The Competition Commission of India (CCI) on Tuesday issued new merger laws, broadening the scope of corporations that must now seek approval from India's antitrust watchdog. Companies with a revenue of more than Rs 500 crore, or more than 10% of global turnover in India in the previous fiscal year, are regarded to have significant business operations (SBO) in India and require CCI permission for a merger.
For digital services, the number of end users in India would be a critical aspect in establishing the viability of India operations. Any transaction with a "deal value" greater than Rs 2,000 crore will be notifiable for CCI approval, if the target entity had "substantial business operations" in India. To establish the deal's value, the CCI will consider all types of consideration for two years prior to the transaction. Previously, the CCI considered solely asset and turnover as factors for merger and acquisition approvals. By putting the deal value requirement inside the purview of the Competition Act, the government has attempted to capture mergers that would otherwise go unnoticed under the customary "asset" or turnover threshold.
"If there is no fairly definite manner of establishing the deal value, the regulations mandate notification if the target has significant business operations in India. This new test will capture many more transactions in the net, as the de minimis target-based exemption will be unavailable where the deal value threshold is satisfied," said Shweta Shroff Chopra, partner at Shardul Amarchand Mangaldas & Co.
According to competition law experts, the latest notification may halt ongoing mergers. "It would bring considerable uncertainty to deal timelines and require urgent attention by all deal-making parties to ensure they do not fall foul of the law and attract penalties for gun-jumping," according to Chopra.
The regulations came a day after the Ministry of Corporate Affairs notified the law's provisions, which would take effect on September 10. According to experts, the requirements require corporations to conduct an urgent reassessment of deals completed or approved before September 10, 2024 but not yet fully realized. "As the deal value threshold is implemented, both the CCI's operational load and the compliance requirements for parties will significantly increase," said Vaibhav Choukse, Partner - Competition Law, JSA.
CCI has also altered the exemptions granted to corporations for notifying mergers, which may become ineffective in some situations. For example, the minority share acquisition exemption would be ineffective if it granted access to commercially sensitive information.
The anti-competition agency has announced that total transaction assessment durations will be reduced from 210 days to 150 calendar days, with a considered automatic clearance if the CCI is unable to establish a prima facie view within the first 30 calendar days. The revised regulations reduce the prima facie review period from 30 working days to 20 calendar days.
"Parties will need to consider the impact of these modifications on any current or proposed transactions. This will also entail determining the inclusion of incidental arrangements or interrelated transactions," said Abhay Joshi, a partner at Economic Laws Practice.
