Industry representatives in their submission before the Parliamentary Standing Committee on finance have said this would inadvertently impact other transactions such as those in commercial real estate or heavy engineering and sought specific carve outs.
On August 5, the government introduced the Competition (Amendment) Bill 2022 in the Lok Sabha that was referred to the standing committee. In the last two weeks, the committee has heard the concerns of various industry participants. According to the Lok Sabha website, the committee will meet with officials of Ministry of Corporate Affairs (MCA) and CCI on November 29 to “conclude oral evidence of representatives” of the officials from MCA and CCI.
During these discussions, several market participants are learnt to have told the standing committee that the proposed deal value threshold may have unintended consequences. Until now any global acquisitions were notifiable to CCI only if the entities involved held more than Rs 1,000 crore worth assets in India or had a cash turnover of more than Rs 3,000 crore. However, digital companies are not asset heavy and don’t have large turnovers hence they were escaping the requirement to be notified to CCI. In this backdrop, the government introduced deal value threshold.
Industry participants told the parliamentary committee that the threshold will bring several unrelated deals including the ones happening in the sectors like commercial real estate or heavy engineering works under the purview – which is not the intent of the law. It will increase the compliance burden on the companies as any deal worth over Rs 2,000 crore will have to be notified to CCI, even if there are no anti-trust concerns. Some experts say even the investments into Infrastructure Investment Trust (INVITs) and Real Estate Investment Trusts (REITs) will have to be notified to CCI.
“Rather than one size-fits all formula, we have suggested to the panel that the law can be made applicable exclusive to digital markets or provide exemption to sectors like real estate where there may not be any significant competition concerns,” said person cited above. “Otherwise, it will not just increase the compliance burden on the industry but will also significantly increase the workload on the commission since it may end up processing dozens of deal applications that have no anti-trust concerns.”