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Overview of the New Merger Control Regime

Posted On - 23 September, 2024 • By - KM Team

On 9 September 2024, the Ministry of Corporate Affairs has notified several provisions of the Competition (Amendment) Act, 2023 (“Amendment Act”) along with the related rules and regulations, bringing in a host of changes in the merger control regime in India. Pursuant to the notification of provisions under the Amendment Act, various provisions under the Competition Act, 2002 (“Act”) have come into force. The rules and regulations that have been notified include:

  1. Competition Commission of India (Combination) Regulations, 2024 (“Combination Regulations”);
  1. Competition (Minimum Value of Assets or Turnover) Rules, 2024 (“De-minimis Rules”);
  1. Competition (Criteria of Combination) Rules, 2024 (“Criteria of Combination Rules”); and
  1. Competition (Criteria for Exemption of Combination) Rules, 2024 (“Criteria for Exemption Rules”).

The Amendment Act and the related rules and regulations have come into effect from 10 September 2024. In this update, we discuss some of the key changes brought about in the merger control regime.

Deal Value Threshold

The most notable change is the notification of provision dealing with deal value threshold under the Act. Every transaction where the ‘value of the transaction’ exceeds INR 2,000 Cr (~USD 240 mn), and where the entity which is being acquired, or merged, or amalgamated (“Target Entity”) has ‘substantial business operations’ in India, must now be notified to the Competition Commission of India (“CCI”). Directions on what constitutes ‘value of transaction’ and ‘substantial business operations in India’ are provided in the Combination Regulations.

Value of transaction

The term ‘value of transaction’ includes every valuable consideration, whether direct or indirect, or current or future, or in cash or otherwise. Valuable consideration, as per the Combination Regulations, includes but is not limited to:

  1. any consideration that has been agreed separately, in relation to any obligation, undertaking or restriction imposed on any party, for instance non-compete fee;
  2. consideration for inter-connected steps and transactions which lead to the final intended business transaction;
  3. any consideration for any acquisition done by either party or its group entity, within the preceding two years from the execution of the transaction documents;
  4. any consideration payable in the future for any arrangement entered into as a part of the present transaction;
  5. consideration of call options and shares to be acquired thereof.

The Combination Regulations also clarify that: (a) in a merger or amalgamation or where the true value of the transaction is not recorded in transaction documents, value of that transaction will be the same as considered by the board of directors; and (b) where true value of transaction cannot be established with reasonable certainty, value of the transaction may be considered as exceeding the prescribed deal value threshold.

Substantial business operations in India

The Target Entity will be deemed to have substantial business operations in India, if it satisfies either of the following conditions:

  1. for digital services, the number of users in India is 10% of its total global users; or
  2. the Gross Merchandise Value (“GMV”) in India is 10% of its global GMV and is at least INR 500 Cr (~USD 60 mn); or
  3. if the total turnover in India is 10% of its global turnover and is at least INR 500 Cr (~USD 60 mn).

Applicability of Deal Value Threshold Criteria

The applicability of the deal value threshold to a particular transaction must be considered based on the following:

Sr. No. Date of Execution of Transaction Documents Date of Consummation / Completion of the transaction Applicability of deal value threshold
 1. Before 10 September 2024 Before 10 September 2024 Not Applicable
 2. Before 10 September 2024 After 10 September 2024 Applicable
 3. After 10 September 2024 After 10 September 2024 Applicable

Criteria for Exemption Rules

The Criteria for Exemption Rules prescribe certain categories of combinations that will be exempted from notifying the transaction to CCI as per the Act. The key exemptions include:

  1. acquisition of shares in the ordinary course of business, subject to following conditions:
    1. unsubscribed shares acquired by underwriters is <25% of the shares or voting rights of the company;
    2. shares acquired as a stock-broker is <25% of the shares or voting rights of the company;  and
    3. shares acquired as a mutual fund is <10% of the shares or voting rights of the company;
  1. acquisition of <25% of shares or voting rights of an entity, solely for the purpose of investment, subject to the acquirer not having the right or ability to appoint a director or an observer to the board of directors, there is no horizontal, vertical or complementary overlaps among the parties to the transaction; and if there is an overlap, the acquirer will hold <10% of the shares or voting rights;
  2. intra-group transactions including asset acquisitions, merger, or amalgamation, which does not have a change in control;
  3. demergers and issuance of shares to the demerged enterprise or its shareholders as a consideration for demerger.

De-minimis Rules

De-minimis Rules have codified the small-target target thresholds notified in March 2024. A transaction is not required to be notified to CCI, if the Target Entity has an asset value of < INR 450 Cr (~USD 54 mn); or its turnover is < INR 1,250 Cr (~USD 150 mn).

Procedural changes

Revised merger review timelines

The timeline for CCI to provide a prima facie opinion is now reduced to 30 ‘calendar’ days from receiving the notice. Also, the timeline for overall review and deemed approval is reduced from 210 days to 150 days.

Increased filing fees

The filing fees for Form I (short form) have been increased from INR 2 mn (~USD 24,000) to INR 3 mn (~USD 36,000). The filing fees for Form II (long form) have been increased from INR 6.5 mn (~USD 78,000) to INR 9 mn (~USD 107,000).

Authors: Souvik Ganguly and Paridhi Rastogi

The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.

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