Bill proposes prior CCI nod for M&As above Rs 2,000 cr

Shweta Shroff Chopra, partner-competition law, Shardul Amarchand Mangaldas & Co, said: “While this change will increase the CCI’s merger review jurisdiction, a lot will depend on how the CCI determines ‘substantial’ local nexus.”

Bill proposes prior CCI nod for M&As above Rs 2,000 cr
An application for settlement may be filed only after receipt of investigation report and before passing of final order by the CCI. The commission may determine the norms for computing settlement amounts.

The government has sought Parliament’s consent to amend the Competition Act, 2002, to ensure that mergers and acquisitions (M&As) involving global tech giants and potentially having an “appreciable” effect on Indian markets don’t escape the country’s antitrust scrutiny.

The Competition (Amendment) Bill, 2022, introduced in Parliament on Friday, proposes that all deals worth over Rs 2,000 crore be subject to the Competition Commission of India’s (CCI) prior approval if the firms have “substantial business operations” in India. It also lays out process to ascertain whether an entity has “substantial business operations” in India or not.

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According to sources, the Bill also provides for a slew of other changes to the Act to incorporate new market realities, including a reduction in the time limit for approval of combinations from 210 days to 150 days. Further, it seeks to put in place a settlement mechanism concerning contraventions related to certain “anti-competitive agreements and abuse of dominance”.

An application for settlement may be filed only after receipt of investigation report and before passing of final order by the CCI. The commission may determine the norms for computing settlement amounts.

The proposal to introduce deal value as the third criterion for M&A scrutiny was first made by the Competition Law Review Committee in its 2019 report. The proposal was in line with a global realisation among antitrust watchdogs that the current twin criteria — asset and turnover – are insufficient to address the market impact of M&A deals between high-tech and digital firms. This is because these firms don’t necessary own much physical assets in the markets concerned and may not even have turnovers above the defined threshold at the time of the transactions, but the value exchanged in such deals could be very high and also have substantial effects on the relevant markets.

In many cases, firms thriving on digital platforms rely on data generated from their wide viewership for value creation. While Germany has already amended its competition law in this context, many other jurisdictions are following suit.

For India, the trigger for the move was Facebook’s acquisition of WhatsApp in 2014 for $19 billion; it required no clearance from the CCI even as India was already a major market for WhatsApp. In fact, the EU competition watchdog imposed a fine of 110 million euros on Facebook for providing false information related to the deal with WhatsApp.

The Bill proposes that all “combinations” (M&A deals) worth over Rs 2,000 crore – defined in terms of acquisition of control, shares, voting rights etc – shall be be subject to the CCI’s scrutiny if the companies have “substantial business operations” in India. Such deals would require filing a notice to the CCI. However, the Centre will have the power to exempt transactions from the requirement to filing the notice.

Shweta Shroff Chopra, partner-competition law, Shardul Amarchand Mangaldas & Co, said: “While this change will increase the CCI’s merger review jurisdiction, a lot will depend on how the CCI determines ‘substantial’ local nexus.”

A former CCI member told FE on condition of anonymity that “there isn’t much transparency as regards the threshold being proposed in the Bill”.

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