Approved Combinations under the Recent Combination Sections/Regulations

The Competition Commission, recently on November 4, 2011, approved the acquisition of BCL Springs Division of Bombay Burmah Trading Corporation Limited (BBTCL) by NHK Automotive Components India Pvt. Ltd. (NHK Automotive), a wholly owned subsidiary of NHK Spring Co. Ltd. (NHK Japan). BBTCL agreed to sell its BCL Springs Division to NHK Automotive as a going concern on a slump sale basis for a lumpsum consideration as per the terms and conditions of a Business Transfer Agreement between the parties. The acquisition came within the purview of Section 5 (a) (i) of the Competition Act, 2002 and was required to obtain the approval of the Competition Commission as per Section 6 of the Act read with the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.

As might be known, BBTCL belongs to the Wadia group and is engaged in the businesses of plantations, food, textiles, chemicals, electronics and light engineering, healthcare, real estate. The Spring Division, which was under acquisition here, is concerned with the manufacture, sale and distribution of various kinds of springs. In its order, the Commission discussed the automotive components sector in India, including springs manufactured for automobiles and noted that there exist two different markets – one, for original equipment manufacturers, and one for the replacements after-market to meet after-sales requirements. The acquirers and acquired in this case were present in the original equipment manufacturers market, making this the relevant market for the Appreciable Adverse Effect on Competition test. The territorial boundaries of India were considered the relevant geographic market. The order then analyses the market in greater detail, looking for potential overlaps in the markets of the acquired and the acquirers and at the impact on other major players in the market. The Commission laid down the following reasons why there was likely to be no appreciable adverse effect on competition through the acquisition –

• The two parties were involved in two different segments of the original equipment manufacturers market. While BCL Spring division was involved manufacturing springs for the 2-3 wheeled vehicles, NSI was manufacturing springs for 4-wheeled vehicles.
  
• The processes for manufacturing were different. While BCL used the cold formed production process, NSI used the hot-formed process.
  
• Prices of the springs manufactured by the two were different.
  
• The acquired and the acquirers could not be said to be involved in different stages or levels of production in India in respect of their springs for 2-3 wheeled and 4 wheeled vehicles as the two were completely different markets.

Having considered these facts, the Commission approved the combination under Section 31 (1) of the Act.

As a recap, the sections in the Competition Act relating to combinations i.e. Sections 5 and 6, were brought into force from June 1, 2011 vide a notification on March 4. Subsequently, on May 11, 2011, the Commission issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (also effective from June 1, 2011), which deal with procedural aspects of notification of combinations, exemptions and pre-merger notification process under the Act. Since coming into effect, the Commission has approved 6 combinations, including above discussed. The other five are: ·

• The merger of AHIL and APIL (approved on 19th October, 2011) ·
  
• The acquisition of the laminates division of BBTCL by AICA Kogyo Company Ltd. and Aica Laminates India Pvt. Ltd. (approved on 30th September, 2011) ·
  
• The acquisition of certain assets of Wockhardt Ltd., Carol Info Services Ltd., and Wockhardt EU Operations (Swiss) AG by G&K Baby Care Pvt. Ltd. and Danone Asia Pacific Holding Pvt. Ltd. (approved on 15th September, 2011) ·
  
• The acquisition of UTV Software Communications Ltd. by Walt Disney Company (Southeast Asia) Pvt. Ltd. (approved on 25th August, 2011) ·
  
• The acquisition of Bharti AXA Life Insurance Co. Ltd. and Bharti AXA General Insurance Co. Ltd. by Reliance Industries Ltd. and Reliance Industrial Infrastructure Ltd. (approved on 26th July, 2011)

[This post has been authored by Shruti Jere, Student, 5th Year, B.A./B.Sc. LL.B., WBNUJS]

Tid-bit: Wal-Mart’s takeover bid faces a wall of objections

Wal-Mart is a massive US-based departmental stores chain, whose takeover bid for Massmart, the biggest food and general goods whole-seller in South Africa, was recently approved by the Competition Tribunal in South Africa but this approval was based on certain conditions like no jobs being cut for two years and the company setting up a fund to assist local suppliers and manufacturers.

The South African Government appealed in the Competition Appeal Court against this approval on grounds of public interest. According to Government lawyers, the tribunal erred by not placing the onus on the company to ensure that increased imports do not destroy jobs, as no specific procurement targets have been set, and by failing to look at whether this merger can be justified on public interest grounds.

[This post has been authored by Antara Roy, Student, 5th Year, B.A./B.Sc. LL.B., WBNUJS]

Tid-Bit: Seagate shrinks competition in Samsung acquisition?

On 19th October 2011 the European Commission approved US based Seagate Technology’s acquisition of the Hard Disk Drive business of South Korean giant Samsung Electronics, although it will further consolidate the market. The primary concern in deciding the matter was the level of competition that will remain in the marker if such acquisition is permitted. The Commission found that there would be no effect on the market for external hard disk drives in the EEA as non integrated suppliers of external hard disk drives would retain sufficient alternative sources for hard disk drives. “The main impact of the transaction is on the markets for 3.5" desktop hard disk drives and 2.5" mobile hard disk drives where the investigation revealed that Samsung is not a particularly strong competitor,” reasoned the official statement. It further stated that this will, in fact, allow competitors to switch suppliers in the market.

[This post has been authored by Antara Roy, Student, 5th Year, B.A./B.Sc. LL.B., WBNUJS]

CCI’s latest order on Combination comes out in record time: Merger Regulation receives thumbs-up!

In the Competition Commission of India’s (CCI) latest approval of a proposed combination (see here), passed on 19th October, 2011, the CCI approved the amalgamation of ALSTOM Holdings India Limited (AHIL) and ALSTOM Projects India Limited (APIL) in a swift period of 7 days upon receiving notice! This is CCI’s fifth order pertaining to Combinations since the Combination Regulations came into effect on June 1, 2011, and with this CCI beats all its own records in speed.

Previous orders passed by the CCI approving mergers were between AICA Laminates India and Bombay Burmah Trading Corporation ( order passed in 23 days), between G & K baby Care Limited and Danone Asia Pacific Holdings on the one hand and the Wockhardt group on the other (order passed in 22 days), the much hyped acquisition of UTV Software Communications Limited by Walt Disney Company (order passed in 25 days) and the acquisition of the Bharati Group Holdings by Reliance Industries Limited and Reliance Industrial Infrastructure Limited (order passed in 18 days). Thus all the orders have been passed within a month, even though the time-limit for the CCI under the Regulations is one hundred and eighty days!

This would quell doubts of many in the industry who were apprehensive about the compulsory pre-merger review process that was created by the Combination Regulations this year, where entities within certain thresholds would have to mandatorily notify the CCI about any proposed Combinations. Since no combination could take place without the CCI’s prior sanction, many felt that delays caused in passing orders by the CCI would cost trade and business dearly. However, with the five orders passed to date, the CCI has quelled all doubts regarding its efficiency. The latest order, coming within a week of one of the parties giving notice to the CCI, goes a long way in boosting the merger regulation regime in India. 

[This post has been authored by Sreerupa Chowdhury, B.A./B.Sc. LL.B., 4th Year, The W.B. National University of Juridical Sciences, Kolkata]