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Competition Commission of India seeks public consultation over non-compete restrictions under merger filings

News / / Competition Commission of India seeks public consultation over non-compete restrictions under merger filings

The Competition Commission of India (“CCI”) is seeking public consultation over its plans to omit the requirement for companies to provide information regarding non-compete restrictions under the regulation for combinations[1] (“Public Consultation”). The premise for issuing the Public Consultation is that ‘prescribing a general set of standards for assessment of non-compete restrictions may not be appropriate in modern business environments.’

It may be recalled that in 2017, the CCI had, vide Guidance Note on non-compete restrictions[2], opined that non-compete clauses should be “directly related and necessary to the combination” in order to be considered “ancillary” to the combination and, thus, merit approval.

At the time of issuance of the Guidance Note, CCI had seemingly relied on international best practices laid down in the European Commission’s Commission Notice on Restrictions Directly Related and Necessary to the Concentrations in the EU[3] (“EU Commission Notice”). However, even at that time, the said EU Commission Notice had been amended to specify that the EU Commission would no longer assess the ancillary restrictions together with the transaction[4]. 

Per standard practice, the notifying entities are required to self-assess the validity of the non-compete restrictions based on the guidance under the EU Commission Notice. Thus, when the Guidance Note was published, the CCI was already aware that the international practice it was adopting had been deemed redundant.

With the Public Consultation, however, the CCI has (reasonably) quickly learnt from its errors and is now willing to adopt the current ‘international best practice’ re non-compete restrictions in merger filings under the Competition Act of India.

[1] https://www.cci.gov.in/sites/d...

[2] https://www.cci.gov.in/sites/d...

[3] Commission Notice on restrictions directly related and necessary to concentrations, (2005/C 56/03) (5 March 2005) available at http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52005XC0305(02)

[4] Press Release, The Commission changes its policy on “ancillary restraints”, 27 June 2001 available at http://europa.eu/rapid/press-r...