Competition Commission of India clears Holcim/ Lafarge merger with commitments

For only the second time in its history the Competition Commission of India (CCI) has approved a merger with conditions. 

The CCI has approved the merger between cement companies Holcim and Lafarge on condition that the companies sell two of Lafarge’s cement plants in India (the Sonadih plant in Chhattisgarh and the Jojobera grinding plant in Jharkhand).  The CCI found that the merged business would represent 31 per cent and 79 per cent of the local markets in these areas.  As a result of the divestments the CCI states that the merged entity’s market share will be 28 and 33 per cent respectively. 

The CCI states that the divestments must be sufficient to cover all tangible assets so as to enable a new market player to enter the market easily. 

This transaction is only the second occasion since the advent of mandatory merger control in June 2011 where the CCI has accepted commitments from the merging parties as a condition of clearance.  In December 2014 the CCI accepted commitments in the Ranbaxy/ Sun Pharmaceuticals merger, another high profile transaction.

 

These cases show that the CCI is prepared to accept modifications to a merger rather than prohibit it entirely.  It is understood that in other cases potential modifications to combinations have been discussed with the CCI at the pre-notification stage and during its review of a proposed combination.  However, the merger remedies experience is limited and there are no formal guidelines as in the EU on the type of commitments that will be acceptable. 

As increasingly complex and potentially more problematic transactions come before the CCI, the CCI is urged to set out its views as to the types of modifications or remedies it would consider acceptable. Among the areas for further clarification could usefully be:

1. whether the CCI has a distinct preference for structural (divestment) or behavioural (commitments on conduct) remedies;
2. the role of intellectual property-related remedies such as licences of know-how and patent rights, whether as standalone remedies or to support a divestment remedy;
3. the duration of any undertaking not to acquire or reacquire an interest in another company;
4. the role of agencies such as trustees or monitors in overseeing a divestment remedy or in supervising a behavioural remedy over time, considering such issues as what degree of independence is required from the merging parties for such monitors;
5. the extent to which parties offering remedies may return to the CCI to have such remedies withdrawn or modified in light of a change in market circumstances;
6. the extent to which the CCI will liaise with other authorities in India (for example, sector regulators) or worldwide (for example, where remedies imposed on the parties in India may not be an effective solution if the relevant parties are situated outside India or where global solutions may be sufficient to address competition issues in India).