CCI imposes highest merger control penalty ever – 5 Crore!

An order passed in February this year, but published on the Competition Commission of India’s website yesterday, has imposed the highest merger control penalty in the history of the country. The penalty, imposed on General Electric over the GE-Alstom deal, is due to the GE’s failure to give notice of the transaction to the Commission as per the Combination Regulations.

More specifically, the 5 crore penalty has been imposed for failing to give notice to the Commission within 30 days of the public announcement.

In May 2015, the Commission had approved the acquisition of Alstom’s India assets by General Electric as part of global deal after General Electric had announced it would acquire thermal, renewable and grid businesses, as well as corporate and shared services of Alstom.

AZB & Partners and Slaughter and May acted for GE while Shardul Amarchand Mangaldas and Hogan Lovells acted for Alstom.

Although the CCI had approved the acquisition, it took suo motu cognizance of two public announcements made by GE and a press release issued by Alstom that on April 30, 2014 GE made a binding offer to acquire assets of Alstom.

In view of this, the CCI issued a show cause notice to GE under Section 43A of the Competition Act to respond as to why penalty should not be imposed on them for failure to file the notice for the said transaction.

GE, who are the acquirers submitted that the initial offer for Alstom’s power and grid business was a unilateral offer made by GE and the terms of the transaction were not yet crystallized at the time of making the Public Announcements.

The Acquirers submitted that they acted in good faith and proactively engaged with the Commission from the date of making the PAs until filing of the notice, keeping the Commission updated on the developments regarding the transaction.

However, the Commission did not accept the submissions of the acquirer and considered it appropriate to impose a penalty of 5 crore on the Acquirers, which is approximately 0.0001 per cent of the combined value of worldwide assets of the Parties.

In its 12-page Order dated February 16, 2016, CCI said,

“The Commission is of the view that the Acquirers failed to give notice to the Commission within 30 days of the PAs, in accordance with sub-section (2) of Section 6 of the Act read with sub-regulation (8) of Regulation 5 of the Combination Regulations, which attracts penalty under Section 43A of the Act.”

Section 43A of the Act states,

 “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 per cent of the total turnover or the assets, whichever is higher, of such a combination.”

Although the Commission could levy a maximum penalty of one per cent of the combined value of worldwide assets of the Parties (approximately 46,000 crore) but while determining the quantum of penalty, the Commission considered the bona fide conduct of the Acquirers as regards the intent to file the notice.