India’s Anti-Trust Law Updates: Stricter Scrutiny, New Thresholds, and Faster Approvals

India’s competition law landscape has undergone significant updates as of September 10, 2024, following more provisions of the Competition (Amendment) Act, 2023 coming into effect. These include the deal value threshold (DVT) and Clause (f) of Section 19, which provide greater clarity on the mergers and acquisitions (M&A) landscape in India. 

Overall, the amendments to the competition law have strengthened the Competition Commission of India (CCI), granting it increased autonomy to regulate anti-competitive practices.

In September 2024, India notified several amendments to the Competition Act, 2023, which are expected to have a major impact on both domestic and international corporate mergers. Post the enactment of the latest amendments, the Competition Commission of India (CCI) now requires companies with significant operations in India to notify the regulator of mergers and acquisitions (M&A) and amalgamations (collectively called “combinations”) that exceed INR 20 billion (US$238 million). This follows the Ministry of Corporate Affairs (MCA) setting this threshold under the Competition (Amendment) Act, 2023, with provisions to define “substantial business operations.”

Significant updates to India’s competition laws and regulations

Key changes include a more business-friendly regulatory environment, requirements for cross-border compliance, enhanced oversight, clear deal value thresholds, and faster decision-making processes.

According to the country’s legal experts, these updates reflect a modernized and efficient approach to competition law in India, promoting the ease of doing business while ensuring robust regulatory checks.

The latest amendments in the Competition Act, 2023 have shortened the merger review timeline by the CCI. Earlier, the CCI had 30 working days to form a prima facie view on a notified transaction, which has now been reduced to 15 days. Additionally, the overall review period has been reduced from 210 to 150 calendar days.

Introduction of deal value threshold

The deal value threshold (DVT) is a new concept introduced in the Competition Act through the 2023 amendment and will come into effect on September 10, 2024. The amendment specifies that M&A deals worth over INR 20 billion (US$238 million) now require approval from the CCI, provided the target company has significant business operations in India (for example, turnover exceeding INR 5 billion (approx. US$59.6 million) or 10 percent of global metrics). This amendment aligns India’s regulatory framework with global standards in countries like the US, Germany, and Austria. This threshold ensures high-value deals are reviewed to prevent anti-competitive practices, particularly in the digital sector, addressing concerns over big data and privacy issues. 

Expert opinions: Industry experts like Nisha Kaur Uberoi have described this as a significant overhaul of India’s merger control regime. Companies need to reassess their deal reporting obligations to ensure compliance under the new rules. 

Asset and turnover limits introduced

Combinations under India’s Competition Act refer to mergers, acquisitions, or amalgamations that meet specific financial thresholds related to the assets or turnover of the parties involved. Prior to the Competition Act amendments, combinations were primarily assessed based on criteria like the size of the companies merging or being acquired.

Compliance challenges: The revised thresholds mean that more deals will fall under the purview of the CCI. Companies that were previously exempt due to smaller deal sizes may now face increased compliance burdens if they exceed the new Deal Value Threshold. 

On March 8, 2024, the Ministry of Corporate Affairs updated the asset and turnover limits under Section 5 of the Competition Act, 2002. The last updates were made in 2011 and 2016. Here’s a breakdown of the new and old limits:

Source: Press Information Bureau

For acquisitions, mergers, and asset acquisitions, the financial value of the acquiring and target companies are combined to assess if they meet these thresholds.

Exemptions from Notification

The Competition Rules, 2024, lay out certain scenarios where companies are exempt from notifying the CCI about combinations reached (or M&A deals). These exemptions include:

• Ordinary business acquisitions (Buying shares as part of normal business activities): Underwriting deals (buying unsubscribed shares) provided the acquirer doesn’t control more than 25 percent of shares. The updated regulations narrow the definition of ‘Ordinary Course of Business’ (OCB) acquisitions, which now mainly apply to stockbrokers, underwriters, and mutual funds. Stockbrokers or mutual funds buying shares, but they can’t control more than 25 percent (or 10 percent for mutual funds).
• Investment purpose: If shares are bought purely as an investment and not for gaining control, the acquirer must not control more than 25 percent of the company’s shares.
• Minor share increases: A company that already holds more than 25 percent can acquire additional shares but cannot exceed 50 percent ownership without triggering notification.
• No change in control: If a company already holds 50 percent of shares, additional share purchases don’t need notification if there’s no change in control.
• Asset acquisition: Acquiring assets like stock, raw materials, or receivables, unrelated to the business or for investment purposes, does not require notification if it doesn’t result in control.
• Intra-group acquisitions: Acquisitions within the same group or through bonus issues that don’t lead to a change in control are exempt.

The Competition Rules, 2024, specify when entities involved in mergers or acquisitions are not required to notify the CCI:

1. No similar products or services: Companies that don’t produce or offer similar or substitutable products/services don’t need to notify the CCI.
2. No vertical integration: If the entities aren’t engaged in related activities across different levels of the supply chain (like production and distribution), they may be exempt from notification.
3. Affiliates: Companies are considered affiliated if one holds 10 percent or more of the other’s shares or voting rights or has access to confidential business information or a representative on the board.

Competition Commission of India (General) Regulations, 2024

In June 2024, the CCI had released draft amendments to its General Regulations, 2009, seeking input from stakeholders. After considering feedback, the Competition Commission of India (General) Regulations, 2024 were finalized and officially implemented on September 17, 2024, replacing the older regulations.

One key update is the clarification of interlocutory and miscellaneous applications. Now, interlocutory applications refer to those filed during an ongoing case under Section 19 of the Competition Act, while miscellaneous applications are filed after the final decision in such cases.

Additional updates include:

• Only substantive filings require signatures and affidavits, with exemptions for requests like adjournments.
• The previous rule to issue final orders within 90 days is reinstated, but the timeline is extended to 180 days.
• Minor procedural changes have been introduced such as how to mark confidential information and guidance on hiring multiple legal representatives.

Several elements of the draft remained unchanged, including guidelines for translations, letterhead use, and the filing process. A significant retained provision is the appointment of external agencies   to oversee compliance with CCI’s rulings, particularly concerning mergers, acquisitions, and settlements under the Competition Act. These agencies, which may include professionals like company secretaries or chartered accountants, are tasked with monitoring and reporting on company compliance, enhancing oversight and reducing the risk of non-compliance with CCI orders.

Latest regulations on settlement, commitment, and determination of turnover or income

On March 6, 2024, the CCI issued three key regulations:

1. CCI (Settlement) Regulations, 2024
2. CCI (Commitment) Regulations, 2024
3. CCI (Determination of Turnover or Income) Regulations, 2024

In addition, the CCI (Determination of Monetary Penalty) Guidelines, 2024 were also released.

Overview:

1. Settlement and Commitment Regulations: These regulations allow companies under investigation for violating Section 3(4) (anti-competitive agreements) or Section 4 (abuse of dominant position) of the Competition Act to apply for settlement or commitment. The objective of this is to resolve issues quicker, reducing litigation and enabling faster correction of market issues. The two mechanisms differ depending on when the application is filed during the inquiry process.
2. Turnover and Income Regulations: These regulations guide the calculation of a company’s turnover or an individual’s income for imposing penalties under Section 27 of the Competition Act. The guidelines ensure that penalties are proportionate to the anti-competitive damage caused.
3. No grandfathering: The new regulations apply immediately and without grandfathering provisions. This means that companies with ongoing transactions need to reassess their deals to ensure compliance under the new thresholds. 
4. Monetary Penalty Guidelines: The new Monetary Penalty Guidelines outline how fines are determined for companies or individuals violating the Act, ensuring penalties reflect the level of market harm.

Section 3 of the Competition Act, 2002: Focus on Anti-Competitive Agreements

A key part of the Competition Act is Section 3, which prohibits anti-competitive agreements. These agreements, whether between competitors (horizontal) or at different levels of the supply chain (vertical), are restricted if they result in or are likely to cause an appreciable adverse effect on competition (AAEC) in India.

Section 3(3) targets horizontal agreements, which are agreements between businesses operating at the same level, often competitors. It specifically prohibits activities like:

• Price-fixing, where companies agree on prices rather than competing.
• Market allocation, dividing markets or customers between competitors.
• Bid-rigging, where competitors conspire to manipulate the outcome of bids.
• Restricting technological innovation, which can stifle competition.

Section 3(4) addresses vertical agreements between entities at different stages of production or distribution. These agreements may include:

• Exclusive supply or purchase agreements, where a supplier or buyer agrees to deal only with a specific partner.
• Tie-in arrangements, which force customers to buy additional products along with the main product.
• Refusal to deal, where a company refuses to engage with specific suppliers or customers.
• Resale price maintenance, where a manufacturer controls the price at which a retailer sells its product.

(US$1 = INR 83.83)

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