Sunday, December 02, 2007

India - merger control - views from the USA

ABA Issues Warning on India's Merger Law

Lawyers group warned Indian government leaders the proposed notification requirements 'could be disastrous to Indian investment'

The most influential lawyers group in the U.S. warned senior officials in India that the country's new merger law could have a devastating effect on that country's economic surge.

Enforcing the new merger regime "may be so burdensome as to discourage competitive conduct and investment in India," the American Bar Association's Section of Antitrust wrote in letters delivered to Indian government leaders on Wednesday, Nov 28.

The ABA's antitrust branch often works with competition authorities around the globe, coaching them on the value of competitive markets while cautioning against pervasive regulation. They are often joined in their efforts to spread the news about competition law by American antitrust regulators, the International Bar Association and the International Competition Network, made up of private firm and government regulators around the world.

But this time, antitrust, business and international lawyers have united to send the unprecedented warning not just to mere competition authorities but to India's minister of finance, and minister of commerce and industry, and members of the India Investment Commission as well.

The goal in targeting such high-ranking officials was to "send a message that this law could be disastrous to Indian investment," said an international lawyer who asked not to be identified.

The strong words were also tempered with offers of further assistance in the murky waters of competition law.

The problem as the ABA sees it is that the proposed revisions to the county's competition law, for which the resulting could be implemented any day, would broaden the nation's premerger notification jurisdiction far beyond any particular transaction's ability to affect the Indian economy.

The new law requires companies with as little as $126 million of assets in India, even if they are only subsidiary operations, to notify officials there of any acquisition from around the globe. Reporting the merger plans and waiting 210 days before completing the deal would be required even if the target is not located in India and doesn't do any business there.

The ABA complained that India's requirements are out of step with international efforts to promote generally accepted antitrust principles that nations would adhere to. Ideally, the ABA notes, most countries require a nexus between the country and the mergers it reviews, because the goal is to make sure that competition within a country is not harmed by any given merger.

India's demanding proposed notification requirement, the ABA said, could make it harder for merging parties to coordinate multiple notifications across different jurisdictions, an issue that is increasingly important as deals reflect ongoing globalization.

The roughly seven-month mandatory waiting period is also cited as a major problem with the new law. In the U.S., there is a 30-day waiting period once parties have filed their merger plans with the government, and that period can be shortened if there are no competitive problems and the parties request an early termination.

The letter said ABA lawyers are "unaware of any other jurisdiction that prescribes such a lengthy waiting period for all transactions."

The ABA's letter went on to say: "The prospect of a seven-month waiting period applicable to all notifiable transactions will unduly delay and may deter many transactions, and will not further India's interests in economic development."

The lawyers urged regulators in India not to wait for legislative change, which is "lengthy and may not provide timely relief," but instead urged the government to implement rules as a stopgap measure.

Whether those rules and regulations will come out at the same time the new law is officially enacted is a big question, and U.S. officials, including Federal Trade Commission general counsel Bill Blumenthal, have already met with Indian officials to discuss the problems and ways to implement modifying regulations.

Indian regulators have said they agree the new law poses a threat to commerce in the country. But so far they have been unable to circumvent requirements of the new law, which was first introduced as an attempt to bring India's merger control regime in line with prevailing global trends but went in a different direction during the give and take in Parliament.

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