Competition Comm to conduct market study on private equity investments: Chairperson

While mentioning about the proposed study, Competition Commission of India (CCI) Chairperson Ashok Kumar Gupta, on Friday, said that in the current year, PE investments have surpassed strategic investments in the country due to the prevailing coronavirus pandemic situation.

According to Gupta, a new trend has emerged where FDI and other foreign investments have been overtaken by PE investments. The regulator has been examining sub-10 per cent investments in target enterprises by PE investors where they even have a board seat in the target enterprises.

Since many of these PE investments are in multiple firms of the same industry, leading to product-market overlaps, the issue of common ownership by minority shareholders across firms and its impact on competition needs to be understood, Gupta said. "In order to understand the trends and patterns of common ownership by PE investors across sectors in India, the Commission is shortly going to conduct a market study," he said.

He was speaking at the annual conference on competition law and practice, organised by industry body CII. The CCI chief said the study will aim to gauge the common PE investors' underlying incentives and motivation behind such investments as it is important to look at the rights they get to protect their legitimate financial interests from their shareholdings.

It also needs to be looked at whether these rights can translate into their ability to influence the decision of the firm, consequently impacting competition, or whether the investor and the company holding minority shareholding will classify them as passive investors, Gupta said. He also emphasised that the study would help the regulator in identifying the kind of shareholding rights available to common shareholders, the type of influence these rights provide and the available safeguard in a company's policies for mitigating competition concerns, if any.

Separately, the CCI is conducting a market study of pharmaceutical sector in the country. The study was started in October. Gupta said quality, access and affordability of medicines are the key determinants for the overall quality of public health.

However, owing to the inherited information asymmetry in consumers and suppliers for medicines, markets by themselves may not deliver optimal outcomes in terms of these parameters, he pointed out. The CCI study intends to focus on the distribution segment of the pharmaceutical market in India with a view to understand discounts, margins, policies at wholesale and retail levels of the distribution system, the role of trade association vis-a-vis various aspects of the distribution business, impact of e-commerce on price and competition, among others.

According to Gupta, the study also aims to investigate the extent of proliferation of branded generic drugs in India, its implications for competition and to assess potential hurdles, if any, in entry of bio-equivalent or biosimilar drugs. The CCI keeps a tab on anti-competitive practices across sectors.