CCI asks Schneider to reserve a part of L&T's capacity for third party firms

The competition commission Thursday asked Schneider, which acquired electrical and automation business of L&T for Rs 14,000 crore, to reserve a part of the latter's installed capacity to offer white labelling services to third party companies.

The fair trade regulator also asked the acquirer to provide third party firm technology access of white-labelled products for the next five years.

In April this year, the regulator had tweeted said it "approves acquisition of electrical and automation business of L&T by Schneider and MacRitchie, subject to compliance of certain modifications".

"In order to eliminate the competition concerns, the Commission has ordered the Acquirers to reserve a part of L&T's installed capacity to offer white labelling services to third party competitors.

"This facility would be available in respect of five high market share LV (low voltage ) switchgears, which are generally used together in LV panels," the CCI said in a statement.

Under the white labelling services, the third party competitors can take L&T products on 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 would revise its commercial policies and remove de facto exclusivity in distribution agreement," the regulator said.

The Competition Commission of India (CCI) laid out the conditions aimed at eliminating the likely anti-competitive effects of the acquisition.

Moreover, the regulator directed Schneider not to discontinue L&T products as well as not to increase average selling price for a period of five years.

The regulator provided modifications to the deal after it found that the transaction have the potential to reduce competition and enable the combined entity to increase price.

The modifications 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 so that competitors could avail this opportunity to strengthen their portfolio of products besides, becoming credible market competitors, the fair trade regulator noted.