By way of a January 13 2017 order, the Competition Commission of India (CCI) imposed a Rs2.5 million penalty on Schulke & Mayr GmBH for failing to notify the CCI about its global acquisition of Ethicon Inc's Healthcare Antisepsis Solutions.(1)
On April 23 2015 Schulke entered into a global asset purchase agreement for the acquisition of the advanced sterilisation products division of Ethicon Inc – a wholly owned subsidiary of Johnson & Johnson. The agreement provided for Schulke's global acquisition of Healthcare Antisepsis Solutions in various jurisdictions, including Australia, Japan, India and New Zealand. However, Schulke provided no information regarding the global acquisition in the notice to the CCI. As a result, Healthcare Antisepsis Solutions' role and objectives in the acquisition, and details of its business activities globally and in India, could not be assessed.
The CCI held that the global asset purchase agreement was the binding document in this case and that Schulke should have filed notice for the global acquisition of Healthcare Antisepsis Solutions with the CCI within 30 days of the execution of the agreement.
However, Schulke argued that the country transfer agreement entered into on September 11 2015 by Johnson & Johnson and Schulke India Private Limited was the trigger document, as the global asset purchase agreement did not result in the transfer of Indian assets. Instead, the final scope of the assets transferred in India was defined in the country transfer agreement.
The CCI held that the Competition Act does not mandate that the binding agreement must be India-specific. It also noted that even if the parties had not entered into a country transfer agreement, the acquisition of Healthcare Antisepsis Solutions would still have been notifiable to the CCI under Section 6(2) of the Competition Act, as the parties met the jurisdictional thresholds prescribed under Section 5 of the act.
A bare reading of the country transfer agreement revealed that it was not intended to be the primary document through which Schulke Germany or Schulke India would acquire Healthcare Antisepsis Solutions. Instead, the purpose of the country transfer agreement was to specify only the mechanics and scope of the business to be transferred in India. The global asset purchase agreement was the basis for the country transfer agreement and created an obligation on the parties to transfer the target business worldwide, including in India.
To determine the applicability of a de minimis exemption, the CCI considered the value of Johnson & Johnson's assets and turnover for the year ending March 31 2014. These were found to be Rs27.03 billion and Rs4.45 billion respectively, which exceeded the thresholds for de minimis exemption.
The CCI therefore imposed a penalty of Rs2.5 million on Schulke for its failure to give notice in accordance with Section 6(2) of the Competition Act.
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(1) CCI order, January 13 2017. For full text, please see the CCI website.