Aravind Prakash·
Competition LawUncategorized
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Competition Commission of India’s Green Channel Route: Concept and Comment

Author’s Details

Anna Mariam Ramacha Thykkadavil is currently in her 5th semester pursuing a 3-year LLB program at Government Law College, Thiruvananthapuram.

Introduction

“With less regulation, I think you would see growth come back. Of course, there are situations where you need regulation. Antitrust regulation, for example, is a good idea because you want competition. But beyond that, it gets very difficult.”

-Eugene Fama (Amercian economist)

Section 5 of the Competition Act, 2002 defines combinations. Section 6 of the said Act regulates combinations. Combinations that cause or are likely to cause an Adverse Anti-Competitive Effect (hereafter AAEC) are considered void ab initio.. Therefore, these combinations must be notified to the Competition Commission of India (hereafter Commission or CCI) to eliminate any potential AAEC. Green Channel Route, introduced by 2019 notification, amended the Competition Commission of India (Procedure in Regards to the Transaction of Business, etc.) Regulations, 2011 with effect from 13th August 2019. The Green Channel Route offers an automatic combination approval process. Approval is granted on the same day as the notice is given, eliminating the need for formal approval from the CCI. This can significantly reduce the time and cost of transactions. It is the first-of-its-kind initiative in any of the world’s antitrust or anti-cartel policies. Through this channel, parties involved in a proposed combination can expedite the process of setting up the combination. A ground-level understanding can help analyse the initiative’s success.

The Concept

The definition of combination is explained in detail in Section 5 of the Competition Act, 2002. This includes acquisitions (of control, shares, voting rights, or assets of an enterprise or group in  mergers or amalgamation in India or outside India,  on condition that  specific threshold of money is  involved. With the 2023 amendment, the value of transactions associated with such acquisitions, if goes beyond prescribed limit, also come under the purview of combinations. The prescribed limit of amount is revised every two years from the date of commencement of the 2002 Act.  This is done by the Central Government in consultation with the Commission, based on the basis of wholesale price index or fluctuations in exchange rate of rupee or foreign currencies, or such factors that in its opinion are relevant in this matter, the value of assets or the value of turnover or value of transaction to define the combination.1 The combinations, if not regulated or supervised, can monopolize the markets. Also they may indirectly have access to consumers from each of the entities that get combined. Thus, when a bigger entity is formed by combination, they start enjoying larger numbers of exclusive consumers, increased market space etc. leading to monopoly. Other smaller entities in the market may face its consequences being left out from the competition sphere itself. If any person or enterprise enters into such combinations which cause or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India, such combinations shall be void as per Section 6 (1) of the said Act. The criteria to determine AAEC is listed in section 20(4) of the said Act. Thus, the combinations in an economy have to be regulated to promote fair competition and eliminate any kind of monopoly. This regulation is brought about by the pre-notification to the Competition Commission of India (CCI).

Pre-Notifying Procedure

The parties are required to give notice of the proposed combination to the CCI in the Form I prescribed in Schedule II of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011 disclosing its details. Evidence of payment of requisite fee2 has to be submitted along with the notice before CCI either after approval of merger or amalgamation by Board of Directors of the enterprises, or execution of any agreement or other document for above said acquisitions.3  

If the acknowledgment is given by the CCI, the proposed combination shall be deemed to have been approved by the Commission.4

After the receipt of the notice, CCI issued a notice establishing its prima facie opinion on ‘whether the proposed combination causes AAEC’.  If Commission does not form prima facie opinion that combination causes AAEC, then the combination shall be deemed to have been approved and no separate order shall be required to be passed.5

If Commission forms prima facie opinion that AAEC is caused or is likely to cause, the CCI conducts inquiry and the Director General may carry out investigation into the proposed to submit report. The parties of the proposed combination are given opportunities to be heard, before any rejection. The Commission passes appropriate orders, either allowing or rejecting the combination. Section 6 (2-A) states that no combination shall come into effect until 150 days have passed from the day in which the notice has been given to the Commission or when Commission has passed orders, whichever is earlier. 

Green Channel Route (GCR)

Regulation 5-A of Competition Commission of India (Procedure in Regard to the Transaction of Business, etc.) Regulations, 2011 prescribes what all to be filed for the approval of combinations under Green Channel. A notice in the Form I, evidence of requisite fee payment as per Regulation 5 and a declaration as specified in Schedule IV has to be submitted to the CCI. The notice must also be accompanied with a summary of the combination.

Once the parties file the notice and receive acknowledgment received from CCI, the proposed combination shall be deemed to have been approved by the Commission.6 However, if the CCI finds that the combination does not fall under Schedule III and/or the filed declaration is incorrect, the notice and approval granted under the regulation shall be void ab initio.” The Commission shall deal with the combination as per various sections of the Competition Act, 2002 dealing with inquiry, investigation, etc. The Commission provides the parties to the combination an opportunity to be heard before arriving at such a finding.7

The category of combinations mentioned in schedule III are only eligible to be approved via Green Channel. The eligibility of the party is determined by considering all plausible alternative market definitions. The parties to the combination, their respective group entities and or any entity in which they directly or indirectly hold shares and/or control should not produce or provide similar or identical, substitutable products or services. They shouldn’t be engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in products or provision of services which are the different stages or levels of the production chain and complementary to each other.8 That is, the proposed combinations should not cause a horizontal, vertical or complimentary overlap. 

The duly filled notice, along with one copy and an electronic version, shall be delivered to the Commission at address published on its official website.9 The fee  may be paid either by tendering demand draft or pay order or banker’s cheque, payable in favour of CCI Competition Fund or through Electronic Clearance Service by direct remittance to CCI’s bank account.10 If the notice is filed in Form I, the fee payable shall be ₹20 lakhs and if filed in Form II, the fee payable shall be ₹65 Lakhs11 (subject to change when Combination Regulations, 2023 come into effect). Form I is for those parties who don’t cause horizontal, vertical or complimentary overlap and the Form II i.e., for those who cause it but with threshold percentages of market share enjoyed by each party as prescribed in the regulation which is 15%.12

The Declaration is a document by which the notifying party to the proposed combination confirms that it has furnished all the information and documents as required, the combination falls in Schedule III and is not likely to cause AAEC. The party also has to declare that it has neither made any false statements knowing it to be false nor omitted to state any material particular knowing it to be material. The notifying party is in full awareness that if any of the statements if found to be incorrect, the void ab initio clause as per the regulation comes into effect.  If there are more than one notifying party, each party shall file this declaration.13 

The summary of the combination should be in not more than 1000 words with details of the proposed combination including name of the parties, nature and purpose of combination, products, services and businesses of the parties, respective markets in which parties operate.14

Conclusion

The CCI’s automatic system of approval for combinations through the ‘Green Channel Route’ is expected to promote speedy, transparent, and accountable review of Combination cases, strike a balance between facilitation and enforcement functions and create a culture of compliance and support economic growth. The amendment inserted Regulation 5-A to the above said 2011 regulations. The CCI website gives the list of Combination registration number, notifying parties, date of notification, status and summary of the status. If the case number is given, the details regarding the case can also be availed. This helps to track the approved combinations in real time. The website lists more than 90 combinations that have been approved through GCR from 2019 to 2023. Also, the CCI has disposed of almost 76 Green Channel dispute matters by 2023.15 The CCI has warned that even on a minor factum of overlap (horizontal/vertical/complimentary relationship) by significant market players, the combination has to be notified through the normal route of approval and not through GCR.16 Thus, there is quality guidance from the Commission for a seamless ‘speedy approval process’. Being a revolutionary step towards bringing more ease of doing business in India’s market, Green Channel Route provides a glimmer of hope for a fair competition and an investment friendly economic environment to many enterprises.

  1. Section 20(3) Competition Act, 2002. ↩︎
  2. Regulation 5(2) of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011 ↩︎
  3. Section 6(2) Competition Act, 2002. ↩︎
  4. Section 6(5) of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011 . ↩︎
  5. Proviso to Section 31(1), Competition Act, 2002. ↩︎
  6. Regulation 5-A (2) of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  7. Regulation 5-A (3) of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  8. Schedule III of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  9. Regulation 13 of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  10. Regulation 12 of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  11. Regulation 11 of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  12. Regulation 5 of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  13. Schedule IV of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  14. Regulation 13 (1-A)of Competition Commission of India (Procedure in regard to the Transaction of Business, etc.) Regulations, 2011. ↩︎
  15. https://www.cci.gov.in/about-us#:~:text=Competition%20is%20the%20best%20means,at%20the%20most%20competitive%20prices. ↩︎
  16. Amazon.com NV Investment Holding LLC (17.12.2021) ↩︎
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