CCI Chief Asks For Control Redefinition

In order to keep merger restrictions in sync with a dynamic market, the influence held by investors under a firm needs to be construed more widely in the law, according to Competition Commission of India (CCI) head Ashok Kumar Gupta.

Gupta's idea for a more nuanced interpretation of control in the context of business mergers and acquisitions (M&A) transactions indicates to the new path that CCI's regulations would take after the proposed revisions to the legislation are approved by Parliament. The Competition Amendment Bill is now being reviewed by the Parliamentary Standing Committee on Finance, which is chaired by Bharatiya Janata Party leader Jayant Sinha, and will be debated during the winter session of Parliament. 

The Competition Act now defines it as controlling the affairs or management. The suggestion is to define it as the power to have substantial influence, in any way, over the company's management, affairs, or strategic commercial choices. Gupta said that because competition is a very dynamic activity, competition legislation must be as dynamic if it is to fulfil its goal. Furthermore, the connection between shareholders or investors and firms is rapidly expanding, and the idea of "control" must thus permit the accurate assessment of such a relationship, according to Gupta.

"As a result, it is believed that the term of 'control' should be associated with the power to influence strategic business decisions that generate changes in market dynamics." "This approach supplements the traditional definition of control, which is based on ownership or affirmative/veto rights," Gupta explained. CCI permission is required for firms to finalise deals since the regulator might advise changes to transactions to avoid any negative effects on competition caused by the transaction. A wider definition that includes the idea of "material influence" might put more agreements under CCI's scrutiny.

According to Gupta, determining substantial influence necessitates a case-by-case examination of the total relationship between the acquirer and the target. "In rendering our decision, we shall consider all of the facts of the case.Material influence may occur as a result of variables such as representation on the board of the target (organisation), contractually agreed upon consultation/veto powers, the voting percentage held by the acquirer, and so on," the chairwoman explained.