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Competition Commission of India (CCI) has imposed a penalty of ₹40 lakhs on Axis Bank for its failure to notify the competition watchdog on its 9.91 percent stake buy in CSC e-governance.
Is India emerging as a hub for Gun Jumping?
No notice was given to CCI on the Axis-CSC e-Governance acquisition, which was closed on November 23, 2020, despite the Competition law requirement that any person or enterprise who or which proposes to enter into a combination should give notice to the Commission, said the order issued by CCI.
Axis Bank is required to pay the penalty within 60 days from August 9, which was the date of order.
- Also Read: Axis Bank witnesses rise in attrition rate despite acquisition of Citibank India’s consumer business
CSC e-Governance is a special purpose vehicle (SPV) established to oversee implementation of the Common Service Centre (CSC) scheme. CSC Scheme is a project under the Digital India programme of the Ministry of Electronics and Information Technology (MeitY) to provide access points for the delivery of essential public utility services, social welfare schemes, healthcare, financial, education and agriculture services and a host of business-to-consumer services to the people in rural and remote areas.
Gun jumping in merger control
Most competition regimes including the one in India requires pre-merger notification. In India’s case, the law stipulates that a merger cannot come into effect until 210 days have passed from the date of notifying the CCI or until the approval by CCI, whichever is earlier.
If they fail to notify CCI, then this is what is called as ‘gun jumping’.
Topic of ‘gun jumping’ has received lot of interest around the world in recent years as high fines have been imposed by competition authorities, especially in Europe and developed jurisdictions.
AXIS-CSC-eGovernance acquisition
While imposing the penalty, CCI rejected the submission of Axis Bank that it made a bona fide error in assessing the applicability of the De Minimis exemption. The competition watchdog noted that Section 43A of Competition Act makes it “abundantly clear” that the provisions get attracted if there is failure to give notice to Commission. It is immaterial whether failure to give notice is bonafide or malafide, or it was inadvertent or intentional.
“Error, if any, made in assessing applicability of the Di minimus exemption to the transaction, does not negate the fact that transaction was not eligible for the benefit of Di minimus exemption. The argument about error is not a relevant argument for determining whether section 43A of the Act gets attracted to a case or not. Axis bank does not get absolved from the duty cast upon it by the provisions of the Act, merely on the ground of an error”, CCI order said.
The CCI also observed that it is apparent that the acquisition of stake in CSC e-governance by Axis Bank was neither solely as an investment nor can be considered to be in ordinary course of business. It is immaterial whether the transaction led to acquisition of control or not and therefore no determination is warranted whether transaction led to acquisition of control or not in the matter.
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