Nothing is known as to what either happened or is happening inside the regulatory bodies responsible for clearing the Jet-Etihad deal. What is clearly known is that it is pending before the Competition Commission for quite some time now. It may not be a big surprise if the 210 days time limit expires

In the recent past, I happened to encounter many members of the public who were waiting with great anxiety for the outcome of the latest merger review pending before the Competition Commission of India (CCI) for clearance.  My endeavour was to explain to them that the Merger Review Architecture of India is so robust that there is no need to worry and the outcome would certainly be in the interest of the economy, consumer and the public interest. The purpose of this write-up is to spread the awareness about the robust institution the CCI has become so that no member of the public has any such unfounded anxieties.
 

On 11 May 2011, India moved closer to a functional merger control regime by unveiling her finalised combination (merger) regulations to the world. After having been finalised it at the end of a huge public debate over more than three years, a wide consultative process involving all the national and international stakeholders in this massive exercise, not having left any professional bodies or business chambers and associations from the consulting process, the exercise could have been said to be really broad based exercise. After putting into practice the combination regulations, which were arrived at the end of such a massive exercise, it is only proper to expect that the merger review process is fair to all, including the public interest—a euphemism for the national interest and interests of the common man.
 

Unfortunately, despite being talked about extensively almost every day in different internal files of the government and courts, in various matters, including the newly invented judicial device called the public interest litigation (PIL), the public interest remains a casualty in most of the governmental business transactions. On the contrary, if it is stated that public interest is more abused than used, it may not be too much of an exaggeration. In the circumstances, it is high time to evaluate if the draft combination regulations, finalised on 11 May 2011, can be able to live up to the hope of serving public interest and, if yes, to what extent.
 

One of the hotly debated deals, pending for clearance before CCI, is the acquisition of 24% stake in Jet Airways by Etihad Airlines. Not much is known, in public domain, about this particular deal except what is being frequently reported in the media. From different stories, what can be pieced together is that this deal took about two quarters of a year to be reached amongst the parties before they could approach regulatory authorities for approvals. It is further reported that, on account of different reasons, there was much to explain before different authorities such as Securities Exchange Board of India (SEBI), Foreign Investment Promotion Board (FIPB) and other government authorities and the deal underwent substantial changes in its structure on account of the issue of ‘control’ whether acquired directly or indirectly. Further, it is widely believed that, after all these changes, the deal between Jet and Etihad hardly remains a deal which it was to begin with.
 

Except for the newspaper reports, which have limited veracity, nothing is known as to what either happened or is happening within the regulatory bodies responsible for clearing this particular deal. The purpose of this write-up is not to look at the other clearances for this deal but only to look at it from the point of view of clearance before CCI from the perspective of public interest.
 

Let us go back to the law dealing with the issue. Section 31 of the Competition Act, 2002 (the Act) directs that if no order is passed by CCI within 210 days (the regulations state that the CCI would endeavour to clear the transaction within 180 days), the combinations would be deemed to have been approved by CCI.
 

Is CCI totally helpless to clear the deal even if it is anti-competitive if 210 days have passed from the date of filing of the details of the acquisition before the CC I or it has some other options before it? The unambiguous answer is: certainly not. The Act has to be read in conjunction with the implementing regulations for fully understanding the issue. Regulation 22 of the combination regulations deals with the publications of the details of the combination. This is the stage when the public is aware of the transaction and can come before CCI pointing out the anti-competitive effects of the combination, if any, before the CCI gives its clearance to the acquisition. Therefore, prior to the details of the combination being published in public domain, public interest remains hidden from the public. It is only left to CCI to take into account public interest, if it is so wants. No member of the public, on its own, can influence the decision of the CCI or can bring out the anti-competitive impact of the combination before CCI. The question arises as to whether there is adequate time for CCI to arrive at its decision and the public to respond after publication of details by CCI, if any.
 

What is the time available before CCI to make up its prima facie opinion before deciding whether to involve the public or not? This is given in Regulation 19 of the combination regulations. Its dictates that CCI has to make up its mind, within the first 30 days of the merger filing before CCI, to decide whether to clear the deal or take it to the second stage of investigation for detailed review. This means that out of 210 days available with the CCI for clearing a deal, 30 days belong to it for making up its mind away from public glare and the remaining 180 days belong to the public to get to know about any particular potential anti-competitive deal and respond with the details of anti-competitive effects, if any. In the circumstances, it is really foolish to fear that there could be a situation where the CCI would clear a deal after keeping it close to its chest for 210 days and then suddenly clearing it on the last day. There is no ambiguity on this score in either the law or the implementing regulations. The track record of the CCI, in the past, has shown that it is a really competent agency following the law and regulations diligently in the interest of the consumer and the economy.
 

The exact date of filing of this deal before the CCI is not known. What is clearly known is that it is pending before CCI for quite some time now. It may not be a big surprise if the 210 days’ time limit is expiring in near future. So far, no publication of this deal has been seen in any newspapers. If the deal was going to take more than 30 days, in terms of Regulation 19 of the combination regulations, it was a very genuine expectation of the public to know the details of the deal. It has not happened. Details of the deal are still not known to public, except by way of speculation in the media, and may only be known to the regulators.
 

It is not clear as to why despite a clear 30 days from the date of filing of this merger review, no public notice was seen in newspapers. It is possible that this did not happen because of heavy to-and-fro traffic of communications between the CCI and the parties to combination. The ever changing contours of this particular deal, which have been in the public eye for quite some time now, could have been another reason. Presuming that the shape of this deal has consistently undergone changes during the period of review, it has two implications. The first one is that the time available before the CCI for review is being constantly reduced. The CCI can only review what can be reviewed. It has to evaluate the anti-competitive impact of any combination of the touchstone of 14 factors clearly enunciated in law. This exercise cannot be done in a vacuum. If what was filed before CCI does not remain static, the CCI has all the powers in the world, in terms of the law and the Regulation 16 of the combinations regulations, to evaluate the degree of changes in the structure having come before it and declare the first merger filing as not valid, if considered appropriate.
 

This serves two purposes. The first one is that the CCI gets adequate time to evaluate a clear and definite merger. The second is that the public is not deprived of its legitimate right of having a look at the deal for a good 180 days before a decision is taken by CCI. It is a fair deal to all concerned including the deal itself and the dealmakers. In terms of the law and regulations, CCI need not base its decision on the ground that 210 days have expired from the date of filing of the combination ignoring the significant changes in the deal which are introduced by the parties to the combination, during its process of review as that would be unfair to the public.
 

It is really early as yet. It is not sure as to what is going on inside the competition agency. However, in view of the position of the law and implementing regulations and the track record of the CCI so far, one can rest assured that the law and regulations are taking their correct course. However, there is a possibility, howsoever remote, that the deadline of 210 days may be projected to look like a great pressure point by the parties to the combination before the competition agency. If they succeed in convincing the CCI to clear the deal under pressure of 210 days without the deal being known to public, that would be a very dangerous precedent. Although such a possibility looks very unlikely even if it is for the sake of argument, such a possibility happens. It can derail the entire merger review procedure. In the most unlikely event of such a thing becoming a precedent, the entire merger review process can be hijacked by vested interests and all types of anti-competitive deals can always be kept hanging till the last day without public knowing what is happening inside and thereafter suddenly clearing the deal in a jiffy on the last day under the claim that the 210 days have already passed from the date of the filing of the combination. This is likely to result in excluding the public interest in a very unfortunate but effective manner. All mergers would be approved even before the public even comes to know the basic details of the deal. It will also mean that half of the law and regulations would remain only on paper and not put into practice at all. That was certainly not the intent when the combination regulations were drafted. If that happens, it is not certain which agency will be needed to look into this exclusionary conduct- of excluding public interest?

(After completing more than two decades as a Commissioner in IRS of India, KK Sharma  was appointed as the first Director General of the functional Competition Commission of India (CCI). He has also been a very active member of International Competition Network (ICN), Merger Working Group. Mr Sharma was also nominated to one of the handful positions of an individual member of the Research Project Partnership (RPP) Platform of UNCTAD. A Ph.D. fellow in competition law from Bangor University, UK, Mr Sharma did masters in engineering from IIT, Roorkee, before doing graduation in law. Later, he completed PG Diplomas in Economics for Competition Law from King’s College, London, and IPR Laws from NLSU, Bangalore, respectively after doing Masters in Economics.)