Mergers and Acquisitions (M&A) play a vital role in shaping corporate strategy and driving economic growth. However, in India, no significant M&A deal is complete without examining its impact on market competition. The Competition Commission of India (CCI) acts as the antitrust watchdog, ensuring that combinations (i.e., mergers, acquisitions, or amalgamations) do not lead to the creation of monopolies or have an appreciable adverse effect on competition (AAEC) in the Indian market.
This blog explores the essentials of CCI approval in M&A transactions, thresholds, timelines, procedural compliance, and recent regulatory trends.
Understanding the Role of CCI in M&A
The Competition Act, 2002, as amended, empowers the CCI to regulate combinations that could negatively affect competition. The rationale is to prevent market dominance, protect consumer interest, and encourage healthy competition.
Under Section 5 and 6 of the Act, parties entering into a combination must notify the CCI prior to consummation, if the transaction crosses certain financial thresholds.
Thresholds for Mandatory Notification
As per the latest Combination Regulations and the updated thresholds (post inflation indexing), the following criteria apply:
1. Assets or Turnover of Parties (India Level)
- Combined assets in India > ₹2,000 crore
- OR combined turnover in India > ₹6,000 crore
2. Group Level Threshold
- Group to which the acquired enterprise will belong has assets in India > ₹8,000 crore
- OR turnover in India > ₹24,000 crore
3. Global Threshold
- Combined worldwide assets > US$1 billion, with at least ₹1,000 crore in India
- OR combined worldwide turnover > US$3 billion, with at least ₹3,000 crore in India
If these thresholds are crossed, the transaction is considered a “notifiable combination”.
When Is CCI Approval Required?
You must file with the CCI before giving effect to the transaction, even if the deal has not closed. Gun-jumping, i.e., closing a deal before clearance, can attract hefty penalties under Section 43A of the Act.
Exemptions:
- Certain intra-group restructurings
- Acquisition of less than 25% shares for investment purposes (without control)
- Acquisition by a bank or financial institution as part of normal business
These may be exempt from prior approval under specific Schedule I exemptions of the Combination Regulations.
Filing Procedure: Forms and Timelines
There are two primary filing forms:
Form I (Short Form)
- For simple, low-risk combinations.
- Filing fee: ₹20 lakh
- Timeline: CCI aims to clear within 30 working days (can extend to 210 calendar days maximum).
Form II (Long Form)
- Required when there is overlap in products/services or potential competition concerns.
- Filing fee: ₹65 lakh
- The CCI may also request the parties to move from Form I to Form II if they believe deeper scrutiny is needed.
Key Considerations for CCI Approval
1. Market Definition
Define relevant product and geographic market accurately. CCI will assess how the combination affects competition in these defined segments.
2. Horizontal and Vertical Overlaps
Whether the parties operate in the same (horizontal) or connected (vertical) markets influences the competitive assessment.
3. Market Share
High post-combination market share (typically >40%) raises red flags.
4. Barriers to Entry
CCI evaluates whether new competitors can easily enter the market post-merger.
5. Countervailing Buyer Power
If buyers are strong enough to discipline the merged entity, it may mitigate competitive concerns.
Penalties for Non-Compliance
Failing to notify the CCI can result in a penalty of up to 1% of the total turnover or assets, whichever is higher. In recent years, CCI has imposed penalties for “gun-jumping” even in minority acquisitions where strategic intent was evident.
Recent Trends & Developments
1. Digital and Tech M&As are under more scrutiny, even where target companies have low revenue (Killer Acquisitions).
2. Green Channel Route introduced for automatic approval in certain low-risk mergers.
3. Proposed Amendments (2023-24): The Competition Amendment Act proposes shorter timelines, deal value thresholds, and more accountability.
Practical Tips for Smooth Approval
- Start early: Engage legal and economic experts before signing the deal.
- Assess overlaps: Conduct a market overlap assessment internally.
- Prepare documentation: Maintain transparency and consistency in disclosures.
- Engage with CCI: In complex cases, pre-filing consultations with CCI help reduce delays.
- Consider “clean team” arrangements to ensure no strategic data is exchanged before clearance.
Conclusion
CCI approval is a critical legal step in M&A in India. With the evolving landscape and rising scrutiny in tech and digital deals, businesses must approach combinations with strategic legal foresight and regulatory preparedness. Early compliance, robust competition analysis, and transparent disclosures are key to avoiding penalties and ensuring a timely closure of deals.
