Introduction India is perhaps the first nation that is bringing into force the Competition act, in bits and

pieces by notifying one section after another. There are lots of deficiencies associated with the competition law which can act as an impediment to the M&A activities in India which may in turn result in a slower growth of Indian economy. Some of the issues are pointed out by the researcher so that amendments can be made and the changes can be brought in. The first and the foremost change is notification of Section 5 and 6 of the Competition Act, 2002 regarding combinations and its regulation. Competition Issues The Federation of Indian Chamber of Commerce and industry (FICCI) has expressed concern over the provisions regulating mergers and acquisitions in the new competition Act, 2002. It was felt that the proposed regulations would impose curbs and slow down combinations. FICCI press release of February 13,2008, pointed out a few problems with section 5 of the Act, arguing that not only would they slow down the competitiveness of the Indian economy, but were biased against Indian firms. And therefore the division on the basis of assets and turnover in India and outside be done away with, and the threshold limits be based upon market share or a combined turnover test. Some of the Industry experts have recommended that an approach similar to the 2 step process of merger regulation provided in the HSR Act, i.e. the size of the transaction and the size of the enterprises making the deal. Such a threshold acts as a filtering device by excluding small transactions from the regulators review and will do away with the concerns of the Competition Act, slowing down combinations. For instance, an Indian company with turnover of Rupees (Rs) 3000 crore cannot acquire another Indian company without prior notification and approval of the Competition Commission. On the other hand, a foreign company with turnover outside India of more than USD 1.5 billion (or in excess of Rs. 4500 crore) may acquire a company in India with sales just short of Rs 1500 crore without any notification to (or approval of) the Competition Commission being required. It has also been pointed out that the definition of combinations is unnecessarily repetitive and gives rise to confusion. For example, Sections 5(b) and 5(c) are subsumed under Section 5(a). But, from a competition law perspective the only pertinent provision is Section 5(a), which regulates an acquisition of control. The rigger for the waiting period is also unclear as the Act stipulates a time period of 210 days from the date of approval of the proposal by the board. The trigger could originate at the term sheet stage itself. However, execution of a term sheet may not always necessarily result in completion of the combination. Although the CCI chairman has stated that he expects to complete the approval process in most of the cases by 30 days, the fact that the provision exists for time period of 210 days for closure, combined with the fact that the CCI staffing is likely to be inadequate and that the number of cases presented to the CCI is expected to be large, one is not sure whether the approval process will be completed in 30 days. This is

likely to result in a long gestation period of about seven to eight months from the date f approval of the proposal. This will add a certain significant element of uncertainty and it can also be a serious drag on crucial merger and acquisition activities in India and it is this uncertainty that has certain implications including perception among customers, uncertainty with regard to identity of the company, market value of the merging entity andalso inability to take any decision during the dormant period.