The Indian merger control regime came into effect on 1 June 2011 with the notification of Sections 5 and 6 of the Competition Act, 2002 (Competition Act). The regime is governed by the Competition Act, notifications issued by the Ministry of Corporate Affairs, Government of India (MCA), and the Competition Commission of India (Procedure in regard to the combination of business relating to combinations) Regulations 2011 as amended up to 26 November 2020 (Combination Regulations). Under the Indian merger control regime, a ‘combination’ (i.e., an acquisition, merger, or amalgamation or a joint venture) must be notified to and approved by the Indian competition authority, the Competition Commission of India (CCI), if it breaches the prescribed asset and turnover thresholds and does not qualify for any statutory exemptions. The requirement to notify the CCI is mandatory and such combinations are subject to a ‘standstill’ or suspensory obligation until approved by the CCI within the prescribed timelines.
The CCI must issue a prima facie opinion on whether the combination is likely to cause an ‘appreciable adverse effect on competition’ (AAEC) within the relevant market in India within 30 working days from the date of notification. If the CCI finds that the combination is unlikely to cause an AAEC, it will approve the combination. Where the CCI has not passed any orders within 210 days (i.e. such days as are calculable for the Combination Regulations), the combination shall be deemed to be approved. In case of a filing under the “green channel”, a combination is “deemed” approved by the CCI on receiving an acknowledgment of filing and there is no waiting period for approval, and therefore consummation.
Where the CCI believes that a combination causes or is likely to cause an AAEC within the relevant market in India, it has the power to direct that the combination shall not take place. As of August 2021, the CCI had cleared approximately 713 combinations, with a vast majority within the 30-working-day Phase I period. To date, the CCI has cleared 8 combinations subject to remedies after a detailed Phase II investigation and has not blocked a single combination. Further, the CCI has approved 39 green channel filings as of August 2021.
In this chapter, we provide a brief overview of the recent trends in Indian merger control, including key amendments to the Combination Regulations. We then outline the circumstances under which parties to a combination are required to notify the CCI, and the factors considered by the CCI when determining whether a combination is likely to cause an AAEC.
2. Is notification compulsory or voluntary?
The requirement to file a notice with the CCI is mandatory, provided the prescribed jurisdictional thresholds are breached and no statutory exemption is applicable. As such, the suspensory regime (i.e., requirement to receive CCI’s approval before closing) applies. Accordingly, any breach of the ‘standstill’ requirements leads to penalties for ‘gun-jumping’ under the provisions of the Competition Act. The CCI is empowered to impose a penalty of up to 1% of the total turnover or value of assets of the combination, whichever is higher, for ‘gun-jumping’. The highest penalty imposed by the CCI till date is INR 5 crores (about USD 0.67 million) imposed in two cases (Piramal Enterprises Limited/ Shriram Transport Finance Company/Shriram Capital Limited/ Shriram City Union Finance Limited ) and (GE Energy BV/ General Electric ).
3. Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
The Indian merger control regime is suspensory and therefore, a combination cannot be consummated until the CCI has granted its approval. This is an absolute restriction and there are no carve-outs for closing a combination before receiving approval from the CCI.
4. What types of combinations are notifiable or reviewable and what is the test for control?
The Indian merger control regime requires combinations (mergers amalgamations and acquisitions), to be notified to CCI if they (i) breach the jurisdictional thresholds prescribed under the Competition Act (refer to question 6), and (ii) are unable to benefit from any exemption. An ‘acquisition’ refers to the acquisition of shares, voting rights, assets, or control of any enterprise.
Under the Competition Act, ‘control’ is defined to include ‘controlling the affairs or management by (i) one or more enterprises, either jointly or singly, over another enterprise or group, or (ii) one or more groups, either jointly or singly, over another group or enterprise’ While there is no ‘bright line’ test prescribed by the Competition Act or the CCI to define control, based on the CCI’s decisional practice, control includes de facto and de jure control as well as ‘material influence’. The CCI has examined the scope of ‘control’ in several cases, a brief overview of which is set out below:
- A bundle of affirmative rights over the day-to-day management/strategic business affairs of the target, including the approval of the business plan, commencement of a new line of business, discontinuing any existing line of business, appointment of key managerial personnel, approval of the budget, changes/amendments to the constitutional documents and any other strategic business decision is viewed as amounting to control (Century Tokyo Leasing Corporation/Tata Capital Financial Services Limited ).
- The right to nominate a director to the board of directors, coupled with certain affirmative rights such as, ability to make changes to the capital structure, removal of key managerial personnel, etc. (Caladium Investment Pte. Limited )
- The right to recommend candidates for senior management constitutes an ability to participate in managerial affairs (Jet/Etihad ).
- To ascertain control, an enterprise must show that it can exercise ‘decisive influence’ either by way of positive or negative control rights. (Piramal Enterprises Limited/ Shriram Transport Finance Company/Shriram Capital Limited/ Shriram City Union Finance Limited ).
- The ability to block special resolutions of an enterprise (which, in per the Indian corporate laws, is achieved with a >25% shareholding) is considered to confer ‘negative control’ (Sun Life India/Birla Sun Life ).
- Control includes ‘material influence’ in addition to de facto and de jure control. The ability to manage the affairs of the other enterprise may be inferred from special rights/ veto rights, status, and expertise of an enterprise or a person. (Ultratech JAL ).
CCI typically determines control by examining the collective impact of a bouquet of rights. The set of rights identified above are, at best, indicative and do not constitute an exhaustive list of rights that may be considered as ‘control’ conferring.
5. In which circumstances is an acquisition of a minority interest notifiable or reviewable?
The Combination Regulations exempt acquirers from notifying an acquisition if the acquisition (i) does not entitle the acquirer to hold twenty-five percent (25%) or more of the total shares or voting rights of the target company; (ii) is made “solely as an investment” or in the “ordinary course of business”; and (iii) does not lead to the acquisition of control over the target company. This exemption applies to transactions that cumulatively satisfy the above parameters.
In the interpretation of the terms “solely as an investment” and “ordinary course of business”, the CCI’s decisions hold that the Item 1 Exemption does not apply to combinations that are ‘strategic’ or where there are overlaps between the activities of the target and the acquirer (directly and indirectly). The CCI has recently held that a holistic appreciation of the shareholding and the nature and extent of rights acquired in the target enterprise would be relevant in determining whether a particular acquisition amounts to be solely as an investment. More specifically, the CCI observed that the following rights are relevant in determining whether the acquisition is a mere investment or strategic in nature – representation on the board of directors and/or its committees, veto or consultation rights with respect to strategically important corporate actions, appointment or termination of key managerial personnel, amendment to charter documents and commencement of new line of business and the right to access non-public information (Canary Investments Limited/Link Investment Trust II/Intas Pharmaceuticals Limited ). The term “ordinary course of business” can be interpreted as combinations that are usual, frequent, and routine .
An acquisition of less than ten percent (10%) of the total shares or voting rights of an enterprise shall be treated as “solely as an investment”, provided that the following conditions are met:
- The acquirer can exercise only such rights that are exercisable by the ordinary shareholders of the enterprise whose shares or voting rights are being acquired to the extent of their respective shareholding;
- The acquirer must not be a member of the board of directors of the enterprise whose shares or voting rights are being acquired and does not have a right or intention to nominate a director on the board of directors of the enterprise whose shares or voting rights are being acquired and does not intend to participate in the affairs or management of the enterprise whose shares or voting rights are being acquired.
The test for control for applicability of Item 1 Exemption is the same as mentioned in question 4 above.
6. What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
The jurisdictional thresholds for notification comprise two broad sets of tests:
i. Parties’ test – Parties (buyer and target (excluding seller)/ or merging parties) have:
- combined domestic assets exceeding INR 20 billion (about USD 269.20 million); or
- combined domestic turnover exceeding INR 60 billion (about USD 807.66 million); or
- combined worldwide assets exceeding USD 1 billion, including domestic assets of at least
INR 10 billion (about USD 134.62 million); or
- combined worldwide turnover exceeding USD 3 billion, including domestic turnover of at
least INR 30 billion (about USD 403.87 million).
ii. Group test – Group (buyer’s group and target (excluding seller) or group to which the merged entity will belong) has:
- combined domestic assets exceeding INR 80 billion (about USD 1.08 billion); or
- combined domestic turnover exceeding INR 240 billion (about USD 3.2 billion); or
- combined worldwide assets exceeding USD 4 billion, including domestic assets of at least INR 10 billion (USD 134.59 million); or
- combined worldwide turnover exceeding USD 12 billion, including domestic turnover of at least INR 30 billion (USD 403.87 million).
While examining whether the parties’ test is satisfied, the value of assets and turnover of the immediate parties (including their subsidiaries) to the combination must be taken into account. Importantly, financial thresholds must be assessed in light of the substance of the combination, and not its form. For example, if the direct acquirer is a special purpose vehicle, then its parent entity’s consolidated value of assets and turnover ought to be assessed to determine whether or not the combination is notifiable.
While examining whether the group test is satisfied, the ultimate parent/holding company of the acquirer/the entity surviving after the merger must be identified. On identification, its consolidated value of assets and turnover must be taken into account. Reliance on the relevant accounting principles on the consolidation of the value of assets and turnover is generally useful.
Further, combinations where the target enterprise either (i) holds assets of less than INR 3.5 billion (USD 47.11 million) in India; or (ii) generates a turnover of less than INR 10 billion (USD 140.77 million) in India, are currently exempt from the mandatory pre-notification requirement (De Minimis Exemption). However, the Indian merger control regime does not have any sector-specific thresholds. The jurisdictional thresholds and the de minimis thresholds are uniformly applied across all sectors (other than certain exempt sectors, detailed in response to question 13).
7. How are turnover, assets, and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The relevant accounting principles on the consolidation of the value of assets and turnover can be relied on for determining the turnover and assets of a company.
The value of assets is the book value of total gross assets (e.g. fixed assets, investments, current assets, and deferred tax assets), deducting any depreciation, as shown in the audited books of account of the enterprise in the financial year immediately preceding the financial year in which the combination falls.
The turnover includes the value of the sale of goods or services i.e., revenue from operations, including exports but excluding indirect taxes and intra-group sales, as shown in the audited books of account of the enterprise in the financial year immediately preceding the financial year in which the combination falls. For banks, turnover shall be the aggregate of operating income (i.e. interest income of a bank) and other income such as commission, exchange, and brokerage, income earned by dividends, profit (loss) on sale of investments, leasing income, and profit (loss) on exchange combinations. For insurance companies, turnover would be the gross premium without deducting the reinsurance ceded, and other income such as income from investments in shares, securities, real estate, or other assets would be considered as a part of turnover where such investments amount to control over the enterprises involved.
Where a portion of an enterprise or division or business is being acquired, taken control of, the value of assets of the said portion or division or business and the turnover attributable to it, is aggregated with the value of assets and turnover of the acquirer, to calculate the jurisdictional thresholds.
8. Is there a particular exchange rate required to be used to convert turnover and asset values?
The rate of conversion of foreign exchange currency into Indian Rupees or US Dollars is based on the average spot rate of the last six months quoted by Financial Benchmarks India Ltd. (FBIL) from the date calculated with reference to the ‘trigger event’ leading to the filing of a notification. The spot rates as published by the FBIL are available here.
9. In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
There is no special dispensation for joint ventures (JVs) under the Competition Act from a merger control perspective and JVs are often examined as an “acquisition”. In relation to a pure greenfield JV absent a transfer of assets, the value of assets and turnover of such JV is unlikely to meet the de minimis thresholds as described above. That said, for setting up or acquisition of a brownfield JV where the parents of the JV contribute assets, business divisions, contracts, intellectual property, etc. to the JV, may be notifiable in case the de minimis thresholds are exceeded and the jurisdictional thresholds are breached due to the contribution of such assets, business division, etc.
10. Are there any circumstances in which different stages of the same, overall combination are separately notifiable or reviewable?
The Indian merger control regime requires parties to file a single notification for such combinations that achieve its ultimate effect by way of a series of steps or smaller individual combinations that are inter-connected (one or more of which amounts to a notifiable combination). The CCI’s decisional practice identifies at least the following parameters for determining whether two or more combinations are inter-connected: (a) commonality of business and parties involved (Shell/Hazira ); (b) cross-conditions in transaction documents or public announcements of the parties (Mandala Rose/Jain Irrigation Systems ); (c) commercial feasibility of isolating two combinations (CCI v. Thomas Cook ); and (d) simultaneity in negotiation, execution, and consummation of combination documents (Piramal Enterprises Ltd.).
11. In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
The thresholds for regulating “foreign – to – foreign” mergers are the same as provided in question 6 above.
12. For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
13. What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
The CCI is required to consider all or any of the following factors to determine whether the combination being considered is likely to cause an AAEC:
- actual and potential level of competition through imports in the market;
- extent of barriers to entry into the market;
- level of combination in the market;
- degree of countervailing power in the market;
- likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
- extent of effective competition likely to sustain in a market;
- extent to which substitutes are available or are likely to be available in the market;
- market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
- likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
- nature and extent of vertical integration in the market;
- possibility of a failing business;
- nature and extent of innovation;
- relative advantage, by way of the contribution to the economic development, by any combination having or likely to have an AAEC; and
- whether the benefits of the combination outweigh the adverse impact of the combination, if any.
The Competition Act does not specify sector specific threshold. However, certain sector-specific exemptions from the mandatory notification requirement are available:
- Any share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank, or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement is not subject to CCI’s suspensory regime. Parties to such combinations, within 7 days from the date of the acquisition, are required to file the details of the acquisition including the details of control, the circumstances for the exercise of such control, and the consequences of default arising out of such loan agreement or investment agreement, as the case may be.
- On 10 August 2017, the Government of India issued a notification (under section 45 of the Banking Regulation Act 1949) exempting certain regional rural banks (governed by the Regional Rural Banks Act 1976) from the merger control provisions for 5 years (that is, until 10 August 2022).
- On 30 August 2017, the exemption from the merger control provisions was also extended to all mergers and acquisitions involving nationalized banks, under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980, for 10 years (that is, until 30 August 2027).
- On 22 November 2017, all mergers and acquisitions involving central public sector enterprises operating in the oil and gas sectors under the Petroleum Act 1934 have been exempted from the merger control provisions for 5 years (that is, until 22 November 2022).
14. Are factors unrelated to competition relevant?
The CCI (usually) only considers factors having a direct effect on competition in a relevant market (factors listed in response to question 13 above) in its competitive analysis of a combination.
15. Are ancillary restraints covered by the authority’s clearance decision?
Ancillary restraints/restrictive provisions such as non-compete covenants are typically addressed during the review of the combination by the CCI. In December 2020, the CCI did away with need to identify and justify non-compete restrictions as a part of the form I (by deleting this query from the form I). Parties will need to undertake a self assessment while entering into non-compete arrangements. The CCI’s analysis of non-compete arrangements is likely to follow similar principles as the guidance note  since it was broadly aligned with best international practices.
16. For mandatory filing regimes, is there a statutory deadline for notification of the combination?
The Competition Act and the relevant regulations governing combinations in India were amended to do away with a statutory deadline for notification. The parties can notify the combination to the CCI any time after the execution of binding combination documents. However, no notifiable combination can be implemented/ closed before receiving approval from the CCI.
17. What is the earliest time or stage in the combination at which a notification can be made?
A notification can be made to the CCI upon execution of binding combination documents in case of any acquisition or board resolutions approving the merger, in case of a merger or amalgamation.
18. Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
A pre-filing consultation (PFC) is an oral and informal process that is typically undertaken when parties seek the CCI’s guidance on (i) whether a combination can benefit from certain exemptions under the Competition Act (ii) the form of filing to be made, or (iii) a substantive review of a draft notification form in an attempt to reduce the follow-on information requests from the CCI (once the formal filing is made). CCI recommends parties to conduct a PFC to assess whether a combination qualifies for a green channel filing (see question 19 for additional details about green channel filings). The CCI has published guidelines on the procedure for seeking a PFC  and parties are encouraged to engage with the CCI. Once a formal request is filed for seeking a PFC, the CCI typically takes 2-5 business days to respond to the request and grant an appointment. In response to the Covid-19 pandemic, the CCI has been conducting PFC meetings through audio-visual conference.
19. What is the basic timetable for the authority’s review?
Scenario A- When a combination has horizontal overlaps, vertical relationships, or complementary relationships
The CCI’s investigation is in two phases:
Phase I – The CCI must issue a prima facie opinion on whether the combination is likely to cause an AAEC within the relevant market in India within 30 working days from the date of notification. If the CCI finds that the combination is unlikely to cause an AAEC, it will approve the combination. The 30-day review period is referred to as Phase I.
The 30-day review period excludes the time taken by:
- The parties to provide additional information required by the CCI;
- The CCI to ask third parties for their views on the combination, subject to a 15 day limit; and
- Further, the review clock stops where the CCI invalidates a notice for being substantially incomplete. The CCI can require the parties to file afresh resulting in resetting the review clock.
At the end of the 30 working days, if the CCI is unable to reach a view that the proposed combination is unlikely to cause an AAEC, the CCI will issue a show-cause notice to parties asking to “show cause” for not initiating a Phase II investigation into the proposed combination. The parties are given 30 calendar days to reply to this notice. If parties’ are unable to address the CCI’s concerns identified in the show cause notice, the CCI will pass an order formally commencing the Phase II investigation process.
Phase II – If the CCI forms a prima facie opinion that the merger or acquisition is likely to cause an AAEC within the relevant market in India, the CCI can extend its review period until the full 210 calendar day statutory period (the Phase II review period) for an in-depth investigation.
A Phase II investigation involves the following steps:
- After the CCI issues an order directing an in-depth investigation, the parties must publish non-confidential details of the combination in 4 leading national daily newspapers and their own websites within 10 working days of the CCI’s decision to investigate further. Third parties, including competitors, suppliers, customers and other market stakeholders are then invited to provide their views on the likely impact of the combination within the relevant market within 15 working days of publication. Thereafter, within 15 working days from the expiry of the period, the parties can respond to these comments.
- After considering the response of the parties, the CCI passes an order within 45 working days either:
- approving the combination;
- disapproving the combination; or
- proposing modifications to the combination.
Where the CCI proposes modifications to the combination, the review timeline is extended by up to 60 working days for discussion on remedies. This extension is excluded from the 210-day review period.
Scenario B- When a combination does not have any horizontal overlaps, vertical relationships, or complementary relationships.
In a recent amendment to the Combination Regulations by way of a gazette notification dated August 13, 2019, the introduction of a ‘Green Channel’ regime (Green Channel) has allowed notifiable combinations that don’t involve any form of ‘overlaps’ in the activities of the parties (vertical, horizontal or ‘complementary’) to be automatically deemed approved on receiving an acknowledgment of filing. Typically, these combinations are approved on the same day of the formal filing upon receiving an acknowledgment of filing. Therefore, parties to such combinations will no longer have to wait for the CCI’s review period before giving effect to the combinations.
A notification filed under Green Channel needs to be notified in a short Form I along with a declaration that attests to (a) the lack of overlaps between transacting parties and (b) the proposed combination not causing an AAEC. However, the following factors have to be taken into account before filing a notification under Green Channel –
- Absence of overlaps will have to be confirmed, not only among transacting parties, but also their respective groups and any entity in which parties, directly or indirectly, hold shares and/or exercise control.
- A combination qualifies for Green Channel only where parties do not overlap in ‘any plausible relevant market(s)’, including narrowly defined relevant markets.
The parties must not have any horizontal overlaps (i.e., they must not produce or provide similar or identical or substitutable products or services), vertical overlaps (i.e., they must not be engaged in commercial activities at different levels of the production chain); or any complementary businesses (i.e., they must not be engaged in any complementary activities).
20. Under what circumstances may the basic timetable be extended, reset, or frozen?
The CCI timelines to review a combination may get extended if the combination is investigated under a Phase II review. The CCI review timelines of a combination may also get reset if a notification gets invalidated by the CCI on the grounds of lack of complete information provided by the parties concerning the proposed combination or a lack of conformity with the Combination Regulations.
21. Are there any circumstances in which the review timetable can be shortened?
While there is no formal procedure for the review period to be shortened, when parties engage with the CCI (by way of a PFC) with a draft notification form, the follow-on information requests issued by the CCI at a later stage typically reduce. According to the CCI’s PFC guidance, parties are encouraged to consult the CCI with the draft notification form to achieve an expeditious review of the proposed combination.
22. Which party is responsible for submitting the filing?
In an acquisition of shares, assets, control or voting rights or the creation of a JV, the acquirer(s)/ parent companies of the JV must file the notification. In a merger or amalgamation, the parties have a joint responsibility to the merger to file the notification.
23. What information is required in the filing form?
The requirement of substantive information depends on the choice of form, i.e., Form I (short form) or Form II (long form), which depends on the extent of overlaps and the combined market shares of the parties in the relevant market(s).
The parties may choose to file the notification in Form II if combined market shares exceed 15% (horizontally) or 25% (in vertical markets). In case the combined market shares are less than 15% (horizontally) and 25% (in vertical markets), the parties may notify the combination in Form I.
The CCI published a revised Form I on 13 August 2019 and subsequently issued guidance for parties to file a Form I (Revised Notes) on 27 March 2020 . Form I requires the following information (non-exhaustive list): (1) description of the combination; (2) corporate and financial information of the parties; and (3) market-facing information, including (a) overlapping products and/or services of the parties; (b) total market size and market shares of the parties and their top 5 competitors, and (c) details of top 5 suppliers and customers of the parties. Based on the Revised Notes, market shares are to be provided for three years (as opposed to the earlier requirement of one year), only when the combined market shares of the parties for any plausible alternative relevant market exceeds 10%. Parties are now also required to disclose any complementary relationships between them, as opposed to the earlier requirement of disclosing only horizontal overlaps and vertical relationships. The Revised Notes also clarify the scope of complementary products and services. Importantly, while mapping horizontal and vertical overlaps, parties are now required to consider entities in which they hold: (a) a direct or indirect shareholding of 10% or more, or (b) a right or an ability to exercise any right (including any advantage of commercial nature) that is not available to any ordinary shareholder, or (c) a right or an ability to nominate a director or observer in another enterprise.
A Green Channel notification is filed as a Form I and does not require any market-facing information, given the absence of overlaps.
Form II, on the other hand, requires additional information over a typical Form I, including additional corporate information from the parties and certain additional market-facing information like characteristics/ end use of the overlapping products/ services, presence of specialized producers, in-house consumption, government procurement policies, licensing/ registration requirements, etc. Form II also requires the parties to provide estimates of concentration levels (Herfindahl-Hirschman Index), entrants/ exits in the market, demand conditions, information on imports and exports, etc.
24. Which supporting documents, if any, must be filed with the authority?
The following supporting documents are required to be filed along with a notification form:
- Company authorization authorizing a signatory to sign the notification form on behalf of the notifying party;
- Declaration signed by the authorized signatory of the notifying party attesting to the fact that all details contained in the notification form are true and bona fide to the best of the authorized signatory’s knowledge and belief, and that all estimates are identified as such and are its best estimates based on the underlying facts;
- For a Green Channel notification, an additional Declaration signed by the authorized signatory of the notifying party, stating that there are no horizontal overlaps, vertical relationships, or complementary relationships between the parties;
- Authorization letter in favor of the legal counsel representing the notifying party;
- Proof of filing fees having been furnished.
- Auditor’s certificate and certificate of authenticity for any unaudited financials provided (if audited financial statements are not ready) for the financial year preceding the date of the combination; and
- Confidentiality affidavit certifying that the information/documents over which confidentiality is being claimed are not available in the public domain.
- In case of a merger, board resolution from the parties approving the combination;
- All combination documents; and
- Audited financial statements of the parties for the financial year preceding the date of the combination.
- Documents and materials considered by the board of directors and/or key managerial persons of the parties and/or their relevant group entities, in relation to the proposed combination (this is not required for green channel filings).
- Form II also requires parties to submit (a) copies of any analyses, reports, studies or surveys taken into account by the parties for the purpose of ‘assessing the impact of the transaction’ and (b) selling aids and promotional material of the parties’ products and services.
25. Is there a filing fee?
The filing fee for a Form I notification is INR 20,00,000/- (approximately USD 27,000) and for a Form II notification is INR 65,00,000/- (approximately USD 89,000). In case of an acquisition, the acquirer must pay the filing fees. In a merger/amalgamation, it is the joint responsibility of all the parties to pay the filing fees.
26. Is there a public announcement that a notification has been filed?
The parties to a combination are required to submit a 1000 word, non-confidential summary of the combination with the notification, which is published on the CCI’s website as soon as the notification is filed.
The summary must contain:
- The names of the parties;
- Nature and purpose of the combination;
- The product(s), services, and businesses;
- The markets in which the parties to the combination operate; and
- If the combination is being filed under Green Channel.
This summary is uploaded on CCI’s website on the date of the formal filing. The CCI’s website also indicates whether the combination is notified in Form I or Form II, and the status of review i.e., whether pending, approved (with or without modifications), or deemed approved (in case of Green Channel notification).
In the event of a Phase II investigation, the parties are required to publish details of the transaction in Form IV (which would include a competitive assessment section as well), which is published on the CCI’s website as well as their own. The purpose of the Form IV is to invite public comments or objections in respect of the transaction.
27. Does the authority seek or invite the views of third parties?
Where the CCI deems it necessary, it may call for information from any other enterprise while inquiring as to whether a proposed combination has caused or is likely to cause an AAEC in India, in Phase I. Where a proposed combination is under a Phase II review, parties are directed to publish non-confidential details of the combination in 4 leading national daily newspapers and their own websites within 10 working days of the CCI’s decision to investigate the combination further. Third parties are then invited to provide their views on the likely impact of the combination within the relevant market within 15 days of publication.
28. What information may be published by the authority or made available to third parties?
Where a combination is being reviewed under a Phase II investigation, the CCI directs the parties to publish the details of the combination in “Form IV” within 10 working days of the date of such direction. The details required to be published under Form IV include:
- Details of the structure of the combination
- Details of the combination in the form of a summary:
– Details of the business activities of the parties;
– Rationale, objectives, and the impact of the combination;
– Information about the market(s) in which the parties to the combination overlap – relevant market definition and the list of overlapping products;
– Information regarding factors considered by the CCI for a competitive assessment of the relevant market and impact of the combination on the relevant market. This includes factors such as level of combination in the market, the extent of barriers to entry into the market, the extent of effective competition in the market; availability of substitutes, aggregation of market shares of the parties to the combination, removal of competitors, the existence of vertical linkage, etc.
– The expected timeframe for completion of various stages of the combination.
29. Does the authority cooperate with antitrust authorities in other jurisdictions?
The CCI has entered into several bilateral/multilateral international cooperation agreements with other competition regulators, such as the European Commission, the Competition Bureau Canada, the Australian Competition and Consumer Commission, the US Federal Trade Commission, Japan Fair Trade Commission and regulators of the BRICS nations. The CCI reaches out to other competition authorities during the review process and regularly seeks waivers from parties to share information with other authorities in large global combinations.
30. What kind of remedies are acceptable to the authority?
The CCI can propose behavioral, structural or hybrid remedies, where it believes that a potential AAEC arising out of a combination in India can be eliminated through suitable modifications. Traditionally, the CCI in most cases has preferred structural remedies. For instance, in ZF , the acquirer proposed to divest its entire shareholding in a joint venture that had overlapped with the target. In Outotec , the parties agreed to divest an overlapping business (along with know-how, intellectual property rights, etc.) to a third party.
The CCI has also accepted/imposed purely behavioral remedies. In Schenider/L&T , the CCI imposed a variety of only behavioral remedies such as white labeling of products, non- exclusivity in distribution networks, and export commitments. In Jio , a non-bundling commitment was accepted. In Hyundai , non-exclusive strategic collaboration agreements as well as non-discriminatory and non-preferential algorithms were accepted. In Northern TK  and Valkyrie , the CCI required parties to ensure that there were no common directors between the acquirers, the target, and the acquirer group’s other companies- which were all competitors). The CCI also directed firewalls between these entities to ensure that there was no information exchange between them. In ChrysCapital/Intas , to address concerns arising from common ownership the CCI accepted voluntary commitments from ChrysCapital to remove its nominee director in a competing portfolio investment and agree not to exercise veto rights over certain “strategic” corporate actions.
31. What procedure applies in the event that remedies are required in order to secure clearance?
Pursuant to the Combination Regulations, notifying parties could offer remedies up-front in Phase I before the CCI passes an order in Phase I. If the parties offer such remedies upfront, the CCI has an additional period, not exceeding 15 days, to evaluate the remedies and accept them. The 15-day period does not count toward the overall 210-day period.
If the parties choose not to offer remedies in Phase I, and the CCI decides to initiate a detailed Phase II investigation, the next opportunity to offer remedies will be at a later stage in Phase II itself. In this stage, the remedies are formally proposed “by” the CCI for acceptance by the parties (even if informally offered by the parties themselves). If the parties choose to accept the remedies, the merger is cleared at that stage. If not, the parties have another 30 working days to submit a counter-proposal. This 30-day period does not count toward the overall 210-day period. If the CCI accepts the revised proposal, then the decision is issued at that point, else the parties have another 30 working days (again, not counting toward the overall 210-day period) to accept the original remedies proposed by the CCI in the first instance.
32. What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
Various types of penalties prescribed under the Competition Act on individuals and companies are as follows:
- If the parties fail to notify a notifiable combination or implement a combination without the CCI’s approval (‘gun-jumping’), the CCI can impose a penalty of up to 1% of the total turnover or value of assets of the parties, whichever is higher, under Section 43A of the Competition Act;
- If the parties fail to pay the above penalty, the Chief Metropolitan Magistrate, Delhi can impose fines of up to INR 250 million (approximately USD 3.4 million) and/or imprisonment of up to 3 years.
Thus far, the CCI has imposed penalties ranging from INR 0.5 million to INR 50 million for delayed notifications and from INR 10 million to INR 50 million for gun jumping.
However, as on June 29, 2017 the MCA introduced a notification which exempts enterprises from filing a notice within 30 days of signing the trigger document, for a period of five years, i.e., until June 28, 2022. As a result of this notification, there is no requirement for transacting parties to notify a combination to the CCI within 30 days of signing the trigger document and hence, there are no accompanying penalties associated with it.
33. What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
If parties make material false statements or omit to disclose material facts in the notification, penalties between INR 5 million to INR 10 million (approximately USD 70,000 to USD 140,000) can be imposed. For a Green Channel notification, the combination would be deemed void.
34. Can the authority’s decision be appealed to a court?
As a general rule, decisions of the CCI which conclusively determine the rights and obligations of the parties can be contested before the appellate tribunal (including decisions arising from gun jumping proceedings). The CCI’s final decisions concerning a combination can be appealed before the National Company Law Appellate Tribunal (NCLAT) either by the notifying party or by any third party who can demonstrate that it has been harmed by the CCI’s order.
In an appeal filed in the case of the CCI’s order in Jet/Etihad , the erstwhile appellate tribunal dismissed the appeal ruling that the complainant was not an ‘aggrieved party’ within the Competition Act and hence had no authority to challenge the CCI’s order. A similar appeal filed by a third party against the approval of the merger of Royal Dutch Shell Plc and BG Group Plc, alleging that the parties had not submitted complete information on the relevant markets involved in the combination and failure on CCI’s part to follow the procedure in relation to issuance of a show-cause notice, was recently dismissed by the NCLAT because (i) the complainant failed to prove that the combination resulted in any AAEC; and (ii) the appeal was not ‘maintainable’ on account of not being under any of the ‘appealable provisions’ under the Competition Act. Further, appeals against any decision or order of the NCLAT can be filed before the Supreme Court of India.
35. What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
In terms of recent trends, the Revised Notes are a welcome development, especially for private equity investors and enterprises that do not have substantial overlaps with the target entity. The Revised Notes: (i) simplify mapping overlaps between the parties; (ii) simplify the provision of market-facing information; and (iii) clarify the scope of ‘complementary’ products and services. The Revised Notes also require an enhanced level of disclosure: (i) from the acquirer concerning its group activities; and (ii) on the intricacies of the combination.
Further, in the wake of the global pandemic of Covid-19, India, like most other countries, went into lockdown. To ensure regulatory continuity and progress new and pending cases, the CCI in a welcome move issued a press release , clarifying the procedure for electronic filing of notification forms as well as online video consultations. Be it Form I/Form II combinations, Green Channel notifications, or even, combinations with remedies, it has been business as usual for the CCI’s combination division which has conducted its review as seamlessly as possible with limited staff and work-from-home facilities.
More importantly, in April 2020, the CCI issued an unprecedented advisory to businesses, in times of Covid-19 . The CCI recognized the need for businesses to coordinate certain activities (such as data sharing and coordination of stock levels, transport logistics, R&D, distribution network and infrastructure, etc.) to ensure the continued supply of products on account of disruptions caused due to Covid-19. The CCI cautioned that businesses should adopt only such measures that are necessary and proportionate to address concerns arising out of Covid-19 while emphasizing that the Competition Act already has certain in-built safeguards to protect businesses from sanctions for coordinated conduct.
As stated in response to question 15, the CCI has done away with the need to identify and justify non-compete restrictions as a part of the form I (by deleting this query from the form I) . CCI is no longer required to approve a non-compete restriction in its merger review, although it can investigate any anti-competitive concerns arising from ancillary restraints including non-compete arrangements under the behavioural provisions of the Competition Act.
Lastly, the gazette notification issued by the Government of India in 2016 which restricted the definition of “group” (in terms of shareholding) to such entities in which 50% or more shareholding was held, has expired in March 2021 . In the absence of any update notification in this regard, two or more enterprises would be considered as a “group” under Section 5 of the Competition Act if they are, directly or indirectly, in a position to: (i) exercise 26% or more of the voting rights in the other enterprise; (ii) appoint more than 50% of the members of the board of directors in the other enterprise; or (iii) control the management or affairs of the other enterprise.
36. Are there any future developments or planned reforms of the merger control regime in India?
The Competition Law Review Committee was formed for reviewing and overhauling the Competition Act, after nearly 18 years of enforcement. The committee submitted its report to the MCA with multiple recommendations, which formed the basis of the Competition Act (Amendment) Bill, 2020 that is currently pending in the Indian Parliament. While the Bill contains substantive changes to the structure and functioning of the CCI, notable amendments to merger control in particular include –
- Eligibility of insolvency resolution proceedings under the Insolvency and Bankruptcy Code for the Green Channel regime;
- Enabling provisions to prescribe necessary thresholds, including deal-value threshold for merger notifications;
- Greater powers to investigate technology mergers that currently fall outside the thresholds;
- A reduction in the maximum time for an investigation to 150 days from the earlier 210 day period;
- A reduction in the time period for the CCI to issue its preliminary opinion on whether a combination is likely to cause an AAEC, to 20 calendar days (from the present 30 working day period);
- Amending the definition of ‘control’ to include the ability to exercise ‘material influence’ over the ‘management or affairs or strategic commercial decisions’; and
- Power to allow derogation from stand-still obligations – this allows parties (in certain circumstances) to enforce a combination while they are awaiting approval from the CCI. An example is that of a hostile takeover where the acquirer will be allowed to purchase securities of the target, provided that the acquirer surrenders the dividend and voting rights attached to such securities until the CCI approves the combination.
- C- 2015/01/243
- Order under Section 43A of the Competition Act against Reliance Jio Infocomm Ltd., C-2017/06/516
- Regulation 9(5) of the Combination Regulations.
- (2018) 6 SCC 549.
- Order under Section 43A of the Competition Act against Piramal Enterprises Limited, C-2015/02/249.
- The press release inviting public comments on the CCI’s proposal to omit this requirement is available at: http://cci.gov.in/sites/default/files/whats_newdocument/PublicComments-Non-Compete.pdf
- The press release inviting public comments on the CCI’s proposal to omit this requirement is available at: http://cci.gov.in/sites/default/files/whats_newdocument/PublicComments-Non-Compete.pdf
Hemangini Dadwal, Partner
Shivam Jha, Senior Associate
Kshaema Susan Mathew, Associate