Companies

Schneider, MacRitchie get CCI nod to acquire L&T’s electrical/automation biz

Our Bureau New Delhi | Updated on June 06, 2019

The CCI approval seeks to give competitors equal opportunity   -  Bloomberg

However, approval comes with some caveats

The Competition Commission of India has paved the way for Schneider Electric India Private Ltd and MacRitchie Investments to acquire the electrical and automation (EA) business of Larsen & Toubro Ltd (L&T). It has introduced some caveats while granting the approval.

CCI has reached this conclusion after an in-depth inquiry. A press note released by CCI said, “The Commission found that Schneider and L&T are the first and second leading players in terms of sales and distribution reach in the low voltage (LV) switchgear industry in India.”

It further said that their consolidation would inter alia lock a large part of the LV switchgear distributors and other downstream players with the combined entity, thereby making it difficult for new players to enter the market. “Thus, the Commission was of the view that the acquisition of EA business of L&T would reduce competition and confer the combined entity the ability to increase price,” the CCI said.

For a level field

The acquisition, therefore, is subject to the acquirers reserving a part of L&T’s installed capacity to offer white labelling services to third party competitors.

“This facility would be available in respect of five high market share LV switchgears, which are generally used together in LV panels. Under the white labelling services, the third party competitors can take L&T products on a reasonable price for selling under their own brand, for a period of five years. Subsequently, these competitors can get access to the technology of white-labelled products to manufacture them, for the next five years,” the release noted.

It further said, “To open up their distribution network to competitors, Schneider would revise its commercial policies and remove de facto exclusivity in distribution agreements. Further, Schneider would not discontinue L&T products and not increase their average selling price, for a period of five years.”

The remedies ordered by the Commission are expected to allow business expansion of competitors in the five white-labelled products thereby leveraging their brand position in the overall LV switchgear business. The competitors could avail this opportunity to strengthen their portfolio of products, increase the viability of their own brand in a sustainable manner and become credible competitors, the press note stated.

Published on June 06, 2019

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