The Competition Commission of India (CCI) has taken an important step in modernizing merger control regulations. In an effort to capture high-profile M&A deals, particularly unreported ones in the digital sector, the CCI has published draft regulations that redefine the criteria for reporting such deals.
Stakeholders and the public have until September 25 to provide feedback under the draft regulations. The focus is on identifying linkages or significant business operations (SBOs) within India which will trigger mandatory reporting to CCI.
The development follows recent amendments to the Competition Act earlier this year, which imposed a deal value threshold of Rs 2,000 crore, requiring CCI to approve deals above this threshold. Its purpose is to settle high-value offshore digital transactions that do not involve large assets or turnover. A notable example is Facebook’s acquisition of WhatsApp, a multibillion-dollar deal that fell below the CCI’s merger notification threshold for traditional companies.
Also read: Gun jumps: CCI fines Axis Bank Rs 4 crore
Many digital deals, especially those involving large technology companies, often lack significant assets or turnover but are characterized by high valuations. To date, these transactions remain outside the scope of CCI’s merger control.
To identify SBOs in India, CCI’s draft regulations outline three key criteria: number of users, subscribers, customers or visitors; total value of merchandise; and turnover. If any of these criteria exceeds 10% of the global figure in the 12 months preceding the relevant date, the transaction will be deemed to be an SBO in India and subject to merger control reporting.
The move fits with a global trend to address enforcement gaps in the digital industry, where deals can involve substantial valuations but lack traditional markers of size such as assets or turnover.
The publication of these draft regulations follows the release of CCI’s draft Settlement and Commitment Regulations, which demonstrates CCI’s comprehensive efforts to modernize and adapt to the changing digital M&A landscape.
Also read: Headstarting in M&A: Obligations and Consequences
Saksham Malik, project manager at the tech policy think tank Dialogue, said the draft regulations are a step toward creating a new-age merger control regime in India. Malik added that the regulations could be strengthened by meaningfully incorporating the analysis and input that industry and the legal and policy community will provide to its comments over the next 21 days.
The purpose of introducing a transaction value threshold is to ensure that transactions not previously notified to the Commission, especially in digital markets, can now be assessed by the Commission. Malik said the draft regulations aim to expand on this by providing an extensive and non-exhaustive list of considerations that can be factored into the calculation of the value of a transaction.
Furthermore, he noted that for a transaction to fall within the scope of the new threshold, the target entity would need to have substantial business operations in India, the implications of which are now included in the draft regulations.
Also read: Amendments to competition law welcome
Nisha Kaur Uberoi, partner and national competition director at Trilegal, said the draft merger statute brought long-awaited pro-business relief, including the introduction of a moratorium on acquisition obligations, shortened merger review times and the introduction of hearing proceedings at any stage of a merger.
She added that the introduction of the transaction value threshold and clarification of applicability to substantive business operations will increase CCI’s caseload and require immediate resources to ensure the continued efficiency and effectiveness of the M&A timeline.
However, she said the introduction of strict notification requirements on Form-2, a 50% increase in filing fees, and a modified specified format that tended to divest would create an additional burden for the industry in any event where the market exceeded the prescribed threshold.
