Evaluating the significance of key recent developments

The Competition Commission of India (CCI) on 28 March amended the regulations governing mergers and acquisitions, pursuant to its subordinate legislative powers. The key modifications are evaluated below.

Substance test: A new sub-regulation has been introduced, the essence of which is that the CCI will scrutinize the substance of a transaction, irrespective of the structure adopted, to determine if there is an appreciable adverse effect on competition. The move is seen as a tightening of the CCI’s grip. As to whether deal-making has become more difficult, the objective of the Competition Act has always been clear. As stated in the preamble, the act was introduced to establish a commission to prevent practices which have adverse effect on competition, promote and sustain competition in markets, protect the interests of consumers, and ensure freedom of trade.

Any perception that a “fancy structure” could bypass this prerogative of the CCI was just wishful thinking. The test has always been substance over form. This new sub-regulation is essentially just a reminder to the business community to be mindful of the impact on competition in its deal making.

Amit Tambe is a partner at Trilegal and Kunal Chandra is a counsel. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.