含羞草社区

Several new provisions of the Competition (Amendment) Act, 2023 (revised act), on merger control were notified by 含羞草社区 government on 9 September 2024. Additionally, three other sets of rules were revised, namely: the Competition (Criteria for Exemption of Combinations) Rules, 2024 (exemption rules); the Competition (Minimum Value of Assets or Turnover) Rules, 2024; and the Competition (Criteria for Combination) Rules, 2024 (combination criteria rules).

In tandem, the Competition Commission of India (CCI) published the Competition Commission of India (Combinations) Regulations, 2024 (revised regulations).

The revised act, related rules and revised regulations, collectively known as the new regime, became effective on 10 September 2024.

This article summarises five key changes in the new regime, and its expected impact on Indian M&A.

Key changes

Introducing the deal value threshold (DVT). Over the years, several transactions with a large deal value were not notified to the CCI due to the ability of parties to seek exemptions, moreso since the CCI did not have residuary power to review non-notifiable transactions and evaluate if there was an appreciable adverse effect on competition. Now, under the new regime, CCI approval is required before executing a transaction where direct, indirect, immediate and/or deferred consideration exceeds INR20 billion (USD236 million), and where the target has “substantial business operations” in India.

The DVT review will cover all payments to be made for two years from the effective date of the transaction for arrangements that are part of the deal. These include: technology assistance; IP licensing; usage rights for products and services; branding and marketing; call options to buy shares; and, in case of open offers, full subscription to the offer excluding costs must be factored for notifying the CCI.

The need for approval shall remain even if the transaction falls within the de minimis exemption. This exemption applies in transactions where Indian targets have turnover below INR12.5 billion or assets less than INR4.5 billion in the fiscal year preceding the transaction.

Additionally, a target is considered to have substantial business operations in India if it meets any of the following thresholds.

• All sectors other than digital sector: Gross merchandise value (GMV) of the Indian target exceeds 10% of the total global GMV for 12 months preceding the date of the definitive transaction documents and is above INR5 billion; or a target’s turnover in India from all products and services in the fiscal year preceding the transaction exceeds 10% of its global turnover derived from all products or services, and is above INR5 billion.
• Digital sector: GMV exceeds 10% of the total global GMV for 12 months preceding the date of the definitive transaction documents; target’s turnover exceeds 10% of its global turnover derived from all products or services; or the number of business users or end users in India is 10% or more of the target’s total global business users or end users.

For the digital sector thresholds, business users are defined as persons or entities supplying goods and services using an e-commerce platform.

Clearly, the Indian customer base of global digital companies is at the heart of the new norms and will play a key role in determining whether CCI approval is essential. The threshold of 10% local customer base evidently means a company has substantial Indian operations.

The CCI has also imposed a penalty of up to 1% of either the transaction value or total assets or turnover – whichever is higher – if parties close a notifiable transaction without obtaining its prior approval.

Thus, the DVT widens the scope of merger scrutiny and brings various digital merger transactions within the CCI’s ambit that would have otherwise obtained exemptions.

Along with removal of the de minimis exemption sought during acquisition of various tech startups – such as Zomato’s avoidance of CCI scrutiny in its acquisition of Blinkit – this heralds an overhaul of combinations in the technology sector.

Revised change in control test. The above-mentioned exemption rules replace previous exemptions provided in the former 2011 regulations, and now exempt certain categories of combinations from mandatory pre-notification requirements.

Until now, CCI practice had been to scrutinise and require parties to notify transactions deemed “solely as investments”, or in the “ordinary course of business”.

The exemption rules now clarify when such acquisitions are exempted, and when minority acquisitions involving parties who are either competitors or have vertical/complementary links will not require notification.

Expedited timelines for merger reviews. Under the above-mentioned revised regulations, the CCI must form a prima facie view on the notified transaction within 30 calendar days, as opposed to 30 working days. If the CCI does not issue an opinion within 30 calendar days, the transaction is deemed approved.

The total merger review period has also been shortened from 210 to 150 calendar days. However, there are several time exclusions built into the review timeline, which may effectively extend the timeframe.

Nonetheless, the accelerated timeframe should lead to a greater predictability for businesses in the review process.

Derogation from standstill obligations. The old merger control regime created hurdles for transactions involving open stock market acquisitions. The new regime allows acquirers to seek derogation from standstill obligations for open market purchases, allowing them to benefit from market opportunities.

Application for derogation requires parties to file a notification form within 30 days of the first on-market acquisition. The acquirer cannot exercise any ownership, beneficial rights or interest in such securities, including voting rights, until the CCI approves the transaction.

However, prior to obtaining CCI approval, the acquirer can obtain economic benefits such as a dividend or any other distribution, subscription to rights issue, bonus shares, stock splits and buyback of securities. Voting rights can also be exercised in matters related to liquidation or insolvency proceedings.

However, the acquirer or its group entities or affiliates cannot, directly or indirectly, influence the target in any manner whatsoever.

Revised definition of affiliate. The definition of affiliate has been broadened under the above-mentioned combination criteria rules. Under the old regime, the term included any enterprise having either: 10% (direct or indirect) shares or voting rights in the other enterprise; the right or ability to nominate a director or observer to the enterprise’s board; or the right or ability to exercise any right (including any advantage of a commercial nature with any of the party or its affiliates) that is not available to an ordinary shareholder.

Now an enterprise can be deemed the affiliate of another enterprise if it has: 10% or more of the shares or voting rights of the other enterprise; the right or ability to have representation on the board either as a director or observer; or the right or ability to access commercially sensitive information of the enterprise.

Curiously, the term “commercially sensitive information” has not been defined.

Green channel route. This was introduced in 2019 as a method for automatic approval for competitively insignificant transactions. A green channel notification is filed by the parties only if the combination satisfies the criteria stipulated, and is not otherwise exempt. The acquirer group should have no horizontal overlap, vertical or complementary relationship with the target.

If conditions are fulfilled, then parties receive deemed approval on filing the notification.

The CCI’s last available report noted it received 76 cases under the scheme. In the financial year ending 31 March 2023, 25 notices were filed through the green channel route, representing one out of every four notices filed with the CCI.

In view of its success, the government, through the above-mentioned revised act and combination criteria rules, has codified the green channel route into law.

Key takeaways

The new regime presents a welcome change addressing significant gaps in the regulatory landscape. It brings a much-needed alignment with global antitrust perspectives to the digital sector by introducing vigorous scrutiny, even when sales and turnover are below the threshold.

However, the flip side is that the new deal value threshold may lead to an increase in notifiable transactions, and it remains to be seen if the CCI will have the bandwidth to handle such enlarged volume.

In cases where antitrust concerns are unlikely to arise — like smaller transactions, or those with limited market impact — the new simplified procedures should lower the compliance burden, helping to accelerate transactions and reduce delays.

Overall, these reforms reflect a more modern, dynamic approach to competition law, balancing rigorous oversight with a pragmatic understanding of market realities.

PSA
14 A & B, Hansalaya
15, Barakhamba Road
New Delhi – 110 001, India
T: +91 11 4350 0500
W: