CCI approves acquisition of L&T’s electrical and automation business
The Competition Commission of India (CCI) has approved the acquisition of Larsen & Toubro’s (L&T’s) electrical and automation business by Schneider Electric India and MacRitchie Investments.
The approval is subject to modifications aimed at eliminating the likely anti-competitive effects.
The CCI decision followed an in-depth inquiry undertaken after the notice given by Schneider and MacRitchie under sub-section (2) of Section 6 of the Competition Act 2002 on July 16 last year.
The commission found that Schneider and L&T are the first and second leading players in terms of sales and distribution reach in the low voltage switchgear industry in India.
Thus their consolidation will lock a large part of LV switchgear distributors and other downstream players with the combined entity and make it difficult for new players to enter the market. So the acquisition L&T‘s electrical and automation business will reduce competition and enable the combined entity to increase the price.
To eliminate competition concerns, the CCI asked the acquirers to reserve a part of L&T’s installed capacity to offer white labelling services to third-party competitors.
This facility will be available in respect of five high market share LV switchgear, which are generally used together in LV panels.
Under the white labelling services, the third party competitors can take L&T products at a reasonable price for selling under their own brand, for a period of five years.
Subsequently, these competitors can get access to the technology of white-labelled products to manufacture them for the next five years.
To open up their distribution network to competitors, Schneider will revise its commercial policies and remove exclusivity in distribution agreements.
Further, Schneider will not discontinue L&T products and not increase its average selling price for five years.
The remedies ordered by the CCI are expected to allow business expansion of competitors in the five white-labelled products, thereby leverage their brand position in the overall LV switchgear business.
The competitors can avail this opportunity to strengthen their portfolio of products, increase the viability of their own brand in a sustainable manner and become credible competitors, according to an official statement. (ANI)