Notifiability of ‘Interconnected Transactions’ Under the Competition Act, 2002

The Competition Act, 2002 (“Act”) classifies certain types of acquisition, merger, and amalgamation as ‘combination’ (“Combination”)^[1] and mandates these Combinations to be notified to and be approved by the Competition Commission of India (“CCI”) prior to its consummation.^[2] The Act further prescribes that a series of steps or smaller inter-connected transactions, when viewed individually, may not meet the notification thresholds, but when considered collectively, constitute a Combination.^[3] In such case, it is important to understand what are the factors that render these smaller transactions as inter-connected and thereby notifiable to the CCI.

CCI has previously examined the notifiability of inter-connected transactions in a series of cases and has guided on the key factors that influence such determination. Some of the CCI’s decisions, which helped identify the indicative factors that render a series of transactions as inter-connected ae set out below:

1. In Novartis AG and GlaxoSmithKline Plc ^[4], CCI had received three separate notices for three inter-conditional and inter-dependent transactions^[5].CCI stated that “since the parties envisage and admit the three steps/transactions as part of a one wider transaction, the Parties be required to file one notice covering all the three transactions”.^[6]

2. In Piramal Enterprises Ltd. and Shriram Group ^[7], the question was whether a set of individual transactions^[8] occurring at different periods would be considered as inter-connected and thereby a Combination. CCI observed that these transactions were specified as ‘strategic and for long-term partnership and association’ in the post-transaction annual report of the acquirer. Accordingly, CCI concluded that these transactions were “interconnected and were made strategically to enter into partnership with and to acquire (joint) control over the financial services business of the Shriram group of companies”.^[9]

3. In CCI’s proceeding against Canada Pension Plan Investment Board (“CPPIB”) and ReNew Power Limited ^[10],CCI observed that certain additional transactions (“Transaction II”) were conducted by the parties after receiving CCI’s approval on a few initial transactions (“Transaction I”).CCI held Transaction I and Transaction II to be interconnected by stating that“ Transaction II was not merely a matter of knowledge of CPPIB gained out of general due diligence but was one of its key considerations and also the rationale for contemplating Primary Acquisition in Transaction I.” ^[11]

4. In AXA India Holdings and Société Beaujon ^[12],CCI decided that both sets of acquisition transactions in question were interconnected given that a single term sheet has been executed for the purpose of both the acquisitions. ^[13]

5. The Hon’ble Supreme Court of India (“SC”) had, in its landmark judgement against civil appeal filed in Thomas Cook (India) Ltd ^[14] case, observed that the parties had conducted multiple transactions while only some of the transactions were being notified to CCI. Aligning with the previous ruling of CCI in this case, SC held that all these transactions are inter-connected considering that they “are intrinsically connected and interdependent with each other and form part of one viable business transaction”.^[15]SC’s ruling in this case was based on the observation that “the scheme was prepared on the same day and the three companies passed the resolution on the same day”, and that “market purchases would not have taken place in the absence of scheme and the other acquisitions”^[16].

Based on the precedence set out above, the following factors can reasonably be considered indicative for determining whether a series of transactions are inter-connected:

1. The series of transactions is a part of a wider transaction.^[17]

2. The series of transactions is strategic to the long-term goal.^[18]

3. One transaction is a key consideration and also the rationale for contemplating the other transaction.^[19]

4. The series of transactions is based on a single agreement or term sheet.^[20]

5. The series of transactions is authorised under the same resolution or on the same date.^[21]

6. There is simultaneity in negotiation, execution, consummation, and/or public announcements of these transactions.^[22]

7. Internal documents or post-transaction disclosures evidence strategic coherence of these transactions.^[23]

It is important to note that the above is only indicative. CCI determines each case on its own merits and based on the specific facts and circumstances. Given the subjective nature of determining inter-connected transactions, businesses planning mergers and acquisitions in India should carefully consider their transaction structures to ensure that they comply with the notifiability requirement if their structure contains series of transaction which are inter-connected based on the above indicative factors.

References

[1] The Competition Act 2002 s 5.

[2] The Competition Act 2002 s 6.

[3] Competition Commission of India (Combinations) Regulations 2024, reg 9(4).

[4] Novartis AG and GlaxoSmithKline Plc (The Novartis) [2014] Combination Reg No.C-2014/07/188, CCI Order.

[5] Transaction relating to the acquisition of a vaccine business, formation of a joint venture, and acquisition of an oncology business.

[6] The Novartis (n 4) [8].

[7] Piramal Enterprises Ltd and Shriram Group (Piramal Enterprises) [2016] Combination Reg No. C-2015/02/249.

[8] Pertaining to acquisition of stakes and subscription (by way of preferential allotment) in Sriram group companies.

[9] Piramal (n7) [7(d)].

[10] Canada Pension Plan Investment Board and ReNew Power Ltd [2019] Combination Reg No.C-2017/11/536, CCI Order.

[11] ibid[28].

[12] AXA India Holdings and Société Beaujon (AXA) [2015] Combination Reg No. C-2015/04/267 CCI Order.

[13] ibid [6].

[14] Thomas Cook (India) Ltd. v. CCI (Thomas Cook) [2018] Civil Appeal No. 13578 of 2015.

[15] ibid[26].

[16] ibid[27].

[17] The Novartis (n 4).

[18] Piramal Enterprises (n 7).

[19] CPPIB and Renew (n 10).

[20] AXA (n12).

[21] Thomas Cook (n 14) [26], [27].

[22] CPPIB and Renew (n 10).

[23] Thomas Cook (n 14).

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