Mergers and acquisitions involving digital firms that have one tenth of their global users or gross merchandise value in the previous one year or annual turnover in India would require clearance from the Competition Commission of India (CCI), as they would then be considered to have “substantial business operations” in the country, the regulator said.
The CCI (Combinations) Regulations, 2024, effective Tuesday, follows the government’s Monday notification that said deals exceeding Rs 2,000 crore, and where the target firm has “substantial business operations in India” would need regulatory clearance.
The CCI regulations define what constitutes substantial business operations.
Transactions involving non-digital companies with an annual gross merchandise value or turnover of more than Rs 500 crore in India will need mandatory regulatory approval, as per the new regulations.
The rules will apply to even those transactions that are already signed but not formally closed yet, the CCI said, removing doubts over their applicability.
The deal value threshold, introduced in the amended competition law of 2023, aims to enable the regulator to capture key transactions, especially in the digital sector, which could otherwise escape its scrutiny based on the traditional asset or turnover criteria, experts said.
Unnati Agrawal, partner at IndusLaw, said, “The parties will now have to carefully assess the consideration value ascribed to ongoing deals as the consideration would include all payments, whether direct or indirect, immediate or deferred, cash or otherwise made within two years from the relevant date.”
The parties will also have to account for separate deals which may be inter-connected, she added.
Agrawal pointed out that the monetary threshold of Rs 500 crore, in addition to the turnover or gross merchandise value criterion, will ensure that smaller entities are not burdened with the requirement to seek the regulatory nod.
The CCI has also reduced the review period for M&A deals to 150 days from 210 days.
The new regulations also stipulate key changes such as shorter merger review timelines, exemption from gun jumping in listed company, creeping acquisitions subject to conditions, and hearings available at request of the merging parties, said Nisha Kaur Uberoi, partner & chair (Competition Law) at JSA Advocates & Solicitors.
“Given that the edifice of merger control is certainty, the combination regulations amendments will further enhance the efficacy of the CCI,” she added.
Fees for acquirers to file for CCI approval have been raised to Rs 30 lakh for the shorter Form I applications from Rs 20 lakh, and to Rs 90 lakh for the longer Form II filings from Rs 65 lakh.
