India Merger Control Update: An analysis by Shardul Amarchand Mangaldas

Shardul Amarchand Mangaldas

The Indian merger control regime under the Competition Act, 2002 (Competition Act) has been in force for nearly five years. The provisions of the Competition Act are to be read together with the notifications issued, from time to time, by the Ministry of Corporate Affairs, Government of India (Ministry) and  the  Competition  Commission of India (Procedure in regard to the transaction of business relating to combinations), Regulations, 2011 (Combination Regulations). Exercising its powers, the Ministry has previously enhanced the jurisdictional thresholds under the Competition Act and also introduced exemptions.

On 5 March 2016, the Ministry has published Notifications S.O.  673(E), 674(E) and 675(E) dated 4 March 2016, enhancing the existing jurisdictional thresholds under the Competition Act and amending and extending the existing exemptions for the target enterprise and group.

Set out below is a snapshot of the changes, all of which are very welcome.

Enhancement in Jurisdictional Thresholds by 100%

Section 5 of the Competition Act provides the asset and turnover based jurisdictional thresholds that are required to be satisfied for a transaction to qualify as a “combination”. A qualifying combination is required to be mandatorily notified to the Competition Commission of India (CCI) for prior approval.

Pursuant to Notification S.O. 675(E), the Ministry has increased the asset and turnover based jurisdictional thresholds under the Competition Act by 100%. Earlier today, we have received a clarification from the Ministry that the enhancement is applicable to the original thresholds set out in Section 5 of the Competition Act and not to the thresholds as enhanced by a similar notification in March 2011. As a result, the jurisdictional thresholds originally set out in the Competition Act have effectively been doubled. The revised thresholds are provided in the Appendix.

As a result of this, it is anticipated that the number of notifiable transactions will decline and this move is seen as being in consonance with the Government’s vision to encourage the ease of doing business in India.

Renewal of Target Exemption with Higher Thresholds

On 4 March 2011, in public interest, the Ministry had issued Notification S.O. 482(E) under Section 54 of the Competition Act, 2002 through which it sought to exempt transactions where the target enterprise either has Indian assets of less than INR 2.5 billion (approx. USD 37.52 million) or Indian turnover of less than INR 7.5 billion (approx. USD 112.56 million), from a notification requirement to the CCI, for a period of five years (Target Exemption). As such, transactions where binding agreements have been entered into prior to 3 March 2016 were entitled to benefit from the Target Exemption.

New notification S.O. 674(E) has not only extended the validity of the Target Exemption for another period of 5 years but also increased the financial thresholds, due to which the transactions where the target enterprise (whose shares, assets, voting rights or control are being acquired) either has Indian assets of less than INR

3.50 billion (approx. USD 52.53 million, an increase by 40%) or Indian turnover of less than INR 10.00 billion (approx. USD 150.07 million, an increase by 33%), will be exempt from the notification requirement, until 3 March 2021.

This is a welcome step, as it ensures that a larger number of transactions involving the acquisition of small targets will not require notification to the CCI for prior approval. However, this is also a missed opportunity in that

(a) it fails to extend the application of the exemption to mergers and amalgamations; and

(b) it does not clarify that in cases of an acquisition   of assets or unincorporated businesses/units/divisions of an enterprise, whether the seller’s entire assets and turnover should be considered (as is currently the practice of the CCI) or those relatable only to the assets or unincorporated businesses/units/divisions being sold.

This is because the language of the Notification continues to only refer to (a) acquisitions (and not mergers and amalgamations) and (b) enterprises (and not the unincorporated businesses/divisions/units or assets, which are a part of an enterprises).

Definition of Group

Notification S.O.481 (E), published on 4 March 2011, by the Ministry had exempt the ‘Group’ exercising less than 50% voting rights in other enterprises from the provisions of section 5 of the Act, for a period of five years (Group Exemption).

As a result, in determining which enterprises are required to be considered for the “group” based jurisdictional thresholds and certain exemptions in Schedule I of the Combination Regulations, only enterprises where 50% or more voting rights are exercised would need to be considered. This had the effect of changing the definition of “group” under the Competition Act (which refers to a 26% voting rights threshold) for the purposes of merger control.

Below are the revised jurisdictional thresholds


This update has been provided by the Shardul Amarchand Mangaldas Competition team.