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]

DLF Receives Temporary Relief in Abuse Of Dominance Case

DLF, India’s largest real estate company, experienced a temporary relief on 10th November, 2011, when the Competition Appellate Tribunal stayed the Rs. 630-crore penalty imposed upon it by the Competition Commission of India in August, pursuant to complaints regarding abuse of market position by the Company.

Abuse of dominant market position occurs where a firm holds a position of such economic strength that allows it to operate in a market without being significantly affected by competition and it engages in conduct that is likely to impede the development or maintenance of effective competition as well as negatively impact the consumers. The law in India, under section 4 of the Competition Act of 2002 clearly specifies that “no enterprise shall abuse its dominant position”. However, having a dominant position does not in itself breach competition law; it is only the abuse of that position that is prohibited. The section also states that there shall be an abuse of dominant position if an enterprise imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or provision of services.

The DLF case relates to the complaint filed by the Belaire Owners’ Association in Gurgaon in May 2010, in response to DLF having extended the deadline by which the possession of the apartments was to be given to the consumers. They also alleged that the Company had unilaterally changed the building plans and imposed unfair and discriminatory conditions in the apartment agreements. Deciding in favour of consumers, the CCI was of the opinion that that the Apartment Agreements imposed conditions that were unfair and discriminatory towards the consumers and which were altered or included unilaterally by DLF for its own benefit and to the detriment of the allottees. It held that DLF, by placing the discriminatory and abusive clauses in the Apartment Agreements was guilty of abusing its dominant position. Imposing a penalty of Rs. 630 crore (the highest penalty ever imposed by it), the Commission stated that “The abuse of dominant position in this case is in respect of the basic necessity of housing. The earlier deliberation on the elements and extent of abuse make it clear that DLF has been grossly abusing its dominant position, and that too against a vulnerable section of consumers, who have little ability to act or organize against such abuse. The penalty, therefore, has to be commensurate with the severity of the violation through such blatant abuse of dominance”.

On appeal by the Company, the Competition Appellate Tribunal, granting a temporary relief to it, stayed the historic penalty, asking both sides to file their draft of the proposed modification to the contentious clauses that were part of the buyers' agreement (which made the agreement one-sided) within eight weeks, subsequent to which the Tribunal will finally hear the parties in February of next year and render a decision.

[This post has been authored by Payel Chatterjee, 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]