The Competition Commission’s proposed regulations on merger thresholds | Explained
The Hindu
The Competition Commission of India has brought in new regulations pertaining to thresholds of mergers and acquisitions. We take a look.
The story so far: Striving to further consolidate regulations pertaining to mergers, particularly those relating to the digital ecosystem, the Competition Commission of India (CCI) on September 5 floated a consultation paper proposing the CCI (Combinations) Regulations, 2023. The proposed code would replace the existing regulations, initially formulated in 2011. It would also follow up on the amendments introduced to the Competition Act by the Parliament earlier this year. Comments to the proposed regulations are invited until September 25.
In April this year, the Competition (Amendment) Act, 2023 was enforced following its passage by both Houses of the Parliament. As enumerated when it was first introduced in August 2022, it had taken cognisance of “significant growth of Indian markets and a paradigm shift in the way businesses operate in the last decade.” Thus, the act, also relying on the “experience gained out of functioning of the Commission,” sought to introduce more regulatory certainty and an overall trust-based environment.
Among other things, the amendment introduced a new notification criterion, that is, a deal value threshold of Rs. 2,000 crore, besides requiring that the enterprise being acquired, merged or being amalgamated should have substantial business operations in India. To put it simply, any merger or acquisition exceeding the threshold would mandatorily require CCI approval. This was among the recommendations made by the Standing Committee on Finance assigned the task of examining the bill when it was first introduced.
Taking note of the definition initially accorded to value of transactions, it highlighted that uncertainty about thresholds could potentially bring transactions likely to cause “adverse effects on competition under the merger control mechanism.”
The report notes imperative observations relating to the ‘value of transactions’ in the digital market space, while enumerating the salient features of the bill. It stated that though the enterprises being acquired have minimal assets and turnover, they may have huge potential in terms of valuable data, technologies and market information etc. Hence, there is a necessity for a definite threshold.
An often-cited example of this paradigm was Facebook’s acquisition of WhatsApp which did not require the competition regulator’s clearance for traditional companies.
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