The Competition Commission of India (CCI) is set to launch a study into multiple minority investments by private equity (PE) firms in the same sector, the regulator’s Chairman Ashok Kumar Gupta said on Friday. He noted that investments by private equity players had surpassed strategic FDI investments in India.
“The Commission has been examining transactions of sub-10 per cent investments in target enterprise by private equity investors where there is even a single board seat,” he said at a conference on competition law organised by the Confederation of Indian Industry. Gupta said the CCI had noted that some investors had invested in multiple firms of the same industry and that the impact of common ownership by minority shareholders across firms on competition needed to be understood.
The CCI chief noted that the study would be aimed at gauging the underlying incentives and motivations of the common key investors. “It is important to look at the rights they get to protect the legitimate financial interests, from their shareholdings, and whether these rights can translate into their ability to influence the decision of a firm,” said Gupta.
The Commission is also currently conducting a market study on the pharmaceutical sector, focussed on the distribution segment of the pharma market in India, including discounts and margins policies at wholesale and retail levels of the distribution system, and the role and impact of trade associations on competition.
The CCI has imposed penalties on many pharma trade bodies, such as the Madhya Pradesh Chemists and Druggist Association, and the Federation of Gujarat State Chemists and Druggists Association.
On the e-commerce sector, Gupta said that amassing of huge data by first movers to the detriment of new entrants and consumers, and the phenomenon of ‘winners take all’ posed objective challenges before the competition authorities. He noted that key competition issues that arose in the CCI’s market study on e-commerce — including lack of platform neutrality, unfair platform business contract terms, existence of platform parity clauses and exclusive agreements — and deep discounting were a result of disparity in bargaining power between platforms and other businesses.
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