The government is likely to periodically revise the proposed ₹2,000 crore deal value threshold for mandatory Competition Commission of India (CCI) approval for global mergers and acquisitions with an India play, offering some relief to investors.
The idea is to go for inflation-linked revision of the deal value so that the threshold remains meaningful and, over time, does not become too restrictive, said a person familiar with discussions in government.
The move to periodically revise the threshold is an outcome of discussions among the ministry of corporate affairs, CCI and the Parliamentary Standing Committee of Finance. The committee, which reviewed the Competition Amendment Bill, 2022, is expected to give its report soon.
Also, the government is likely to drop the plan to further curtail the timelines for merger approvals by CCI as the regulator is already overloaded with work and has also taken on the additional mandate of adjudicating on goods and services tax-related profiteering.
The original proposal in the Bill tabled in the Parliament in August was to reduce the combination approval timeline from 210 days to 150 and the timeline for CCI to offer a prima facie opinion on the deal from 30 days now to 20. The government is likely to retain the existing timelines for these two provisions.
The deal value threshold for merger regulation was introduced in the Bill to bring global transactions among businesses with a presence in India in certain sectors like the digital economy that may otherwise escape CCI’s review because of their low assets and turnover—the conventional criteria for CCI to regulate M&As. Exerts pointed out ₹2,000 crore is a low threshold.
“A blanket threshold of ₹2,000 crore for global deals across sectors looks like a very low bar and would catch many more transactions than is necessary. Instead, a sector-based threshold or limiting the proposed threshold’s applicability to certain sectors would serve the intended purpose,” said Neelambera Sandeepan, a partner (competition and antitrust) at law firm Lakshmikumaran and Sridharan Attorneys.
Besides the deal value threshold, the business getting acquired also has to meet the criteria of substantial business operations in India. Experts also said this needs to be clearly specified. “The expression ‘substantial business operation’ in the Bill has not been clearly defined, and this can lead to confusion for companies in notifying mergers. Therefore, it needs more clarity to ensure there is no inconvenience caused to the businesses,” said Sonam Chandwani, managing partner at law firm KS Legal & Associates.
The Competition Act, as it exists today, prescribes that the transaction must not take effect until 210 days after the CCI has been notified of it or until the CCI has issued an order approving the deal, Chandwani said.
“The shrinking of merger approval timeline from 210 days now to 150 days will put pressure on CCI by increasing the risk of invalidated merger filing, parties having to refile and thereby adding to the cost of M&A in India… The Bill leaves a lot of scope for interpretation,” said Chandwani. Experts fear deal invalidation as reduced availability of time could force the regulator to err on the side of caution.
According to Sandeepan of Lakshmikumaran and Sridharan Attorneys, the current merger review timelines seem to be working quite well from the perspective of businesses as well as the regulator.
“In fact, in a majority of multi-jurisdictional filings, CCI seems to be one of the first regulators clearing transactions. As such, “don’t fix it if it ain’t broke” should be the mantra to be followed here. The proposed reduction in the timelines would increase the burden on the CCI, and we could be witnessing more invalidations,” Sandeepan said.
