The much-anticipated provision of deal value threshold (DVT), which seeks to capture combinations under the Competition Amendment Act 2023 where the deal value exceeds Rs 2,000 crore or the target—the company being acquired—has substantial business operations in India, was notified by the Ministry of Corporate Affairs (MCA) on Monday.
The notification will come into effect from September 10 onwards. The accompanying regulations for this provision of the law are expected to be notified by the Competition Commission of India (CCI) soon.
By bringing the deal value threshold into the ambit of the Competition Act, the government has tried to capture mergers that may otherwise evade scrutiny under traditional “asset” or turnover-based thresholds. This has been done to keep pace with the ever-evolving digital markets, where mergers often involve the sharing of big data, privacy concerns, among other things.
“The decision to introduce DVT stems from CCI’s inability to review several transactions within the digital and other sectors, which were not subject to reporting requirements due to asset or turnover values falling below the jurisdictional thresholds/ target exemption. This is similar to the law follow in developed countries like the US, Germany, Austria, and South Korea in implementing deal value thresholds,” said Vaibhav Choukse, Partner – Competition Law at JSA.
The regulations by the MCA for mergers and acquisitions (M&As), including the deal value threshold, have come more than a year since the Competition Amendment Act 2023 became a law. The Act had received the President’s assent in April 2023.
Besides the deal value threshold, the MCA has notified that a company would be considered to be an affiliate of another enterprise if the latter has the right or ability to access commercially sensitive information of the enterprise or has 10 per cent or more of the shareholding or voting rights of that company. The third criterion is the right or ability to have a representation on the board of directors of the enterprise, either as a director or as an observer.
“These provisions were part of the amendments of 2023 but were pending notification. They have now been brought into force. We expect the fine print to show up in the CCI’s regulations, which have been the subject of stakeholder consultation over the past few months,” said Avaantika Kakkar, partner (head – competition law), Cyril Amarchand Mangaldas.
Experts said that the newly notified merger control amendments herald the single largest overhaul of the Indian merger control regime, bringing the CCI on par with global regulators like the US, Germany, and Austria.
“However, the devil will lie in the details—the enabling regulations and the need for the CCI to enhance capacity to keep up their efficient track record of clearing M&A deals will be key to ensuring ease of doing business remains unimpacted,” said Nisha Kaur Uberoi, partner and chair, competition law, JSA, on merger control amendments.
First Published: Sep 09 2024 | 7:22 PM IST