The pharmaceutical sector may have a separate threshold for mergers and acquisitions (M&As) to fall under the purview of the Competition Commission of India (CCI) if the amendments in the Competition Bill are passed in Parliament.
The amendments, cleared by the Cabinet, propose to give the Centre, the power to fix thresholds different from those in the Competition Act, 2002, for any sector in case of mergers and acquisitions (M&As).
A new section 5A has been inserted in the Act, enabling the government to lay down, “in consultation with the CCI, different thresholds for any class or classes of enterprises for the purpose of examining acquisitions, mergers and amalgamations by the commission”.
The move comes after the anti-competition watchdog expressed its inability to the government to have a different threshold for the pharma sector, for M&A purpose.
Last October, Prime Minister Manmohan Singh had asked the CCI to approve M&As in the pharma sector and had given six months’ time to the anti-competition watchdog to amend its legislation for the same.
The Foreign Investment Promotion Board (FIPB) is the nodal agency for approving proposals of foreign direct investments in the country.
Experts say the move will help not only the pharma sector but other sectors too which were being left out of the purview of the CCI given the high thresholds provided for in the Act. According to the Act, the acquirer and the acquiree should have a combined asset of Rs 1,500 crore and combined turnover of Rs 4,500 crore to fall under the purview of the commission.
“It is a good move. There are many sectors like the IT sector or the banking or insurance sector where it makes sense to have different thresholds. For instance, in the pharma sector, lower thresholds are required,” Amitabh Kumar, partner, J Sagar Associates, said.
Apart from the new insertion, the government has also proposed to change the definition of ‘group’.
As defined in the act, a group means two or more enterprises which, directly or indirectly, are in a position to exercise 26 per cent voting rights in the other. The government has raised this limit to 50 per cent. The Bill also seeks to provide the power of ordering search and seizures to the chairman of the commission. The Bill also proposes that while defining turnover, taxes would not be a part of the total value.
Press Release by Government of India
Credit: Indian Express