The Competition Act 2002 (the “Competition Act”), read with the Competition Commission of India (Procedure in Regard to the Transaction of the business relating to Combinations), 2011 (the “Combination Regulations”), governs the merger control regime in India, which falls within the regulatory jurisdiction of the Competition Commission of India (CCI).

The CCI has published guidance notes to explain the information requirements for different types of filing, and also issued a list of FAQs that explains its position on the interpretation of the legal framework governing merger control, enabling the parties to assess notification requirements.

In addition to the CCI, the Ministry of Corporate Affairs (MCA), an important administrative arm of the government of India, is empowered to issue notifications to regulate the merger control framework in India. Last year, the CCI also published a draft of the revised Combination Regulations for public consultation, which once implemented would replace the existing Combination Regulations and would also incorporate some of the changes brought by the Competition Amendment Act, 2023 (the “2023 Amendment”).

There is no separate legislation relating to foreign transactions or any sector-specific merger control regimes in India. All such transactions are required to be assessed and notified to the CCI, based on the merger control framework prescribed under the Competition Act in India.

Other than the merger control framework, which falls within the exclusive domain of the CCI, there are other foreign investment laws (such as the Foreign Direct Investment (FDI) Policy of the Department for Promotion of Industry and Internal Trade (DPIIT) and the Securities and Exchange Board of India’s (Foreign Portfolio Investors) Regulations) and sector-specific statutory bodies that regulate foreign investment and/or govern sector-specific issues.

The CCI is the exclusive statutory authority empowered to enforce the provisions of the Competition Act and regulate the merger control regime in India. The CCI’s orders may be appealed before the National Company Law Appellate Tribunal (NCLAT), which is the relevant appellate authority under the Competition Act. The final appellate authority for all decisions passed by the NCLAT is the Supreme Court of India (SC).

Mandatory Suspensory Regime

The Indian merger control framework follows a mandatory and suspensory regime – ie, if a transaction is notifiable, the relevant parties cannot implement the transaction, or any part of it, until receipt of the CCI approval.

Any merger, amalgamation, or acquisition (of shares, voting rights, control, or assets) must be notified to the CCI if the parties (i) breach certain asset value and turnover-based thresholds (“jurisdictional thresholds”); and (ii) do not benefit from any exemptions under the Competition Act, relevant government notifications, or the Combination Regulations. The Competition Act and the MCA prescribe exemptions to certain transactions from notification, even if they breach the Jurisdictional Thresholds.

Exemptions

Target-based/de minimis exemptions

Any transaction where the target enterprise (ie, the enterprise whose shares, voting rights, assets or control are being acquired) has either (i) assets not exceeding INR4.5 billion in India; or (ii) turnover not exceeding INR12.5 billion in India (“de minimis thresholds”), is currently exempt from the mandatory pre-notification requirement (“de minimis exemption”).

Other exemptions

The Combination Regulations exempt certain categories of transactions from the mandatory notification requirement. These exemptions are set out below.

• Minority (below 25% shares or voting rights), non-controlling investments made in the acquirer’s ordinary course of business (OCB) or solely for investment purposes (SIP):
1. OCB – combinations are considered to be in the ordinary course of business if the purchase and sale of securities is done solely with the intent to benefit from the price movement of securities (TPG Growth V SF Markets Pte. Limited); and
2. SIP – an acquisition below 10% of shares or voting rights where the acquirer (i) does not have a right or intention to nominate a director on the board of directors of the target, (ii) does not intend to participate in the affairs or management of the target and (iii) has the ability to exercise only such rights as are exercisable by the ordinary shareholders, is deemed to be considered as “solely for investment purposes” and is therefore exempt from notification (further, an acquisition above 10% and below 25% (that does not benefit from the “deemed” explanation) can also be considered as “solely for investment purposes”, if such an acquisition does not lead to any control being acquired (including through acquiring a director/observer right) and if such acquisition is not strategic in nature).
• Creeping acquisitions of between a 25% and 50% shareholding of the target, provided there is no change of control.
• Acquisition of shares/voting rights pursuant to a bonus issue, stock split, consolidation, buy-back or rights issue (not leading to the acquisition of control).
• Certain intra-group transactions (except in cases where the transaction results in transfer from joint to sole control).

The Draft Exemption Rules

Notably, the MCA has recently published the Draft Competition Commission of India (Exempted Combination) Rules, 2024 (the “Draft Exemption Rules”), inviting public comments and outlining 12 categories of transactions that will be exempt from the CCI-approval requirement. Some notable changes under the Draft Exemption Rules include the following.

• Providing clarity on the scope of OCB, which is to be restricted to acquisitions:
1. when made by an underwriter or a stockbroker, below 25% shares or voting rights in a target; and
2. when made by a mutual fund company, below 10% shares or voting rights of a target.
• Modifying the explanation of SIP to limit it to be applicable to transactions where:
1. the acquirer does not get the right to appoint a director/observer on a target;
2. the acquirer does not get the right to access commercially sensitive information; and
3. there are no overlaps between the business activities of the acquirer group (including its affiliates) and the target (including its affiliates), except where acquisition is below 10%; and
• Codifying CCI’s existing practice for exempting demergers where the resulting company issues proportionate shares to the demerged company.

These provisions are only in their draft form, subject to change based on the inputs received from public consultation.

Gun-Jumping

The Competition Act empowers the CCI to penalise parties that are (i) obliged to notify a combination to the CCI and fail to notify such a combination, and/or (ii) implement or partly implement a combination before the CCI clearance (“gun-jumping”).

The CCI may impose a penalty of up to 1% of the combined turnover or value of assets of the parties to a transaction (whichever is higher) for gun-jumping.

Practical implications

To date, the CCI has imposed gun-jumping penalties on parties in 59 cases. Typically, the gun-jumping penalties have ranged between INR500,000 and INR50 million. The highest penalty imposed for gun-jumping so far is INR2 billion, in a case which also involved an allegation of material non-disclosure (Amazon/Future). Since the CCI uploads the public version of all gun-jumping penalty decisions on its website (after giving due consideration to the confidentiality claims by the parties), all penalties are publicly available.

All combinations – ie, acquisitions (of shares, voting rights, control or assets), mergers, and amalgamations – whether domestic or international, that meet the jurisdictional thresholds and are not otherwise exempt from notification are required to be notified to the CCI. That said, transactions involving internal restructuring or reorganisation within the same group are exempt from the notifiability requirements provided that they meet the relevant tests prescribed under the intragroup exemption.

The Combination Regulations exempt the following intragroup transactions:

• an acquisition within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are not part of the same group; and
• a merger or amalgamation of two enterprises where one of the enterprises has more than 50% of the shares or voting rights of the other enterprise, and/or a merger or amalgamation of enterprises in which more than 50% of the shares or voting rights in each of such enterprises are held by enterprise(s) within the same group, provided that the transaction does not result in transfer from joint control to sole control.

Separately, transactions not involving shares or assets may also be notifiable if they relate to the acquisition of “control”. Any commercial agreement between parties (not limited to the shareholders’ agreement) that in effect confers “control” is considered as a reportable acquisition to the CCI, provided that it meets the jurisdictional threshold and is not otherwise exempt.

Transactions involving an acquisition or change in control are required to be notified to the CCI. Under the Competition Act (as amended), “control” has been defined as the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions by

• one or more enterprises, either jointly or singly, controlling the affairs or management of another enterprise or group; or
• one or more groups, either jointly or singly, controlling the affairs or management of another group or enterprise.

Even prior to the 2023 Amendment, the CCI interpreted “material influence” in its decisional practice, to be the lowest level of control, and which can be exercised through special rights/veto rights, status and expertise of an enterprise or person, board representation, structural/ financial arrangements, etc. In fact, per the CCI, material influence can also be exercised by even a single investor being present on the board of an enterprise – eg, as a result of the investor’s industry expertise, which may lead to its advice being followed by the remaining board members (Ultratech Cement) – or by simply having a board observer right.

Additionally, in its decisional practice, acquisition of affirmative voting rights over matters including the (i) approval of the business plan, (ii) commencement of new line of business, (iii) discontinuing any existing line of business, (iv) change in capital structure, (v) appointment or termination of key managerial personnel, (vi) amendment to charter documents (articles of association and memorandum of association), (vii) approval of annual budget, (viii) appointment or change of auditors, and (ix) change in dividend policy, have been considered (on a bundled basis) by the CCI to be control conferring.

If the parties to an acquisition, merger or amalgamation meet the jurisdictional thresholds (see 2.1 Notification), then such a transaction becomes notifiable to the CCI. The jurisdictional thresholds take into account the combined asset value or the turnover of:

• the acquirer(s) and the target(s) (the “parties test”); or
• the acquirer’s group and the target(s) (the “group test”).

The jurisdictional thresholds currently applicable in India are as set out below:

• for the Indian parties test, either the acquirer, the target or both have INR25 billion (around USD240 million) in assets or INR75 billion (around USD900 million) in turnover in India;
• for the Indian group test, the group to which the target will belong will have INR100 billion (around USD1.2 billion) in assets or INR300 billion (around USD3.6 billion) in turnover in India;
• for the worldwide enterprise test, either the acquirer, the target or both have USD1.25 billion in worldwide assets, with INR12.5 billion in India (around USD150 million), or USD3.75 billion in worldwide turnover, with INR37.5 billion (around USD450 million) in India; and
• for the worldwide group test, the group to which the target will belong will have USD5 billion in worldwide assets, with INR12.5 billion (around USD150 million) in India, or USD15 billion in worldwide turnover, with INR37.5 billion (around USD450 million) in India.

These jurisdictional thresholds are sector-agnostic.

Deal Value Threshold

The 2023 Amendment introduces a “deal value” test as an alternative jurisdiction threshold. Under this threshold, a transaction will be notifiable to the Authority where its value exceeds INR20 billion (around USD240 million) and the target has “substantial business operations” in India. While assessing the value of the transaction, the authority will include every valuable consideration, whether direct or indirect, or deferred.

Further, the manner of determination of “substantial business operations” will be introduced by way of subsequent regulations by the CCI. The provisions pertaining to the Deal Value Threshold are yet to be enforced.

The Competition Act lays down the methodology to calculate asset value as well as turnover.

Assets

Asset value is determined on the basis of the book value of the assets of the relevant party, as shown provided in its audited financial statements of the financial year immediately preceding the financial year in which the notified transaction falls. The value of assets includes (i) brand value; (ii) value of goodwill; and/or (iii) value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout-design or other similar commercial rights (as reduced by depreciation).

Turnover

The value of turnover includes the value of sale of goods or services (ie, only revenue from operations, excluding intra-group sales, indirect taxes, and trade discounts), as provided in a party’s audited financial statements of the financial year immediately preceding the financial year in which the notified transaction falls. The Amendment Act excludes all amounts generated through assets or business from customers outside India from the ambit of turnover. As such, it includes a customer location test in the calculation of turnover. This new definition of turnover is yet to come into force.

For calculating group assets and turnover, the value of entire assets and turnover of a jointly controlled enterprise are included. The CCI has rejected the principle of apportionment when computing turnover in the Investcorp case observing that even if an enterprise acquires material influence over another entity, the whole of the financials of the target enterprise would be taken into consideration.

Methodology of Conversions

To convert turnover or asset value booked in a foreign currency, the relevant exchange rate is the average exchange rate, as published by Financial Benchmarks India Pvt. Ltd., over the preceding six months.

The combined value of assets and turnover of the parties to the transaction (ie, the acquirer and the target, or the merging parties) is required to calculate the jurisdictional thresholds. If the combined asset value or turnover of the parties does not meet the parties test, then the combined asset value or turnover of the acquirer group and the target is required to be considered. The asset value and turnover of the seller entity is not required to determine jurisdictional thresholds. See 2.5 Jurisdictional Thresholds for further detail.

The Competition Act defines “group” to mean two or more enterprises where one enterprise is, directly or indirectly, in a position to:

• exercise 26% or more of the voting rights in the other enterprise;
• appoint more than 50% of the members of the board of directors in the other enterprise; or
• control the management or affairs of the other enterprise.

If the parties to a transaction have completed a separate acquisition or divestment during the reference period, in practice, the parties make appropriate adjustments in their asset and turnover values to conduct a notification assessment, although there is no formal guideline issued by the CCI on this matter.

All foreign-to-foreign transactions are subject to merger control rules in India provided they meet the jurisdictional thresholds. The jurisdictional thresholds are calculated in a way to test the effects of foreign transactions in India before terming it notifiable. For example, a foreign-to-foreign transaction where the combined turnover of the parties was more than USD3 billion worldwide, but less than INR30 billion (around USD360 million) in India, may not be notifiable.

Since foreign-to-foreign transactions are notified only if they breach the jurisdictional thresholds (which are supplemented by an India-specific threshold), the parties must have a business presence in India (not limited to physical presence). Without business presence in India, the India-specific jurisdictional threshold will not be met and the transaction will not be notifiable.

Separately, it is also essential for the target to have a business presence in India for a transaction to be notifiable. If the target has less than prescribed (or no) sales or less than prescribed (or no) assets in India, the transaction will be exempt from notification under the de minimis exemption.

The Competition Act does not prescribe a market share-based jurisdictional threshold for filing merger notifications in India.

However, if the transaction is reportable, the Combination Regulations allow the parties to file a notification before the CCI either under a short form (Form I) or a long-form (Form II). The post-transaction combined market shares of the parties is a relevant matrix to determine the type of form that a party files before the CCI. A notification is usually filed through a Form II if:

• the parties share horizontal overlaps, and the post-transaction market share of the parties is more than 15% in the relevant market; or
• the parties share vertical overlaps, and their individual/combined market share is more than 25% in the relevant market.

The Competition Act does not create any specific rule or exception to govern joint ventures (JVs). Setting up a greenfield JV may typically benefit from the target-based exemption, unless the JV partners contribute assets to the JV. On the other hand, entry of a new partner in a brownfield JV needs to be evaluated on the basis of standard merger control rules, as described throughout this article, as such a transaction would typically involve the acquisition of shares, voting rights, control, or assets.

The CCI is empowered to investigate and impose sanctions on notifiable transactions (ie, transactions that meet the jurisdiction thresholds and are not otherwise exempt) that are not notified before the CCI. However, the CCI can neither investigate nor sanction transactions that are non-notifiable. Mere apprehension that a non-notifiable transaction may cause appreciable adverse effect on competition (AAEC) in the market is not a sufficient threshold for the CCI to investigate a transaction (PVR/INOX).

However, post-facto, if the transaction leads to any entity engaging in any anti-competitive conduct, the CCI is empowered to examine the conduct under the relevant provisions sanctioning anti-competitive (horizontal and vertical) agreements and abuse of dominance.

If reportable transactions are not notified to the CCI, the Competition Act empowers the CCI to investigate such combinations within a period of one year from the date of closing of such transaction, in addition to initiating gun-jumping proceedings.

The Indian merger control regime is a suspensory one. The parties cannot put the transaction, or any part of it, into effect before the earlier of (i) receiving a clearance from the CCI or (ii) the expiry of 210 calendar days (excluding clock stops, if any) from the date of notification. The standstill period commences from the date of execution until the CCI’s approval is received. If a transaction or any of its part is implemented during the standstill period, the CCI may initiate an investigation for gun-jumping and impose sanctions on the notifying party(ies).

Notably, the 2023 Amendment has shortened this statutory deadline for the CCI to grant approval for a filing to 150 calendar days; however, the relevant provision of the 2023 Amendment is yet to be notified.

Please refer to 2.2 Failure to Notify which is equally applicable to this query. The Competition Act prescribes the same rules on penalty for implementation (or partial implementation) of a combination before the CCI clearance, as it does for failure to notify a reportable transaction.

This legal framework applies to foreign-to-foreign transactions as well. For instance, in SABIC/Clariant, the CCI imposed a penalty of INR4 million on SABIC International Holdings B.V. for implementing the transaction before the CCI clearance. Similarly, in Veolia/Suez, the CCI imposed a penalty of INR10 million on Veolia Environment S.A for not notifying a hostile takeover of a French company.

At present, the Competition Act does not provide for any exception to the mandatory and suspensory merger notification regime in India, either with respect to on-market purchases or acquisition of a failing firm. However, the 2023 Amendment proposes to exempt certain combinations from the standstill obligations and allows post-facto filing, if the combination involves:

• an open offer; or
• an acquisition of shares or securities convertible into other securities from various sellers, through a series of transactions on a regulated stock exchange.

The acquirer, in either of the above cases, would:

• have to file the notification form within such time from the date of such acquisition as the CCI may prescribe through regulations; and
• be allowed to acquire shares but cannot exercise any ownership or beneficial rights or voting rights, till the CCI approves such acquisition.

That said, this provision of the Amendment Act has not been effected into law yet.

The Competition Act does not prescribe any exceptions to any type of transaction permitting closing before the CCI clearance.

With respect to reportable foreign transactions, the parties are obliged to notify and secure CCI’s approval before implementation of the global transaction.

There are no deadlines for notifying a combination. However, in the case of a reportable transaction, the parties cannot consummate any step of the transaction before the CCI’s approval.

A notifiable transaction must be notified after any of the following:

• In the case of a merger: the board of directors’ approval of the proposed merger or amalgamation.
• In the case of an acquisition: the execution of any binding agreement conveying an agreement or decision to acquire control, shares, voting rights or assets.
• In the case of a hostile takeover:
1. any document executed by the acquiring enterprise conveying a decision to acquire control, shares or voting rights; or
2. a public announcement for the acquisition of shares, voting rights or control under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

There is no prescribed format of the binding document set out under the Indian merger control laws. It can be in the form of agreement or a binding memorandum of understanding (MoU). The MoU must comprise all the key terms of the transaction – ie, the terms of the transaction, the consideration, governance rights, etc. Further, in the case of a binding MoU, the terms set out in the subsequent definitive documents should not deviate from the terms mentioned in the MoU. A filing cannot be made on the basis of an oral agreement based on good-faith intention.

Filing fees of INR2 million and INR6.5 million are applicable for filing Form I and Form II respectively. The payment of fees must be made at the time of filing and the proof of payment has to be attached with the form being filed.

The Draft Combination Regulations propose to increase the filing fees of INR3 million and INR9 million are applicable for filing Form I and Form II, respectively. These provisions are only in their draft form, subject to change based on the inputs received during public consultation.

The merging parties are jointly responsible for filing the notification form in case of a merger or amalgamation. However, in the case of an acquisition, the responsibility to notify the CCI lies with the acquirer.

Form I as well as the Form II prescribe a comprehensive set of details required to be included by the parties in a filing.

Information to be provided in the Form I and II includes the following:

• description of the parties to the combination;
• details of assets and turnover of the parties;
• scope of the proposed combination, including details of any inter-connected transaction and the rights arising out of such transaction;
• steps to give effect to the transaction and the economic/strategic purpose;
• value of the proposed combination;
• details of the products/services provided by the parties;
• details of horizontal overlaps (if any) – in the case of horizontal overlaps, details of the overlapping products as well as relevant products and relevant geographic markets;
• details of vertical and complementary activities of the parties;
• brief overview of the sector where the parties operate;
• market share data in terms of percentage as well as revenue generated in the overlapping segments;
• details of top five customers as well as suppliers in the overlapping segments; and
• submissions on competitive assessment of the proposed combination in the overlapping segments.

In addition to the above, Form II further requires more detailed description from the parties regarding the relevant markets. For instance, a Form II requires, in addition to a detailed competitive assessment of the combination, five years of market share information and multiple data points on market dynamics, such as barriers to entry and details of market concentration in the form of a Herfindahl-Hirschman Index (HHI), an economic tool that measures concentration levels in a market, as well as concentration rations.

The documents to be attached while filing include letters of authorisation, copies of executed documents in support of approval of the proposed combination, financial statements, transaction documents, board presentations considered for the transaction, structure chart of the parties, pre and post-combination shareholding information, proof of payment of filing fee, declaration by the notifying parties confirming that all the requisite details and documents have been furnished in a bona fide manner, market reports, summary of the combination, and other details as necessary depending upon the nature of the filing. Additionally, the parties also need to attach an affidavit to claim confidentiality over the submissions made.

The filing must be made in the English language. The documents need to be translated into English by an approved translator before being submitted. However, no notarising or apostilling of documents is required.

In the case of a materially incomplete notification, the form is invalidated; however no penalty is applicable in such cases. The parties are then required to resubmit the form in a fresh process with all the remaining details and the filing fee is accordingly adjusted.

Further, if any information or documents provided in the notice or response during the review process of a combination is found to be incomplete, the parties involved may be requested to rectify or provide the necessary information or documents in the form of a “request for information” (RFI) issued by the CCI to address the identified deficiencies. Thus, parties may amend the form if the information is not materially incomplete.

Under the Draft Combination Regulation, if a filing has been made without all the requisite information, the CCI is likely to issue a defects letter within ten business days of receipt of the filing, and parties would be given time to clear the defects. It further proposes that CCI’s statutory time frame for review (sometimes knows as “the clock”) will start only once the “defects” are cleared by the parties.

Parties can face penalties of up to INR10 million if they provide inaccurate or misleading information or omit to state any material fact. The 2023 Amendment has increased this maximum penalty amount to INR50 million.

The CCI has applied penalties for supplying inaccurate or misleading penalties in practice, and has recently levied a penalty of INR20 million (ie, INR10 million each) under two separate provisions of the Competition Act on Amazon.com NV Investment Holdings LLC for suppressing the actual scope and purpose of the combination.

The review process takes place in two phases, namely, Phase I and Phase II. The Phase I process begins with the filing of formal notification until the CCI forms an initial view on whether a combination is likely to cause an AAEC within the relevant market in India, thereby initiating a Phase II investigation, or is of the view that the combination presents no competition concerns and thus provides for its clearance.

Under the 2023 Amendment, the timeline for the CCI to make a prima facie determination on Phase II (or approve the transaction) is 30 calendar days (as opposed to the current 30-working-day review period under the present law). Further, if the clearance is not issued or an initial order to conduct Phase II is not issued within the 30-calendar-day period, the transaction would be deemed approved under the2023 Amendment

If the CCI is of the initial view that a combination is likely to adversely affect competition in India, the CCI issues a show-cause notice (SCN) to the parties directing them to respond within 30 calendar days of the receipt of such notice, furnishing reasons as to why the detailed investigation in respect of such combination should not be conducted. If the parties offer upfront remedies in responding to the SCN, then the above mentioned Phase I period of 30 days is extended by another 15 days for the CCI to evaluate such remedies. If the CCI is not satisfied with the response, it initiates a detailed Phase II investigation.

Under the present law, the CCI is required to pass an order or issue clearance within 210 calendar days from the date of notification. This overall approval timeline has now been reduced to 150 calendar days under the Amendment Act; however, the said provision has not been effected into law yet.

The parties can engage in a pre-filing consultation (PFC) with the CCI to seek clarity in relation to the notification requirement or the manner in which they seek to approach disclosures in the form. The PFC process is informal and the views reflected by the CCI are non-binding.

A PFC is typically done to (i) assess whether the parties can take advantage of the benefit of a “green channel filing”; (ii) determine the nature of the Form (I or II) that must be filed if the CCI’s approach on the definition of relevant market is unclear; and (iii) consider the applicability of exemptions, definition of relevant markets, interpretational issues relating to provisions of the Competition Act and the Combination Regulations, as well as any other issue depending upon the nature of the transaction.

The parties are encouraged to engage in a PFC as it serves as a tool to expedite the process of review once the ambiguities surrounding various substantive and procedural issues have been resolved before the filing.

Since the PFC is an informal process, there is no statutory mandate that specifically requires the CCI to treat the entire process as confidential. However, the general confidentiality regime prescribed under the Competition Act, read with the regulations, is extended to all PFCs in practice and the CCI typically treats such PFC discussions as confidential.

RFIs are a common phenomenon during the review process across both the types of notification (ie, Form I or II). The substance of an RFI depends on the competition concerns presented by the transaction, or the completeness of information provided by the parties in the notice. Such RFIs stop the review clock and the time taken by the parties to furnish the information is excluded from the review timeline.

As mentioned in 3.6 Penalties/Consequences of Incomplete Notification, the Draft Combination Regulation proposes that the CCI’s review clock will start only once the “defects” are cleared by the parties.

The CCI has introduced a mechanism for fast-track approval of transactions which is called the “Green Channel filing” route. It is an automatic system of approval for transactions where there are no horizontal, vertical, or complementary overlaps between the businesses of parties to the combination. Under this route, the transactions are deemed approved upon the day of filing itself. There is no separate form for a green channel filing as the details have to be furnished under the Form I itself, without providing any market facing data or assessment.

The review process cannot be expedited under any other circumstances.

The Competition Act requires the CCI to assess if a combination is likely to cause an AAEC within the relevant market in India. To determine if a transaction is likely to cause an AAEC, the CCI is required to assess any or all of the following factors:

• actual and potential level of competition through imports in the market;
• extent of barriers to entry into the market;
• level of concentration/combination in the market;
• degree of countervailing power in the market;
• likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
• extent of effective competition that the market can likely sustain;
• extent to which substitutes are available or are likely to be available in the market;
• market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
• likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
• nature and extent of vertical integration in the market;
• possibility of a failing business;
• nature and extent of innovation;
• relative advantage, by way of the contribution to the economic development, by any combination having or likely to have an AAEC; and/or
• whether the benefits of the combination outweigh the adverse impact of the combination, if any.

The CCI considers whether the parties to the transaction are competitors or share a vertical or complementary relationship. The transaction may affect all markets in which the parties compete, are vertically linked, and/or are complementarily linked. As such, in order to assist the CCI in its assessment, the parties are required to identify all plausible alternative definition(s) of relevant product and geographic market, including the narrowest possible definition, with appropriate reasoning. Based on the parties’ submissions, and the overlaps exhibited, the CCI determines the relevant markets. The CCI also relies on its own precedents in the same sector, to delineate the relevant market.

While determining the relevant product market, the CCI may consider any or all of the following factors:

• physical characteristics or end-use of goods;
• price of goods or service;
• consumer preferences;
• exclusion of in-house production;
• existence of specialised producers;
• classification of industrial products;
• costs associated with switching demand or supply to other goods or services; and/or
• categories of customers.

Additionally, while determining the relevant geographic market, the CCI may consider any or all of the following factors:

• regulatory trade barriers;
• local specification requirements;
• national procurement policies;
• adequate distribution facilities;
• transport costs;
• language;
• consumer preferences;
• need for secure or regular supplies, or rapid after-sales services;
• characteristics of goods or nature of services; and/or
• costs associated with switching supply or demand to other areas.

Separately, in all cases where the activities of the parties exhibit an overlap, the CCI conducts an analysis to foresee if the transaction will cause an AAEC in the relevant market. There is no de minimis level prescribed by the CCI, below which, competitive concerns are deemed unlikely.

The CCI considers the decisional practice and market definitions of other antitrust authorities, especially the European Commission (EC) and US Department of Justice (DoJ), while reviewing transactions. However, these decisions only hold a persuasive value and do not necessarily bind the CCI to the competitive analysis or the market definitions provided.

For instance, in Jet/Etihad, the CCI relied on EC’s “point of origin or point of destination” approach to market definition as a starting point for the competition analysis in air transport cases. Further, in Umang/AM, the CCI relied on the Elzinga-Hogarty test for delineation of the relevant geographic market, which has been often relied upon by the DoJ.

The CCI adopts a holistic approach to assessment of the harm associated with a combination – ie, unilateral effects, portfolio effects, as well as foreclosure concerns arising out of vertical integration. The unilateral effects are assessed when the parties are engaged in the same business with high combined market shares (typically, more than 40%). While assessing such effects, the CCI takes into consideration factors such as barriers to entry, the bargaining power of consumers, and the lack of competitive constraints from competitors.

In PVR Cinemas/DT, the CCI observed that there was a highly concentrated market in the market for exhibition of films in multiplex theatres. With a significant increase in the level of concentration, competitive constraint from competitors was inadequate, there was an absence of economic efficiencies specific to the combination and limited incentive for the acquirer to innovate. Accordingly, the CCI ordered appropriate structural remedies involving divestiture of specific target assets to address the associated risks. A similar remedy was ordered by the CCI in Holcim/Lafarge, to address the risk arising out of the unilateral effects in the market for grey cement.

Co-ordinated effects have not been specifically assessed by the CCI in merger control proceedings. The CCI assesses the unilateral effects of common ownership, typically in cases involving private equity enterprises, where the enterprise has multiple investments in entities within the same sector or industry. In ChrysCapital/Intas, the CCI addressed the risks arising out of common ownership by requiring ChrysCapital to cancel certain control-conferring rights in a competing portfolio entity.

Further, conglomerate or portfolio effects arise where the merging entities have complementary or overlapping products or services that may incentivise bundling as well as creating an enhanced market position for the merged entity. Such effects have also been considered by the CCI while granting remedies. In L&T/Schneider, the CCI ordered a set of behavioural remedies to address the risk arising out of the consolidation of two prominent competitors in the market. The CCI observed that there was a prima facie risk of portfolio effects and bundled offerings as the consolidation would enable the combined entity to push its portfolio to the distributors by way of bundled offerings, rebates, value discounts, etc, thus giving rise to an AAEC.

While assessing vertical integration in the market, the CCI evaluates factors such as input foreclosure and customer foreclosure as starting points of the assessment. In ChemChina/Syngenta, the CCI assessed various risks including bundling of products and observed that such risks could result in furthering the market power of the combined entity.

Elimination of potential competition is also an essential factor considered by the CCI while assessing the risks associated with a combination. The introduction of deal value thresholds under the 2023 Amendment is a significant step towards assessing such risks.

The CCI considers economic efficiencies arising out of a combination. The factors include:

• nature and extent of innovation;
• relative advantage, by way of the contribution to overall economic development, by any combination having or likely to have appreciable adverse effect on competition; and
• whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Such economic efficiencies should be demonstrable to the CCI and must arise from the combination. For instance, in Holcim/Lafarge, the parties claimed the defence of efficiencies; however, the CCI observed that the efficiencies were not combination specific and the submissions of the parties lacked quantification and verifiability. Thus, in the absence of any evidence to suggest that the gains from efficiency are combination specific, the CCI rejected the submissions put forth by the parties.

The Competition Act does not specify any non-competition issues that may be considered by the CCI. In any case, there are facilitative provisions under the Competition Act for the CCI to consult the sector-specific regulators, which applies to the merger control review process as well. For instance, the CCI has recently consulted other regulators before approving a transaction (Billdesk/PayU).

FDI is governed under separate laws which are implemented by the DPIIT.

There are no special considerations for reviewing joint venture transactions. However, for transactions where a joint venture parent transfers a product to the joint venture, the CCI would consider mapping overlaps between the product transferred to the joint venture and the presence of the other joint venture parents in the same market. Similarly, if both joint venture parents are present in the market in which the product transferred to the joint venture competes, the CCI considers the combined market shares of the joint venture parents as well as the transferred product for its assessment GSK/Pfizer.

Upon notification of a combination, the CCI may either:

• clear the combination;
• clear the combination with modifications/remedies; or
• prohibit the combination.

In its 11 years of reviewing combinations, to date, the CCI has not passed any order prohibiting a combination and has directed modifications in 26 combination cases. In terms of modifications, the CCI may impose:

• a behavioural remedy; or
• a structural remedy; or
• both.

If, based on its assessment of the AAEC factors, the CCI is of the opinion that the proposed combination will cause or will likely cause an AAEC in the market, but such adverse effect can be eliminated by suitable modifications to the proposed combination, it may propose appropriate modifications to the combination, to ensure that its AAEC concerns are addressed. Typically, the CCI has considered a holistic assessment of

• high combined market shares;
• a high post-combination market concentration;
• HHI; and
• the factors set out in section 4.1 Substantive Test – such as absence of competitors, barriers to entry and bargaining power – to assess if a proposed combination is likely to cause an AAEC and had then imposed appropriate modifications (Holcim/Lafarge).

The parties have the ability to negotiate remedies with the CCI. Please refer to 5.4 Negotiating Remedies With Authorities for a detailed process of negotiation.

Typical Remedies

The kinds of remedies required are based on fact specific assessment and depend on the competition concerns presented by each combination. In the past, remedies accepted or directed by the CCI have included:

• divestiture of overlapping businesses;
• commitment not to re-enter into the divested business market;
• commitment to license IP on a fair, reasonable and non-discriminatory (FRAND) basis;
• commitment to not bundle products in a manner that could have the effect of excluding competitors;
• commitment to maintaining non-exclusive distribution channels for supply of products;
• commitment to not discontinue certain products;
• commitment to not increase a product’s average selling price; and
• commitment not to expand market presence in the concerned relevant markets, etc.

The CCI may direct any other remedy, to address AAEC concerns, and the above list is only indicative of the CCI’s precedent. Please note that the CCI is not empowered to direct remedies unrelated to competition concerns.

There is no prescribed legal standard that a remedy must meet in order to be acceptable. Typically, the CCI specifies the competition concerns arising out of the transaction by issuing an SCN, and remedies are negotiated between the regulator and the parties, or upfront remedies are provided by the parties to address the competition concerns.

There is no threshold that deems a remedy to have been accepted. All remedies have to be accepted by the CCI, via an affirmative action.

The Combination Regulations allow the parties to voluntarily propose modifications during the Phase I review (ie, even before the CCI forms a prima facie opinion that the proposed combination may cause an AAEC). The CCI has, in multiple cases, accepted the voluntary modifications offered by the parties during the Phase I review and has approved the combination with modifications without initiating a Phase II review (Canary/Link Investment; Hyundai/Kia).

The parties may also, upon the issuance of an SCN by the CCI for initiating Phase II review, voluntarily propose modifications to address the CCI’s concerns in the SCN. The CCI has, in multiple cases, accepted the voluntary modifications offered by the parties and has approved the combination with modifications (Air India/Vistara; Sony/Zee; Outotec/Metso).

Currently, in cases where the parties do not offer voluntary modifications, the Competition Act prescribes that upon initiation of a Phase II review, if the CCI believes that the potential AAEC may be eliminated by suitable modifications, it will propose these modifications to the parties. The parties are free to accept the CCI’s modifications or to make a counter-proposal to the CCI. The CCI may either accept the counter-proposal of the parties or reject it and direct the parties to undertake the modifications initially proposed by the CCI. As such, the Competition Act provides for an opportunity to the parties to negotiate remedies with the CCI.

The 2023 Amendment allows the CCI to propose remedies even at the Phase I review stage. It also prescribes that upon the initiation of the Phase II review process, the CCI must issue a statement of objections to the parties identifying the AAEC that may be caused by the proposed combination. The parties can then offer modifications to the CCI. The CCI may accept these modifications or reject them. If the CCI rejects these modifications, it has to provide reasons as to why the modifications are not sufficient. Based on this, the parties can offer revised modifications. As such, the 2023 Amendment also allows sufficient room to the parties to negotiate with the CCI. However, please note that the 2023 Amendment has not been effected into law, as of June 2023.

Ultimately, if the CCI is of the view that only a particular remedy or modification can address the AAEC concerns, then the parties are free to not consummate the proposed combination if they do not wish to accept the remedies, or implement the modifications ordered by the CCI.

The approach of the CCI in terms of conditions and timings depends upon the facts and circumstances of each case. Typically, the parties implement the remedies ordered by the CCI, in parallel, along with closing of the transaction.

Behavioural remedies typically come into force after the consummation of the transaction. Similarly for structural remedies, since the divestment procedure is a lengthy one, parties may complete the transaction (with the exception of the acquisition/merger of the business being divested) and then later complete the divestment procedure.

If, after closing the transaction, the parties do not comply with the remedies ordered by the CCI, the CCI will deem that the combination has caused an AAEC. The CCI may declare the transaction as void, in such cases. Separately, the CCI may also initiate non-compliance proceedings against the parties and levy a fine of up to INR100,000 for each day of non-compliance, up to a maximum of INR100 million. Continued non-compliance may lead to imprisonment for up to three years or a fine up to INR250 million.

The CCI issues the final decision permitting (with or without remedies) or prohibiting a combination, to the parties. Typically, the CCI approves the combination and formally communicates such approval to the parties. A detailed order is issued later (after seeking necessary waivers on confidentiality from the parties). A non-confidential version of the detailed order is made publicly available on the CCI’s website.

To date, the CCI has not prohibited any transaction. However, the CCI has directed modifications in a few foreign-to-foreign transactions. For instance, in Outotec/Metso, the CCI approved an integration of two close competitors in the market for iron ore pelletisation (IOP) equipment in India after a commitment from the parties to divest Metso Minerals’ Indian Straight Grate IOP capital equipment business to a suitable buyer, to prevent concentration.       

The Combination Regulations prescribe that where the ultimate intended effect of a transaction is achieved by way of a series of steps or smaller individual transactions which are interconnected, one or more of which may breach the Jurisdictional Threshold, a single notification form covering all inter-connected transactions is to be filed by the parties to the combination (the “inter-connection rule”). Further, no step of an inter-connected transaction that triggers a CCI notification may be consummated unless CCI approval is received. Steps or transactions undertaken to achieve a common ultimate effect are typically deemed “inter-connected”.

To determine whether two transactions are inter-connected, the CCI typically considers the following factors:

• commonality of the business and entities involved;
• simultaneity in negotiation, execution and consummation of the transactions;
• commercial feasibility of isolating the two transactions – ie, whether one would happen without the other; and
• cross-conditionalities in transaction documents or public announcement of the parties to the two transactions.

Since the parties file one single notification form for all related transactions, the CCI clearance decision also covers clearance to consummate all related transactions.

Separately, the CCI previously required the parties to specifically provide details, detailed explanation, and justification of non-compete clauses (ancillary restraints) agreed to in the transaction documents. However, the CCI has done away with this requirement. The CCI retains the power to review such clauses under the rules governing anti-competitive agreements/abuse of dominance.

The Competition Act and the Combination Regulations prescribe that when the CCI initiates a Phase II review process, the parties must publicly publish the details of the combination. This publication also invites comments/objections/suggestions in writing, from any person(s) adversely affected or likely to be affected by the combination.

As such, in all Phase II review processes, an affected third party has a right to file a representation before the CCI. However, the right of third parties is limited to filing a written representation before the CCI in Phase II reviews and does not extend to being involved in the review process in any other way.

Separately, even at a Phase I review stage, the CCI also has the power, if it deems it necessary, to call for information from any other enterprise (including third parties) while inquiring as to whether a combination has caused or is likely to cause an AAEC in India. While there is no legal provision allowing third parties to file a representation in the Phase I review process, without an invitation from the CCI, third parties may still file representations. However, it is discretionary for the CCI to consider these submissions.

Typically the CCI considers the representations filed by third parties while deciding on whether a combination will cause or is likely to cause an AAEC in the market (Walmart/Flipkart).

Upon initiation of Phase II review, the CCI calls for written comments/objections/suggestions from any person(s) adversely affected or likely to be affected by the combination. While this is a general call for objections which does not entail the CCI “contacting” third parties directly, the CCI has the power to contact a third party and seek their written response while inquiring as to whether a combination has caused or is likely to cause an AAEC in India. In fact, the CCI has, in the past, exercised this power to contact third parties to seek their responses (Bayer/Monsanto). Typically, the CCI will reach out to the third parties (if required) after the initiation of the Phase II review, with a written questionnaire and direct the relevant third party to file a written response.

While the CCI does not typically market test all remedies offered by the parties, it has, in multiple instances, reached out to third parties (competitors of the parties, public and private research institutions, institutional investors, and other experts) while allowing combinations with modifications (Bayer/Monsanto).

The parties are required to file a 1,000-word, non-confidential summary of the proposed combination with the CCI, at the time of submitting the formal filing. The CCI publishes this non-confidential summary on its website. As such, the fact that the parties have filed a notification and a brief description of the combination is made public as soon as the notification form is filed. The summary typically contains:

• the names of the parties to the transaction;
• the nature and purpose of the transaction;
• the products, services, and business(es) of the parties to the transaction;
• the respective markets in which the parties to the combination operate; and
• whether the combination is being filed under green channel route.

Subsequently, upon approving the combination, the CCI also uploads a non-confidential version of the detailed order approving the combination. The non-confidential version of the order does not contain any commercially sensitive information.

The parties can claim automatic confidentiality over all information that may be termed as commercially sensitive (such as trade secrets, pipeline products, market shares and sales volumes) upon submission of an undertaking self-certifying that:

• the information over which the parties have claimed confidentiality is confidential and not available in the public domain;
• the information over which the parties have claimed confidentiality is known only to limited employees, suppliers, distributors and others involved in the parties’ business;
• the parties have taken adequate measures to guard the secrecy of the information over which they have claimed confidentiality; and
• the information over which the parties have claimed confidentiality could not be acquired or duplicated by others.

For discharging its duties or performing its functions, the CCI enters into arrangements with agencies of other jurisdictions to co-operate and share information. The CCI has entered into multiple memorandums of understanding with its counterparts in other jurisdictions, even for exchanging information involving mergers or acquisitions (see MoU with Competition Bureau Canada).

As such, the CCI may discuss specific transactions with foreign competition agencies especially in the case of global transactions. However, legally, the CCI may not discuss/share confidential information of the parties unless the parties providing a specific waiver to the CCI. Once the CCI gets a limited waiver of confidentiality from the parties, it may even discuss and share confidential data of the parties with foreign regulators.

All decisions of the CCI are appealable, except certain administrative decisions. The party(ies) or any other aggrieved third party may prefer an appeal from the CCI’s decision to the NCLAT. The decision of the NCLAT may further be appealed before the SC. Notably, as per the recent amendments, the appellants are required to deposit 25% of the amount of penalty imposed with the NCLAT for preferring an appeal.

An appeal to the NCLAT may be preferred within 60 days from receipt of the CCI’s order by the party(ies). Further, an appeal to the SC may be preferred within 60 days from the date of communication of the NCLAT decision to the party(ies).

Since the CCI has not blocked any combination to date, and has directed remedies in 29 cases, there are only a few instances of appeal from the CCI’s order to the NCLAT. To the best of the authors’ knowledge, there have only been four appeals (three of which were filed by a third party against approval orders and one by the notifying parties themselves) against the CCI’s order before the appellate authority in the merger control regime. However, to date, no appeal has been successful before the appellate authority.

Any person (including any third party) who can demonstrate that they have been “aggrieved” by any direction, decision, or order of the CCI may file an appeal before the appellate authority (Samir Agrawal). That said, to date, no appeal by any third party, against a clearance decision of the CCI has been successful before the appellate authority.

There are no separate antitrust filing requirements for foreign transactions and investments apart from the merger control regulations under the Competition Act.

Apart from merger control, the FDI transactions are regulated by the DPIIT under the Foreign Exchange Management Act (FEMA) 1999, and the accompanying regulations issued by the government. There are two different routes for approval of FDI transactions; namely, the automatic route and the government route. The routes have been classified on the basis of the sector to which the transaction belongs. FDI in most sectors is automatically approved, but may require a separate approval from the government or the Reserve Bank of India (RBI) in certain specific sectors such as defence, mining, satellite, and print media, as determined by the FDI policy in India.

The 2023 Amendment, which was recently enacted by the Parliament, proposes significant changes to the existing provisions under the Competition Act. The amended provisions have been partially enforced and the remaining provisions shall come into force in a staggered manner when the accompanying regulations are notified by the CCI.

The following key changes have been introduced to the merger control provisions under the 2023 Amendment:

• Introduction of deal value thresholds – the proposed bill introduces a new requirement for notification of transactions that exceed a global deal value of INR20 billion, provided that the target company has substantial business operations in India.
• Shortening of review timelines – the proposed bill suggests reducing the review timeline for transactions from the current 210 days (from the date of notification) to 150 days. Additionally, the CCI is now obliged to form its prima facie opinion within 30 calendar days as opposed to the previous timeline of 30 working days. The transaction shall be deemed approved if the CCI does not form its preliminary opinion within the prescribed time limit.
• Enhanced penalty for making false statements/omission of material facts – the maximum penalty for making false statements or omitting to disclose material facts has been increased from INR10 million to INR50 million.
• Exemption from standstill obligations – the combinations involving an open offer or an acquisition of shares or securities, through a series of transactions on a regulated stock exchange shall be exempted from standstill obligations as per the amended act. However, the acquirer in such transactions cannot acquire any voting rights before getting approval from the CCI.

Further, as mentioned in 2.1 Notification, the Draft Combination Regulations and Draft Exemption were also published by the MCA for public consultation, and are expected to be introduced soon in their final form, based on the input of/comments from the public.

In the past year (2023–24), the CCI has issued seven orders imposing penalties upon parties for gun-jumping as well as three decisions imposing remedies to address the anti-competitive risks associated with transactions causing an AAEC in the market.

Typically, the penalties imposed by the CCI for gun-jumping in transactions in the past years (2023–24) have ranged from INR500,000 to INR10 million. In Bharti Airtel, a penalty of INR10 million was imposed by the CCI for consummating the acquisition of an additional degree of control in Bharti Telemedia Limited without seeking approval.

The CCI has not prohibited any transaction to this date, however it has approved several transactions with remedies. In the past year, transactions where the CCI accepted the voluntary modifications offered by the parties before granting an approval were ICPA/Unichem, Air India/Vistara as well as General Atlantic/Acko Tech.

The CCI has consistently displayed concerns over minority acquisitions/investments, especially with regards to PE enterprises acquiring significant rights in a target entity and has accordingly lowered the threshold of control under the 2023 Amendment. The 2023 Amendment also expedites the overall process for reviewing transactions by shortening the statutory review timelines.

Further, the introduction of deal value threshold (DVT) has been made with a view to assessing transactions in the digital space that may have otherwise been exempt from scrutiny owing to the parties not meeting the jurisdictional thresholds for notification. This points towards the CCI’s concern over elimination of potential competition by bigger players in the digital market.

The CCI has also increased its focus towards handling gun-jumping in transactions and has been actively imposing penalties on parties failing to notify any notifiable transaction.

Furthermore, the competitive assessment of transactions has become more layered with the CCI taking into account a wide range of risks associated with the transactions, resulting in a greater number of modifications/remedies being imposed.