Bharat Forge Limited

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Page 1 of 44 COMPETITION COMMISSION OF INDIA Combination Registration No.C-2024/10/1197 Non- Confidential 22nd April 2025 Notice under Section 6(2) of the Competition Act, 2002 filed by Bharat Forge Limited and AAM India Manufacturing Corporation Private Limited CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 31(1) of the Competition Act, 2002 1. On 23rd October, 2024, the Competition Commission of India received a notice given by Bharat Forge Limited (BFL/Acquirer) and AAM India Manufacturing Corporation Private Limited (AAMCPL/ Target), under sub-section (2) of Section 6 of the Competition Act, 2002 (Act) [Collectively, BFL and AAMCPL are referred to as ‘Parties’]. 2. The notice is filed pursuant to Share Purchase Agreement (SPA) dated 17th October 2024 entered into amongst BFL, Target, AAM International Holdings, Inc. [wholly owned Combination Registration No. C-2024/10/1197 Page 2 of 44 subsidiary of American Axle & Manufacturing Holdings Inc. (AAM Holdco)], and American Axle & Manufacturing, Inc. (AAM) [wholly owned subsidiary of AAM Holdco]. 3. The notice is filed in relation to the proposed acquisition by BFL of 100% shareholding and full and sole control over AAMCPL [including e-axle assembly lines that AAMCPL will acquire from AAM Auto Component (India) Private Limited (AAM Auto) [Proposed Combination]. Description of the Parties 4. BFL is a listed company incorporated in 1961. It is listed on the National Stock Exchange as well as the Bombay Stock Exchange. It is a global provider of safety and critical components and solutions to various sectors including automotive, railways, defence, construction, mining, aerospace, marine, and oil & gas. BFL is primarily engaged in the manufacture and sale of metal forging products including vehicle components such as certain forged axle sub-components, in India and outside India. BFL and BFL Group entities operate across sectors and industries both in India and in other countries. It has 33 subsidiaries, 1 joint venture, and 2 associate companies in India. In the automotive industry in India, BFL manufactures and sells various metal forged components for vehicles including commercial vehicles and passenger vehicles. Its sales are predominantly institutional sales i.e., sales to Original Equipment Manufacturers (OEMs). 5. Certain promoters of BFL, namely, (a) Babasaheb Neelkanth Kalyani, (b) Amit Babasaheb Kalyani, (c) Sunita Babasaheb Kalyani (BNK Family) ultimately control BFL and its downstream entities. BNK family cumulatively has 32.03% shareholding in BFL. As shareholders, the BNK Family, i.e., Mr. Babasaheb Neelkanth Kalyani, Mr. Amit Babasaheb Kalyani and Ms. Sunita Babasaheb Kalyani, have the same rights as those available to any ordinary shareholder of BFL. Mr. Babasaheb Neelkanth Kalyani is the Chairman and Managing Director of BFL and Mr. Amit Kalyani is the Vice- Combination Registration No. C-2024/10/1197 Page 3 of 44 Chairman and Joint Managing Director of BFL. Therefore, these two members of the BNK Family do have rights such as rights through board presence and information rights, that are not available to ordinary shareholders. 6. BNK Family also has controlling shareholding (through BF Investments) in two joint ventures with Meritor Heavy Vehicle Systems, LLC acquired by Cummins Inc. (Cummins) in 2022 in India i.e., Meritor HVS (India) Limited (MHVSIL) and Automotive Axles Limited (AAL) [collectively, BFL’s Affiliate JVs]. BF Investments’ shareholding in MHVSIL and AAL is 48.99% and 35.52%, respectively. BFL has submitted that the BFL’s Affiliate JVs are not part of BFL Group but are part of the list of entities categorised as ‘BFL Affiliates’ and have been included in the list containing names and business activities of BFL's Affiliates. BFL’s Affiliate JVs are, inter alia, engaged in the manufacture and sale of axles for commercial vehicles, off-highway vehicles, and defence vehicles. In addition to axles, AAL, one of the BFL’s Affiliate JVs, (a) manufactures drum brakes for commercial vehicles which it sells directly to OEMs and also to MHVSIL, the other Affiliate JV; and (b) manufactures and supplies suspension systems/ kit (includes all suspension components) for only one customer1. MHVSIL also manufactures and sells certain components / spares (Such as oil seals and brake linings), primarily to OEMs, and has limited direct aftermarket sales of components/ spares. It is clarified that (a) BFL Group entities, and (b) entities in which BNK Family exercises control, are not present in the e-axle for CV segment in India. 7. The Target is a company incorporated in India. It is an indirectly held wholly owned subsidiary of AAM Auto. Currently, 99.92% of the equity shareholding of the Target is held by AAM International Holdings Inc., which is a wholly owned subsidiary of AAM Holdco. Remaining 0.08% equity shareholding of the Target is held by AAM, AAM Holdco’s wholly owned subsidiary incorporated in Delaware. The Target is primarily engaged in the business of manufacture and sale of axles for commercial vehicles in 1 It is submitted that AAL also manufactures miniscule quantities of sub-components/spares for the replacement market and sales of such sub-components/ spares are only to OEMs and formed approximately 0.15% of its total revenue for F.Y. 2023-24. Combination Registration No. C-2024/10/1197 Page 4 of 44 India. Its sales are predominantly institutional sales i.e., sales to OEMs. The Target houses (i) two manufacturing facilities (one in Maharashtra and one in Tamil Nadu) that primarily manufacture axles for commercial vehicles; and (ii) ‘Pune Engineering and Development Centre’ (Acquired Business). It also houses (i) a ‘Pune Business Office’ which is engaged in the provision of captive IT support and product engineering services, and (ii) components business division that purchases vehicle components and exports the same to other group entities of AAMCPL (as pass-through sales) (Retained Business). Scrutiny of Notice 8. In terms of Regulations 14(2) of the Competition Commission of India (Combinations) Regulations, 2024 (Combination Regulations), BFL vide letters dated 6th November 2024 and 3rd December 2024 was asked to provide complete information and clarifications. BFL filed its complete response on 16th December 2023 and a voluntary submission on 27th December 2024 (BFL’s Responses). 9. In terms of Regulation 14(8) of the Combination Regulations, the Commission sought information from third parties i.e., competitors/Original Equipment Suppliers (OESs) and customers/ OEMs of the Parties vide letters dated 8th January 2025. The Commission received third-party responses from certain competitors / OESs [Competitor Responses] as well as certain customers / OEMs [Customer Responses] of the Parties till 29th January 2025 [collectively, Competitor Responses and Customer Responses are referred to as ‘Third-Party Responses’]. 10. On 04th February 2025, the Commission considered all the material available on record and formed a prima facie opinion that the Proposed Combination is likely to cause appreciable adverse effect on competition in India in the horizontally overlapping relevant market(s) identified below, namely, Axle CV Market, particularly its segment Axle MHCV Market. Accordingly, the Commission directed the Secretary to issue a Show Cause Notice (SCN) to the Parties, under the provisions of sub-section (1) of Section 29 of the Act, to respond in writing, within fifteen days of the receipt of such Combination Registration No. C-2024/10/1197 Page 5 of 44 notice, as to why investigation in respect of the Proposed Combination should not be conducted. Accordingly, SCN was sent to the Parties on 04th February 2025. 11. The Acquirer, after seeking extension, submitted response to the SCN on 05th March 2025 (SCN Response). Along with the SCN Response, the Acquirer also proposed certain voluntary modifications/behavioural commitments in Form IV read with Regulation 25(4) of the Combination Regulations, to address the prima facie concerns raised by the Commission. The Target vide e-mail dated 05th March 2025 acknowledged the receipt of the Commission's notice dated 4th February 2025 and submitted that it understands that BFL had filed a response and it does not have any further response or submission in relation to the notice. 12. The Commission in its meeting held on 11th March 2025, considered the SCN Response and all material available on record and noted that the SCN response and the voluntary modifications/ behavioural commitments do not seem to address all the prima facie concerns raised by the Commission in the SCN and could not be accepted. Accordingly, the Commission noted that the competition concerns, as raised in SCN, continue to exist and careful analysis was required before reaching any final determination. 13. In view of the above, the Commission vide letter dated 12th March 2025 directed the Parties to (i) publish details of the Proposed Combination, in terms of sub-section (2) Section 29 of the Act read with Regulation 21 of the Combination Regulations within seven days; and (ii) submit details of the Proposed Combination to be published in Form III contained in Schedule I to the Combination Regulations along with the names of newspapers in which such details are proposed to be published, to the Commission before its publication. 14. In compliance with the above direction, the Parties submitted Form III to the Commission on 18th March 2025 and published the same on their website2 as well as in all India 2 Since the Target did not have a website, it sought exemption from this requirement. Combination Registration No. C-2024/10/1197 Page 6 of 44 editions of Mint, The Financial Express, Hindustan Times and The Indian Express on 19th March 2025. The same was also uploaded on the website of the Commission on 19th March 2025. Till 28th March 2025 i.e., last date for receiving public comments as per statutory timeline given in Section 29 of the Act, the Commission received comments from two stakeholders. 15. Thereafter, the Commission directed parties to submit its response to the public comments and also sought certain additional/ other information vide letter dated 4th April 2025 issued under sub-section 4 of Section 29 of the Act within ten days. The Acquirer submitted its response on 15th April 2024 [29(4) Response] and also proposed revised voluntary modifications/behavioural commitments in Form IV to address the prima facie concerns of the Commission. Overlaps and Relevant Market(s) A. Horizontal Overlaps 16. As per the information provided in the Notice, BFL’s Affiliate JVs are engaged in the manufacture and sale of axles for Commercial Vehicles (CVs), off-highway vehicles and defense vehicles and exhibit horizontal overlap with the Target which is also engaged in the business of manufacture and sale of axles for CVs in India. 17. At the broadest level, business activities of BFL’s Affiliate JVs and the Target overlap at the vehicle components level and at a narrower level in the market for supply of axles. As the Target is primarily engaged in the supply of axles for CVs in India, the horizontally overlapping relevant product market can be considered as the ‘market for supply of axles for CVs’. 18. BFL has submitted that in terms of industrial parlance, commercial vehicles with Gross Vehicle weight (GVW) > 7.5 tonnage are classified as Medium and Heavy Commercial Vehicles (MHCVs). MHCVs are used to transport large quantities of goods over long distances, such as haulage trucks, tipper trucks and tractor trailers. Whereas commercial Combination Registration No. C-2024/10/1197 Page 7 of 44 vehicles with GVW < 7.5 tonnage are classified as Light Commercial Vehicles (LCVs). LCVs are used for vehicles which transport courier, shuttle passengers within cities, or for local haulage of supplies. Thus, based on vehicle segments i.e., LCVs and MHCVs, the ‘market for supply of axles for CVs’ can be further segmented into ‘market for supply of axles for LCVs’ and ‘market for supply of axles for MHCVs’. 19. Further, the Parties have submitted that the relevant geographic market may be considered as ‘pan-India’ since (i) consumer preferences for axles do not vary regionally, (ii) OEMs that manufacture commercial vehicles, are present across the country and often have multiple manufacturing facilities in different states, and axles are sourced and supplied across the country, (iii) OEMs that manufacture commercial vehicles source axles depending on specifications of their vehicles, irrespective of their location, (iv) it is not imperative for OESs/ component suppliers to set up production units in the same clusters where OEMs are present, and (v) regulations applicable to axles for vehicles including commercial vehicles are applicable uniformly across the country. 20. In view of the foregoing, the Commission considers that for the purposes of assessment of horizontal overlaps that exist between the Acquirer and Target, the relevant markets may be considered as ‘the market for supply of axles for CVs in India’ (Axles CV Market) at a broader level, which can be further segmented into ‘the market for supply of axles for LCVs in India’ (Axles LCV Market) and ‘the market for supply of axles for MHCVs in India’(Axles MHCV Market) at a narrower level. B. Vertical/ Complementary Relationship I. Existing Vertical Relationship 21. BFL manufactures and supplies Front Axle Beams (FABs) to the Target (at arm’s length) which the latter utilises to assemble axles to sell to OEMs. Accordingly, there exists a vertical relationship for supply of FABs manufactured by BFL to the Target (at arm’s length). BFL is present in the upstream segment for supply of FABs in India while the Target is present in the downstream segment for supply of axles for CVs in India. Combination Registration No. C-2024/10/1197 Page 8 of 44 22. Accordingly, the upstream relevant market for the purposes of assessment of vertical relationship may be considered as ‘the market for supply of FABs for CVs in India’ (FAB Market) and the downstream relevant market may be considered as Axles CV Market. II. Potential Vertical Relationship 23. BFL manufactures certain forged axle sub-components (other than FABs). Axle sub- components (other than FABs) that are manufactured by BFL through forging process and sold in the open market in India (to OEMs and axle assemblers) are gears and shafts, and other forgings such as wheel hubs and brackets, differential pinion, crown wheels, axle housings, spindle, pin-pivot, axle tubes, etc. that the Target can potentially utilise to assemble axles for CVs. To this end, there could be potential vertical relationship between BFL and the Target for the supply of forged axle sub-components (other than FABs) by BFL (in the upstream segment) to the Target which assembles axles for CVs (in the downstream segment). 24. Accordingly, the upstream relevant market for the purposes of assessment of the potential vertical relationship may be considered as ‘the market for supply of forged axle sub- components (other than FABs) for CVs in India’ (Other than FAB Market) and the downstream relevant market may be considered as ‘the market for supply of axles for CVs in India’ (Axles CV Market). III. Complementary Relationship 25. AAL, one of the BFL’s Affiliate JVs, supplies drum brakes for commercial vehicles to MHVSIL on arm’s length basis. MHVSIL sells drum brakes further to OEMs and OESs including the Target. The Target is primarily engaged in the manufacture of axles for CVs. It is submitted that the Target purchases brakes from MHVSIL as “directed buys3” 3 It is submitted that in limited instances, where an OEM chooses to get brakes and axles assembled by a third- party and the third-party, typically, is the supplier of assembled axles, in such cases, OEMs (customers of axles and brakes) ask the axle suppliers to procure brakes from other suppliers (that manufacture brakes). In some cases, OEMs may identify/ select the brake supplier. The contractual arrangement for the supply of brakes can be Combination Registration No. C-2024/10/1197 Page 9 of 44 and incorporates the brakes into axles that it assembles. This supply arrangement is for only one OEM i.e., […………………………………………. ………………………]. Brakes are purchased by the Target at arm’s length. 26. It is submitted that AAL, one of BFL’s Affiliate JVs, also supplies drum brakes in the open market. However, AAL does not supply brakes to the Target. Since the Target purchases drum brakes only as a directed buy, a potential complementary relationship between AAL and the Target for the supply of brakes has not been made out. This is because the Target does not sell assembled brakes and axles as a composite system/assembly to other OEMs. 27. Accordingly, for assessing the complementary linkage between drum brakes manufactured and sold by BFL’s Affiliate JVs and axles manufactured by the Target, the relevant markets and its segments may be considered as (i) Axles CV Market and its segment Axles MHCV market and (b) ‘the market for supply of drum brakes for commercial vehicles in India’ (Drum Brakes Market) and its segment ‘the market for supply of drum brakes for MHCVs in India’. Competition Assessment A. Horizontal Overlaps 28. The competition assessment of the horizontal overlaps based on the information in the notice, BFL’s Responses, Third-Party Responses, SCN Response and 29(4) Response and other material available on record is brought out in the ensuing paragraphs. a) Market Share and Concentration 29. Based on the submission in the notice, it was noted that the market data based on which market shares of the BFL’s Affiliate JVs and the Target and their competitors (based on between OEMs and the entity supplying brakes, or between the axle supplier and the OEMs. In industry parlance, this arrangement is referred to as ‘directed buys.’ Combination Registration No. C-2024/10/1197 Page 10 of 44 sales value and sales volume) were provided was inclusive of in-house production / assembly of axles by [……………………………………………… … ………… … … …………… ……………………………………………………….] for their vehicles. Considering that the in-house production/assembly of OEMs is not market facing, the Acquirer was required to provide market shares after excluding the value and volume of in-house production/assembly of axles by [………………………………………] from the market data. 30. Subsequently, the Acquirer provided market shares excluding in-house production/ assembly of axles by [……………………..] stating that, as a large part of their demand4 for axles for CVs is being met through in-house assembly, revised market data is provided based on assumption that the entire CV axle demand of [………………………] is met in-house. However, regarding [……………..], the Acquirer stated that the demand for axles for CVs of [……………..] being met in-house could not be accurately estimated and therefore, the data pertaining to in-house production/assembly of axles by [……… ……..] was not excluded. 31. It was noted that the market shares of BFL’s Affiliate JVs, the Target and their competitors, excluding the estimated sales of [………… …….…..] depicted [……… ……..] as the next largest competitor after the Parties. However, based on Third-Party Response provided by [……………..], it was observed that it does not have an in-house assembly line for manufacturing axles for CVs (LCVs and MHCVs) and is currently completely dependent on OESs for the supply of axles required for its CVs. This indicates that [……………..] is neither a competitor of the Parties nor a player in the Axle CV Market or its segments. Accordingly, for purposes of competition assessment the market data depicting [……………..] as a competitor was also excluded. 4 While [……………………...] meet almost their entire demand of axles for CVs through in-house axle assembly, they both purchased axles for CVs from third-party axle manufacturers also. However, their purchases were less than 1% of their total sales of axles for CVs in FY 2023-24. Likewise, [………………] also met part of its demand for axles for CVs through in-house assembly and procured axles from MHVSIL (as well as […………… … .…...] and the Target). However, percentage of [……………… .] demand for axles for CVs being met through in-house axle assembly could not be estimated. Combination Registration No. C-2024/10/1197 Page 11 of 44 32. Resultantly, the estimated market shares of BFL’s Affiliate JVs, the Target and their competitors for FY 2023-24 and their corresponding and Herfindahl-Hirschman Index (HHI) values across various segments (based on the value and volume data furnished by the Acquirer) are as under: Axles Axle CV Market Axle LCV Market Axle MHCV Market Value Volume Value Volume Value Volume BFL’s Affiliate JVs 15-20 % 11-15 % 0-5 % 0-5 % 30-35 % 35-40 % Target 15-20 % 15-20 % 5-10 % 10-15 % 25-30 % 25-30 % Combined 35-40 % 30-35 % 10-15 % 10-15 % 60-65 % 60-65 % Dana5 5-10 % 5-10 % 5-10 % 5-10 % 0-5 % 0-5 % ZF India Pvt. Ltd. 0-5 % 0-5 % 5-10 % 0-5 % 0-5 % 0-5 % York6 0-5 % 0-5 % 0-5 % 0-5 % 0-5 % 0-5 % Others 45-50% 55-60% 75-80% 70-75% 25-30% 25-30% Pre-Combination HHI 3000-3500 3500-4000 6000-6500 5500-6000 2500-3000 2500-3000 Post-Combination HHI 3500-4000 4000-4500 6000-6500 5500-6000 4500-5000 4500-5000 Delta HHI 700-750 400-450 10-15 10-15 1900-1950 1850-1900 33. Based on above, BFL’s Affiliate JVs and the Target appear as the two largest and almost equally placed domestic players in the Axle CV Market and its segment Axle MHCV Market. In fact, post the Proposed Combination, the Parties appear to have the largest share of the market, with the remaining being split between few other small fringe players with market shares around 5% or less, who may lack resources, scale, or influence to be able to impose competitive constraint on BFL’s Affiliate JVs and the Target. The Third- 5 Dana Limited including Axles India Limited 6 York Transport Equipment (India) Private Limited Combination Registration No. C-2024/10/1197 Page 12 of 44 Party Responses also indicate that BFL’s Affiliate JVs and the Target are significant and well entrenched players in the Axle CV Market. Further, high HHI and delta HHI values show that proposed combination is likely to result in an increase in concentration in overlapping Axle CV Market as well as its segments. Thus, based on high combined market shares and increase in concentration post combination, a prima facie concern was raised in SCN. 34. The Acquirer in its SCN Response, inter alia, submitted that: i. The Target’s market share based on sales provided in the notice was overstated as the same is largely attributable to one exclusive supply contract with […….….]. [………………], Target has assembled axles for MHCVs for […….….] under a contract manufacturing arrangement which is for a duration of five (5) years (i.e., till 2029). In FY 2023–24: (a) majority of the Target’s MHCV axle sales (by value) were to [….….] (b) majority of its total revenues were from sales to [….….], and (c) supplies to [….….] alone comprised between [5-10] % by value and volume of the MHCV axle market based on actual production. If the supplies made to [….….] are excluded, then the market share of Target as well as the incremental market share of BFL (through Affiliate JVs) will be < 5% based on Target’s sales figures for F.Y. 2023-247. Thus, purportedly high market share of the Target is not reflective of its market position and the supplies being made by the Target to [….….] should be excluded for purpose of calculation of market share. ii. Pursuant to the arrangement with [….….], the Target is, inter alia, contractually required to reserve assembly lines to assemble MHCV axles for sale to [….….]. This effectively converts Target’s MHCV axle assembly facilities into a dedicated supply source for [….….], mirroring the role of in-house production used by OEMs like [……………………..]. Since in-house production of [……………………..] 7 The argument regarding exclusion of market shares attributable to Target due to its contract with [………] raised in the SCN response refers to a contract manufacturing arrangement with […………………………….] however, the wallet shares of the Target submitted in the notice depicted that the Target's share of supply of axles for MHCVs to [………] are in range of 90-95% from FY 2019-20 to FY 2023-24. […………… ……………… ……… ………………………….. ………………………………………………. …………………………. ….. …………………………………………………………………………….] Combination Registration No. C-2024/10/1197 Page 13 of 44 is excluded from market share calculations, the Target’s locked-in facilities, which serve only […..…] under a long-term exclusive contract, must also be excluded. iii. The in-house axle assembly by OEMs, such as, [……………………….], should also be included in the relevant market as in-house axle assembly poses significant competitive constraints on third-party suppliers and exclusion of same would be ignoring supply-side substitutability and switching in the market. iv. The market shares of the BFL’s Affiliate JVs and the Target must not be combined for undertaking competition assessment of the Proposed Combination as the degree of control exercised by the Acquirer in BFL’s Affiliate JVs does not amount to material influence given the significant control exercised by Cummins Inc. (Cummins) in MHVSIL and AAL. Given the independent nature of the management of BFL’s Affiliate JVs, the likelihood of any coordination between the BFL’s Affiliate JVs and the Target is highly unlikely. Therefore, simply combining the market share of the BFL’s Affiliate JVs and the Target will not provide an accurate picture of the market dynamics as the BFL’s Affiliate JVs do not operate under the umbrella of BFL/ BFL Group, and BFL does not exercise any influence in day-to-day business operations of the Affiliate JVs. v. Given that the relevant market is a bidding market the demand in the market is lumpy in nature and in such markets, market shares often provide a distorted picture of the relative market position. In bidding markets, competition ‘for markets’ occurs at the bidding stage, and high sales in the past does not translate into market power in current and future bids. Thus, because of the bidding characteristics of the market and the dynamic supplier selection process that OEMs/OESs employ, market shares are an imperfect proxy for assessing the existence of market power. 35. At the outset, the Commission observes that the contention of the Acquirer for exclusion of supply of axles by the Target to […..…] under long term exclusive contract from market share calculation, is misconstrued and untenable. In-house production/ assembly of axles for CVs by OEMs like [………………….…] and the assembly of axles for CVs by the Target for […..…] cannot be equated. […..…] is a third-party customer of the Combination Registration No. C-2024/10/1197 Page 14 of 44 Target and the contractual obligation is applicable to the Target only during the tenure of contract (as stated by the Parties, each agreement with […...…] was entered into following the termination of the preceding agreement). Thus, even though, currently, a large portion of the supply of axles for CVs is being made by the Target to […..…] under a locked-in supply agreement, its activity is market facing and not akin to in-house assembly by OEMs. Consequently, the Target’s market data needs to be included to arrive at an accurate depiction of market dynamics. 36. Further, the contention of the Acquirer to include in-house axle assembly by OEMs, such as, […………………….…] in the relevant market is also not tenable as supply side substitutability and switching can be considered as competitive constraints if in response to a small but significant price increase the products can be supplied by the firms in a short period of time to the customers in the relevant market without it being necessary for them to incur significant costs. A shift to in-house assembly by certain OEMs in the past or possibility of such shift in future cannot be construed as supply-side substitutability for purposes of competition assessment. Accordingly, the market data relating to in-house axle assembly ought to be excluded from the relevant market. 37. In relation to the contention that the market shares of the BFL’s Affiliate JVs and the Target must not be combined, it is pertinent to note that BFL’s Affiliate JVs as well as BFL/ BFL Group, are both operating under the umbrella of BNK Family which holds significant shareholding and board presence in both. Thus, given the material influence of BNK Family over both BFL as well as BFL’s Affiliate JVs, it is appropriate that their combined market shares be considered to assess the impact of the Proposed Combination on competition in the relevant market. 38. Finally, regarding the role of market shares in a bidding market, the Commission considers that despite the bidding nature of the markets, the market shares may still be a relevant parameter for competition assessment in such markets as they reflect the ability of suppliers to make credible bids in future tenders. Further, market concentration may Combination Registration No. C-2024/10/1197 Page 15 of 44 also be a relevant parameter as increase in concentration may reflect reduced competition due to a reduction in the number of competitors, which could harm customers. 39. Thus, it is observed that the combined market share of the BFL’s Affiliate JVs and the Target in FY 2023-24 (as also over the past five years) was around 35-40 % in terms of value in Axle CV Market, and around 60-65 % in terms of both value and volume in the Axle MHCV market, which is significantly higher than the next largest competitor i.e., Dana, which has market share of only around 5-10% in these markets. Given the high combined and incremental market shares of the Parties, it appears that the Proposed Combination is likely to strengthen the market position of the acquiring firm due to removal of a competitive constraint currently being exerted by the Target firm upon it as well as other players in the relevant market(s). This may also increase concentration in the relevant market(s) as well as market power of the combining firms. b) Closeness of Competition 40. The Acquirer has submitted that the relevant market is a bidding market as procurement of products such as axles by OEMs is generally through issue of Request for Proposals (RFPs)/ Request for Quotations (RFQs) to procure axles from third-party axle manufacturers. OEMs then negotiate with OESs to finalise the offer terms. Once an offer is accepted, Purchase Orders (PO) are placed by OEMs or supply arrangements such as a direct supply agreement are entered into between the OEM and the OES. 41. The Third-Party Responses also state that mostly business in the market for supply of axles for CVs is awarded by OEMs to OESs through RFQ process. However, it is also stated that certain OEMs do not issue RFPs/RFQs for procurement of axles. They procure from two or three empanelled OESs, such as BFL’s Affiliate JVs and Target, through contract manufacturing or otherwise. Third -party Responses also reveal that various large OEMs are procuring products either from BFL’s Affiliate JVs or Target or both. Some OESs have identified them as their top suppliers for axles for MHCVs. Combination Registration No. C-2024/10/1197 Page 16 of 44 42. Based on the information submitted by the Parties, it is noted that BFL’s Affiliate JVs and the Target have certain common customers viz. […………………………………] etc. Therefore, to assess the closeness of competition amongst the OESs, bidding data pertaining to the RFQs/RFPs in which Acquirer and the Target participated in past five years was sought. 43. Considering the limited information provided by the Parties regarding their participation in RFPs/ RFQs along with information provided by certain third parties in their Third- Party Responses, it is noted that mostly, BFL’s Affiliate JV and the Target did not participate in the same RFPs for MHCVs of the common customers. However, in certain instances where they both did participate in same RFP/ RFQ, in some instances bids were won by BFL’s Affiliate JVs and in other instances by the Target. Only in a few cases bids were won by a third party, which depicts the Parties as credible competitors of each other. Consequently, the proposed combination of the Parties, is likely to result in loss of or reduction in competition in the bidding market due to reduced number of credible competitors, which could harm customers. c) Impact on innovation 44. As per the Acquirer, axles are not off-the-shelf products and are customized to meet specific requirements of OEMs. OEMs provide design specifications, technical specifications, access to intellectual property rights they hold/ own, access to other proprietary materials, and even fixtures and tooling in some instances, to axle manufacturers. Axle manufacturers take into account the technical specifications provided by OEMs and rely heavily on proprietary materials made available by OEMs, to manufacture axles based on the design of a vehicle. 45. However, in Third-Party Responses, OEMs stated that they only share specifications of axles required for their CVs (LCVs and/or MHCVs) with OESs, such as, load carrying capacity, torque rating, gear box features, etc. Axles are proprietary products of the OESs and are manufactured based on minor customization to suit requirements of the OEMs. Combination Registration No. C-2024/10/1197 Page 17 of 44 Further, the axles supplied by OESs are library products i.e., off-the-shelf or standard products from the supplier’s product range which any OEM can choose, with minor customization to suit the adaptation requirements. Also, there is no restriction on OESs selling products to other OEMs, if they are from the library of OES. However, where IPR is owned by OEM or the product is jointly developed, there may be restrictions on supply of same design to other OEMs. Certain third-party responses identified BFL’s Affiliate JVs and the Target as leading suppliers of axles for CVs (LCVs and/ or MHCVs). 46. The Acquirer initially submitted that R&D activities undertaken by component and sub- components suppliers like BFL and the Target are only process-centric, focus being on improving efficiency and making the manufacturing process more cost effective. Further, axles are build-to-print products that are designed and manufactured based on the design of a vehicle. The Acquirer stated that while library products are typically standardized and interchangeable products which can be used across different models and variants of vehicles with little to no customization, built-to-print products cannot be used interchangeably across different brands, models and variants. 47. Subsequently, the Acquirer also made a distinction between (i) proprietary axles, and (ii) built-to-print axles based on designs developed by OEMs and assembled /manufactured by third party axle manufacturers. The Acquirer stated that in case of proprietary axles developed by OESs, designs are developed by OESs on their own (based on vehicle application provided by OEMs) and IP associated with the designs are also owned by OESs. OESs select the sub-component suppliers from whom axle sub-components are procured and warranty on the products manufactured based on such designs as well as the liability in case of design failure rests with the OES. It is stated that the axles supplied by MHVSIL to OEMs are proprietary axles, where the IP associated with the design of the axle is owned by Meritor. Axles supplied by Target to […………………………… …….] are proprietary axles developed by Target. 48. Regarding built-to-print axles, the Acquirer stated that the designs are developed by OEMs and assembled /manufactured by OESs, the IP associated with the designs are Combination Registration No. C-2024/10/1197 Page 18 of 44 owned by OEMs, OESs select the sub-component suppliers from whom axle sub- components are procured, in consultation with OEMs, and warranty on the products manufactured by OESs is limited only to manufacturing defects. It is stated that the axles supplied by Target to […..…] are manufactured under a contract manufacturing arrangement and are built-to-print. […..…] supplies technical product documentation basis […….…] standards and specifications, based on which Target manufactures axles. 49. Thus, it is observed that though the relevant markets are relatively static, they may be driven by innovation as the axles are largely custom made by each OES as per the requirements of the OEMs for which the IPRs may be held either by OEMs or OESs, depending on type of product development involved. While the Proposed Combination may not impact incentives to innovate where IPRs are owned by OEMs or where the product is jointly developed by OEM and OES, there may be a reduced pressure to innovate post combination in case of proprietary products developed by OES. d) Switching Costs - Switching to in-house assembly or to other OESs 50. The Acquirer stated in notice that as OEMs are large players, a 5-10% price increase can induce them to build/ expand in-house manufacturing facilities and switch to in-house assembly of axles. It is submitted that as per the industry estimates, the cost and lead time of setting up a new assembly line to assemble axles for LCVs is ~INR 10 crore/ 10 months and MHCVs is ~ INR 100 crore/15 months which is low compared to OEMs’ overall revenue from operations. Thus, the entry barriers are low in terms of lead cost and time to enter the market and OEMs can easily switch to in-house assembly. 51. Further, the Acquirer contended that switching by the OEMs to other OESs is also easy. It is stated that since axles are customised based on an OEM’s requirements, they are free to switch to other axle manufacturers. Cost of switching from an OEM's perspective only involves the costs associated with floating a new RFQ and/or negotiating with a new supplier. Hence, switching costs for OEMs in terms of time and the costs involved in switching between different axle manufacturers are not significant. Combination Registration No. C-2024/10/1197 Page 19 of 44 52. Additionally, the Acquirer stated that the OESs can also switch their production process from, say, axles for LCVs to axles for MHCVs as there is significant overlap in the manufacturing process for assembling axles for LCVs and MHCVs. The same production process and assembly lines can be used by axle manufacturers, with minimal modifications and by incurring minimal costs, to manufacture axles for any type/ category of CVs. 53. However, from the Third-Party Responses it is noted that: (i) OEMs that do not have in- house assembly line find setting up an in-house assembly line a cost-intensive process and involving multiple challenges such as, access to capital and other resources, adaptation to evolving technologies, and design expertise. Further, they do not find switching to in-house assembly viable due to technical, regulatory and validation requirements along with investment recovery obligations; (ii) OEMs who have in-house assembly but are also procuring from OESs, have stated that [……………………… .. . …………………………………………………………………………….]. Further, they assess switching to in-house assembly on a case-to case basis depending on the nature, volume and specifications of the relevant requirement, production timelines involved, in- house availability of facility, manpower, technology, etc., (iii) OEMs who are engaged in in-house assembly of axles for LCVs have stated that they cannot easily switch to in- house assembly of axles for MHCVs as work has to be started from drawing board and they have cited time and other constraints in developing the suitable type of axles. In addition, they have cited catering to aftermarkets parts requirements for 15 years after discontinuation of axle from OES as a challenge. 54. Regarding switching to other OESs, OEMs in their Third-Party Responses have stated that it would be challenging and time-consuming for them to engage other OES. The finalisation of suppliers is not solely based on quoted price. The evaluation process encompasses a comprehensive assessment of various factors, including technical expertise requirements, complete vehicle level validation and adherence to requirements as per applicable laws in addition to investment recovery reconciliation by suppliers for production set up. Certain OEMs who have been procuring from the BFL’s Affiliate JVs Combination Registration No. C-2024/10/1197 Page 20 of 44 and the Target have stated that […………………….. ……………………… …….. ……………………………………………….. …………………………. …………. …. …………………………………………………………. ……………….. ………… ….. ……]. 55. Subsequently, the Acquirer also stated that cost of setting up a plant for axles assembly depends on several variable factors such as whether the land / building in which the plant has been situated has been leased or bought, capacity of the plant, level of automation, and the manufacturing plan (i.e., in-house machining capabilities). Axle assembly plants typically require approvals regularly, applicable to plants where auto components are manufactured or assembled. These approvals are related to building (including verification of land title and use, clearances, building plan approval, occupancy and competition certificates), labour (registration and license), factories (license, GST registration, consent of the Pollution Control Board), no-objection certificate for fire safety, etc. Further, switching to in-house production is not a knee-jerk response. Rather, such decisions are typically made when there is a sustained pattern of high pricing, supply disruptions, or other adverse conduct over a period of time. 56. Based on the foregoing, it appears that given the cost, time and effort involved in setting up an in-house axle assembly line, OEMs may not easily switch to in-house assembly. Also, given the limited number of OESs in the Axle CV Market, OEMs may not easily switch to other OESs. Moreover, OEMs appear to be selective in choosing the OESs with whom they would work and are not likely to switch easily due to quality, product range, technical capability, production capacity, trust, and their long-standing relationships with OESs. Even so, if the OEMs decide to switch to other OESs they may have to bear considerable switching costs in terms of time and effort to once again develop the components of their choice with another OES, leading to time delays in getting the products. In fact, the Target’s own long-standing contract with […..…] may be an example of the unwillingness of OEMs to switch to in-house assembly or to other OEMs. Combination Registration No. C-2024/10/1197 Page 21 of 44 57. Thus, considering the above, it appears that though theoretically it may be possible for OEMs to switch to in-house assembly or to other OESs; however, practically, such switching may not be easy. Therefore, the reduction in number of players pursuant to the Proposed Combination is likely to lead to reduced choices for the customers due to a reduced number of credible competitors in the relevant market. e) Entry 58. The Acquirer has stated that there are low entry barriers in the Axle CV Market as setting up new assembly lines for axles requires a low capital investment and time compared to overall annual revenue of OEMs and axle manufacturers. For instance, setting up a new MHCV assembly line which is estimated to cost around INR 100 crore, translates to about 3-6% of revenue from operations of domestic players like Dana (Dana Anand India Private Limited and Dana India Private Limited), ZF India, and Carraro India Limited. and less than about 1% of the global revenue from operations of global players like ZF Friedrichshafen AG, Dana International and the Carraro Group. Thus, domestic and global players have the necessary financial resources to expand their operations in India should they decide to build strong positions in the Indian CV market / MHCV segment. There are no significant regulatory barriers as 100% FDI is permitted in the automotive sector. Thus, it is a low capital-intensive industry and any OEM can enter the market. 59. However, in Third-Party Responses OEMs have stated that Axle CV Market is highly capital-intensive and not easy to enter. Certain OEMs have stated that setting up an assembly line involves multiple challenges that make setting up in-house assembly unviable for them. As per the Third-Party Responses, there has been no new entry in last five years. It is noted that only ZF India started operation in India in 2023, but has miniscule presence. 60. The Acquirer in turn has stated that several players have entered and / or expanded their capacity in the Indian axle market in the past five (5) years like, (i) Ramakrishna Forgings Limited which acquired Multitech Auto Private Limited and entered in 2023, (ii) ZF India invested in a plant at Coimbatore in 2023 to expand its production capacity of axles, and Combination Registration No. C-2024/10/1197 Page 22 of 44 (iii) Happy Forgings Limited which launched axles for buses in 2023. Further, given that the CV market is undergoing significant disruption through introduction of electric vehicles the newer e-axle segment has higher growth potential and there have been more new entrants in the e-axle market compared to the traditional axle market. 61. Based on foregoing, it appears that the Acquirer’s submissions on ease of entry are largely based on the financial cost involved and do not adequately address the time and effort-based costs involved in setting up new assembly lines as pointed out in Third-Party Responses. Considering the material on record, it appears that the entry in the market may not only require a considerable time of around 1.5 to 2 years but also substantial efforts in planning; construction and operation of production facilities; obtaining design, permits, licensing, or other approvals; satisfaction of customer testing and qualification requirements; developing promotion, marketing and distribution strategies etc. 62. It is pertinent to note that an entry to be considered as a competitive constraint to the Parties should meet the standard of timeliness, likeliness and sufficiency. Even if the likeliness and timeliness criteria are met, an entry may not pose a competitive constraint if the scale and scope of such entry is not sufficient to counteract the anti-competitive outcomes of the Proposed Combination. Considering that BFL’s Affiliate JVs and the Target are well established players in the market with access to technology, IPRs and strong relationships with the OEMs, it appears that even if a new entry meets the likeliness and timeliness criteria it may not meet the sufficiency criteria. f) Countervailing Buyer Power 63. The Acquirer has submitted that OEMs have significant countervailing buying power as they are large, sophisticated customers with the ability to negotiate rates and contractual terms to their advantage. Since axles are intermediate products for which there is no independent end-consumer demand but only a ‘derived demand’ (as the end-consumer demand is for CVs which incorporate axles), OEMs with in-house assembly may be able to generate certain cost benefits that they can partially / fully pass-on to end-consumers Combination Registration No. C-2024/10/1197 Page 23 of 44 of CVs, which puts pricing pressure on OEMs that do not have in-house assembly but must consider market behaviour of OEMs with in-house assembly, to remain competitive. Thus, the OESs do not have pricing power. Further, the ability of OEMs with in-house assembly line like [……………………] to switch to in-house production as a credible alternative to external procurement as well as the ability of other OEMs to switch to other OESs or multi-source the product acts as disciplining force on the OESs. 64. Additionally, the Acquirer has submitted that the structural characteristics of the automotive supply chain particularly in the Axle MHCV Market naturally confers a high degree of countervailing buyer power in favour of the OEMs. Some of these characteristics are: (i) concentrated demand side market with presence of limited number of OEMs8, (ii) captive capacity and ability of certain OEMs to switch to in-house production as a credible alternative to external procurement, (iii) standardised nature of axles with limited scope for product-level differentiation enabling OEMs to dictate specifications and maintain control over the engineering process through build-to-print arrangement reducing scope for proprietary input, (iv) standard industry practice of OEMs of issuing competitive RFPs inviting bids from multiple suppliers for axle contracts imposing constraint on the ability of any single supplier to enforce price increases or dictate terms, (v) long-term contracts based on a matrix of cost, quality, performance, and past delivery reliability factors reducing the scope for unilateral pricing power, (vi) markets with lumpy demand bestowing high bargaining power on buyers given the low frequency in the issuance of new RFPs, and (vi) strong negotiating position of OEMs on account of ability to dual- or multi-source components and switch suppliers or expand in-house production. 65. Based on the market structure as explained above, it appears that the OEMs may have buyer power in the relevant market(s). However, given the financial as well as time and effort-based costs involved in setting up assembly line or switching to other OESs as 8 It is stated by the Acquirer that in the MHCV segment, there are only five key OEMs: Tata Motors, Ashok Leyland limited, VE Commercial Vehicles Limited, Mahindra and Mahindra Limited and Daimler Commercial Vehicles Private Limited which collectively account for nearly the entire MHCV production in India. Combination Registration No. C-2024/10/1197 Page 24 of 44 explained earlier, the likelihood of OEMs/ customers who procure from certain OESs switching to other OESs or the potential threat of such OEMs/ customers switching to in- house assembly in case of increase in price by OESs may not in fact materialise. Further, while the OEMs may be able to exert certain degree of countervailing buyer power in RFQ/ RFP process in terms of deciding the OES for procurement, the reduction in number of players may weaken such power. Considering that the Proposed Combination entails coming together of two leading OESs in the relevant market, it appears that the same may result in reduction of competitive alternatives available to OEMs and hence weakening of the countervailing buyer power that the OEMs currently enjoy on account of the competition constraints in the relevant market due to independent presence of BFL’s Affiliate JVs and the Target. 66. Thus, it appears that the Proposed Combination could lead to a further concentrated market structure, which may (i) reduce/eliminate the incentives of BFL’s Affiliate JVs to compete with the Target in terms of price, products, innovation, areas of operation etc., (ii) impact countervailing buyer power of the OEMs/customers potentially leading to higher input prices, and (iii) incentivize other players to follow the behaviour of the leading players, resulting in effects such as increased prices for the OEMs and consequently for the end customers. Thus, the Proposed Combination is likely to result in reduction of competitive choice to consumers, increased price and entry barriers. 67. Consequently, upon consideration of the Proposed Combination in light of various factors mentioned in sub-section (4) of Section 20 of the Act, the Commission is of the view that it is likely to result in appreciable adverse effect on competition. Voluntary Modifications / Behavioural Commitments: 68. The Commission notes that the Parties, along with their response to Commission’s letter under sub-section (4) of Section 29 of the Act, proposed revised voluntary modifications / behavioural commitments to address and allay concerns in relation to the Proposed Combination in the Axle CV Market, particularly the Axle MHCV Market, on account Combination Registration No. C-2024/10/1197 Page 25 of 44 of loss of the competition and independent choices presently available to the consumers pursuant to the Proposed Combination. 69. The Acquirer has submitted that the revised voluntary modifications / behavioural commitments will ensure that effective competition between BFL’s Affiliate JVs and the Target continues to be maintained. 70. In order to ensure that the BFL’s Affiliate JVs and the Target continue to compete post the Proposed Combination, the Acquirer has voluntarily offered the following behavioural commitments concerning the Target and the BFL’s Affiliate JVs: (a) Behavioural commitments concerning the Target: 71. BFL commits that: (i) the Target will not share common board members, Key Managerial Persons (KMPs), management team members, or employees with the BFL’s Affiliate JVs9; (ii) the Target will maintain a brand identity distinct from the BFL’s Affiliate JVs; (iii) the Target will operate independently, i.e., have independent sales and marketing functions; and (iv) the Target will participate in RFPs/ RFQs independently. 72. BFL will implement safeguards and protocols to ensure that certain competitively sensitive business information (BI10) between the Target and the BFL’s Affiliate JVs are appropriately ring-fenced. These safeguards will include – (i) restricting access to Target’s BI only to authorized personnel within Target; (ii) signing of non-disclosure agreements by Target’s management and employees; (iii) IT-related safeguards such as 9 Additionally, BFL will implement a 12-month cooling-off period before any individual associated with the Affiliate JVs can be appointed as a board member, KMP, or employee of the Target 10 Competitively sensitive business information (BI) identified in Form IV: (i) Names of customers in the MHCV axle segment; (ii) Details of participation in RFPs/ RFQs in the last five (5) years in the MHCV axle segment; (iii) Transaction-specific information such as bid price, bid quantity, quantity supplied, and terms and conditions of supply relating to the MHCV axle segment; (iv) Terms and conditions of axle assembly and supply agreements, axle component procurement and other purchase agreements relating to the MHCV axle segment; (v) Details of any ongoing or any future product development relating to the MHCV axle segment that is not available in public domain / is not likely to be in public domain within a reasonable time period; and (vi) Names of suppliers/ vendors supplying axle components relating to the MHCV axle segment. Combination Registration No. C-2024/10/1197 Page 26 of 44 dedicated IT systems, separate databases, restricted access servers, and regular audits; (iv) appointment of a Competition Compliance Officer; (v) establishing a whistle-blower mechanism; and (vi) requiring Target’s personnel to attend regular competition law training programs. 73. BFL will issue communications to (a) Target’s customers and vendors; (b) Cummins; and (c) BFL’s Affiliate JVs mentioning that Target will continue to operate independently and will compete with the BFL’s Affiliate JVs. (b) Behavioural commitments concerning the BFL’s Affiliate JVs 74. BFL commits: (i) to not nominate, recommend, or seek to appoint any individual to AAL’s management team, either directly or indirectly. All executive appointments within AAL will continue to be made independently by AAL’s board and management; (ii) to appoint only non-executive directors to the board of MHVSIL, and to refrain from nominating or appointing any individual as Deputy General Manager (DGM) or to the management team of MHVSIL, either directly or indirectly; (iii) no board member of the BFL’s Affiliate JVs nominated by BFL shall participate in a board meeting, or vote on any decision, involving (a) strategic decisions affecting competition with Target, and (b) RFPs/RFQs where BFL’s Affiliate JVs and Target compete. In the event of such discussions, the concerned board member shall recuse themselves; and (iv) that BFL’s Affiliate JVs will maintain a separate brand identity when selling / marketing products. 75. Further, individuals nominated / appointed by the Acquirer to the board of BFL’s Affiliate JVs will not access BI of BFL’s Affiliate JVs, directly or indirectly (unless BI has been appropriately anonymised, aggregated or removed from any document or record). 76. The commitments proposed will override the rights available to BFL under the joint venture agreements, the articles of associations and the memorandum of associations of the BFL’s Affiliate JVs. Combination Registration No. C-2024/10/1197 Page 27 of 44 77. BFL commits to implement the behavioural commitments until December 2031 (i.e., for a period of 7 years) (Commitment Period). 78. The revised voluntary modifications / behavioural commitments offered by the Parties (extracted from Form IV given by the Parties) are annexed as Annexure 1 to this Order. 79. The Commission notes that the purpose of remedy is to preserve the present competition / choices available to the consumers that would be lost because of the Proposed Combination. In the facts and circumstances of the case, the Commission is of the view that the purpose of the Commission could be achieved through the revised voluntary modifications / behavioural commitments proposed by the Acquirer. The modifications are expected to maintain the existing level of competition in the relevant markets through preservation of effective competition between BFL’s Affiliate JVs and the Target by keeping board and management separate, maintaining separate brand identities, ensuring appropriate ring-fencing of competitively sensitive business information, and BFL’s Affiliate JVs and Target continuing to compete independently and vigorously in the market. Monitoring Agency: 80. The Commission shall appoint an independent agency as Monitoring Agency for the purpose of, inter alia, supervision of the commitments offered by the Parties to ensure that the Target and BFL’s Affiliate JVs operate independently and are in compliance with the commitments set out in Annexure 1. 81. The Monitoring Agency, under Regulation 27 of the Combination Regulations read with Regulation 54 of the Competition Commission of India (General) Regulations 2024, shall undertake such functions as may be directed by the Commission, which shall inter alia include the following functions: Combination Registration No. C-2024/10/1197 Page 28 of 44 (i) Overseeing and monitoring compliance by the Parties with the voluntary behavioural commitment / modification provided in the Order; (ii) Propose to Parties such measures as the Monitoring Agency considers necessary to ensure Parties’ compliance with the Order with prior approval of the Commission; (iii) Submit to the Commission a written report within 15 days after the end of every six months, which shall cover the progress of the compliance by the Parties with the voluntary modification/ commitment. A non-confidential copy of the said report will be provided to the Parties; (iv) The Monitoring Agency shall report immediately in writing to the Commission of any failure on the part of the Parties to comply with the Order; (v) Assume the other functions assigned to the Monitoring Agency under the Monitoring Agency Agreement. 82. A copy of the Monitoring Agency Agreement shall be provided to the Parties and they shall use their best efforts to facilitate the Monitoring Agency in performance of its duties and obligations provided in the Monitoring Agency Agreement. Any failure in such facilitation by the Parties may be deemed to be a contravention of the Order. Reporting & Nodal Officer 83. Within 15 days, following the date of receipt of the Order, the Parties will appoint an officer who will act as a single point of contact (Nodal Officer) to supervise the implementation of the Order. The Nodal Officer shall ensure that the Commission is kept fully informed about the process and progress made in relation to implementation of the Order until the Monitoring Agency is appointed. After the selection of the Monitoring Agency, Nodal Officer shall inform about the progress made in relation to the implementation of the commitments to the Monitoring Agency. 84. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall submit written reports in relation to the status and progress of the Order to the Commission no later than Combination Registration No. C-2024/10/1197 Page 29 of 44 15 days after the end of every six months following the date of receipt of the Order. After the selection of the Monitoring Agency, the Nodal Officer shall inform about the progress made in relation to implementation of these commitments to the Monitoring Agency only. Duties and Obligations of Parties 85. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall provide and shall cause their advisors to provide the Commission and Monitoring Agency with such co- operation, assistance and information as the Commission / Monitoring Agency may reasonably require to perform its tasks. 86. The Commission / Monitoring Agency (as the case may be) shall have full and complete access to any of the books, records, documents, management or other personnel and technical information necessary for fulfilling its duties, to the extent the Parties and/or the BFL’s Affiliate JVs (as the case may be) can provide such access under applicable law. 87. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall provide the Commission / Monitoring Agency upon request with copies of any document required by the Commission / Monitoring Agency, as the case may be and as available with the Parties and/or the BFL’s Affiliate JVs (as the case may be). 88. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall make available to the Commission / Monitoring Agency one or more offices on their premises, if required and shall be available for meetings in order to provide the Commission / Monitoring Agency with all necessary information for the performance of their task. 89. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall provide the Monitoring Agency with the managerial and administrative support that it may reasonably request. Combination Registration No. C-2024/10/1197 Page 30 of 44 90. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall cause its advisors to provide the Monitoring Agency, on request with the information for reviewing the relevant documentation, information memorandum and due diligence process in particular give the Monitoring Agency access to all other information in the due diligence procedure, and keep the Monitoring Agency informed of all developments in the process. 91. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall indemnify the Monitoring Agency and its employees and agents and hold each indemnified party harmless against any liabilities arising directly out of the performance of the Monitoring Agency’s duties under the Order, except to the extent that such liabilities result from the wilful default, recklessness, gross negligence or bad faith of the indemnified party. 92. The Commission may share confidential information of the Parties and/or the BFL’s Affiliate JVs (as the case may be) with the Monitoring Agency, without seeking any approval from them. Costs: 93. The payment to the Monitoring Agency appointed by the Commission shall be made by the Parties. 94. The Commission may, at any time, request information from the Parties and/or the BFL’s Affiliate JVs (as the case may be) that is reasonably necessary for the effective implementation of the Order. 95. The Parties and/or the BFL’s Affiliate JVs (as the case may be) shall notify the Commission at least thirty days prior to any proposed change in the corporate structure of the Parties and/or the BFL’s Affiliate JVs (as the case may be) that may adversely affect their compliance obligations. Combination Registration No. C-2024/10/1197 Page 31 of 44 Removal of difficulty 96. The Commission may either on its own motion or based on a reasoned application filed by the Parties and/or the BFL’s Affiliate JVs (as the case may be), pass such order or direction as it deems fit, to address any unforeseen circumstances or difficulties in implementing the Commission’s Order. B. Vertical/ Complementary relationships 97. With respect to Existing Vertical Relationship, it is noted that the market shares of the BFL’s Affiliate JVs in the upstream relevant market and the Target in the downstream relevant markets are in the range of [15-20] %. Further, it is noted that there is presence of other players in these markets and compared to the Acquirer’s overall sales of FABs, the Target’s demand for FABs is insignificant, in terms of both value and volume. Therefore, there may be no incentive for BFL to reduce supplies to other customers. Accordingly, based on the submissions of the Parties, it appears that the Existing Vertical Relationship is not likely to raise competition foreclosure concern. 98. Regarding the Potential Vertical Relationship, it is noted that the market shares of the Acquirer in the upstream relevant market and the Target in the downstream relevant markets are in the range of [0-5] % and [15-20] %, respectively. Further, there is presence of other players in these markets. Moreover, the Acquirer’s sales in Other Than FABs components to the Target are relatively small and in addition, the Acquirer’s market share in the non-FAB Market is not significant Accordingly, based on the submissions of the Parties, it appears that the Potential Vertical Relationship is not likely to raise competition foreclosure concern. 99. Lastly, with respect to Complementary Relationship, it is inter alia noted that the market shares of the Target in the Axle CV Market and Axle MHCV Market are in the range of [15-20]% and [25-30]% respectively and the market shares of BFL’s Affiliate JVs in the Drum Brakes CV Market and Drum Brakes MHCV Market are in the range of [15-20]% Combination Registration No. C-2024/10/1197 Page 32 of 44 and [25-30]% respectively. However, it is noted that the existing supply arrangement between the Parties is through directed buy only for one customer. Moreover, there are other players in the drum brakes market, particularly Brakes India which is the largest player with highest market share. Accordingly, based on the submissions of the Parties, it appears that the complementary relationship is not likely to raise competition foreclosure concern. 100. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in sub-section 4 of Section 20 of the Act, and after taking into account the revised voluntary commitments / modifications offered by the Parties, the Commission is of the opinion that the Proposed Combination is not likely to have AAEC in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act subject to compliance of the voluntary commitments offered by the Parties. 101. All Annexures annexed to this Order shall form an integral part of the Order. 102. In carrying out the aforesaid modification, the Parties shall comply with the provisions of the Act and the Combination Regulations. 103. In case the Parties fail to comply with the commitments as given in the Order and the Annexures thereof, the Proposed Combination would be deemed to have caused AAEC in India and the concerned Parties shall render themselves liable for being proceeded under the relevant provisions of the Act. 104. This order may be revoked if, at any time, the information provided by the Parties is found to be incorrect. 105. This approval should not be construed as immunity in any manner from proceedings before the Commission for violations of other provisions of the Act. Combination Registration No. C-2024/10/1197 Page 33 of 44 106. The information provided by the Parties shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act. 107. The Secretary is directed to communicate to the Parties accordingly. Combination Registration No. C-2024/10/1197 Page 34 of 44 ANNEXURE I REVISED COMMITMENT PROPOSAL IN FORM IV 1. BFL is offering the following modifications which are structured into two distinct parts: Part I – Behavioural commitments concerning the Target; and Part II – Behavioural commitments concerning the BFL’s Affiliate JVs. 2. Duration of commitments: To address the potential concerns highlighted by the Commission in the SCN regarding the Proposed Combination, BFL commits to implement the following behavioural commitments until December 2031, i.e., until the end of the Commitment Period. BFL submits that the duration specified is sufficient to address the potential competition concerns highlighted by the Hon’ble Commission in the SCN for two reasons: […………………………………. …… ……………………………………………………………………… …….. …………………….] and (b) in any case, through the Target, BFL intends to focus on LCV segment which presents high growth potential. However, it is clarified that Target will continue its presence in the MHCV axles segment as well, post the Proposed Combination. Part I | Behavioural commitments concerning the Target Commitment to Maintain Separate Business Operations 3. Commitment to maintain separate brand identity of Target: BFL commits that the Target will maintain a distinct and independent brand identity for its products, separate from the product brand names used by BFL’s Affiliate JVs11, ensuring clear differentiation from the BFL’s Affiliate JVs in the CV axle market. To this end, the 11 The Affiliate JVs currently operate under brand ‘Meritor’. Combination Registration No. C-2024/10/1197 Page 35 of 44 following steps will be implemented by Target/ BFL post-closing of the Proposed Combination: 3.1 The Target and its employees will not make reference to or leverage the reputation, goodwill, or brand equity of the BFL’s Affiliate JVs in any communications with OEMs, thereby ensuring that customers continue to view them as distinct and competing suppliers. 3.2 BFL will ensure that BFL’s Affiliate JVs do not use any product brand name that includes the words ‘Kalyani’, ‘Bharat Forge’ or ‘BFL’. 4. Commitment to have independent operations and separate sales and marketing operations: BFL commits to ensure that Target continues to operate independent of the BFL’s Affiliate JVs and operates in compliance with legal requirements of the Competition Act, 2002. To this end, the following steps will be implemented by Target post-closing of the Proposed Combination: 4.1 Commitment to ensure independent market conduct: BFL commits to take steps to ensure that the Target will not engage in any coordinated activities with BFL’s Affiliate JVs that could imply joint market behaviour, including but not limited to pricing alignment, market allocation, information sharing, joint negotiations, strategic coordination, supply or capacity planning, or common branding and marketing. 4.2 No joint marketing activities: The Target will not engage in any cobranding initiatives, joint marketing campaigns, shared advertising or promotional activities with the BFL’s Affiliate JVs that could create a perception of reduced competition between the entities, for third parties. 4.3 No joint customer engagement: The Target will maintain separate customer acquisition and engagement strategies, customer relations, and pricing models, to reinforce its independent market positioning. The Target will not approach any customer (existing/future) for business proposals, negotiations, or supply arrangements; jointly with the BFL’s Affiliate JVs. Combination Registration No. C-2024/10/1197 Page 36 of 44 4.4 No joint representations: The Target will not present to any third party, including customers, regulators, or suppliers, that the Target and the BFL’s Affiliate JVs operate as a joint venture or partnership, or have strategic business alignment. 5. Commitment to ensure Target places independent bids/quotations post-closing of the Proposed Combination: The Target will independently participate in bidding process, when submitting quotations in response to RFPs/RFQs, for the supply of CV axles (both LCV and MHCV axles). This will ensure effective competition in the market continues and customers (OEMs) continue to have the diverse choices that they currently have. BFL commits that the Target will retain its full operational independence post-combination, ensuring that competition with the BFL’s Affiliate JVs remains unaffected. To this end, the following steps will be implemented post- closing of the Proposed Combination: 5.1 Independent Board & management: The Target’s governance and management will be structured to ensure that Target and BFL’s Affiliate JVs do not have any common directors or KMPs, as discussed in detail in paragraphs 7 below. 5.2 Decision-making autonomy: The Target will ensure that all pricing decisions, bidding strategies, and customer negotiations are managed exclusively by its independent management team, as discussed in detail in paragraphs 4 above. This team will have no existing or prior affiliations with the BFL’s Affiliate JVs for twelve months (12 months) preceding the date of employment of the members of the independent management team, ensuring complete separation in commercial decision-making and preventing any potential influence from the BFL’s Affiliate JVs. 5.3 Ring-fencing BI: The Target’s and BFL’s Affiliate JVs’ BI will be appropriately ring-fenced, as outlined in paragraphs 8 below. 5.4 Compliance & training: Regular trainings on competition law and governance will be conducted for employees of Target that have market-facing roles. Combination Registration No. C-2024/10/1197 Page 37 of 44 6. Commitment to issue notices to relevant stakeholders: Immediately after the closing of the Proposed Combination, the Target will take steps to reinforce the message that the Target will continue to operate independent of the BFL’s Affiliate JVs, despite the fact that BFL (indirectly through BF Investments Ltd.) has equity shareholding and certain rights in the BFL’s Affiliate JVs (including the right to nominate director(s) to the boards of the BFL’s Affiliate JVs). To this end, the following steps will be implemented immediately after the Commission approves the Proposed Combination: 6.1 Notice to business partners: BFL/ Target will issue formal communications, via email to (a) key managers of its OEM customers, and (b) vendors, followed by in-person or virtual meetings, explicitly communicating Target’s commitment to operate independent of the BFL’s Affiliate JVs, including participating in in RFPs/RFQs floated by OEMs. Copies of these communications will be submitted to the Commission at the earliest. 6.2 Notice to Cummins Inc. and Affiliate JVs: Immediately after the closing of the Proposed Combination, BFL will issue formal communications, via email, to the management of Cummins, explicitly communicating the Target’s commitment to operate independent of the BFL’s Affiliate JVs, including participating independently in RFPs/ RFQs floated by OEMs. A copy of the communication will also be shared with Meritor HVS LLC, USA and the BFL’s Affiliate JVs. 6.3 Disclosure of interest in terms of the provision of the Companies Act, 2013 to the BFL’s Affiliate JVs: BFL, through BF Investments Limited, has equity shareholding and certain rights in the BFL’s Affiliate JVs. BFL’s nominee, Mr. Babasaheb Neelkanth Kalyani (Nominee Director), is on the board of the BFL’s Affiliate JVs. The Nominee Director is also the chairperson of AAL. It is submitted that, in accordance with the provisions of Section 184 of the Companies Act, 2013 (Companies Act), Nominee Directors are required to provide declarations disclosing their interest or concern in the Target, in Form Combination Registration No. C-2024/10/1197 Page 38 of 44 MBP-1 to the BFL’s Affiliate JVs. Although these disclosures are, typically, required to made before the next board meeting of the BFL’s Affiliate JVs, after the Target is acquired, Nominee Directors will send similar communications with all information as required to be provided in Form MBP-1 to the BFL’s Affiliate JVs. This disclosure will ensure that other board members of the BFL’s Affiliate JVs including Cummins’ nominee directors and independent directors, are aware of the nature of the Nominee Director’s interest in the Target. 7. Commitment to keep Target’s board, KMPs, management and employees, separate from board, management and employees of BFL’s Affiliate JVs and BFL: BFL will take steps to ensure that the Target’s ‘Relevant Persons12’ will not include any individual who (a) is currently a ‘Relevant Person’ of the BFL’s Affiliate JVs; or (b) was a ‘Relevant Person’ of the BFL’s Affiliate JVs unless twelve (12) months have lapsed from the date of which the individual ceased to be a ‘Relevant Person’ of the BFL’s Affiliate JVs. 8. Commitment to ring-fence BI of the Target: Safeguards and protocols: BFL, with the aim of maintaining effective competitiveness between the Target and the BFL’s Affiliate JVs, will implement robust organizational safeguards and operational protocols to ensure that, post the Proposed Combination, BI between the Target and the BFL’s Affiliate JVs are appropriately ring-fenced. To this end, the following steps will be implemented post-closing of the Proposed Combination: 8.1 Structural and governance safeguards: The Target will have safeguards in place by way of having an independent board and management, as discussed in paragraph 7 above. 12 For the purpose of this Form IV, the following individuals will be considered as ‘Relevant Persons’: (i) Board members; (ii) Board observers; (iii) KMPs (as per the definition in the Companies Act); (iv) Individuals involved in (a) preparation of bids; (b) negotiating/ deciding/finalising bid prices; (c) responding to RFP, RFQ, or similar documents issued by OEMs for purchase of MHCV axles; and (v) Individuals involved in sales and marketing activities relating to MHCV axles. Combination Registration No. C-2024/10/1197 Page 39 of 44 8.2 Information control measures: To ensure complete separation of BI between the Target and BFL’s Affiliate JVs, the following steps will be implemented post-closing of the Proposed Combination: (i) Restricted access to BI: BI will be strictly limited to authorized personnel within the Target. (ii) Non-disclosure agreements: Target’s directors, senior management, KMPs and employees (and Target’s advisors wherever it is deemed appropriate) will sign robust nondisclosure agreements specifically agreeing to not exchange any BI between the Target and BFL’s Affiliate JVs, either directly or indirectly. 8.3 IT-related safeguards: BFL commits to take steps to ensure that Target’s IT infrastructure is designed to adequately prevent unauthorised information flow. To this end, the following IT and data security measures will be implemented post-closing of the Proposed Combination: (i) Dedicated IT systems: The Target will operate distinct IT infrastructure, ensuring that there is no overlap or possibility for unauthorized access of Target’s BI by BFL’s Affiliates JVs. These systems will be designed to handle specific needs of Target without compromising on security or efficiency. (ii) Separate database of Target: All data, including BI, of the Target will be stored only in the database of the Target. This will prevent accidental or deliberate sharing of data between the Target and the BFL’s Affiliate JVs. The Target’s database will be configured to ensure secure, independent access with clearly defined roles and permissions for each user. (iii) Restricted-access servers/cloud: Separate servers/cloud will be designated for the Target, with access restricted to authorized personnel only. These servers/cloud will be protected by multi-layered security protocols such as strong passwords and encryption to reduce the risk of unauthorized data transfer or leakage. Combination Registration No. C-2024/10/1197 Page 40 of 44 (iv) Regular IT audits and monitoring: Continuous monitoring and regular IT audits will be carried out to track and log data access. Any suspicious activity, such as attempts to access BI, will be promptly flagged and investigated as per Target’s internal IT protocols. (v) Vendor and supplier safeguards: Third-party suppliers will be contractually restricted from facilitating BI exchange with the BFL’s Affiliate JVs. (vi) External compliance reviews: An independent third-party auditor having technical IT expertise will annually assess adherence to these commitments. 9. Zero-tolerance policy: BFL and Target will adopt a zero-tolerance policy for non- compliance. To this end, the following steps will be implemented post-closing of the Proposed Combination: 9.1 Disciplinary action: If any individual is found to engage in actions that contravenes commitments set out at paragraphs 6.2.8 above, appropriate disciplinary or legal actions may be initiated as deemed necessary including termination of employment. 9.2 Written policy: The Target will put in place a written policy setting out the disciplinary mechanism. 10. Regular training programs: To effectively implement compliance and training for competition law and governance at the Target, the following steps can be taken to implement structured training programs post-closing of the Proposed Combination: 10.1 Mandatory Onboarding Training: All new employees of the Target with market-facing roles will be required to attend a competition law compliance training module within the first 30 working days of their employment. 10.2 Annual Refresher Training: The Target will conduct compulsory biannual training sessions for all relevant employees to reinforce compliance obligations. Combination Registration No. C-2024/10/1197 Page 41 of 44 10.3 Scenario-Based Learning: Trainings will use real-world case studies to illustrate risks related to sharing of pricing, bidding strategies, and competitive behaviour. 10.4 Clear Internal Guidelines and Policies: Develop a Competition Compliance Handbook covering: (i) prohibited conduct under the Competition Act (e.g., information sharing and bid coordination), (ii) clear escalation procedures for suspected non-compliance including details of whistle blower mechanism, (iii) distinct and separate operational and decision-making boundaries between the Target and BFL’s Affiliate JVs, (iv) requirement for employees to sign an annual compliance certification acknowledging their understanding of these policies. 10.5 Independent Oversight & Monitoring: (i) Competition Compliance Officer: The Target will appoint a dedicated competition compliance officer responsible for monitoring compliance and reporting directly to the Board. (ii) Regular Audits: The Competition Compliance Officer will have the responsibility to ensure periodic audits of ringfencing measures set out in these commitments, Target’s pricing decisions, Target’s bidding processes, and Target’s customer negotiations are conducted to ensure Target’s autonomy is maintained. (iii) Whistleblower Mechanism: Target will establish a confidential reporting channel for employees to flag potential breaches/non-compliance with legal requirements of the Competition Act. 10.6 External Compliance Review (i) The Target will engage independent legal or economic experts for periodic review to assess whether compliance measures implemented/ proposed to be implemented are effective. Combination Registration No. C-2024/10/1197 Page 42 of 44 (ii) The Target will arrange sessions with external legal counsel to address new regulatory developments and risks. 11. Commitment with respect to customers: BFL and the Target commit that neither BFL nor the Target will, on their own initiate any renewal or extension of the existing customer contracts for the supply of MHCV Axles. The Target may however, respond to RFPs/RFQs issued by such customers, with any award of business remaining solely at the discretion of the respective customers13. Part II | Behavioural commitments concerning the BFL’s Affiliate JVs, to prevent any coordination or exchange of competitively sensitive information 12. Commitment on independent management and non-interference by BFL Group in BFL’s Affiliate JVs: To ensure the independent functioning of the BFL’s Affiliate JVs, BFL Group makes the following commitments regarding its involvement in the management of BFL’s Affiliate JVs which will be implemented post-closing of the Proposed Combination: Name of the Entity Current Position Commitment AAL As of now, BFL Group has only nominated, Mr. Baba Kalyani, as a non-executive director and chairperson, to the board of AAL and has not nominated any individual to AAL’s management team. AAL operates independently, and key executive positions are appointed without BFL Group commits to: (i) appointing only non-executive directors to the Board of AAL; and (ii) refraining from nominating or appointing any individual to the management team, either directly or indirectly. All executive appointments within AAL will continue to be made independently by AAL’s board and management, ensuring that no 13 [……………………………………………………………………. ……………………………………… …… ……………………………………………………………………………… …………………………………… .. …………………………………………………………………….] Combination Registration No. C-2024/10/1197 Page 43 of 44 any influence or recommendation from BFL Group. individual affiliated to BFL Group holds any executive or operational decision- making role within AAL. MHVSIL Currently, BFL Group has nominated only Mr. Baba Kalyani as a non-executive director on the Board of MHVSIL, despite holding the right to nominate up to three (3) directors. While BFL Group has the right to nominate or appoint the DGM of MHVSIL, no such appointment has been made. BFL Group commits to: (i) appointing only non-executive directors to the Board of MHVSIL; and (ii) refraining from nominating or appointing any individual as DGM or to the management team, either directly or indirectly. 13. Commitment on separate brand identity of products marketed by BFL’s Affiliate JVs: The BFL’s Affiliate JVs currently operate under the brand ‘MERITOR’ for products manufactured and sold in India including axles. BFL commits to ensure that the BFL’s Affiliate JVs do not use any brand name to sell / market any product, that incorporates the words - ‘BFL’, “Bharat Forge’, or ‘Kalyani’. It is clarified that the BFL’s Affiliate JVs may use ‘Kalyani’, ‘BFL’, and ‘Bharat Forge’ in their corporate documents, statutory documents, disclosures and filings and non-market facing communications. 14. Commitments to recuse in case of any discussions involving identified BI: No board member of either BFL’s Affiliate JVs nominated/ appointed by BFL (through BF Investments Ltd.) shall participate in a board meeting, or vote on any decision, of the BFL’s Affiliate JVs concerning following matters relating to the MHCV segment: (a) strategic commercial or operational decisions directly affecting competition with the Target; and Combination Registration No. C-2024/10/1197 Page 44 of 44 (b) Any discussion and decision on bidding, negotiations, or participation in tenders/RFPs/RFQs where both the BFL’s Affiliate JVs and the Target are potential competitors. 15. In the event of any discussion regarding the matters stated above, the concerned board members shall recuse themselves from such discussions and decision-making process. 16. Commitments to ring-fence BFL’s Affiliate JVs’ BI: No access to BI: Individuals nominated / appointed by BFL (through BF Investments Ltd.) to the board of BFL’s Affiliate JVs will not access BI of BFL’s Affiliate JVs, either directly or through any other entity including any BFL Group entity or through any third party. However, this commitment will not prevent individuals from accessing documents and records where BI has been aggregated, anonymised, or removed in a manner that the document / record can no longer be said to include any BI. 17. Commitments to take steps to implement internal governance mechanisms: BFL commits to take steps to ensure that the BFL’s Affiliate JVs implement robust internal governance mechanisms to enforce compliance, including maintaining records of recusals in minutes of board meetings and conducting periodic audits to uphold the integrity of this safeguard. 18. Commitments to override rights available to BFL under the joint venture agreements, articles of association, and memorandum of association: The commitments proposed above will override the rights available to BFL under the joint venture agreements/ articles of association/ memorandum of association of the BFL’s Affiliate JVs. *****