watchdog may have its say on all M&As
Standard, August 30, 2012
regulators may consult each other if jurisdictions overlap
The tussle between the Competition Commission of India (CCI)
and sector regulators over jurisdiction on mergers and acquisitions may soon be
settled. The Cabinet Committee on Economic Affairs (CCEA) is likely to consider
the proposal of empowering the competition watchdog for this, while keeping
provisions for consultations between the two.
The proposed amendments in the Competition Act, 2002, are
expected to be considered in a CCEA meeting in the coming week. The ministerial
panel would evaluate recommendations of a group of ministers (GoM) headed by
Finance Minister P Chidambaram, which suggested mergers and acquisitions,
including those in the banking, telecom and pharmaceuticals sectors, be under
CCI’s purview. “We are expecting more powers for CCI, in line with the GoM’s
recommendations. It is eminently possible the Cabinet would take up the proposal
at its next meeting,” a senior official in the Ministry of Corporate Affairs
told Business Standard.
The GoM, set up for considering amendments in the
Competition Act, has suggested more powers for CCI. According to a source, the
GoM feels matters of competition must be scrutinised by CCI, which is empowered
to check the abuse of dominance and unfair trade practices. Therefore, CCI must
have a say in clearing mergers and acquisitions, even in sectors like banking
Earlier, various sectors had opposed CCI’s scrutiny of
mergers and acquisitions, saying specific regulators in various sectors were
already looking into the issue and, therefore, overlapping of jurisdiction was
possible if CCI took up the issue. Some sectors also doubted CCI’s ability to
monitor mergers and acquisitions.
In the past, the lobby group in the pharmaceuticals sector
has also argued CCI did not have the wherewithal to understand public interest
in the pricing of drugs and, therefore, foreign investment in the sector should
be cleared by the Foreign Investment Promotion Board.
However, ruling out blanket exemptions to any sector from
the purview of the Act, the GoM suggested there was no reason to keep CCI away.
Instead, it maintained competition should be overseen by a
specialised agency. It, however, suggested CCI and sector regulators must
consult each other if their jurisdictions overlapped. “Section 21 and 21 (A) of
the Act states the commission, as well as the sector regulator, may make
reference to each other if need be. This will now be changed to “shall”, making
it mandatory for both to consult each other,” the official said.
However, to leave a provision for exemption, the GoM
decided in case there was a need for exemption, the Ministry of Corporate
Affairs, under whose ambit CCI functioned, would have the powers to decide.
“Such a move by the GoM will reinforce the integrity of economic governance
system in the country,” said Pradeep Mehta, secretary general, CUTS
International. He added, “Otherwise, such legislative ambiguities would have led
to forum shopping and an uncertain legal environment, which would also affect
the investment climate adversely.”
The GoM also recommended powers for search and seizure to
CCI at the level of Director General of Investigations, the source said.
The GoM had finalised its recommendations last week, the
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