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Abhay Joshi

Partner, Economic Laws Practice

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Importance of Disclosures Before The CCI And Key Takeaways

Given the focus on substance over form which guides the CCI’s approach, parties must take a holistic view on the disclosures based on the requirements under the law and the decisional practice of the CCI. The objective is to provide all material information, facts or documents to satisfy legal requirements and to assist the CCI in making a well-considered decision.

NV Investment Holdings LLC (“Amazon”) appears to have landed itself in murky waters with the Competition Commission of India (CCI) recently issuing a show-cause notice to the online retail conglomerate in relation to its 2019 transaction when it acquired a 49% stake in Future’s gift voucher unit, Future Coupons Private Limited (“Transaction”). Reports suggest that the CCI has sought an explanation from Amazon for allegedly suppressing or/and concealing the existence of special rights / strategic interest that Amazon acquired in Future Retail through the Transaction. According to the CCI, the existence of such special rights/strategic interest was not disclosed by Amazon when it approached the regulator for approval of the Transaction back in 2019.

Should the CCI ultimately determine that an enterprise or person had in fact suppressed or concealed an information which was material for CCI’s assessment of a transaction, there may be consequences under the Competition Act, 2002 (“Act”) and its regulations. The consequences, which could vary depending on the severity of the violation, includes a penalty of up to INR 1 crore and could even result in CCI withdrawing its approval for the transaction.

Against the backdrop of this case, it is important to understand the applicable law, the extent of disclosures expected by the CCI and what can enterprises do to avoid non-compliance.

Disclosures: How much is enough?

The CCI’s Combination Regulations framed under the Act, provide three different formats (Form I, II and III) for notifications to be made before the CCI. These forms require the parties to make a range of disclosures, including but not limited to horizontal and vertical overlaps between the target and the acquirer, the purpose / objective of entering into the proposed combination, its economic / strategic rationale and the manner in which such objective would be achieved. Taking a narrower view of these requirements may potentially result in errors in notifying the CCI. The issue which often most parties are faced with is the extent of disclosures to be made.

Given the focus on substance over form which guides the CCI’s approach, parties must take a holistic view on the disclosures based on the requirements under the law and the decisional practice of the CCI. The objective is to provide all material information, facts or documents to satisfy legal requirements and to assist the CCI in making a well-considered decision. The parties should bear in mind that the forms require parties to explain the ‘purpose’ and ‘description’ of the transaction. The disclosures in this respect should therefore be comprehensive enough to include all relevant rights, restrictions or obligations that emanate from the transaction in question, whether at the time of the transaction or at a later stage. The obligation to furnish complete and updated information is paramount, even after filing of the notice, as any change in the previously filed information also have to be notified to the CCI.

The Act empowers the CCI to impose penalty upon the parties for violation of their disclosure obligations and potentially also withdraw the approval previously granted to the transaction in question. The CCI has however, never withdrawn its approval granted to a combination on account of failure to provide full or accurate information. That being said, the CCI has however initiated proceedings for concealment or omission in three combinations so far.

To illustrate, the CCI has considered non-disclosure of existence of indirect interests of the promoters’ and shareholders’ of Ultratech in its competitors as a concealment / omission of material information. Similarly, in another transaction involving Canada Pension Plan Investment Board (“CPPIB”), failure to disclose that its investment in ReNew Power Limited (“ReNew”), will be utilized by ReNew for acquiring interests in another entity. This omission also was considered by the CCI as an omission to disclose material information.

Lessons Learnt

a. Parties to notifiable transactions must, clearly understand, confirm and meet the applicable disclosure requirements.

b. The proverb ‘err on the side of caution’ is most relevant in this scenario. ‘full and accurate’ disclosure is always advisable.

c. The CCI case teams looking into the proposed transactions are usually approachable and timely guidance and clarity from them is a prudent option to exercise.

d. It is also important to disclose to the CCI at any stage (during or post CCI approval) any material development or information, which may influence the decision of the CCI in respect of the proposed transaction, including any inadvertent underreporting or misreporting, to avoid future legal consequences.

Finally, correct understanding of quality and quantum can be achieved by seeking suitable and timely advise from the local competition counsels and CCI case team. With the merger filings, the devil lies in the details.


Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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