CUTS moves NCLAT against CCI order on PVR and INOX merger

The Economic Times, December 15, 2022

Non-profit group CUTS has moved NCLAT against the fair trade regulator CCI’s order which had rejected its complaint against the proposed merger of multiplex chains PVR and INOX Leisure. In its petition, Consumer Unity & Trust Society (CUTS) has also made PVR and INOX as parties before the National Company Law Appellate Tribunal (NCLAT).

The matter came up for hearing before a two-member bench on Wednesday and was adjourned till February 9, 2023 over the request from the parties.

CUTS has challenged an order of the Competition Commission of India (CCI) passed in September this year, in which it had rejected a complaint against the proposed merger of multiplex chains PVR and INOX Leisure, saying apprehension of the likelihood of anticompetitive practices by an entity cannot be a subject of the probe.
NCLAT is also the appellate tribunal against any direction issued or decision made or order passed by the CCI.

On March 27, PVR and INOX Leisure announced their merger. However, the entities were not required to seek CCI approval for the deal as it was below the regulator’s threshold levels.

Under the competition law, deals beyond certain thresholds require clearance from the regulator.

CUTS had complained before CCI contending that the proposed merger agreement would have anti-competitive effects on the film exhibition industry and sought a detailed probe against the two entities.

CCI in its seven-page order said it was of the view that apprehension of likelihood of AAEC (Appreciable Adverse Effect on Competition) by an entity which is yet to take form cannot be a subject matter of inquiry/investigation under Section 3 or 4 of the Competition Act.
While passing the order, the regulator also made it clear that post-facto if any matter of abusive conduct comes up, then that could be examined under the provisions of the Act.

Regarding averments that PVR-INOX Leisure becoming a dominant entity in the future and the apprehension of possible abuse of dominance, CCI said the proposed transaction has not even been consummated to give legal status to the new entity.

The proposed merger would create the country’s largest multiplex chain with a network of more than 1,500 screens.

The merger has already approved by the shareholders and creditors of both the companies. In June this year, both PVR and Inox Leisure had also received clearance for their merger from bourses NSE and BSE.

In a statement CUTS said the Competition Act prohibits agreements which “cause” or are “likely to cause” appreciable adverse effect on competition in India.

“Since both these terms are consciously and separately used, the thresholds to invoke them should not be same,” it said, adding, “CUTS has challenged the CCI order in the information filed by it against PVR and Inox, arguing that the merger agreement between them is likely to cause appreciable adverse effect on competition in India.”

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