CCI’s Deemed Approval to Synergy Metals’ Stake-Buy in JSW Cement9 min read
By Jalaj Tokas
Published On: November 27, 2021 at 16:10 IST
Competition is the most effective way to ensure that consumers get exposed to the widest choice of goods and services at the lowest possible rates. While, producers will be more motivated to innovate and specialize as a result of this increased competition. Consumers would benefit from lower pricing and more options. To attain this goal, a level playing field in the marketplace is required.
The Competition Act of 2002, as revised by the Competition (Amendment) Act of 2007, is based on the ideology of modern competition laws. The Act outlaws anti-competitive agreements, enterprise abuse of dominant position, and mergers and acquisitions that are or are likely to adversely affect competitions in India.
Following the footsteps, The Competition Commission of India (CCI) has very recently “deemed approved” a Green Channel notice regarding the acquisition of an equity stake by Synergy Metals Investments Holding in JSW Cement. This article investigates into the matter while understanding the concepts and institutions involved.
Competition Commission of India (CCI)
The Competition Act of 2002 was approved by the Parliament and it was subsequently signed into law by the President’s assent in January of 2003. Since then, it was revised by The Competition (Amendment) Act of 2007.
The Competition Commission of India and the Competition Appellate Tribunal have been constituted under the terms of the Amendment Act of 2007. With a Chairperson and six members, India’s Competition Commission is now fully operational. On May 20, 2009, the Competition Act’s anti-competitive undertakings and misuse of hegemonic position clauses were intimated.
The Competition Commission of India (CCI) aims to develop and maintain fair competition in the economy, which assists producers with a “level playing platform” and ensures that markets work for the benefit of consumers.
It is the Commission’s responsibility to eradicate anti-competitive activities which are adversely affecting the promotion and maintenance of competitions meanwhile also protecting the interests and freedom of consumers in the Indian trade markets.
The Commission is also mandated to raise concerns and opinions over competition issues while responding to references from any statutory entity formed under any legislation and to engage in competition advocacy, raising public awareness and providing competition training.
CCI aspires to encourage firms to be rational, competitive, and inventive while simultaneously improving consumer welfare and supporting economic growth by promoting and maintaining an inclusive competition culture via involvement, dialogue and enforcement.
Competition Commission of India (CCI) aspires to promote a healthy competitive environment through:
- Proactive involvement of all stake-holders, including consumers, enterprise, various organisations and administration and international authorities.
- By being a highly-competent, knowledge-intensive organisation.
- Expertise, condour, commitment and judgement while enforcing laws
What is a Green Channel?
Due to the pressing need for a smooth and painless procedure in antitrust lawsuits involving combination filings, the Competition Law Review Committee, chaired by Mr Injeti Srinivas, submitted a recommendation to the Ministry of Corporate Affairs, Government of India, requesting necessary amendments to the Competition Act 2002.
The changes created a new Green Channel Route to expedite the resolution of certain merger and acquisition cases where no potential harm lies to competition regimes and no significant detrimental effects on competition.
Green channel is an automated validation procedure that considers a combination of parties to be approved once both the parties file a merger or acquisition notice. It works as a filter for certain types of merger and acquisition filings that do not pose a threat to competition regimes. This way it allows them to avoid the traditional judicial process, and opt for faster settlements and administrative judgments.
This also eliminates the original Act’s statutory 210-day timeframe for CCI to conduct an investigation to determine if the transaction would have a meaningful detrimental effect on competition. In addition, parties are not needed to reveal market size, market share, competition details, or other information in order to expedite the process. As a result, they are exempted from some disclosure obligations.
With the implementation of this provision, a party might navigate the complexities of the merger control regime with relative ease. The Competition Commission of India (CCI) amended the law to include all of the specified conditions and standards. Given the abundance of red tape and lethargic bureaucracy, which makes retrieving justice a long-lost quest, industry experts hailed the move.
Protocol and Requirements
The newly configured Schedule III of the revised combination provisions recommends the procedure for parties to self-evaluate the proposed transaction while keeping in mind relevant market interpretations in all logical and reasonable ways to determine whether or not the proposed transaction is suitable for Green Channel Approval.
The self-evaluation measure is in place to ensure that all parties are aware of each other’s perspectives as well as the potential economic and financial consequences of the transaction. The requirements listed below must be met for parties to be considered eligible for Green Channel clearance before moving forward:
- The parties do not produce goods that are substitutes, identical, or goods that are interchangeably being used.
- That they are not engaged in activities involving the manufacture, supply, marketing and transportation or circulation of commodities at various stages of the production chain.
- That they are not engaged in any activity involving the manufacture, supply, marketing and transportation or circulation of commodities that are mutually beneficial or complementary to each other.
If all of the above-mentioned requirements are fulfilled, the parties must complete and submit the revised Form I along with a proclamation that the resulting combination will not have any significant adverse effect on competition.
The proclamation must prove that:
- The proposed combination will not result in any overlaps mentioned.
- As a result of the successful completion of this transaction, there will be no significant detrimental effect on competition.
- The information submitted in the application is accurate to the best of one’s knowledge.
Regulation 11 of the Competition Commission of India Regulations, 2011 stipulates that a filing fee of ₹20,00,000 must be paid while submitting an application. If the transaction is suitable for processing through Green Channel, the CCI provides an acknowledgement paper validating the considered approval. Under Section 31(1) of the Competition Act 2002, this permission is read as a CCI order.
CCI’s Deemed Approval to Synergy Metals
Undoubtedly, India’s development and infrastructure narrative is the most promising in the world. Recently, Synergy completed a structured equity investment worth up to Rs. 750 crores in one of India’s top and fastest expanding sustainable goods building companies, JSW Cement.
This is Synergy’s biggest investment till date, and was found to be completely consistent with the environmental, social, and economic impact goals.
The acquirer, Synergy Metals and Mining Fund is a specialist strategic advising and private equity fund firm with offices in Dubai, London, Mumbai, and Singapore. Globally, the company targets industrial, natural resources, metals and energy sectors and other related sectors along the value chain. The Fund focuses on unique circumstances where Synergy may provide value via active management and restructuring of operations. The fund has made ten investments totaling $675 million.[i]
The JSW group of enterprises owns the target, JSW Cements, which is an unlisted public corporation established in India.
The Target is an unlisted public company based in India and belongs to the JSW group of companies. Its business operations encompass
- The processing, manufacturing, and dealing of cement, blast-furnace slag and its sand, and other associated products;
- The extraction, squashing, and grinding of raw materials, as well as all other processes required to generate and manufacture cement;
- Providing land transportation services; and
- The purchase of properties for the construction of buildings, among other things.
Based on the facts, The Competition Commission of India claimed in its notice that the proposed merger fits well with the acquirer’s objective of investing in leading firms with excellent investment gains, while citing the transaction’s intent.
Important Case Laws
- Notification of Combination – SCM Solifert Ltd. Vs CCI[ii]
The Supreme Court held that the offer to enter into a combination was expected to be notified to The Competition Commission of India, as the regulatory mandate clearly mentions that a notification has to be rendered prior to actually entering into the combination. While explaining the intent behind it, the Court mentioned that the Commission should have an opportunity to evaluate whether the proposed combination would end up adversely affecting the competition or not. Failure to do so would defeat the very purpose of the combination.
- Combination of Two-Banking Companies – State Bank of India, In re[iii]
While initiating an inquiry about the proposed combination involving the amalgamation of Bhartiya Mahila Bank Limited(BMBL) with State Bank of India(SBI), the Commission inthis case,reflected that the combination entails the merger of two banking entities that provide financial services and while considering the low market shares in various financial services sectors and the presence of alternative rivals, it concluded that the Proposed Combination is unlikely to have a significant detrimental effect on competition in any of the banking services segments.
- Transactions should not be made to avoid the Act – CCI Vs Thomas Cook (India) Ltd.[iv]
The Supreme Court laid down that the substance of transactions should be seen in the circumstances of the case structuring. The transaction in question was not an independent one but part of a single, composite combination which was interconnected and interdependent with other transactions.
- Insignificant Overlap between Operations – Chubb Alba Control Systems Limited, In re[v]
While approving the combination in this case the Commission suggested that the combination is related to the “Building Energy Management System” (“BEMS”). BEMS is a set of computer-assisted tools for monitoring, controlling, and optimising the energy demands of a building. It should be recognised that the Parties’ activities do not cross horizontally. In the section of BEMS energy management services, however, there is an overlap between the operations of UTC CCS and Wipro Eco Energy. The Commission found that Target Business and UTC CCS had a little market position in India’s BEMS energy management services for the 2015-16 fiscal year. There are no vertical linkages between the activities, as stated in the notification.
The Green Channel pathway is a positive step forward in India’s merger standards. To encourage quick commercial transactions and expedite regulatory processes, the Ministry of Corporate Affairs established the Green Channel pathway.
It primarily caters three purposes:
- Offering a fast and reliable examination of combination instances; and
- Achieving a balance between collaboration and enforcement tasks.
- Fostering a business-friendly and economically healthy environment.
The requirement for a Green Channel Route arises from the fact that organisations occasionally exceed the threshold restrictions, but the proposed transaction does not offer any major concerns of unfair competition because it does not create any type of overland route.
Because their figures exceeded the statutory limit, the parties to such transactions were forced to go through needless processes and formalities. As a result, the necessary rules were developed to provide an alternative manner for such organisations to rapidly complete a transaction without any unnecessary wait.
More and more companies are opting for the green channel approval pathway, which is suitably affiliated with the government’s idea of ease of doing business as it fosters smooth mergers and acquisitions by avoiding unnecessary regulatory delays and decreasing the regulatory body’s load. Therefore, we can expect more combinations to follow the footsteps of Synergy and JSW Cement in near future, thus popularising the Green Channel Route.
ABOUT THE AUTHOR
Jalaj Tokas is a second Year Law student pursuing B.A.LLB from University School of Law and Legal Studies, GGSIPU, New Delhi. He is a life-long learner is self driven towards his ambitions. He strongly believes that expectations are premeditated disappointments and strives not just to be successful but more importantly to be of value.
Edited by: Aashima Kakkar, Associate Editor, Law Insider
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[i] Sudhir Maheshwari, “Investment in JSW Cement”, Synergy (last visited on November 18, 2021).
[ii] SCM Solifert Ltd. Vs CCI, (2018) 6 SCC 631.
[iii] State Bank of India, In re, 2016 SCC OnLine CCI 126.
[iv] CCI Vs Thomas Cook (India) Ltd., (2018) 6 SCC 549.
[v] Chubb Alba Control Systems Limited, In re, 2017 SCC OnLine CCI 131