdog lacks capacity and has faced some opposition from policymakers who do not favour merger regulation.

“Telecommunications is one problem [where existing rules apply]. But many sectors have their own merger guidelines. Insurance has its own merger guidelines and petroleum probably has too,” said Pradeep Mehta of the CUTS Institute for Regulation and Competition.

“The people there [at CCI] are not very experienced in competition issues. There is a capacity issue; knowledge and experience will be built up over time,” he said.

The CCI replaces the age-old Monopolies Commission, which lacked teeth to tackle India’s sometimes endemic anti-competitive practices. The revised Competition Act was passed in 2002 and has been awaiting the official government green light since an amendment to the act was passed in October 2007.

Lawyers warned overseas groups, which have flocked to India in recent years to take advantage of soaring economic growth rates, to factor in the new anti-monopoly regime in to their day-to-day operations or risk severe penalties.

“The CCI is likely to be active and that represents a big change for companies operating in India,” said Jonas Koponen, a partner in the anti-trust practice of Linklaters. “Companies should be prepared for it.”

The postponement of the merger control provision will provide relief for its critics in India’s vociferous business community, some of whom fear it could, unintentionally, delay the completion of global mergers and acquisitions involving Indian companies and harm economic growth.

New Chinese laws introduced last summer have had a significant impact on the timetable of some global M&A deals.

Vinod Dhall, the architect of the new laws while he served as acting CCI chairman until last year, praised the government for taking a“pragmatic” approach to the merger control provision.

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