The Competition Commission of India (CCI) on August 25, 2011 approved the proposed takeover of UTV by Walt Disney under Section 31(1) of the Competition Act, 2002 (Act) in a record time of 25 days..US media giant Walt Disney had last month announced its plans to buy out shares held by public shareholders and original promoters (Ronnie Screwala Group) of UTV Software Communications to become the sole owner and delist the company. The deal is valued at around Rs. 2,000 crore (approximately $450 million). The Walt Disney Company (Southeast Asia) Pte Ltd, which currently holds 50.44 percent stake in UTV Software, has indicated a floor price of Rs. 1,000 per share..Since the proposal needed the approval of the CCI, the UTV Software had approached the Commission on August 1. J. Sagar Associates and Dhall Law Chambers represented Disney while AZB & Partners represented UTV..The Commission approved the proposed combination as “it is not likely to have any appreciable adverse effect on competition”, said the order..“Based on the facts on record and the notice of the proposed combination filed by the acquirer (Walt Disney) under sub-section (2) of section 6 of the Competition Act, and the examination of the businesses involved which are commonly characterized by the presence of a large number of players and prevalence of intense competition among them, availability of ample choice and variety of products to consumers, demand driven nature of the business, interchangeable and converging nature of the business involved, relative ease of entry and exit in these businesses, less likelihood of any co-ordinated or exclusionary behaviour, regulatory oversight in TV broadcasting and the future growth potential in addition to the fact that the Acquirer is already in joint control of the Acquired Enterprise (UTV). The Commission, hereby, approves the proposed combination,” the CCI order said..The notice under Section 6 (2) was filed on August 1, 2011 and the approval order of the CCI was given on August 25, 2011. This is the second combination approval order of CCI, the first one being the approval of acquisition of shares of Bharti AXA by Reliance Industries from Bharti Enterprises in which CCI had taken 18 days..CCI has been very proactive and has kept up its commitment to clear cases as soon as possible. The CCI is surely removing the apprehension in the minds of the investors that CCI may take longer to approve these combinations. We will need to see how much time CCI may take for a Form II filing which may have competition concerns..Bar & Bench spoke to Amitabh Kumar (pictured), Senior Advisor at JSA on the CCI merger approval process.Bar & Bench: Do you think CCI has been a proactive regulator by passing the first two approval orders in a record time of 18 and 25 days respectively?.Amitabh: I think the intent seems to be good. There have been very few filings as of now. We have a concern outside CCI that they are not adequately staffed. Since the number of filings has been very limited, they have been able to deliver in time which of course shows good positive intent. I wish the Government sanctions more posts for them so that even when the number of filings increases, CCI is able to meet the deadlines..Bar & Bench: If there was a delay in the approval, would it have affected the delisting process?.Amitabh: Delisting doesn’t require an approval. It is only the acquisition of shares from the promoter which would have run into problem. Since UTV is a subsidiary company in terms of the Companies Act, acquisition of its shares is an intra group transfer. There is no filing requirement for intra-group transfer of shares as it is exempted under the Regulations except when it leads to a sole control. In this case, there were two promoters, one was the acquirer and the other is Ronnie Screwala Group. After Ronnie Screwala shares are acquired by Disney, they would become the sole owners and therefore, a filing is required at that point of time. It was supposed to be a two step transaction but leading to sole control. So we notified the CCI well in advance so that we have all the necessary governmental approvals before the entire deal goes through..Bar & Bench: Did CCI have several issues and questions on the merger process? .Amitabh: Very minor query and no detailed query. That query was very limited in nature of asking few details about the company..Bar & Bench: CCI has honoured its commitment to clear cases within 30 days when no competition issue is involved. The first 2 cases were Form I (short form) filing. Do you think a form 2 (long form) filing can be done in a short span?. Amitabh: This is something which is in a grey area so one has to make an intelligent guess. Looking at the difference between Form I and Form II, one can say that Form I permits you to provide as much documentation and evidence as you think necessary but primarily it is meant for those kinds of transactions where there is no competition concern. A natural corollary is that if you are using Form II, you yourself think that there is going to be a competition concern. So my take would be that may be the competition authority may also think that there is some competition concern and may be then they will not approve it in 30 days. The law does not say so but this is an intelligent guess..Bar & Bench: As a lawyer or law firm, did you face difficulty in finding data regarding market share of the rival companies? What data or reports did you rely on?. Amitabh: The world over the data is taken from third party independent sources because there is more credibility attached to third party independent data. Every businessman would generate data for himself and his competitors but that probably would not be accepted readily by a competition authority. We also tried to take as much data possible from the public domain and from websites. Whatever data/information was not available with independent third parties, we clearly informed the Commission though the filing. The Commission has all the authority to call for the data from anywhere..Bar & Bench: What grounds did CCI consider before giving its approval?.Amitabh: Typically, there are factors given in the law itself which are to be considered for deciding what the relevant market is and then there are other set of factors which permits them to do competition assessment, i.e. whether it is likely to cause appreciable adverse effect on competition. In all, there are some 28 factors. Form I is basically like a self assessment in income tax where you yourself decide what is the income tax payable and file your tax returns and then the authority looks at it..In case of UTV and Disney, both are into media and entertainment. At the first look, both appear to be present in the same market. We had to do market segmentation and then we found that both are into different markets. we analysed the factors to try and tell the Commission what is the relevant market and in that relevant market, the factors for doing a competition assessment show that there is no competition concern. CCI agreed with our analysis.
The Competition Commission of India (CCI) on August 25, 2011 approved the proposed takeover of UTV by Walt Disney under Section 31(1) of the Competition Act, 2002 (Act) in a record time of 25 days..US media giant Walt Disney had last month announced its plans to buy out shares held by public shareholders and original promoters (Ronnie Screwala Group) of UTV Software Communications to become the sole owner and delist the company. The deal is valued at around Rs. 2,000 crore (approximately $450 million). The Walt Disney Company (Southeast Asia) Pte Ltd, which currently holds 50.44 percent stake in UTV Software, has indicated a floor price of Rs. 1,000 per share..Since the proposal needed the approval of the CCI, the UTV Software had approached the Commission on August 1. J. Sagar Associates and Dhall Law Chambers represented Disney while AZB & Partners represented UTV..The Commission approved the proposed combination as “it is not likely to have any appreciable adverse effect on competition”, said the order..“Based on the facts on record and the notice of the proposed combination filed by the acquirer (Walt Disney) under sub-section (2) of section 6 of the Competition Act, and the examination of the businesses involved which are commonly characterized by the presence of a large number of players and prevalence of intense competition among them, availability of ample choice and variety of products to consumers, demand driven nature of the business, interchangeable and converging nature of the business involved, relative ease of entry and exit in these businesses, less likelihood of any co-ordinated or exclusionary behaviour, regulatory oversight in TV broadcasting and the future growth potential in addition to the fact that the Acquirer is already in joint control of the Acquired Enterprise (UTV). The Commission, hereby, approves the proposed combination,” the CCI order said..The notice under Section 6 (2) was filed on August 1, 2011 and the approval order of the CCI was given on August 25, 2011. This is the second combination approval order of CCI, the first one being the approval of acquisition of shares of Bharti AXA by Reliance Industries from Bharti Enterprises in which CCI had taken 18 days..CCI has been very proactive and has kept up its commitment to clear cases as soon as possible. The CCI is surely removing the apprehension in the minds of the investors that CCI may take longer to approve these combinations. We will need to see how much time CCI may take for a Form II filing which may have competition concerns..Bar & Bench spoke to Amitabh Kumar (pictured), Senior Advisor at JSA on the CCI merger approval process.Bar & Bench: Do you think CCI has been a proactive regulator by passing the first two approval orders in a record time of 18 and 25 days respectively?.Amitabh: I think the intent seems to be good. There have been very few filings as of now. We have a concern outside CCI that they are not adequately staffed. Since the number of filings has been very limited, they have been able to deliver in time which of course shows good positive intent. I wish the Government sanctions more posts for them so that even when the number of filings increases, CCI is able to meet the deadlines..Bar & Bench: If there was a delay in the approval, would it have affected the delisting process?.Amitabh: Delisting doesn’t require an approval. It is only the acquisition of shares from the promoter which would have run into problem. Since UTV is a subsidiary company in terms of the Companies Act, acquisition of its shares is an intra group transfer. There is no filing requirement for intra-group transfer of shares as it is exempted under the Regulations except when it leads to a sole control. In this case, there were two promoters, one was the acquirer and the other is Ronnie Screwala Group. After Ronnie Screwala shares are acquired by Disney, they would become the sole owners and therefore, a filing is required at that point of time. It was supposed to be a two step transaction but leading to sole control. So we notified the CCI well in advance so that we have all the necessary governmental approvals before the entire deal goes through..Bar & Bench: Did CCI have several issues and questions on the merger process? .Amitabh: Very minor query and no detailed query. That query was very limited in nature of asking few details about the company..Bar & Bench: CCI has honoured its commitment to clear cases within 30 days when no competition issue is involved. The first 2 cases were Form I (short form) filing. Do you think a form 2 (long form) filing can be done in a short span?. Amitabh: This is something which is in a grey area so one has to make an intelligent guess. Looking at the difference between Form I and Form II, one can say that Form I permits you to provide as much documentation and evidence as you think necessary but primarily it is meant for those kinds of transactions where there is no competition concern. A natural corollary is that if you are using Form II, you yourself think that there is going to be a competition concern. So my take would be that may be the competition authority may also think that there is some competition concern and may be then they will not approve it in 30 days. The law does not say so but this is an intelligent guess..Bar & Bench: As a lawyer or law firm, did you face difficulty in finding data regarding market share of the rival companies? What data or reports did you rely on?. Amitabh: The world over the data is taken from third party independent sources because there is more credibility attached to third party independent data. Every businessman would generate data for himself and his competitors but that probably would not be accepted readily by a competition authority. We also tried to take as much data possible from the public domain and from websites. Whatever data/information was not available with independent third parties, we clearly informed the Commission though the filing. The Commission has all the authority to call for the data from anywhere..Bar & Bench: What grounds did CCI consider before giving its approval?.Amitabh: Typically, there are factors given in the law itself which are to be considered for deciding what the relevant market is and then there are other set of factors which permits them to do competition assessment, i.e. whether it is likely to cause appreciable adverse effect on competition. In all, there are some 28 factors. Form I is basically like a self assessment in income tax where you yourself decide what is the income tax payable and file your tax returns and then the authority looks at it..In case of UTV and Disney, both are into media and entertainment. At the first look, both appear to be present in the same market. We had to do market segmentation and then we found that both are into different markets. we analysed the factors to try and tell the Commission what is the relevant market and in that relevant market, the factors for doing a competition assessment show that there is no competition concern. CCI agreed with our analysis.