In the immediately preceding issue, the performance of the CCI in the task of regulations of combinations, as compared to international standards, was discussed and found to be really impressive for any new competition agency. However, this experience in regulation of combinations has thrown up interesting lessons in merger control. In this concluding part, the author, who laid down the basic analytical and procedural framework for combination review, as the first Head of Merger Control CCI, in India, takes a look at the lessons from the journey in merger control so far in India. The comparisons with other jurisdictions throw up extremely interesting results as seen here in this concluding part.

1. B-852012]
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jurisdictional thresholds annually,
based upon the changes in Gross
National Product. This is intended to
keep pace with inflation. Interestingly,
the pre-merger filing fees, which have not
changed for more than a decade, were
also revised. The thresholds and the
filing fees, as revised by FTC, USA and
as applicable to all the transactions
closing on or after 27th
February, 2012, are
as under:
For the size-of-transaction test
In terms of the new thresholds, no
transaction will be reportable
unless, as a result of it, the acquiring
person will hold voting securities,
assets, or non-corporate interests of
the acquired person valued above
US$ 68.2 million.
# Combination Review in India: A Mid-year Review (Part I) published in Competition Law
Reports, February, 2012 at page B-31.
* Commissioner of Income Tax, Govt of India, Kochi, India. He was Director General & Head
of Merger Control, in CCI till recently. The views in this article are personal. He can be
reached at kksharmairs@gmail.com
Combination Review in India: Lessons So Far - Part II#
K.K. Sharma*
In the immediately preceding issue, the performance of the CCI in the task of
regulations of combinations, as compared to international standards, was discussed
and found to be really impressive for any new competition agency. However, this
experience in regulation of combinations has thrown up interesting lessons in
merger control. In this concluding part, the author, who laid down the basic
analytical and procedural framework for combination review, as the first Head of
Merger Control CCI, in India, takes a look at the lessons from the journey in
merger control so far in India. The comparisons with other jurisdictions throw
up extremely interesting results as seen here in this concluding part.
On 24th
January, 2012 Federal Trade
Commission (FTC) of United States of
America (USA) announced the revised
thresholds for pre-merger notifications
filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (15
U.S.C. §18a) (HSR Act). The HSR Act of
United States of America (USA) requires
parties to notify authorities if — among
other things — the value of a transaction
exceeds the filing thresholds. This
announcement of change in thresholds
was a result of a mechanism of annual
revision mandated by the major
amendments to HSR Act passed by the
U.S. Congress in 2000 which
significantly increased the HSR
thresholds. As the law stands today in
USA, Section 7A (a) (2) of the Clayton Act
requires the FTC to revise the
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For the size-of-persons test
On the other hand if, as a result of the
transaction, the acquiring person
will hold voting securities, assets, or
non-corporate interests of the
acquired person valued above US$
68.2 million but below US$ 272.8
million, then the size-of-persons test
will also need to be met for the
transaction to be reportable.
Generally, the size-of-persons test
will be met if one person (either
acquiring or acquired) has annual net
sales or total assets equal to or
exceeding US$ 13.6 million, and the
other person has annual net sales or
total assets equal to or exceeding
US$ 136.4 million.
Revised slabs of filing fee
The filing fee tiers have also been
amended. The fee will be US$ 45,000
for transactions valued above US$
68.2 and below US$ 136.4 million; US$
125,000 for transactions valued at or
above US$ 136.4 million and below
US$ 682.1 million; and US$ 280,000
for transactions valued at or above
US$ 682.1 million.
the total cost of a Deputy Director (DD)
or a Level II expert engaged for a month
by the Competition Commission of India
(CCI). Let us not forget that the DD is the
lowest level at which recruitment takes
place in the CCI in professional category.
Needless to say that the review involves
a team which is much larger than a mere
DD/Level II expert in CCI including the
time and skills of many higher ups
including the Members and the
Chairman, whose remunerations have
been pegged quite high by the standards
of the Government based on the
reasoning that they have to handle a very
specialised subject. Therefore, in the
ultimate analysis, the cost of any review
of combination is much higher and is
many times more than the fee received
along with the notification even in the
cases filed in Form I where the notifying
parties to the combination could get
away by filling up merely the first four
columns in Part I of the form and leaving
out the Part II of the form.
As regards the revenues of the CCI, it may
be mentioned that, in terms of Section 51
of the Act, only the fees received under
the Act will go to the Competition Fund
of India (COMFI). The revenue inflows
into the COMFI are to be from the
following streams:
(i) All Government grants received by
the Commission;
(ii) The fees received under this Act;
(iii) Interest accrued on the above two
amounts.
Therefore, if there is anything to augment
the resources of the CCI, including hiring
of any new professional staff for the
combination review, it is the fees received
under the Act of which fees received for
notification for combinations are a major
chunk. The other fee is the one received
along with the information filed with the
CCI. This originally, in May 2009, was
kept at Rs. 50,000. This has since been
revised in various slabs depending on
the status of the person filing information
The filing fee for Form I was
kept at a figure of Rs. 50,000
which is less than the total cost
of a Deputy Director (DD) or
a Level II expert engaged
In Part I of this article in the previous
issue, amongst the various concerns
listed by different stake holders in India
before the regulations of combinations
came into force, were the fears that the
filing thresholds for mandatory pre-
merger filings in India are too low and
the filing fees were too high. It was the
result of these fears and the
consequential very effective protests that
the filing fee for Form I was kept at a
figure of Rs. 50,000 which is less than
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— the lowest being Rs. 5000. Naturally,
this becomes negligible in contrast to the
fees along with the combination filings.
In the initial period, the CCI may be
sustained by the Government by way of
grants. However, in a stable scenario,
after a few years of full functionality, it
should be a self-sustaining regulatory
institution as is the case with Securities
and Exchange Board of India (SEBI). A
market regulator, in a healthy market, in
stable circumstances, unless dictated by
other socio-economic considerations,
should be supported by the markets it is
supposed to invigorate. Secondly, it is a
market regulator and Government, after
having brought this institution into
existence in the first place, should
slowly but certainly exit from the funding
responsibility. This is not necessary just
from the point of unburdening the
Government but also in view of the fact
that, in terms of the definition of
“enterprise” given in Section 2(h) of the
Act, with some limited exceptions
relating to the sovereign functions of the
Government, the departments of the
Government, engaged in commercial
activities, are also within the purview of
the CCI. If the CCI does not aim and
actually become a self-sustaining market
regulator in a market in which the
Government, although slowly limiting
its role, still remains a meaningful
participant because of historical reasons,
it may leave a room for allegation of
conflict of interest. In any case, in its short
existence as a functioning institution, the
CCI already had Public Sector Entities,
Railways, Passport Office as well as
other Government departments as
parties in various matters before it. Suffice
it to say that these matters give rise to
many other issues as well which are
equally complex to decide and may be
discussed separately elsewhere.
The foregoing discussion would indicate
that there is no reason for the regulator
to shy away from recouping its costs and
funding a perspective planning for its
capacity augmentation which is a critical
necessity for its effective functioning.
Popular sentiments of a section of
stakeholders should be respected but not
taken as either representing the concerns
of all the stakeholders, just because other
stakeholders are not so resourceful and
consequentially vociferous, or be allowed
to dent the capacity of CCI as an
institution. Unfortunately, that is what
precisely happened during the run up to
the effective date of the implementation
of the regulation of combinations and
finalisation of the Combination
Regulations. This was the reason of the
fees being at the levels at which they were
actually adopted in the regulations
finalised on 11th
May, 2011 by CCI (off
course, in consultation with the
Government).
In this background, the timings of the
change of thresholds by FTC, USA, make
comparisons inevitable and interesting.
Given below is a Table1
comparing the
thresholds of USA (after above mentioned
revision), other major jurisdictions and
India:
A market regulator, in a
healthy market, in stable
circumstances, unless
dictated by other socio-
economic considerations,
should be supported by the
markets it is supposed to
invigorate
1 The figures are approximate because of conversion. USD has been taken equal to Rs. 50.
GBP has been taken equal to Rs. 79.The Euro has been taken equal to Rs. 66. These USD,
GBP & EURO rates are as on 4th
March, 2012.
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Jurisdiction Domestic turnover Worldwide Other
turnover
Australia NA NA No monetary thresholds at
all.
Belgium Aggregate — —
consolidated turnover
of more than EUR 100
million (Rs. 6600
million) and if at least
two of the firms in
question have a
turnover in Belgium of
EUR 40 million
(Rs. 2640 million) each
France The combined
aggregate worldwide
turnover of all
participating
companies must be
above 150 million
Euro (Rs. 9900
million) and the
domestic turnover of at
least two participating
companies must be
above 50 million Euro
(Rs. 3300 million)
each.
Germany Domestic aggregate Combined
turnover of all least worldwide
one of the undertakings aggregate turnover
must be at least of all undertakings
25 million euros must be 500 million
(Rs. 1650 million euros (Rs. 33000
approx) million approx).
European Aggregate Combined – of all If it does not meet either of
Union Community-wide undertakings these thresholds, it may still
turnover of each of at concerned - EUR qualify if:
least two of the 5000 million
undertakings Rs. 3,30,000 million
concerned is more than approx)
EUR 250 million
Rs. 16,500 million
approx)
(a) the
combined
aggregate
worldwide
turnover of
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all the
undertakings
concerned is
more than
EUR 2500
million (Rs. 165000
million
approx);
(b) in each of at least three
Member States, the
combined aggregate
turnover of all the
undertakings concerned is
more than EUR 100
million (Rs. 6600 million
approx);
(c) in each of at least three
Member States included for
the purpose of point (b), the
aggregate turnover of each
of at least two of the
undertakings concerned is
more than EUR 25 million
(Rs.1650 million approx);
and
(d) the aggregate
Community-wide turnover
of each of at least two of
the undertakings concerned
is more than EUR 100
million (Rs. 6600
million),unless each of the
undertakings concerned
achieves more than two-
thirds of its aggregate
community-wide turnover
within one and the same
Member State.
Netherlands At least EUR 30,000,000 Combined turnover —
(Rs. 1980 million) of of the participating
the combined annual undertakings must
turnover was realised must exceed
in the Netherlands by EUR 113,450,000
at least two of the (Rs.7,458 million)
undertakings involved
United Value of turnover — —
Kingdom £70 million. (Rs. 5530
million)
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South Less than R.30
Africa million: small mergers:
no notification
required; R.30 million
(Rs.172 million) and
above: Intermediate
mergers:require
notification R.200
million (Rs.1149
million) and above:
Larger mergers having
stricter notification
requirements (all
values refer to the
combined size of the
entities either in terms
of assets or
annual turnover)
United As a result of such — Specification in case of
States acquisition, the manufacturing companies
acquiring person that the acquiring company
would hold an must meet the minimum
aggregate total amount threshold of $100 million
of the voting securities and the acquired company
and assets of the must meet the minimum
acquired person is in threshold of $ 10 million.
excess of $ 272.8
million (Rs. 13640
million) (Size of
transaction) OR If
less than $272.8
million but greater
than $68.2 million
(Rs. 3260 million)
then it must satisfy the
size of entity test
where total assets or
annual net sales of the
one of the parties must
be a minimum of $10
million (Rs.500
million) and the other
- $100 million
(Rs.5000 million)
Korea One party should have
total asset or total
annual sales exceeding
100 billion won (Rs.
4178 million), the
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other party should
have total assets or
annual sales exceeding
3 million won (Rs.125
million)
Canada Parties together with — —
their affiliates must
have assets or gross
revenues from sales -
400 million dollars
(Rs. 1562 crores)
Value of all assets or
gross revenues from
sales must exceed 35
million dollars
China At least one party’s RMB 5 billion The value of transaction is
China-wide assets or (Rs. 2500 crores) more than RMB 300
turnover in the million (Rs. 165.3 crores)
preceding year above
RMB 3 billion (Rs.
1653 crores)
Brazil Any of the participants has
posted in its latest balance
sheets an annual gross
revenue equivalent to
R$ 400,000,000 (four
hundred million of Reals)
(Rs. 897 crores)
Russia The Aggregate value of
assets in accordance with
the accounting balance
sheets exceeds three
billion Rubles (Rs. 4800
million) or aggregate
revenues from sale of
commodities for the
calendar year preceding the
merger exceeding six
billion Rubles (Rs. 9600
million)
India Assets of value Assets of value In case of group
Rs.15,000 million or $ 500 million enterprises:
turnover over (Rs. 2500 million)
Rs.45,000 million or Turnover over
$ 1500 million
(Rs.75000 million)
In India:
assets of
value
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Like the latest revision in the thresholds
for pre-merger filings in USA, there is a
similar revision mechanism provided
under Section 20 (3) of the Act in India.
Section 20 (3) of the Act reads as under:
Notwithstanding anything contained
in Section 5, the Central Government
shall, on expiry of a period of
two years from the date of
commencement of this Act and
thereafter every two years, in
consultation with the Commission, by
notification, enhance or reduce, on the
basis of the wholesale price index or
fluctuations in exchange rate of rupee
or foreign currencies, the value of the
assets or the value of turnover, for the
purposes of that section.
The Act was enacted in January, 2003.
However, the provisions relating to
regulations of combinations could come
into effect only with effect from
1st
June, 2011. Thus considerably, time
elapsed without these provisions being
in force. Accordingly, the Government,
on 4th
March, 2011, issued a notification
enhancing the thresholds by 50 per cent.
This effectively meant that the figure of
1000 became 1500, figure of 3000 became
4500 and so on so forth. Irrespective of
the detailed provisions given in
Section 5 of the Act, the effective
thresholds in the Act is $ 3 billion of
assets or turnover of $ 9 billion. This is
for the simple reason that any enterprise
which is exceeding a turnover of Rs. 4500
crores is nearly certain to have at least
one associate concern. Further, in present
globalised world, it is almost impossible
to imagine an enterprise which shall not
have any income from outside India
including income on account from
foreign exchange fluctuations. If these
two conditions are met which is mostly
expected to be the case, the effective
Indian thresholds are USD 9 billion of
turnover or INR 450 billion. All the cases
of merger notifications before the CCI
have had at least one associate concerns
and income from outside India.
Coming back to the claims of a section of
stakeholders that the thresholds for
regulations of combinations were too low
in India, the thresholds in India, as can
be inferred from the forgoing table, are
the highest in the world. In the table given
above, the thresholds of different
countries are compared after converting
all these figures in Indian currency. This
is for facilitation of comparison. There
Rs.60,000
million or
turnover
Rs.180,000
million and
above
Worldwide:
$3 billion
(Rs. 150
billion
approx) in
value of
assets or
turnover of
over $9
billion (Rs.
450 billion
approx)
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may be small variations in numbers on
account of the ever changing foreign
exchange fluctuations but for the
purpose of comparison, the above table
gives the relative positions. As we see
from the above table, the thresholds for
India, effectively $ 3 billion of assets or
the turnover of $ 9 billion. Thus, in rupee
terms the thresholds in India are at
Rs. 450 billion turnover in comparison
to the thresholds of Rs. 330 billion in EU
which is the second highest. The EU is
not a single country but an economic
grouping of nearly two dozen developed
countries. This leaves room for revising
thresholds in future. If and when it is
done, India will not be the first country
to do so. Other countries, in the past, have
calibrated the thresholds liberally.
Lesson: Keep a watch on thresholds
and adjust them in due course as CCI
gains experience. The first step in this
direction may be discontinuance of
the two notifications — one which
relaxed the definition of “group” and
the other which exempts acquisitions
below a minimum size — dated
4th
March, 2011.
Looking into the fact that the basic
thresholds for merger control, in India
were, deliberately, kept were very high,
in view of the stage of the evolution of
the economy, it could be inferred that the
framers of the law never anticipated to
deal with the neighbourhood grocery
stores and aimed to catch the big market
players only into the regulatory net and
let the smaller players grow in size
unhindered so as to achieve efficiencies
of scale before getting into the mesh of
regulatory burden. Be that as it may be,
the fees of Rs. 50,000 was, indeed, quite
low by any standards.
As a matter of fact, the first time fee was
proposed at Rs. 40,00,000 in the first ever
draft of combination regulations, it was
done after due deliberation. There are
four, broad, models of filing fees across
the world. These are:
After considering the existing patterns
all over the globe, in view of the stage of
the development of the economy, a small
flat fee of Rs. 40,00,000 was kept. In the
very first draft put in public domain, the
fee was based on the basis of stage of
review. However, many stakeholders felt
that it may be misinterpreted as an
incentive to CCI to push the combination
review cases into the second stage of
investigation. However unjustified those
fears might have been, especially in view
of the fact that in the reviews of the
combination done by the CCI so far CCI
has been very circumspect in asking for
the filing in Form II although it brings in
an additional fee of Rs. 9,50,000 (the total
for Form II being Rs. 10,00,000), the fee
was first kept at a flat figure, in the second
revised draft in the public domain, and
later Rs. 50,000 for Form I and
Rs. 10,00,000 for Form II in the final draft.
The combination review is quite resource
intensive. It calls for updating the skills
from time to time. This means continuous
training. This is the reason that a new
competition agency has to have a good
skill base and need to keep on updating
it from time to time. This is to be made up
from the filing fees. There are agencies in
the world which work out the resources
spent and then depending on the time
Thresholds in India are at
Rs. 450 billion turnover in
comparison to the thresholds
of Rs. 330 billion in EU
which is the second highest
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Combination Review in India: Lessons So Far - Part II
(a) No Fee For Merger Filings
(b) A Single Flat Fee
(c) Slabs of Fees Depending on the Size
of Transaction
(d) Fee Based on Services (to be raised
as a bill at the end of review)

10. Competition Law ReportsB-94 [Vol. 1
COMPETITION LAW REPORTS ™ MARCH, 2012
spent, raise a bill on the notifying party.
In a scenario where, already, there is a
lot of opposition on various counts,
raising a bill may be like showing the
red rag to the bull. It was not considered
appropriate in the present socio-
economic circumstances to have the
system of billing. Similarly, for doing
away the fees altogether was not
considered feasible. That is why a very
low level of fee, which was less than even
0.000001 per cent of turnover of the
combining parties, was kept.
The finally adopted figure of Rs. 50,000,
for Form I, did not really fit into any model
of fee, discussed above, except some
tokenism. Therefore, irrespective of the
noise from a section of the stakeholders,
it was not very high in comparison with
the other incidental expenses on other
incidental activities including counsel
fees in a merger, amalgamation or
acquisitions. There was enough elbow
room for rationalisation, if the CCI
wanted to be effective by capacity
enhancement and augmentation. As
shown in the above table, the highest
filing fee payable in USA is US $ 280,000.
This means in INR 140,00,000 or
Rs. 140 lacs. Compare this with the fee
with the default form i.e. Form I in India
at Rs. 50,000. The USA, being a much
bigger economy, having much lower
thresholds for merger control, has a
maximum fee which is 280 times of ours.
Fortunately, near about the date the
revised thresholds of FTC in USA were
to come into effect i.e. 27th
February, 2012,
on 23rd
February, 2012, the CCI also
amended the combination regulations
and revised the minimum fee payable
along with Form-I at Rs. 50,000 to
Rs. 10,00,000. This was a really welcome
step except that there is still scope to
further rationalise and enhance it, if the
need be, in future. Even after this upwards
revision, the maximum fee payable in
USA is about 3.5 time of the maximum
fee payable i.e. Rs. 40 lacs despite much
lower thresholds in USA. So this lesson
has partly been followed. However, even
this enhanced fee is also just about
0.000002 per cent of the effective
thresholds of turnover in India.
Lesson: There is enough elbow room
for enhancing the fee to ensure that
the quality of review remains good
and it does not become the victim of
resources.
Thresholds in the Act are extremely high.
The changes made in the combination
regulations are likely to have an impact
on the number of filings in near future.
There is likely to be a reduction in filings
by about 50 per cent in the coming times.
However, plugging of loopholes in the
last amendments is likely to enhance the
number of filings. There were a number
of studies done, internally, in the
Commission, to find out the expected
workload of the Commission in the run
up to the enforcement of Combination
Regulations. These studies had thrown
up a number of about 100 filings a year.
On revised thresholds, which were
about 50 per cent higher than the
original filings, the number thrown up
was about 50-60. However, the
exemption of acquisitions by
introducing a “de-minimis” for the
acquisitions through an amendment
reduced the number further. However,
as the mergers and amalgamations
remained outside the intent of the
combination regulations the reduction
in numbers was not really significant.
As referred to in the last issue, if the
intra-group mergers and
amalgamations are left out, the total
number of filings in the first half would
be about 10. Depending on the cycles of
economy, the second half may show
filings to the tune of 10 to 30. However,
it may not be wrong to expect filings to
the tune of 50 to 80 in the following year.
This number is adequate both for
gradually kick starting merger control
as well as training the core team of the
combination division into the nitty
gritty of combination review.
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There may be some enterprises claiming
to be victims of the information being
sought by the CCI combination Division.
Actually, a close look at the cases decided
by then CCI so far would show that the
information being sought is not because
of the information overburden on the
notifying parties but lack of
understanding on the part of notifying
parties. On the other hand, there have
been cases where the CCI has not sought
for any other additional information and
cleared the cases in record time.
Therefore, it is a two way process —
learning of the Combination Review
Team as well as the skill building of the
stake holders. The quality of the merger
filings speaks volumes about the
understanding of the stakeholders. The
type of information being sought in the
first few filings is being less and less.
Interesting issues are being thrown up
in most of the reviews. It is a constant
learning process. Unless properly
documented, the lessons may soon be
lost because of the frequent shift of
professional staff.
Lesson: A mechanism be evolved
through which any new matter / issue
coming up as a result should,
immediately, be sent to a designated
officer in the Legal Division who
would compile it for action in future.
The person on the job will be so
involved that he/she is likely to defer
it and, thereafter, forget the whole
matter.
Joint Venture is likely to be another route
which is going to give the CCI a very
severe headache in the times to come. The
Joint Venture can easily be a route to
acquisitions and takeovers. A corporate
lawyer really does not need any tutoring
how, with a couple of SPVs thrown in
for good measure, we can design nearly
all transactions as JVs and get away
from the filing requirements. For a good
defence the explicit definition of
efficiency enhancing joint venture in
Section 3 and no mention of JVs in
Lesson: Clarity on JVs may be in a form
of clarification that they need to file
notice.
When the regulations of combinations
were brought into force, the acquisitions
were given some breathing space by
carving out a minimum size test for
transactions. However, any relief given
in Section 5 of the Act has to be fair to all
the three limbs of Section 5. However, the
effect of the notification was that the
Clause (a) of Section 5 got impacted
whereas the Clause (c) of the same
section, practically, remained outside its
benevolent impact. This is the because of
this fact that the notifying parties could
never understand that whereas there
was no filing requirement for the filings
if the acquisitions size was below a
particular size, there was this
requirement even if a wholly owned
subsidiary had to be amalgamated as a
As the CCI gains experience,
there may be many matters
which may be sought to be
exempted as not causing any
adverse effect on competition
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Combination Review in India: Lessons So Far - Part II
Section 5 may be a fertile wrestling
ground for the ingenious advocates and
the CCI. It may not be a conclusive victory
for any. The matter may get even muddier
as we travel along. May be, in times,
where the authority given by Section 53B
is also sought to be taken away through
regulations (which any law student may
find quite amusing and beyond his
comprehension being against the basic
tenants of legal thinking of the relative
stature of main and subordinate
legislation), there is a strong need for
some clarification on Joint Ventures
(such as a positive need to file in case of
JVs) through regulations or else the
legislation may continue to be mired in
controversy and confusion.

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COMPETITION LAW REPORTS ™ MARCH, 2012
part of internal restructuring. It defied
all logic. The good thing is that the CCI
has been wise enough and really
understood the lessons and made
suitable changes in the combination
regulations so that it was not left to
explain impossible things in which it
hardly had any role but it had to live with.
This meant that the entries in Schedule I
have gone up by one. As the CCI gains
experience, there may be many matters
which may be sought to be exempted as
not causing any adverse effect on
competition. The USA, having an
experience of a little more than a century,
has a long exemption list.
Lesson: Be open to learn and accept
the transactions which are not likely
to impact the competition. If Schedule
I gets enlarged, so be it.
In the end, to summarise, following
lessons emerge from the experience so
far:
(a) The thresholds are not etched in
stone. With experience, these
should be adjusted so as to ensure
that problematic combinations do
not escape but there is not undue
regulatory burden too.
(b) Don’t shy away from further
enhancing the fee if it is needed.
(c) Proper knowledge management to
document the evolving experience.
(d) Bring a little clarity on Joint
Ventures to avoid litigation
(e) Add exemptions in Schedule I if the
experience dictates so.
It is time to learn from the experience and
move on.
Copyright © K.K. Sharma
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