CCI Approves Nippon’s Acquisition of a Minority Stake in Future Supply Chain Solutions Limited

On December 10, 2019, CCI approved the acquisition of approximately 22% of the shareholding in Future Supply Chain Solutions Limited (‘FSCSL’) by Nippon Express (South Asia and Oceania) Pte. Limited (‘Nippon Express’)[1]. Nippon Express proposed to purchase around 14.63% of the share capital of FSCSL from Griffin Partners Limited (‘GPL’), and subscribed to 8.64% equity share capital of FSCSL, on a fully diluted basis.

Nippon Express is a wholly owned subsidiary of Nippon Express Co. Limited., which provides one-stop logistics services at a global level including transport services through ground, air and ocean solutions, industry-specific transport services, specialised transport services such as moving and relocation, heavy haulage and construction, and warehouse and distribution services. FSCSL is a subsidiary of Ritvika Trading Private Limited, which in turn is a wholly owned subsidiary of Future Enterprises. Like Nippon Express, FSCSL is also a third-party supply chain and logistics service provider, which offers automated and IT-enabled warehousing, distribution and other logistics solutions. The parties to the combination do not provide warehousing and distribution services on a standalone basis, but may provide these services in exceptional situations.

CCI observed that parties to the combinations’ businesses overlapped horizontally in the provision of four services: (i) contract logistics; (ii) road transport services; (iii) cross border freight services by air; and (iv) cross border freight services by water.

CCI did not delineate the relevant market as the combination would not lead to adverse appreciable effect on competition in any of the alternative relevant markets because:  (i) the combined market share of the parties to the combination, in terms of value, is in the range of (0-5%) in each of the segments, and (ii) 90% of the logistics sector is unorganised with both organised and unorganised players imposing significant competitive constraints on each other. CCI observed that while there could be potential vertical overlaps in the activities of Nippon Express or the group it belonged to, in the cross-border freight forwarding by water and air (Upstream Markets), and the activities of FSCSL, in provision of contract logistics (Downstream Market) and vice versa, these relationships are not likely to raise anticompetitive concerns as parties to the combination don’t have the ability or the incentive to foreclose competition in these markets.

[1] Combination Registration No. C-2019/10/695.

Published In:Inter Alia Special Edition- Competition Law - March 2020 [ English
Date: March 30, 2020