COMPARATIVE GUIDE
19 March 2024
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Merger Control Comparative Guide

CA
Cyril Amarchand Mangaldas

Contributor

Practice areas include residential and commercial real estate, private client services, asset management and estate planning. The firm provides a total service solution for clients worldwide with assets in Israel.
Merger Control Comparative Guide for the jurisdiction of India, check out our comparative guides section to compare across multiple countries
India Antitrust/Competition Law

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?

The key statutory provisions and relevant regulations and guidelines governing the Indian merger control regime are as follows:

  • Competition Act, 2002: This act governs merger control in India. Section 5 provides that an acquisition of shares, voting rights, assets of or control over an enterprise, or a merger or amalgamation of enterprises, requires the prior approval of the Competition Commission of India (CCI) when certain prescribed asset or turnover thresholds are exceeded. Section 6 provides that any transaction that meets the thresholds specified in Section 5 must be notified to the CCI and cannot be consummated without the prior approval of the CCI.
  • Competition (Amendment) Act, 2023: The Competition (Amendment) Act, 2023 ('2023 amendment act) has:
    • added a new jurisdictional/merger filing threshold based on deal value; and
    • clarified existing provisions relating to the merger control regime in India.
  • Some provisions of the 2023 amendment act were notified by the Indian government on 18 May 2023 and are now in force (see question 8.1).
  • CCI FAQs: The CCI publishes certain FAQs as part of its advocacy initiatives, to provide greater clarity and predictability for stakeholders.
  • Small Target Exemption Notification (Original Notification SO 988(E) dated 27 March 2017, renewed by Notification SO 1192(E) dated 16 March 2022): This notification exempts transactions from the prior notification requirement if either:
    • the value of assets in India of the target is less than or equal to INR 3.5 billion; or
    • the turnover in India of the target is less than or equal to INR 10 billion.

1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?

There are no special provisions regulating specific sectors under the merger control regime in India. However, exemptions apply to certain activities in certain sectors, as follows:

  • mergers and amalgamations between regional rural banks (the notification to this effect expired on 10 August 2022 and is yet to be renewed);
  • reconstitutions, transfers and amalgamations involving nationalised banks under specified statutes; and
  • all transactions involving public sector enterprises (run by the Indian government) operating in the oil and gas sectors (the notification to this effect expired on 22 November 2022 and is yet to be renewed).

1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?

The CCI is India's antitrust regulator and is responsible for enforcing the provisions on merger control under the Competition Act. All transactions that breach the thresholds specified in Section 5 of the Competition Act must be notified to the CCI.

Review and approval of transactions: The Indian merger control regime is mandatory and suspensory in nature. Transactions that are notifiable cannot be consummated, either entirely or in part, without the approval of the CCI. The CCI will approve a transaction upon reviewing the information provided in the notification. The CCI can also solicit information from third-party enterprises, and can solicit the views of such parties on the appreciable adverse effect on competition (AAEC) that could be caused as a result of a proposed transaction. If the CCI is satisfied that no AAEC will be caused in the relevant market in India, it will approve the transaction.

In-depth investigations: If the CCI believes that a proposed transaction is likely to cause an AAEC in a relevant market(s) within India, it will issue a show-cause notice (SCN) to the parties, inviting them to explain why a detailed investigation to assess the transaction's competitive effects should not be conducted. If the parties successfully address the CCI's concerns in response to the SCN, including by offering voluntary behavioural and/or structural remedies, the CCI may approve the transaction. If the CCI's concerns persist, it will commence a Phase II investigation.

Where the CCI has started a Phase II investigation, the merging parties must provide certain required information specified in Form IV under Combination Regulations – including:

  • a summary of the proposed transaction;
  • the names of the parties; and
  • details of:
    • the business activities of the parties;
    • the relevant market; and
    • the competition impact assessment for the proposed transaction.

The CCI may thereafter invite comments from public and any persons affected or likely to be affected by the transaction by asking the parties to publish the details provided in Form IV. Based on the comments received during public consultation, the CCI may require the parties to accept certain behavioural or structural remedies (the parties can also offer a remedy proposal on their own). If the parties accept the remedies proposed by or agreed with the CCI, the CCI may grant conditional approval to the transaction. If the parties do not accept the remedies proposed by or agreed with the CCI, the CCI has the power to block the transaction.

Power to impose penalties: The CCI can impose penalties on parties if:

  • they fail to notify a transaction that breaches the statutory merger filing thresholds; or
  • the transaction is consummated in part or in totality without obtaining the CCI's approval.

The maximum penalty for failure to notify the CCI is 1% of the combined assets or turnover, whichever is higher, of the combining parties. Further, under the 2023 amendment act, 1% of the "total value of the proposed transaction" must also be considered to arrive at the highest possible penalty that can be imposed on the parties. However, this provision is not in force as of the time of writing.

Power to examine previous transactions: The CCI can also 'look back' at the effects of a transaction that was not notified for a period of one year from the date of its completion, based on its own information or knowledge of the transaction. There is no statutory time limit that prevents the CCI from penalising parties for a failure to notify it.

Power to block transactions: The CCI has the power to block transactions where:

  • the proposed combination is likely to cause an AAEC in India;
  • the parties to the proposed combination fail to implement the remedies to which they initially committed and such combination is deemed to have an AAEC in India due to non-implementation of the remedies; or
  • the parties fail to accept the remedies proposed by the CCI within 30 working days or within a further additional period of 30 working days and the proposed combination is deemed to have an AAEC in India (please see question 5.2 for a detailed overview of the procedure for negotiating remedies with the CCI and timelines, including the changes in the timelines pursuant to the 2023 amendment act).

2 Definitions and scope of application

2.1 What types of transactions are subject to the merger control regime?

The Indian regime covers acquisitions of shares, voting rights or assets and control, as well as mergers and amalgamations. An acquisition of shares or voting rights may be subject to merger notification even if the acquisition does not result in a change of control.

2.2 How is 'control' defined in the applicable laws and regulations?

'Control' is defined under Section 5 of the Competition Act to include any right that amounts to control over the affairs or management of an enterprise(s)/group(s) by another enterprise(s) or group(s) which may be acting jointly or singly.

Here, a 'group' is defined as two or more enterprises which, directly or indirectly, are in a position to:

  • exercise 50% 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.

This definition of 'control' under the Competition Act is circular in nature and no guidance on its interpretation is provided. Therefore, in the absence of guidance in the Competition Act, the definition of 'control' must be derived from the decisional practice of the Competition Commission of India (CCI). The precise definition of 'control' has been crystallised in the decisional practice of the CCI. The CCI has analysed different degrees of control in competition law. The first degree of control identified by the CCI is 'material influence', which gives an enterprise the ability to influence the affairs and management of another enterprise. This constitutes the lowest level of control.

An explanation has been added by the 2023 amendment act to clearly define the meaning of 'control' with reference to the 'material influence' standard that has been elucidated by the CCI in its decisions. However, this amendment is not in force as of the time of writing.

The second degree of control identified by the CCI is 'de facto' control, where an enterprise holds less than a majority of the voting rights, but in practice controls more than half of the votes actually cast at a meeting.

The third degree of control identified by the CCI is 'de jure' or controlling interest, which exists where an entity has a shareholding conferring more than 50% of the voting rights upon it.

Thus, a nuanced review of commercial realities must be undertaken by the parties to assess the level of 'control' exercised in order to ascertain whether the CCI's approval is required for a particular transaction.

2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?

Yes, the acquisition of a minority interest may trigger a merger filing in India in certain circumstances. However, a minority acquisition may be exempt from the notification/approval requirement based on the nature of the rights being acquired. A proposed transaction is exempt from the requirement to be notified to the CCI under Item 1 of Schedule I of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 ('Combination Regulations') in case of an acquisition of shares or voting rights, which:

  • is made "solely as an investment" or "in the ordinary course of business";
  • does not entitle the acquirer to hold 25% or more of the total shares or voting rights of the target; and
  • does not vest the acquirer with any controlling rights over the target.

The Combination Regulations further clarify that for the purpose of the above exemption (which is popularly known as the 'financial investor exemption'), an acquisition of less than 10% stake shall be treated as an acquisition made "solely as an investment" as long as the acquirer:

  • can exercise only such rights that are available to the ordinary shareholders of the target to the extent of its shareholding (ie, has no special rights); and
  • has no board seat or a right or intention to nominate a director on the board of the target or intention to participate in the affairs or management of the target.

If an acquirer is acquiring any of the above rights and/or control/controlling rights, the CCI does not consider that the acquisition is being made solely as an investment or in the ordinary course of business.

However, various orders passed by the CCI in recent years have limited the applicability of the above exemptions. There is always a doubt as to whether a non-controlling minority acquisition by such investors which is indeed made "solely as an investment" or "in the ordinary course of business" (ie, a passive investment as against an active or strategic investment) will be eligible to avail of the financial investor exemption if the investor is acquiring some customary minority protection rights or an observer's seat on the target's board in order to protect the value of its investment.

The CCI's decisional practice has also indicated that where an acquirer and the target are engaged in competing businesses or where their businesses are vertically related, the acquisition need not necessarily be termed as an acquisition made solely as an investment or in the ordinary course of business.

In the case of private equity investors, while they may not be direct competitors of the target, the private equity fund may have interests in portfolio companies that are in the same line of business or vertically linked with the target. Therefore, the applicability of the financial investor exemption remains doubtful and requires a case-by-case analysis of portfolio investments of the private equity fund that are competitors of the target.

2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?

The Competition Act does not expressly cover joint ventures. Joint ventures created through the transfer of assets by one or more enterprises (also referred to as 'brownfield joint ventures') may be notifiable if the thresholds in the Competition Act are met and none of the exemptions (including the small target exemption) are available. In determining the applicability of the thresholds, only the values of the relevant asset being transferred by the parent(s) and the turnover generated by such relevant assets will be considered.

Joint ventures formed afresh by capital contributions by one or more enterprises (also referred to as 'greenfield joint ventures') are generally exempt from the requirement to notify to the CCI – since the target will be eligible to avail of the small target exemption.

2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?

There is no exemption for foreign-to-foreign transactions. All transactions – including foreign-to-foreign transactions – that exceed the thresholds under the Competition Act (which include certain local nexus thresholds) must be notified to the CCI.

2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?

A transaction must be notified if the transaction meets the thresholds in either the parties test or the group test.

Parties test: The parties (ie, the legal persons directly involved in the transaction) either:

  • have combined assets in India of INR 20 billion or a combined turnover in India of INR 60 billion; or
  • have:
    • combined worldwide assets of $1 billion, including combined assets in India of INR 10 billion; or
    • a combined worldwide turnover of $3 billion, including a combined turnover in India of INR 30 billion.

Group test: The group (ie, the group that the parties will belong to after the transaction, including the parties, their ultimate parent(s) and all entities directly or indirectly controlled by the ultimate parent(s)):

  • has assets in India of INR 80 billion or a turnover in India of INR 240 billion; or
  • has:
    • worldwide assets of $4 billion, including assets in India of INR 10 billion; or
    • a worldwide turnover of $12 billion, including a turnover in India of INR 30 billion.

Transaction value threshold: The 2023 amendment act (see question 8.1) has introduced a transaction value threshold, which will be triggered where:

  • the value of any transaction – in connection with acquisition of any control, shares, voting rights or assets of an enterprise, or merger or amalgamation – exceeds INR 20 billion; and
  • the target in question has 'substantial business operations in India' ('transaction value threshold').

Where this threshold is applied, parties cannot avail of the small target exemption (described in question 1.1).

The transaction value threshold is not in force as of the time of writing. It will come into force upon publication of a notification to this effect by the government of India.

2.7 Are any types of transactions exempt from the merger control regime?

A transaction is exempt if it meets any of the conditions specified in Schedule I of the Combination Regulations. This schedule lists out transactions that are presumed not to cause an appreciable adverse effect on competition (AAEC) ('Schedule I Exemptions'). These transactions are:

  • acquisitions of up to 25% of the shareholding/voting rights that do not amount to control (as described in question 2.3);
  • acquisitions of the shareholding/voting rights where the acquirer:
    • already holds between 25% and 50% of the shareholding/voting rights of the target before or after the transaction; and
    • does not acquire joint/sole control of the target;
  • acquisitions of shareholding/voting rights where the acquirer already holds 50% or more shareholding/voting rights in the target (unless the transaction leads to transfer from joint control to sole control);
  • acquisitions of assets of the target that do not amount to a strategic acquisition. The assets must also:
    • be unrelated to the business activities of the acquirer; and
    • not lead to acquisition of control over the target;
  • amended/renewed tender offers which have already been notified to the CCI;
  • acquisitions of stock-in-trade, raw materials, stores and spares, trade receivables or other similar current assets in the ordinary course of business;
  • acquisitions of shares/voting rights pursuant to issue of bonus shares, stock splits, consolidation of face value shares, buybacks or subscription to a rights issue (unless such acquisition leads to the acquisition of control over the target);
  • acquisitions of an enterprise that is in the same group as the acquirer (unless the target is jointly controlled with an entity that is not part of the same group);
  • mergers/amalgamations where one enterprise already holds a 50% or more shareholding/voting rights in the other (unless the transaction leads to a transfer from joint to sole control); and
  • acquisitions of shareholding/voting rights/assets/control pursuant to an order of the CCI.

Small target exemption: A transaction is also exempt from notification to the CCI if the value of assets of the target in India does not exceed INR 3.5 billion, or the value of the turnover of the target does not exceed INR 10 billion respectively, in terms of the audited financials of the immediately preceding financial year to that in which the definitive transaction documents are executed.

This exemption is available pursuant to notifications issued by the Ministry of Corporate Affairs dated 4 March 2011, 4 March 2016, 29 March 2017 and 16 March 2022. At present, the exemption is available until 27 March 2027.

The exemption is not available for any transaction that breaches the transaction value threshold (described in question 2.6) which was introduced by the 2023 amendment act; however, this threshold is not yet in force as of the time of writing.

Further, any share subscription, financing facility or acquisition pursuant to a covenant of a loan agreement or investment agreement is also exempt from notification under the Competition Act if it is entered into by the following entities:

  • public financial institutions;
  • foreign portfolio investors;
  • banks; or
  • Category I alternative investment funds (ie, funds which invest in start-ups, early stage ventures, social ventures, small and medium-sized enterprises, infrastructure or other sectors which the government or regulators consider as socially or economically desirable).

Under the Competition Act, such transactions were required to be notified on a post facto basis within seven days of consummation. The 2023 amendment act has done away with this requirement; however, this amendment has not entered into force as of the time of writing.

3 Notification

3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?

The merger control regime in India is mandatory (under Section 5 of the Competition Act) and suspensory (under Section 6 of the Competition Act).

A transaction is exempt from notification to the Competition Commission of India (CCI) if it meets the small target exemption. If the small target exemption is unavailable, the parties must assess whether the transaction falls under the exemptions specified in Schedule I of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 Combination Regulations (see question 2.7), which set out the transactions for which a merger notification "need not normally be filed" because they are presumed not to cause an appreciable adverse effect on competition (AAEC) in the relevant market due to factors such as:

  • the profile of the acquirer/investor;
  • the nature and structure of transaction; and
  • the percentage of acquisition.

Transactions may also be exempt from notification if they relate to a covenant of a loan agreement or investment agreement (please see question 2.7 for the sectors/parties that are eligible for this exemption). If none of the exemptions is available and the jurisdictional thresholds are met, the CCI's approval must be mandatorily sought.

3.2 Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?

Parties intending to file a merger notification with the CCI can approach the CCI for an informal consultation prior to filing, in case of any doubts or queries regarding the filing procedures or the information to be provided as part of the merger filing. However, the advice given during such pre-filing consultation is non-binding and may not necessarily reflect the views of the CCI which may be formed after an in-depth review of the merger notification.

Parties can also approach the CCI for a pre-filing consultation on substantive issues (including interpretational issues such as the applicability of any exemptions).

3.3 Who is responsible for filing the notification?

In a transaction structured as an acquisition, the obligation to notify rests with the acquirer; whereas in a merger or an amalgamation, as well as in the case of joint ventures, both transacting parties must notify the combination jointly to the CCI.

3.4 Are there any filing fees, and if so, what are they?

The fee for a short-form filing on Form I is INR 2 million; while the fee for a long-form filing on Form II is INR 6.5 million.

3.5 What information must be provided in the notification? What supporting documents must be provided?

The nature of the information required from the parties will depend on the background to the relevant transaction. In general, the parties must provide the information requested through Form I (short form) and Form II (long form).

Form I: This provides a list of the information that must be submitted by the parties in case of a notifiable transaction. The CCI has published certain clarificatory notes to Form I (Introductory Notes and Notes to Form I) explaining the extent of the information that it expects for each question in Form I.

The following information is broadly required in a notice on Form I:

  • information about each party to the transaction – for example:
    • name;
    • legal status;
    • contact information;
    • details of regulatory registration/incorporation;
    • details of authorised representatives; and
    • National Industrial Classification of its business activities;
  • proof of payment of the filing fee;
  • the names and contact details of individuals based in India who can receive communications from the CCI on behalf of the parties;
  • details of the assets and turnover (India and worldwide) of the parties;
  • the particulars of the proposed transaction – for example:
    • the steps involved;
    • the structure and value of the transaction;
    • details of other connected transactions;
    • the commercial objective of the transaction;
    • rights accruing to the parties from the transaction;
    • any non-compete obligations;
    • merger notifications made in foreign jurisdictions and
    • the particulars of incoming foreign investment (if any); and
  • the business activities of the parties in India – for example:
    • details of the presence of the parties in India;
    • the business groups to which the parties belong;
    • a list of products manufactured by the parties;
    • an assessment of the overlaps between the parties' business activities; and
    • an overview of the sectors in which the parties operate.

The following supporting documents must be filed alongside the notice in Form I:

  • a certified copy of the authorisation in favour of a person signing the notice in the prescribed format;
  • a copy of the proof of payment of the filing fee;
  • copies of the relevant parties' approval of the proposal relating to the transaction and their agreement/other documents executed in relation to the transaction;
  • an authorisation letter in favour of a person located in India who is authorised to receive communication on behalf of the notifying parties from the CCI;
  • a certified copy of any decisions passed in other jurisdictions in which the transaction has been filed and approved;
  • copies of the most recent annual report and accounts of the parties to the transaction;
  • copies of all presentations analysing the transaction prepared by or for, or received by, the management, the board of directors, the supervisory board, the shareholders' meeting or similar (necessary only where the merging parties have overlapping activities or are engaged in vertically connected markets or the supply of complementary, non-competing but related goods/services); and
  • two summaries prepared in accordance with Regulations 13(1A) and (1B) of the CCI (Procedure in Regard to the Transaction of; Business Relating to Combinations) Regulations, 2011.

Form II: A Form II filing is required if:

  • the parties are competitors and hold a market share exceeding 15%; or
  • the parties are vertically integrated and hold an individual or combined market share exceeding 25%.

In addition to the information specified for Form I above, the parties must submit certain additional information on matters such as:

  • key managerial personnel;
  • major customers/suppliers;
  • control exercised in other enterprises engaged in vertically/horizontally linked activities;
  • the relevant market (eg, product differentiation, ease of switching, presence of imports and exports);
  • a detailed competition assessment;
  • certain economic data (eg, concentration levels);
  • research and development activities on the market;
  • the conditions of entry/exit in the market;
  • imports/exports;
  • costs; and
  • logistics.

The following key additional documents must be filed along with the notice in Form II:

  • copies of analysis, reports, studies or surveys or any other document taken into account for the purpose of assessing the impact of the transaction and any documents prepared for the purposes of analysing the transaction with respect to:
    • market shares;
    • competition and competitors;
    • markets;
    • the potential for sales growth or expansion of products or geographical markets; and/or
    • the rationale for the merger;
  • copies of the memorandum and articles of association of all parties to the transaction;
  • a list of holders of 5% or more of the voting rights or shares, directly or indirectly, of the parties to the transaction; and
  • for each party:
    • a list of the chief executive officer/chief financial officer/ directors/partners/trustees/persons in charge/persons acting in concert over the past year; and
    • a detailed organisational chart.

3.6 Is there a deadline for filing the notification?

The parties must notify the transaction at any time prior to consummation/closing, but after the trigger event has occurred (eg, the execution of definitive transaction documents/board approval for mergers and amalgamations).

3.7 Can a transaction be notified prior to signing a definitive agreement?

No. The signing of a definitive agreement/transaction document is the event that triggers a merger filing and a merger filing can be made only thereafter. In case of acquisitions, a merger filing can be made only after execution of the definitive transaction agreement/document. In case of a merger/amalgamation, the parties can notify the transaction only after the resolutions approving the merger/amalgamation have been passed by the respective boards of directors of the merging/amalgamating parties.

3.8 Are the parties required to delay closing of the transaction until clearance is granted?

Yes. The parties cannot close the transaction until the earlier of the date on which:

  • approval has been granted by the CCI; or
  • 210 days have passed from the date of filing of the notification before the CCI.

If the transaction is not approved within the outer time limit of 210 calendar days, it is deemed approved.

The above timeline has been reduced by the 2023 amendment act (see question 8.1). Where the CCI does not come to a prima facie opinion in respect of a transaction notified before it within 30 calendar days (as opposed to 30 working days as specified in the Competition Act), the transaction will be deemed approved. Further, where the CCI conducts an in-depth inquiry or initiates a Phase II investigation in relation to a proposed transaction (described in question 1.3), the transaction will be deemed approved within 150 calendar days (as opposed to 210 calendar days in the Competition Act). These changes have not yet entered into force as of the time of writing.

3.9 Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?

The CCI requires the parties to submit a 500-word summary of the proposed transaction (excluding any confidential information) for publication on the CCI's website as soon as they file the merger notification.

Once the transaction has been approved, the CCI will issue a brief email informing the parties accordingly. The detailed approval order of the CCI will follow within a few weeks of the date of approval of the CCI and will subsequently be published on its website.

The parties must submit a non-confidential version of the merger notification along with the confidential version to protect any confidential information provided by the parties in the notification. The CCI relies on non-confidential information only when preparing its final order. It is common practice for the CCI to publish orders with commercially sensitive information of the parties redacted. However, the CCI has discretion to include or exclude such confidential information – typically in discussion with the notifying parties – as part of the final approval order that is published on its official website.

4 Review process

4.1 What is the review process and what is the timetable for that process?

Phase I (prima facie decision stage): If the Competition Commission of India's (CCI) prima facie opinion is that the transaction does not cause and is not likely to cause an appreciable adverse effect on competition (AAEC) in India, the CCI will pass an order approving the transaction. This is loosely referred to as a 'Phase I investigation'. The CCI must issue its prima facie opinion on the transaction within 30 working days of the date of submission of the merger notification. The CCI usually approves simple notifications within this timeframe. Where the CCI reaches out to third parties under Regulation 19 of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 ('Combination Regulations') in order to assess the impact of a transaction, an additional 15 working days are available to it. The CCI may also request additional information from the parties. The 30-working-day clock is stopped while the parties respond to requests for information from the CCI and the time taken by the parties to respond is excluded from the 30-working-day timeframe.

Phase II: Where the CCI comes to a prima facie view that the combination is likely to cause an AAEC in the market, it may initiate an in-depth Phase II investigation (described in questions 1.3 and 5.2).

Outer limit – maximum time permitted: The CCI may take up to 210 calendar days to review and approve a proposed combination (Phase I or Phase II) from the date of filing of the notification, excluding the time taken by the parties to respond to the CCI's information requests. If the notifying parties and the CCI engage in any discussions on modifications/remedies, the CCI may take up to 60 additional calendar days (in addition to the 210 calendar days allowed) to come up with its decision.

2023 amendment act – reduced timelines: The above timelines have been reduced by the 2023 amendment act (see question 8.1):

  • Phase I: The CCI must issue its prima facie order within 30 calendar days (as opposed to the current 30 working days in the Competition Act) of the date of submission of a merger notification. Where the CCI does not come to a prima facie opinion in respect of a transaction notified before it within 30 calendar days, the transaction will be deemed approved.
  • Phase II: Where the CCI conducts an in-depth inquiry or initiates a Phase II investigation in relation to a proposed transaction, the transaction will be deemed approved within 150 calendar days (as opposed to the current 210 calendar days in the Competition Act).

4.2 Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?

The parties can engage in a pre-filing consultation with the CCI to gain clarity on the nature of the information to be furnished in the notification. In doing so, they can ensure that the information submitted in the merger notification is to the satisfaction of the CCI, thereby reducing the likelihood that the CCI will seek additional information from the parties after filing of the notification. This will reduce the time taken by the CCI to grant approval to the transaction.

4.3 Is there a simplified review process? If so, in what circumstances will it apply?

The CCI has introduced the concept of a 'Green Channel' approval route under the Combination Regulations which allows the parties to file a simplified version of Form I and receive deemed/on-the-spot approval of the transaction immediately upon notifying the CCI. However, it applies only to transactions where the acquirer and the acquirer group have no existing interests in companies that:

  • may be seen as competitors of the target's business;
  • operate in markets with vertical linkages to the target's business; or
  • have complementary linkages to the target's business.

Parties that wish to submit their notification under the Green Channel route may approach the CCI for a pre-filing consultation to informally check that this route is indeed available.

Once the parties have received acknowledgement of their Green Channel filing, they can consummate the transaction immediately.

4.4 To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?

The CCI has cooperated with competition regulators in other jurisdictions when reviewing certain transactions notified before it in the past (eg, the proposed Siemens/Alstom merger). Further, the CCI can enter into a memorandum of understanding (MoU) with foreign regulators to facilitate information exchange and capacity building, among other things. At present, it has entered into at least nine MoUs with various foreign competition authorities.

4.5 What information-gathering powers does the authority have during the review process?

When examining a proposed transaction, the CCI can request additional information from the parties to the transaction. The CCI can also reach out to third parties (eg, customers, suppliers, competitors, sector-related bodies and regulators) under Regulation 19 of the Combination Regulations to assess the impact of a transaction on competition in the relevant market.

Where the CCI comes to a prima facie view that the combination is likely to cause an AAEC in the market, it may initiate a Phase II investigation (described in question 1.3). The merging parties must then provide certain details of the combination as specified in Form IV under the Combination Regulations. Form IV, inviting comments from the public and persons that will be affected or are likely to be affected by the transaction, must be published by the parties.

The CCI can also direct the Office of the Director General (ie, the investigative wing of the CCI) to investigate a proposed transaction and file a report for the CCI's consideration. The Office of the Director General has wide-ranging powers to collect evidence and information – for example, by:

  • examining individuals under oath;
  • requisitioning documents and information; and
  • receiving evidence on affidavits.

4.6 Is there an opportunity for third parties to participate in the review process?

Third parties can participate in the review process under two circumstances:

  • Phase I investigation: If the CCI finds it necessary, it can solicit information from third-party enterprises, including the views of such parties on the AAEC caused by the transaction.
  • Phase II investigation: Third parties may file written objections to the proposed transaction once Form IV has been published.

4.7 In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?

The parties to a multi-jurisdictional merger control filing must ensure that they receive the CCI's approval before the transaction closes both globally and in India. The law includes no carve-out or hold-separate provisions. There are no cases in which the CCI has allowed carve-outs (ie, the separation/sale of the Indian division of the acquirer, such that it would operate on a standalone basis following completion of the transaction) or hold-separate agreements (ie, an agreement which requires that the Indian business operations be conducted independently from the remaining operations of the acquirer until approval of the proposed transaction by the CCI).

4.8 What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?

In reviewing a transaction, the CCI undertakes an AAEC analysis based on the factors specified in Section 20(4) of the Competition Act. These include various negative and positive factors to determine the impact of a transaction on a relevant market in India. The CCI specifically considers an assessment of AAEC in cases where the parties have:

  • horizontal or vertical overlaps; and
  • substantial incremental market share in such overlapping markets.

If a transaction is notifiable, the same AAEC analysis will be applied regardless of the sector of the proposed transaction; although in practice, based on the CCI's experience in certain sectors (eg, pharmaceuticals; sectors involving bidding markets), some of these factors may be prioritised in its analysis. The factors considered by the CCI in its AAEC analysis include:

  • the actual and potential level of competition through imports in the market;
  • the extent of barriers to entry in the market;
  • the level of concentration in the market;
  • the degree of countervailing power in the market;
  • the likelihood that the transaction will result in the parties to the transaction being able to significantly and sustainably increase prices or profit margins;
  • the extent of effective competition likely to be sustained in the market;
  • the extent to which substitutes are available or are likely to be available in the market;
  • the market share, in the relevant market, of the merging parties, both individually and combined;
  • the likelihood that the transaction will result in the removal of a vigorous and effective competitor in the market;
  • the nature and extent of vertical integration in the market;
  • the possibility of a failing business;
  • the nature and extent of innovation;
  • the relative advantage, by way of the contribution to economic development, of any transaction that will have or is likely to have an AAEC; and
  • any benefits of the transaction that may outweigh its adverse impact.

4.9 Does a different substantive test apply to joint ventures?

The criteria for the assessment of joint ventures are similar to those for the other kinds of transactions. The CCI will therefore conduct an AAEC analysis as part of its competition impact assessment when reviewing a merger notification in relation to a joint venture where the parties have:

  • horizontal or vertical overlaps; and
  • substantial incremental market share in such overlapping markets.

In certain cases involving joint ventures between competitors, the CCI may also look closely at spillover effects and information exchange protocols.

4.10 What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?

The CCI usually relies on the theories of harm specified in Section 20(4) of the Competition Act to assess the competitive impact of a proposed transaction (please see question 4.8 for a non-exhaustive list of the theories of harm considered by the CCI when reviewing a transaction).

The CCI's application of assessment tools and theories of harm has matured over the years and is broadly in line with global best practices and precedents. Even though, in most cases, the CCI has focused on the unilateral effects of transactions (eg, combined market shares, the presence of strong competitors post-transaction, pricing factors), it has also shown itself willing to look at coordinated effects (along with unilateral effects or on a standalone basis) and other new theories of harm and non-pricing factors, such as innovation.

5 Remedies

5.1 Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?

If the Competition Commission of India (CCI) has serious concerns about a proposed transaction, the parties can propose remedies as early as during the Phase I review period – that is, during the 30-working-day statutory period available to the CCI for forming its prima facie opinion (30 calendar days under the 2023 amendment act, whenever the amended timeline comes into force (see question 1.1)). Thus, the parties may enter into negotiations on possible remedies well before the expiry of the prima facie or overall deadline for approval of the transaction from the date of filing of the notification (ie, 210 days under the Competition Act and 150 days under the 2023 amendment act, whenever the amended timelines come into force). This is because where the CCI comes to a prima facie view that a proposed transaction will lead to an appreciable adverse effect on competition (AAEC) in the relevant market, it will likely consider a conditional approval, with certain remedies being accepted by the parties.

The CCI usually considers and accepts:

  • structural remedies – for example, divestment of assets, company resources and equity shareholdings;
  • behavioural remedies – for example:
    • the inclusion of non-exclusive licensing arrangements;
    • the inclusion of information control arrangements between the parties;
    • the appointment of independent directors to the board; and/or
    • the withdrawal of a party's presence from a relevant market; and
  • hybrid remedies.

Such remedies may be accepted with or without time limitations.

While the CCI has publicly stated in earlier Phase II cases that it prefers structural remedies to behavioural remedies, its approach has evolved over the years and the nature of the remedies acceptable to the CCI will ultimately depend on the specific facts of each case.

5.2 What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?

Remedies at the stage of the show-cause notice: Upon review of the merger notification, the CCI may arrive at an opinion that there is likely to be an AAEC on competition in the relevant market(s). In such a scenario, a show-cause notice (SCN) is issued to the parties asking them to explain why a detailed Phase II investigation to assess the proposed transaction's effects on competition in the relevant market(s) should not be conducted. The parties must address the CCI's concerns in response to the SCN, which could include voluntarily offering behavioural or structural remedies/commitments. If the CCI is satisfied with the response (including any remedy proposal), it may approve the transaction. However, if the CCI's concerns persist, it will commence a Phase II investigation (please see question 1.3 for a detailed overview of the Phase II investigation).

Remedies during the Phase II investigation: Upon the commencement of the Phase II investigation, the parties may offer remedies to assuage the CCI's concerns. If remedies were already offered in response to the SCN, parties should offer improved remedies with additional behavioural/structural commitments.

Where the parties do not offer remedies on their own, the CCI may propose appropriate remedies on its own – in which case the parties will be required to accept the remedies within 30 working days or propose modifications to the CCI's proposal. If the CCI accepts the modifications, the combination will be approved subject to the parties giving effect to the agreed remedies.

However, if the CCI does not accept the modifications suggested by the parties, it will return the proposed remedies to the parties, which will be required to accept the CCI's proposal within an additional 30 working days – failing which the proposed transaction will be deemed to cause an AAEC in the relevant market. In such case, the CCI may pass an order directing that the proposed transaction not take effect. The CCI may also impose penalties on the parties if they do not comply with its order (please see question 7.3 for the penalties and sanctions that the CCI can impose for contravention of its orders).

The parties can therefore offer remedies to assuage the CCI's concerns:

  • during the prima facie stage;
  • at the time of responding to a SCN; or
  • upon commencement of the Phase II investigation.

The remedies that are ultimately accepted by the CCI will depend on the specific facts of each case.

5.3 To what extent have remedies been imposed in foreign-to-foreign transactions?

The CCI has imposed (and parties have accepted) both behavioural and structural remedies in at least 10 foreign-to-foreign transactions (where the transaction had an Indian nexus or the parties were present in India, thus meeting the jurisdictional thresholds) that were notified to it. The remedies included:

  • the divestment of assets, business resources (eg, IP rights, customer lists, inventory) and equity shareholdings;
  • the execution of non-exclusive licensing arrangements;
  • the sharing of data;
  • the establishment of information control arrangements between the parties;
  • the appointment of independent directors to the board;
  • the withdrawal of a party's presence from a relevant market; and
  • white labelling.

6 Appeal

6.1 Can the parties appeal the authority's decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?

The parties can appeal the following key orders passed by the Competition Commission of India (CCI) under the merger control regime of the Competition Act:

  • rejection of a proposed transaction;
  • orders relating to gun-jumping; and
  • orders relating to penalties for material non-disclosure/omission or misstatements.

Appeals must be filed with the National Company Law Tribunal (NCLAT). Orders passed by the NCLAT can also be appealed to the Supreme Court of India.

6.2 Can third parties appeal the authority's decision, and if so, in what circumstances?

Third parties are not barred from appealing an order of the CCI. However, third parties must demonstrate that they are 'aggrieved parties' – that is, that they have been, or are likely to be, adversely affected by the proposed transaction. The NCLAT is unlikely to entertain third-party appeals unless the third party can substantiate that it is an aggrieved party. The third party will also have to explain whether it approached the CCI while the latter was reviewing the notification, considering that a public notice by way of a summary of the merger notification will have been uploaded on the CCI's official website.

7 Penalties and sanctions

7.1 If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?

The parties may be fined if the proposed transaction is implemented without or prior to the approval of the Competition Commission of India (CCI). The CCI can impose a penalty of up to 1% of the combined assets or turnover of the parties, whichever is the higher. Up until 2021, the CCI imposed only nominal penalties of between INR 0.1 million and INR 50 million. Since 2016, the CCI has imposed penalties for failure to notify/gun jumping in more than 40 cases. Under the 2023 amendment act (see question 1.1), 1% of the 'total value' of the proposed transaction must additionally be considered in order to arrive at the highest possible penalty that can be imposed on the parties. This amendment is not in force as of the time of writing.

Notably, in December 2021, the CCI issued an unprecedented gun-jumping order in Amazon/Future Group (C-2019/09/688), which highlighted the CCI's extensive powers to impose penalties. Through this order, the CCI suspended the approval that it had issued to Amazon for its acquisition of 49% of the share capital of a Future Group entity, Future Coupons Private Limited. The CCI asked Amazon to obtain fresh approval and imposed its highest-ever monetary penalty – INR 2 billion – for failure to notify the full details/rationale and all interconnected transactions/commercial arrangements in relation to Amazon's intention to indirectly achieve a strategic alignment with Future Group's retail entity, Future Retail Limited.

7.2 If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?

Notifiable transactions cannot be consummated (fully or partially) before the CCI has issued its approval. Interconnected transactions must also remain in abeyance until the CCI has approved the transaction. The parties will be subject to proceedings and potential penalties under Section 43A of the Competition Act if the transaction is closed (fully or partially) prior to approval by the CCI.

The CCI can also impose penalties on the parties if the transaction is consummated (fully or partially) before the CCI's approval has been received. The maximum penalty for failure to notify the CCI is 1% of the combined assets or turnover of the combining parties, whichever is higher.

Further, under the 2023 amendment act, 1% of the total value of the proposed transaction must also be considered in order to arrive at the highest possible penalty that can be imposed on the parties. This amendment is not in force as of the time of writing. (Please see questions 7.1 and 7.3 for the penalties and sanctions that can be imposed by the CCI on the parties.)

7.3 How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?

Where the parties offer behavioural/structural remedies in relation to a proposed transaction, they will have to submit a compliance report to the CCI. The CCI, at its discretion, usually appoints an independent third party (eg, a professional monitoring trustee, accounting firm, management consultancy or any professional organisation) to monitor the parties' compliance with the remedies. The parties to the transaction must pay the fees charged by such third parties for monitoring compliance.

If the CCI has proposed remedies in relation to a proposed transaction but the parties fail to accept such remedies within 30 working days (extendable to a total of 60 working days under some conditions), or within such timeframe as may be prescribed by the CCI, the CCI can direct that the proposed transaction not be given effect. To this end, the CCI can establish a scheme to ensure implementation of its order.

If the parties have agreed to comply with remedies but fail to do so within the stipulated timeframe or under the agreed conditions, the transaction will be deemed to have an appreciable adverse effect on competition in the market. The CCI may also impose penalties of up to INR 100,000 for each day of non-compliance with the terms and conditions of the remedies agreed by the parties. Such penalties may extend to a total of INR 100 million. Parties that fail to pay any penalties imposed by the CCI may also be liable to:

  • imprisonment for up to three years; and
  • an additional fine of up to INR 250 million.

8 Trends and predictions

8.1 How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The Indian government officially passed the 2023 amendment act (see question 1.1) on 11 April 2023. Some of the notable provisions of the amendment act that are in force as at the time of writing are as follows:

  • Penalties for material non-disclosure: If a party to a transaction does not disclose full and complete particulars, or discloses false particulars, in relation to a notifiable transaction under the act, the upper limit of the applicable penalties will be increased from INR 10 million to INR 50 million.
  • Expert depositions before the Competition Commission of India (CCI): Parties under investigation for gun-jumping and other proceedings before the CCI are now permitted to bring experts engaged by them to submit their opinion in relation to the parties' submissions/objections.
  • Information from other regulators: The CCI can now enter into formal arrangements with statutory regulators or departments of the Indian government to facilitate cooperation, information sharing and so on. Thus, the CCI may now solicit information or opinions from relevant sector regulators where it is conducting a detailed investigation (including a Phase II investigation) in relation to a combination notified before it.
  • Stakeholder consultation: The CCI now has a statutory obligation to publish a draft of proposed rules and regulations, and to invite comments from stakeholders. It is also obliged to publish its response to the comments received from stakeholders. This amendment will enhance transparency and facilitate effective representation of stakeholders' concerns when the CCI proceeds with drafting new regulations in relation to the amended provisions under the 2023 amendment act.

The 2023 amendment act also includes the following provisions which are not in force as of the time of writing:

  • Transaction value threshold: Any transaction in connection with an acquisition of control, shares, voting rights or assets of an enterprise, or a merger or amalgamation, must be notified to the Competition Commission of India (CCI) where:
    • the value of the transaction exceeds INR 20 billion; and
    • the target has 'substantial business operations in India'.
  • Definition of 'control': An explanation has been added to clearly define the meaning of 'control' with reference to the 'material influence' standard that has been elucidated by the CCI in its decisions.
  • Faster approval timelines: If the CCI does not come to a prima facie opinion in respect of a notified merger within 30 calendar days (as opposed to 30 working days under the Competition Act), the transaction will be deemed to have been approved. Further, where the CCI conducts an in-depth inquiry or initiates a Phase II investigation in relation to a proposed transaction, the transaction will be deemed to be approved within 150 calendar days (as opposed to 210 calendar days under the Competition Act).
  • Time-sensitive market purchases on the stock exchange: Parties can now carry out market purchases or open offers on stock exchange without prior notification to the CCI. This is subject to the following conditions:
    • The parties file a notification within the stipulated timeframe; and
    • The acquirer exercises no ownership or beneficial rights or interests until the CCI's approval has been received.
  • Calculation of turnover: The 2023 amendment act sets out a clear methodology for the calculation of turnover, which is to be calculated on the basis of the last available audited accounts. In calculating such turnover in India, intra-group sales, indirect taxes, trade discounts and all amounts generated through assets or customers located outside India will be excluded. In essence, turnover in India will focus purely on sales made to third parties in India.

9 Tips and traps

9.1 What are your top tips for smooth merger clearance and what potential sticking points would you highlight?

Parties must keep in mind the following points when assessing the merger filing requirements in India to ensure hassle-free merger clearance:

  • As an additional transaction value-based jurisdictional threshold has been introduced (see question 2.6), which may come into effect at any time during the coming weeks or months, whether the merger notification requirement is triggered must be assessed with caution and in consultation with antitrust experts.
  • Early engagement with an antitrust team during the stage of planning and drafting the transaction documents is essential, to avoid potential delays in closing and gun jumping issues.
  • Closing timelines should be carefully planned, taking into account issues such as:
    • the complexities of the transaction; and
    • potential follow-up requests from the Competition Commission of India (CCI) which could stop the clock.
  • The 2023 amendment act (see question 8.1) has reduced the timeline for approval from:
    • 30 working days to 30 calendar days for prima facie (Phase I) approval; and
    • 210 calendar days to 150 calendar days for matters which requires an in-depth investigation (Phase II).
  • Although the aim is to enhance deal certainty and expedite the approval process, this is in fact likely to prolong the timelines and increase uncertainty. Given the truncated timelines, it is probable that overburdened case officers will issue more requests for information from parties to 'stop the clock'. This will add to the burden of the parties and may also result in the invalidation of some filings in situations where the parties need more time to respond to requests for information or in complex fact scenarios. The amended timelines are not in force as of the time of writing.
  • Engage in the CCI's informal consultation process before filing notifications, as this gives case officers additional time to examine submissions before the statutory timeline begins. Organising state-of-play meetings with the CCI may also help to avoid invalidation of the form (ie, a 'pull and refile' situation).
  • Plan for well-thought-out long-stop dates and antitrust risk shifting and standard of efforts clauses, taking into account the potential delays in obtaining regulatory merger control approvals in India.
  • Ensure that the merger notification is comprehensive, to avoid follow-up questions from the CCI and thus extended review timelines.
  • Identify in advance potential remedies that can be offered to the CCI in case of complex transactions.
  • In the coming years, expect the CCI to intervene more aggressively, apply novel theories of harm and conduct relatively more robust, detailed and sceptical scrutiny of transactions – particularly those relating to innovation and data-driven sectors involving network effects, such as e-commerce, platforms, fintech, paytech and pharmaceuticals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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