[India] Understanding Merger Control In India: Navigating The Antitrust Framework And Compliance

Introduction

India has emerged as a global hub for investment, innovation, driven by its robust industrialization, technological advancements, and growing service sector. The young and dynamic workforce, increasing urbanization, and rising consumer demand has not only created new opportunities, but also posed a new challenge of making regulatory frameworks critical for fair and sustainable market expansion. The Competition Act, 2002 (the “Act”) plays a crucial role in fostering a fair, transparent, and competitive market environment that benefits both businesses and consumers. The Act prohibits anti-competitive agreements, abuse of dominant position and merger regulation with a view to ensure that there is no adverse effect on competition in India. The Competition Commission of India (the “CCI”) acts is the primary regulatory body entrusted with the task of examining these antitrust challenges in India. By examining key aspects of the merger control regime, this newsletter aims to provide valuable insights into navigating the regulatory landscape and ensuring compliance with India’s antitrust laws.

Overview Of The Merger Control Regime

Understanding Combinations

The merger control regime in India came into effect in June, 2011, with the notification of Sections 5 [Combination] and 6 [Regulating Combinations] of the Act.A Combination is an acquisition of one or more enterprises or merger or amalgamation of enterprises, which exceeds the prescribed threshold. A Combination is of three types under the Act:

• Acquisitions of control, voting rights, shares and assets,

• Acquisition of control over an enterprise that is engaged in similar or identical services as that of the acquirer, or

• Mergers and amalgamations

Here control, includes within its ambit, the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions. Such influence can be exercised either by one or more enterprises over another enterprise or group, or by one or more groups over another group or enterprise. A ‘Combination’ must be notified to and approved by the CCI, if it breaches the prescribed asset and turnover thresholds and does not qualify for any statutory exemptions. Additionally, a Combination which causes or is likely to cause an appreciable adverse effect on competition is void.

Triggering of Notification Requirement

The Act lays down specific thresholds that trigger the notification requirement to the CCI. These thresholds are critical in determining whether a merger, amalgamation or acquisition constitutes a Combination and necessitates prior approval from the CCI. The thresholds are revised every two years by the government, in consultation with the CCI, based on the changes in Wholesale Price Index (WPI) or fluctuations in exchange rates of rupee or foreign currencies. There thresholds are categorised under two heads:

I. Jurisdictional Thresholds

Jurisdictional thresholds relate to the assets and turnover of the parties to the Combination. The value of assets is determined by the book value shown in the audited financial statements of the enterprise for the financial year preceding the proposed Combination. If the financial statement has not yet been filed, the value is based on the statutory auditor’s report from the last available audited accounts. This value includes not only physical assets but also intangible assets like brand value, goodwill, copyrights, patents, trademarks, and similar commercial rights, after accounting for depreciation. Turnover refers to the turnover certified by the statutory auditor from the last available audited accounts for the financial year preceding the notice filing. The turnover in India is calculated by excluding intra-group sales, indirect taxes, trade discounts, and amounts generated from business outside India. A proposed transaction will be considered to be a Combination requiring mandatory notification to the CCI if any of the following thresholds are satisfied:

	Assets More Than		Turnover More Than
Enterprise Level	India	INR 2500 crore (USD 300 million)	OR	INR 7500 crore (USD 900 million)
Worldwide (with India nexus)	USD 1.25 billion with at least INR 1250 crore in India (USD 150 million)	USD 3.75 billion with at least INR 3750 crore in India (USD 450 million)
			OR
Group Level	India	INR 10000 crore (USD 1.2 billion)	OR	INR 30000 crore (USD 3.6 billion)
Worldwide (with India nexus)	USD 5 billion with at least INR 1250 crore in India (USD 150 million)	USD 15 billion with at least INR 3750 crore in India (USD 450 million)

Two enterprises belong to a ‘Group’ if one is in a position to exercise at least 26% voting rights or appoint at least 50% of the directors or controls the management or affairs in the other. The conversion rate of foreign exchange into Indian Rupees or US Dollars is determined using the average spot rate from the last six months, as quoted by Financial Benchmarks India Ltd. (FBIL), calculated based on the date of the trigger event that leads to the filing of the notification.

II. Deal Value Threshold

Deal Value Threshold (“DVT”) is a new concept under the Act, read with the Competition Commission of India (Combinations) Regulations, 2024 (“Combination Regulations”). If the value of the transaction exceeds beyond INR 2,000 crores (USD 239 million), and the target has ‘substantial business operations’ in India, the transaction needs to be notified to the CCI, if no other exemption is available. The following parameters are provided under Regulation 4 of the Combination Regulations to assess whether a transaction exceeds DVT:

Computing Deal Value

Deal value is inclusive of all direct, indirect, immediate, deferred, cash or other valuable consideration, including but not limited to:

• payments for covenants, obligations, or restrictions imposed on the seller or others if agreed separately;

• interconnected steps and transactions;

• payable within 2 two years from the effective date of the transaction, including payments for technology assistance, intellectual property licensing, raw material supply, branding, or marketing;

• consideration for call option and share to be acquired thereof, assuming full exercise of such option;

• and payable, in terms of best estimates, based on the future outcome specified under the transaction documents.
  

Deal value includes consideration for any acquisition by the parties or group entities within 2 years before the relevant date, meaning the date on which the approval of the proposal relating to merger or amalgamation is accorded by board of directors or the date of execution of agreement or the date of such other document for acquisition or acquiring of control. Deal value does not include transaction costs such as legal or regulatory fee. If the value cannot be reasonably established, it may be deemed to exceed the DVT of INR 20 billion (USD 239 million).

Substantial Business Operations in India

The following tests are applied to determine whether an enterprise has substantial business operations in India:

• Digital Services Test: An enterprise is deemed to have substantial business operations in India if, for digital services, the number of business users or end users in India is 10% or more of the enterprise’s global number of such users.

• Gross Merchandise Value Test: An enterprise has substantial business operations in India if, its gross merchandise value for the period of 12 months preceding the relevant date in India is: (i) 10% or more of its total global gross merchandise value, and (ii) over INR 500 crores (USD 59.54 million). Gross merchandise value includes cash, receivables, or consideration for goods or services sold or facilitated by an enterprise.

•  Turnover Test: An enterprise has substantial business operations in India if its turnover during the preceding financial year in India is: (i) 10% or more of global turnover, and (ii) over INR 500 crores (USD 59.54 million).

EXEMPTION RULES Under the earlier framework, Schedule I of the Combination Regulations outlined specific categories of transactions that were exempt from the obligation to notify the CCI. These included minority share acquisitions, intra-group transactions, bonus issues, stock splits, and creeping acquisitions.

The newly introduced “Exemption Rules” have now replaced Schedule I, consolidating and revising the categories of combinations that are exempt from mandatory notification to the CCI. The Exemption Rules bring significant updates to the framework for exemptions under competition law, replacing and revising provisions from the earlier Combination Regulations. These Rules have brought about the following key modifications:

I. Revamped Exemption for Minority Share Acquisitions

The minority share acquisition exemption has been divided into two distinct categories: Acquisitions in the Ordinary Course of Business (“OCB”) and Acquisitions Solely for Investment Purposes.

• Ordinary Course of Business: Under the new merger control regime, acquisitions of shares or voting rights in the OCB are limited to underwriters, stockbrokers, and mutual funds, subject to specific thresholds: underwriters (less than 25%), stockbrokers (less than 25%), and mutual funds (less than 10%).

• Solely for Investment Purposes: Acquisitions of less than 25% of shares or voting rights are exempt if they are purely for investment, do not lead to control or access to commercially sensitive information (“CSI”), and do not result in horizontal, vertical, or complementary overlaps. If overlaps exist, the exemption applies only where the acquirer’s stake remains below 10%, after acquisition. 

II. Incremental Shareholding or Voting Rights Exemption

Incremental acquisitions by existing shareholders holding less than 25% are exempt, provided they do not result in control or access to CSI. The extent of the exemption depends on the presence of overlaps:

• If no overlaps exist, acquisitions up to 25% are exempt.

• If overlaps exist, incremental acquisitions are capped at 5%.

• If overlaps exist and the acquirer’s shareholding crosses 10%, the exemption does not apply.

  
  

III. Intra – Group Transaction Exemption

The Exemption Rules specify that for intra-group transactions, the acquirer and its group entities encompass the ultimate controlling entity of the acquirer and other entities forming part of the same group. The exemptions applicable under this category include: 

Acquisition of Shares or Voting Rights: Acquisitions where the acquirer or its group entities already hold 50% or more of the shares or voting rights in the target are exempt, provided there is no resulting change in control.

Acquisition of Assets: Intra-group acquisitions of assets are exempt unless the transaction leads to a change in control of the assets. 

Mergers and Amalgamations: Mergers or amalgamations within the group are exempt, provided they do not cause a change in control. 

IV. Change in Control Standard

The Exemption Rules codify the “material influence” standard for control, introducing a uniform test for determining whether a transaction results in a change in control. Exemptions remain valid if the transaction does not result in such a change. The scope of “change in control,” including whether it applies only to shifts from joint to sole control or across the spectrum of control, is yet to be clarified.

V. Introduction of Demerger Exemption

The Exemption Rules now exempt demergers and the issuance of shares to the demerged company or its shareholders as consideration for the demerger. These changes provide clarity and structure to the exemptions available under competition law, ensuring that transactions are evaluated more efficiently while maintaining regulatory safeguards.

GREEN CHANNEL

The Green Channel Rules establish a fast-track mechanism for deemed approval of certain combinations by the CCI on the day of filing. This route is available for transactions where no horizontal, vertical, or complementary overlaps exist among the parties, their group entities, or affiliates. The rules largely mirror the earlier Combination Regulations in assessing overlaps.

The primary change introduced by the Green Channel Rules is a revised definition of “affiliates”. Under the new rules, an enterprise is considered an affiliate if it: (i) holds 10% or more of the shares or voting rights, (ii) has the right or ability to nominate a director or observer to the board, or (iii) has the right or ability to access CSI of the enterprise. This marks a shift from the earlier criterion, which focused on special rights not available to ordinary shareholders. This updated definition broadens the scope of entities evaluated for overlaps, ensuring a more comprehensive assessment.

DE – MINIMIS EXEMPTION

The rules, codified under the Competition (Minimum Value of Assets and Turnover) Rules, 2024, (“De – Minimis Rules”) exempt certain transactions from mandatory notification to the CCI. These rules align with the thresholds set out in the Ministry of Corporate Affairs notification dated 7 March 2024 (De – Minimis Notification). De – Minimis Rules exempts certain combinations from mandatory notification to the CCI if the target enterprise’s assets or turnover fall below specific thresholds (“Target Exemption”).

Under De – Minimis Rules, a combination does not require prior notification to or approval from the CCI if the target enterprise, including its divisions, units, and subsidiaries, meets either of the following criteria: its assets in India do not exceed INR 450 crore (INR 4.5 billion / approx. USD 54 million); OR its turnover in India does not exceed INR 1,250 crore (INR 12.5 billion / approx. USD 150 million)

It is important to note that, where a transaction qualifies for Target Exemption, but breaches the DVT, it will still be notifiable to the CCI if the Jurisdiction Thresholds are met and no other exemptions can be availed. Therefore, the De – Minimis Rules serve to streamline regulatory compliance by exempting smaller transactions that do not meet prescribed thresholds, ensuring a more efficient and focused review process by the CCI.

OPEN OFFER RELAXATIONS

The Competition Amendment Act permits the implementation of open offers or the acquisition of convertible securities on a regulated stock exchange as part of a combination before receiving CCI approval. This is conditional upon filing the required notice with the CCI and refraining from exercising ownership rights, voting rights, or receiving dividends or other distributions until the CCI grants approval. These provisions have been effective since September 10, 2024.

As per the Combination Regulations, acquirers are allowed to avail of economic benefits such as dividends, rights issue subscriptions, bonus shares, stock splits, and buy-backs even before obtaining CCI approval. They may also exercise voting rights, but only on matters related to liquidation or insolvency proceedings. However, the acquirer, its group entities, or affiliates are prohibited from influencing the target enterprise in any way. Additionally, the acquirer must file a notice and declaration with the CCI within 30 days of acquiring the initial tranche of shares or securities.

PENALTIES

With the introduction of the revised merger regime under the Competition Act, stricter enforcement mechanisms have been established to ensure compliance. Parties to notifiable transactions are now subject to more stringent obligations, including heightened penalties for violations such as gun-jumping, non-disclosure, and the provision of false or incomplete information.

Factors Determining Penalties

The CCI evaluates several factors, as outlined in the Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024, to determine the quantum of penalties. These include:

• The extent and reasons for non-compliance or non-cooperation.

• The nature and significance of the misleading or omitted information.

• Whether the party furnishing the information knew it was incomplete or untrue.
  

Failure to Notify a Notifiable Transaction

Under the updated merger control framework, failing to notify a notifiable transaction or completing (fully or partially) a combination before obtaining CCI’s approval can result in penalties of up to 1% of the total turnover, assets, or the value of the transaction, whichever is higher. The CCI may impose penalties even if the transaction is subsequently notified and approved. Importantly, there is no statutory limitation period for the CCI to penalize non-notification or non-disclosure, ensuring that compliance obligations remain ongoing. Transactions consummated before CCI approval are deemed invalid, requiring re-filing for review and potential penalties. 

Increased Penalties for False or Misleading Information

The penalties for providing false or incomplete information have been significantly increased under the new regime. The penalty has risen from INR 10 million (~USD 120,312) to INR 50 million (~USD 601,560). Additionally, the CCI may impose fines ranging from INR 5 million (~USD 62,705) to INR 500 million (~USD 6,016,485) for non-disclosure of material information or for submitting misleading information.  

These comprehensive guidelines underscore the CCI’s commitment to ensuring compliance and deterring non-compliance through stringent penalties. 

CONCLUSION

The merger control regime in India has undergone a significant transformation with the recent amendments introduced by the Government of India and the CCI. These changes, including the Revised Combination Regulations and the codification of key provisions, have fundamentally reshaped the regulatory landscape. While offering novel concepts such as the De – Minimis threshold and DVT, they also impose stricter obligations, requiring parties to exercise enhanced diligence when evaluating transactions. With stricter obligations and expanded notification requirements, businesses must evaluate transactions; especially large-value deals with greater scrutiny to avoid violations such as gun-jumping. The transitional provisions underscore the importance of cautious navigation in this dynamic landscape, requiring stakeholders to adapt swiftly to the modernized antitrust framework.