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Competition Commission slaps Rs3 crore penalty on Tesco

LiveMint logoLiveMint 13-06-2014 PTI

New Delhi: The Competition Commission of India (CCI) has slapped a penalty of `3 crore on British retailer Tesco Plc for delay in filing notice related to its purchase of a 50% stake in Tata Group firm Trent Hypermarket.

The fair trade watchdog, on 22 May, had cleared the Tesco-Trent deal which is the first FDI transaction in multi-brand retail since the sector was opened up in 2012.

CCI, in an order dated 27 May, has imposed a penalty of `3 crore on Tesco Overseas Investments for delay in filing notice seeking approval for the deal.

A Tesco spokesperson could not be contacted for comments.

Under the Competition Act, any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission, disclosing the details of the proposed combination, “within thirty days of execution of any agreement or other document for acquisition”.

As per the Commission, Tesco should have filed the notice seeking approval within 30 days of its application to the Department of Industrial Policy and Promotion (DIPP) and the Foreign Investment Promotion Board (FIPB).

However, the notice was given only on 31 March 2014, after a delay of around 73 days. Going by Competition Act, the acquirer as required to give the notice by 16 January.

In case of such violations, the watchdog can impose penalties.

“... the maximum penalty that may be imposed could be 1% of the total turnover or the assets, whichever is higher, of such a combination, which in the instant case is more than `600 crore,” according to the 27 May order, which is posted on the CCI website.

However, the fine has been at a nominal amount of `3 crore after taking into consideration the fact that Tesco, despite a delay of around 73 days in giving notice, had voluntarily filed the notice within 30 days of executing the joint venture agreement and share purchase agreement.

The Commission said Tesco in its application to DIPP/FIPB on 17 December 2013, had provided enough details of the proposed combination which demonstrate that the parties were aware about the type, nature and purpose of the proposed combination at the time of making the said application.

Hence, the watchdog said the acquirer’s claim that had the notice been filed with the Commission without executing the definitive agreement (s), it would have been incomplete as being without the relevant documents/details, is also misconceived.

Clearing the stake purchase in Trent Hypermarket by Tesco Overseas Investments Ltd, CCI in its order on 22 May had said the transaction “is not likely to have appreciable adverse effect on competition in India”.

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