Jumping the gun under the merger control regime in India

Posted by Lexology

Jumping the gun under the merger control regime in India

By Ajay Goel and Subodh Prasad Deo (Saikrishna & Associates) 

Merger control regime in India provides for a suspensory regime wherein the ‘combinations’ (i.e. the notifiable transactions under the provisions of Section 5 of the Act) cannot be implemented unless approved by the Competition Commission of India (CCI) or expiry of the 210-day review period following notification.[1] Failure to notify a reportable combination and consummating the deal may expose the parties to a penalty which may extend up to 1% of the total turnover or the assets, whichever is higher, of the combination. The CCI has used this power increasingly and levied penalties under Section 43A of the Act.

Procedural and substantive gun jumping and issues regarding partial implementation:

Gun jumping, broadly defined, can occur in two distinct contexts i.e. (i) procedural gun-jumping, which occurs when the merging parties fail to comply with the mandatory premerger notification and the waiting period under the merger control regulations, and (ii) substantive gun jumping, which implies that the merging parties coordinate their competitive conduct or consummate the transaction prior to approval of the same by the competition authority, thus resulting in an anti-trust violation.

However, defining or determining what constitutes a gun jumping is not easy as many forms of pre-merger co-ordination between the merging parties are indeed reasonable and necessary during the merger negotiation process. The competition agencies are not insensitive or averse to such a requirement. However, they want the combining parties to maintain the fine distinction between planning activities, which may be permissible, and integrating activities, which are prohibited. It is, therefore, important for the combining parties to ensure that they understand the fine distinction between the two, so as to avoid any inadvertent violation of the suspensory regime.

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