On August 7, 2023, the CCI imposed a penalty of INR 5,00,000 (approx. US$ 6,000) on Massachusetts Mutual Life Insurance Company (‘Massachusetts Mutual’) in relation to its acquisition of 16% shareholding (‘Transaction’) in Invesco Limited (‘Invesco’). ^[1]

Massachusetts Mutual belongs to the MassMutual Financial Group and operates as an insurance firm offering individual and group life insurance, disability insurance, individual and group annuities, and guaranteed interest contracts to individual and institutional customers in the USA and Puerto Rico. Invesco is a company incorporated in Bermuda with its corporate headquarters in Atlanta, USA, and listed on the New York Stock Exchange.

The parties consummated the Transaction in May 2019 without prior notification to the CCI.

Proceedings under Section 43A

Show Cause Notice: On December 20, 2021, the CCI initiated proceedings considering the issue of consummation of the transaction without filing a notice before the CCI and formed a prima facie view that the Transaction cannot benefit from Item 1 under Schedule I of the Combination Regulations. Accordingly, the CCI issued a show cause notice to Massachusetts Mutual on January 17, 2022.

Submissions by Massachusetts Mutual: Massachusetts Mutual submitted that, based on the turnover of Invesco in India in the financial year 2017-18, the Transaction qualified for DME. It submitted that it has acquired only beneficial ownership in Invesco and did not acquire a business in India. At the time of the Transaction, Invesco did not have any portfolio entities which it could be said to have control over. Massachusetts Mutual also submitted that the revenue/ turnover of Invesco Mutual Fund (an Invesco subsidiary) should not be attributed to Invesco’s turnover in India. Therefore, the transaction is not required to be notified under Section 6(2) of the Competition Act.

CCI on Calculation of Assets in DME Threshold: The CCI noted that in combinations pertaining to mutual fund businesses, the value of assets, in accordance with the jurisdictional thresholds provided under Section 5 of the Act, is the aggregate of (i) assets of the Asset Management Company (‘AMC’) of the mutual fund; (ii) assets of the trustee of the mutual fund (if it is subject to the acquisition); and (iii) Assets Under Management (‘AUM’) of the mutual funds. Therefore, in the present case, the correct methodology for computing the total assets would include the AUM of the Invesco Mutual Fund and the assets of the Invesco India Subsidiaries. The CCI observed that the value of AUM of the Invesco Mutual Fund for March 2018 was more than INR 20,000 crore (approx. US$ 240 million). Even on considering only the aggregate value of assets of Invesco India Subsidiaries, it amounted to approximately INR 450 crore (approx. US$ 54 million) in the financial year 2017-18. In both the scenarios, the assets exceed the DME threshold.

CCI on Calculation of Turnover in DME Threshold: The value of turnover, in mutual fund businesses as per thresholds under Section 5 of the Act, is the aggregate of (i) turnover/revenue from operations of the AMC of the mutual fund; (ii) turnover/revenue from operations of the trustee of the mutual fund (if it is subject to the acquisition); and (iii) turnover of the mutual funds. Turnover of mutual funds are aggregate of: (i) gross value of sale and redemption of securities; and (ii) income such as dividend, interests, etc. Moreover, the CCI also held that “any income generated from the securities held by a mutual fund company is considered as turnover, irrespective of whether holding of those securities confer control to mutual fund company or not”.  In this case, the gross revenue generated from the sale of securities would be in excess of the DME threshold. Lastly, it held that since the Transaction exceeds the de minimis threshold, the same is notifiable under Section 6(2) of the Competition Act.

The CCI, while invoking the provisions of Section 43A of the Competition Act on the ground of failure of Massachusetts Mutual to notify the transaction in accordance with Section 6(2) of the Act, imposed a penalty of INR 5,00,000 (approx. US$ 6,000).

^[1]       Proceedings against Massachusetts Mutual Life Insurance Company, Ref. No. M&A – 2021/01/810.