Tesco and Trent Combination: Gun Jumping

Tesco and Trent Combination: Gun Jumping 

Tesco said that the intention to acquire was clear as far back as 17 December 2013. Tesco had sought the approval of the DIPP and FIPB for the proposal to acquire fifty percent of the issued and paid up equity share capital of THL and that the said application inter-alia mentioned that the proposed investment by Tesco will include subscription of equity shares of THL and acquisition of existing equity shares of THL from Trent the claim of the Acquirer that no intention or decision to acquire was formed by Tesco at the time of making the application to the DIPP and FIPB is not correct.”

“The Acquirer’s claim that had the notice been filed with the Commission without executing the definitive agreement (s), it would have been incomplete as being without the relevant documents/details, is also misconceived as the Acquirer in its application to the DIPP/FIPB on 17^th December 2013 had provided enough details of the proposed combination which demonstrate that the parties were aware about the type, nature and purpose of the proposed combination at the time of making the said application.” CCI imposed Rs. three Crore fine on Tesco.

In terms of Section 43A of the Act, if any person or enterprise fails to give notice under sub-section (2) of Section 6 of the Act, the Commission shall impose on such person or enterprise a penalty which may extend to one per cent of the total turnover or the assets, whichever is higher, of such a combination. Therefore, under the provisions

Gun Jumping: Thomas Cook India Ltd.

Gun Jumping in Combination Regulation: Thomas Cook India Ltd.

While approving the combination on March 5, 2014, the CCI took note of acquisition of 9.93% shares of Sterling by Thomas Cook Insurance Services Limited (TCISL) through open market purchases between February 10 -12, 2014.

CCI has imposed a penalty of INR 1 Crore on Thomas Cook (India) Limited (“TCIL”),

Thomas Cook Insurance Services Limited (“TCISL”) and Sterling Holidays Resorts

(India) Limited (“Sterling”) under Section 43A of the Act, for failing to notify and consummating certain non-reportable but inter-connected transactions before taking the

approval of the CCI for the reportable part of the inter-connected transactions.

Parties filed a combination notice with the CCI on February 14, 2014.

The CCI held that, since the Transaction and the market purchases were authorized in the same Board meeting and all transactions were related to the business and shares of Sterling, the market purchases were inherently related to the other transactions and, therefore, cannot be viewed in isolation for the purpose of any exemption.

The CCI held that the substance of the transaction is relevant to assess the effect on competition irrespective of the number of steps involved in the transaction.

Therefore, the Parties were required to notify all the steps and not consummate any part of the composite combination prior to the approval of the CCI.

Gun Jumping in Combination Regulations: Jet–Etihad

Gun Jumping in Combination Regulations: Jet–Etihad

Under the Competition Act, failure to notify CCI of a proposed combination attracts a penalty that can extend up to 1% of the total turnover, or the assets of the parties involved in the combination, whichever is higher.

Jet- Etihad is the first precedent in India where a penalty has been imposed on the acquirer for gun jumping.

Given that CCI has imposed a penalty on Etihad under Section 43A of the Act (Penalty for delayed filing).

Power to impose penalty for non-furnishing of information on combinations

[43A. If any person or enterprise who fails to give notice to the Commission under sub- section(2) of section 6, the Commission shall impose on such person or enterprise a penalty which may extend to one percent, of the total turnover or the assets, whichever is higher, of such a combination.]”

In Jet- Etihad, Etihad, the acquirer, on May 1, 2013,  notified CCI of its proposed acquisition of 24% equity stake in Jet. The transaction was approved by CCI on November 12, 2013. CCI, while approving the transaction, observed that:

(i) certain provisions of the commercial cooperation agreement (‘CCA’) had already been implemented; and

(ii) sale of certain landing/take off slots of Jet at the London Heathrow Airport (‘LHR Transaction’), had not been notified before consummation.

Upon hearing the parties, CCI limited the penalty due to certain mitigating factors, such as:

(i) the fact that parties had made full disclosure of all the other transaction agreements entered into between them, from which CCI had observed the non-compliance; 

(ii) the parties were under the impression that the LHR Transaction constituted an independent transaction; and

(iii) while CCA was notified to CCI within the statutory time frame, parts of it were implemented while approval from CCI was pending. Based on these mitigating factors, CCI limited the penalty to INR 10m.