Overview of the Indian merger control regime

 

The Indian merger control regime has now been in place for a little over a decade. During this time, the regulations have undergone several rounds of amendments. The antitrust regulator, the Competition Commission of India (the CCI), has adopted a largely collaborative approach in this reform process by inviting comments from stakeholders on a periodic basis.

The regulations seek to contribute towards the overall effort in bringing about ease in doing business in India and bringing about an efficient merger control regime in India.

An overview of the Indian merger control regime is set out below:

TRIGGER EVENTS AND THRESHOLDS

The Indian merger control regime is mandatory and suspensory in nature. A notification requirement in India is triggered, subject to certain thresholds being met, in the event of: (i) an acquisition of shares, voting rights or assets of an enterprise, (ii) acquisition of control over an enterprise, or (iii) a merger or amalgamation (each, a combination).

The law prescribes the following two-fold jurisdictional thresholds, which are to be applied (i) to the parties to the combination (i.e. the acquirer and the target along with its subsidiaries), and (ii) to the acquirer’s group:

Joint parties thresholds:

– Where the parties jointly have (a) assets in India of more than INR 20 billion; or (b) turnover in India of more than INR 60 billion; or

– Where the parties jointly have (a) worldwide assets of more than USD 1 billion, including assets in India of more than INR 10 billion; or (b) worldwide turnover of more than USD 3 billion including turnover in India of more than INR 30 billion; or

Acquirer’s group thresholds:

– Where the acquirer’s group has (a) assets in India of more than INR 80 billion; or (b) turnover in India of more than INR 240 billion; or

– Where the acquirer’s group has (a) worldwide assets of more than USD 4 billion, including assets in India of more than INR 10 billion; or (b) worldwide turnover of more than USD 12 billion including turnover in India of more than INR 30 billion.

KEY EXEMPTIONS

The small target exemption is currently in place till 27 March 2027. Under this exemption, combinations where the target either has consolidated assets in India of not more than INR 3.5 billion or consolidated turnover in India of not more than INR 10 billion are exempt from making a merger filing. Further, it is only the value of the true target / actual target that need be considered for the purposes of the filing thresholds. Previously, the value of the seller’s assets / turnover was also considered for determining the filing thresholds in the case of asset acquisitions.

Certain categories of combinations which ordinarily do not have an appreciable adverse effect on competition within the relevant market in India (AAEC) are also exempted from the requirement of making a merger filing. These include acquisition of non-controlling stakes of up to 25% either “solely as an investment” or “in the ordinary course of business” and intra-group mergers and acquisitions.

FILING REQUIREMENTS

When to file

The notification must be filed:

In a merger or amalgamation: Pursuant to final approval by the board of directors to the merger or amalgamation.

In an acquisition of shares, voting rights, control or assets: Pursuant to execution of any agreement or binding document or other document conveying an agreement or decision to acquire.

The requirement for notification of the transaction within 30 days of the trigger event (such as board approval or execution of any agreement) has been suspended till 29 June, 2027.

Where a public announcement has been made for a public tender offer for acquisition of shares, voting rights or control, the CCI has clarified that such public announcement shall be deemed to be the “other document” conveying an agreement or decision to acquire, and, therefore, will be the trigger event for the filing.

Where the parties to the combination and their respective group entities do not have any horizontal or vertical or complementary overlaps, they may avail of the green channel route, where the combination is deemed to be approved by the CCI upon notification of such combination.

Who should file

In an acquisition of shares, voting rights or assets, or an acquisition of control over an enterprise, the acquirer must make the merger filing.

In a merger or an amalgamation, all the parties to the merger or amalgamation are jointly required to make the merger filing.

There are no specific rules for a joint venture, but if a joint venture triggers a filing, it is likely that all the parties to the joint venture will jointly have to make the merger filing.

Filing in the case of inter-connected transactions: In the case of a transaction whose ultimate intended effect is achieved by way of a series of individual transactions which are inter-connected, a consolidated filing covering all such transactions is required to be made even if some of the individual transactions are not required to be notified or are exempt.

TIME LIMIT FOR THE DECISION

Phase I clearance: The CCI is required to form a prima facie opinion on whether the combination causes or is likely to cause an AAEC within 30 working days (which extends to 45 working days if the CCI approaches any third party for information) from the date of making the merger filing.

Phase II clearance: While there is no specific time period for the CCI to issue its final decision, there is a statutory waiting period of 210 calendar days from the date the merger filing is submitted, after which the combination will be deemed to have been approved.

In practice, timelines for approval typically fall in between these two statutory periods as the CCI often issues requests for further information which stop the clock.

PROCEDURAL FORMALITIES

What form to file: Form I (short form) is the default form in all cases (including green channel filings) and Form II (long form) is to be filed only if the individual or combined market shares of the acquirer and target is more than 15% in case of an horizontal overlap and 25% in case of a vertical overlap. Form I is to be filed along with filing fees of INR 2 million and Form II is to be filed along with filing fees of INR 6.5 million.

Who can execute the notification: Any person who has been duly authorised to act on behalf of the executing company can sign a notification.

While the CCI has made available an online system of e-filing for merger notifications, this facility is not widely used. Currently the e-filing facility is available only for making a filing in Form I (short form) and is optional. Through the Covid-19 pandemic, the CCI was however accepting merger notifications through electronic filings, with physical filings to be made subsequently.

INFORMAL CONSULTATION

While the CCI allows non-binding, informal consultation with parties and their advisors on substantive as well as procedural issues, such guidance and opinion of the CCI is generally quite guarded, especially on substantive issues.

PENALTIES

The CCI has the authority to impose a fine of up to 1% of the total turnover or value of the total assets of the combination, whichever is higher, for failure to make a merger filing with the CCI within the prescribed time limit or for instances of gun-jumping. The CCI is also empowered to impose a penalty for submitting wrong information as part of the merger filing. While the CCI exercised this power sparingly in the first few years of the merger control regime, this has now changed and the CCI is no longer shy to resort to such punitive measures to penalise defaulting entities.

DISCLAIMER

This material is for general information only and is not intended to provide legal advice. This material is distributed with the understanding that the authors are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use.

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