CCI levies ₹55 lakh penalty on Abu Dhabi Investment Authority, TPG Group for false information in acquisition of UPL SAS stake

The Competition Commission of India (CCI) has levied a penalty of ₹55 lakh on Abu Dhabi Investment Authority (ADIA) and private equity company TPG Group for giving false declarations in relation to their acquisition of agrochemical manufacturer UPL Sustainable Agri Solutions Limited (UPL SAS) through the green channel route..The Commission in its order made it clear that going forward, any disregard to the conditions for availing the green channel would be dealt with seriously.The green channel route is an automatic system of approval for combinations, with a view to significantly reducing time and cost of transactions and to promote speedy, transparent and accountable review of combination cases..The acquirers, a subsidiary of TPG Group and Platinum Trust (owned and settled by ADIA and established under the laws of the Abu Dhabi Global Market), had sent the CCI a notice in relation to the combination envisaging acquisition of 5% shareholding of UPL SAS, as required under Section 6(2) of the Competition Act, 2002. The notifying parties had availed the facility of green channel approval for the combination.Regulation 5A(1) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) provides that the green channel route can be taken only if the parties to the combination, their respective group entities and/or any entity in which they, directly or indirectly, hold shares and/or control: - (a) do not produce/provide similar or identical or substitutable product(s) or service(s) (horizontal overlap); (b) are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in product(s) or provision of service(s) which are at different stage or level of production chain (vertical interface); and (c) are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in product(s) or provision of service(s) which are complementary to each other (complementarity)..The CCI issued a show cause notice to the acquirers in May this year on finding that Upswing Trust, owned by TPG, holds a 22.2% stake in UPL Corporation. Arysta LifeScience India Limited, a subsidiary of UPLC, is engaged in the business of manufacturing and distribution of formulated crop protection products to UPL SAS and others. Thus, it was found that the activities of Arysta India and UPL SAS and exhibit overlaps.In this light, the Commission found that the green channel declaration made by the acquirers appeared to be incorrect and false. Further, it noted that the notifying parties made statements in the notice that are false..In response to the show cause notice, the acquirers argued that Arysta India and UPL SAS/SWAL belong to the same corporate group and are essentially two arms of the same group selling the same products. Thus, there is no need to map overlaps between two entities that belong to the same group. They further contended that the Commission has been liberal while examining transactions under the green channel mechanism and has approved combinations even though the transaction exhibited certain minor horizontal/vertical overlaps because these transactions have no impact on the market. Thus, it was argued that the green channel mechanism, being a beneficial provision, must be liberally interpreted..However, the CCI found that so far as the eligibility of a combination for green channel approval was concerned, facts such as the overlapping entities belonging to the same group, the transaction not resulting in change in competition landscape and no likely effect of a combination etc are inconsequential. It held,"The Green Channel approval facility does not envisage detailed assessment of likely effect of a combination on competition in India that is otherwise undertaken for all other combinations. If any overlap exists between the parties to the combination, their respective group entities and/or any entity in which they, directly or indirectly, hold shares and/or control, then case requires detailed assessment of likely effect of the combination on competition in India and accordingly is not eligible for benefit of the Green Channel approval facility.".Finding that Arysta India and UPL SAS exhibited overlaps, the Commission decided that the UPL SAS acquisition does not satisfy the conditions for green channel approval prescribed under Schedule III of the Combination Regulations.Given that the UPL SAS acquisition had already gone through, the Commission held that the acquirers are liable for penalty under Section 43A of the Act. It noted that Section 44 of the Act empowers the Commission to levy a penalty of not less than ₹50 lakh if a party to a combination makes a statement which is false in any material particular.It thus directed the acquirers to pay a total penalty of ₹55,00,000..Given that that the UPL SAS Acquisition is not likely to have any appreciable adverse effect on competition in India, the CCI granted approval for the same..The acquirers were represented by Senior Advocate Rajshekhar Rao, who was briefed by Advocates Meherunissa Anand, Manasa Dammalapati, Toshit Shandilya, Sanjeev Kumar and Nandini Modi.