The government on Monday notified the provisions related to the deal value threshold under the competition law, wherein companies will be compulsorily required to seek the Competition Commission's approval for mergers and acquisitions beyond a certain limit.
Besides, the clearance of the Competition Commission of India (CCI) will be needed if the target company has substantial business operations in India, according to notifications issued by the Corporate Affairs Ministry.
The latest move will help the fair trade regulator to keep a closer tab on mergers and acquisitions in the digital space.
Vaibhav Choukse, Partner -- Competition Law at JSA -- said among several provisions that have been notified, one of the most significant is the introduction of an additional deal value criterion for assessing whether an M&A deal requires mandatory approval from CCI.
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"Under the criterion, a transaction will require approval of the CCI if the deal value exceeds Rs 2,000 crore and if the target has substantial business operations in India.
"The decision stems from CCI's inability to review several transactions within the digital and other sectors, which were not subject to reporting requirements due to asset or turnover values falling below the jurisdictional thresholds/ target exemption," Choukse added.
Nisha Kaur Uberoi, Partner & Chair of Competition Law, at law firm JSA, said the amendments herald the single largest overhaul of the Indian merger control regime.
"The introduction of the deal value threshold of Rs 2,000 crore for companies with substantial business operations in India brings the CCI on par with global regulators like the US, Germany, and Austria," Uberoi said.
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CCI, which comes under the Corporate Affairs Ministry, has the mandate to ensure fair business practices in the marketplace.
According to her, the enabling regulations and the need for CCI to enhance capacity to keep up their efficient track record of clearing M&A deals will be key to ensuring ease of doing business remains unimpacted.
She also said the exemption rules are a mixed bag for industry.
There will be clarity in relation to the ordinary course of business and solely as an investment minority acquisitions.
However, she said, the inclusion of the right or ability to access commercially sensitive information of the enterprise is going to result in a slew of unintended merger notifications, particularly for PE players, who need access to such information for corporate governance.
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