Introduction:

As businesses look to grow their operations and boost their market share, mergers and
acquisitions (M&A) have become a widespread practise. To achieve success, M&A deals must
carefully manage a number of complicated legal and regulatory hurdles. The results of these
transactions can be greatly impacted by the continuously changing legal and regulatory
landscape surrounding M&A1.

Now let’s first try to understand what are Mergers?

Oxford dictionary defines Mergers as the act of joining two or more organizations or businesses
into one2.

Mergers and acquisitions are manifestations of an inorganic growth process. While mergers can
be defined to mean the unification of two players into a single entity, acquisitions are situations
where one player buys out the other to combine the bought entity with itself. It may be in the
form of a purchase, where one business buys another, or a management buyout, where the
management buys the business from its owners.

Mergers and acquisitions are used as instruments of momentous growth and are increasingly
getting accepted by Indian businesses as a critical tool of business strategy. They are widely used
in a wide array of fields such as information technology, telecommunications, and business
process outsourcing as well as in traditional business to gain strength, expand the customer base,
cut competition, or enter into a new market or product segment. Mergers and acquisitions may be
undertaken to access the market through an established brand, to get a market share, to eliminate
competition, to reduce tax liabilities or to acquire competence, or to set off accumulated losses of
one entity against the profits of another entity. 3

Mergers

Corporate restructuring in the form of M&A often leads to anti-competitive issues. There are
essentially three types of mergers that may lead to anti-competitive issues:

1. Horizontal Merger. It refers to combination or merger of two companies at the same level
of production or distribution in the relevant market. Horizontal mergers are
predominantly undertaken by companies to increase value i.e. to utilize economies of
scale, increase market power and exploit cost based and revenue-based synergies.
However, such mergers eliminate competitors and changes the competitive environment
so that the merging companies could more easily coordinate on price, output and other
1
https://taxguru.in/company-law/study-legal-framework-regulatory-issues-involved-mergers-acquisitions.html
Copyright
2
merger noun - Definition, pictures, pronunciation and usage notes | Oxford Advanced Learner's Dictionary at
OxfordLearnersDictionaries.com
3
 Ministry of Corporate Affairs, https://www.mca.gov.in/MinistryV2/mergers+and+acquisitions.html.
 dimension of competition. For example: Merger of HP (Hewlett-Packard) and Compaq in
2011 and merger of Daimler-Benz and Chrysler in 1998.

2. Vertical Merger. It refers to merger of two companies at different levels of production

chain, essentially, between companies that operate at different, but complementary levels
of the market for the same end product. Vertical mergers can often lead to collusion
between merger companies and third parties or foreclosure of upstream/downstream
market to third parties in the form of limiting or controlling the competitor’s access to
key inputs or outlets. For example: Merger between AOL (America Online) and Time
Warner in 2000, acquisition of Pixar Animation Studios by Walt Disney in 2006, merger
between AT&T and Time Warner in 2016 etc.

3. Conglomerate Mergers. It refers to a merger between businesses that operates in

completely different product markets. Such mergers are rarely anticompetitive by nature,
however such mergers have the potential to eliminate future competitors and delay price
competition. In US, conglomerate mergers are excluded from merger review guidelines.
For Example: Merger of Walt Disney Company and ABC (American Broadcasting
Company) in 1995, acquisition of Whole Foods by Amazon in 2017 etc.

Various laws that govern merger and acquisition in India:

The Competition Act, 2002 (Competition Act) is the principal legislation that regulates
combinations (mergers and acquisitions) in India. Sections 5 and 6 4 of the Competition Act,
which deal with the regulation of mergers and acquisitions, have been in force since 1 June 2011.

The merger control regime is also governed by various notifications issued by the Ministry of
Corporate Affairs, Government of India (MCA) and the Competition Commission of India
(Procedure in regard to the transaction of business relating to combinations) Regulations, 2011
(as last amended on 30 October 2019) (Combination Regulations).

The 2013 Companies Act’s Chapter XV, Sections 230–240, governs mergers and acquisitions.
These are a unique category of compromise and arrangements. The Companies (Compromises,
Arrangements, and Amalgamations) Rules, 2016, were released by the Ministry of Corporate
Affairs, Government of India, by notification on December 14, 20165.
4

5
LAWYERSCLUBINDIA, https://www.lawyersclubindia.com
 Section 230 of the companies act 2013 talks about Making Compromises and Arrangements with
Creditors and Members
 Section 231 talks about the Power of the Tribunal to enforce compromise or arrangement under
Section 230
 Section 232 of the companies act 2013 deals with the Broad Provisions Governing Mergers and
Amalgamations of Companies
 Section 233 of the companies act 2013 talks about the companies that can adopt the Fast Track
Merger route.
 Section 234 of the companies act 2013 talks about a Merger or amalgamation of a company with
a foreign company
 Section 235 talks about the Power to acquire shares of shareholders dissenting from the scheme
approved by the majority
 Section 236 deals with the Purchase of minority shares
 Section 237 talks about the Power of the Central Government to provide for Amalgamation in
the public interest
 Section 238 deals with the Registration of offer of schemes involving the transfer of shares
 Section 239 deals with the Preservation of books and papers of the Amalgamated company
 Section 240 talks about the Liability of officers in respect of offenses committed before the
merger or amalgamation.

The Competition Act, 2002

The Competition Act regulates combinations such as mergers and acquisitions of companies. It
prohibits anti-competitive agreements which have or likely to have an adverse effect on
competition in India. While Section 3 of the Act covers anti-competitive agreements, Section 4
deals with the abuse of a dominant position. Other sections including Sections 5, 6, 20, 29, 30,
and 31 deal with various types of combinations.

 Section 3 of the Competition Act prohibits agreeing to any kind – of composition, supply,
distribution, storage, possession, or administration of goods or prerequisite assistance.
 Section 4 of the Competition Act contains a condition regarding the exploitation of a
commanding position by an industry.
 Section 5 of the Competition Act deals with the Combination which causes or is likely to cause
an appreciable adverse effect on competition (AAEC) within the relevant market in India shall be
void.
 Section 6 Of the Competition Act presents the prerequisites for managing the sequence.
Following this section, the Competition Act sets limits on penetrating any arrangement that
creates a significant adverse effect on competition within a significant business in India.

This assignment will primary focus on how Competition Act, 2002 governs mergers and
acquisition in India.
Relevant Authority for checking Mergers:

The Competition Commission of India (CCI) is the regulatory authority responsible for
reviewing and assessing mergers and acquisitions (see www.cci.gov.in). An M&A transaction
that qualifies as a “Combination” under Section 5 of the Act, is required to be notified to the
CCI unless the transaction is exempted. Such notification to the CCI has to be filed by the
acquirer in case of an acquisition and jointly by the merging or amalgamating parties in case of a
merger or amalgamation6.

What are relevant triggering events:

All forms of (domestic and international) acquisitions, mergers or amalgamations that exceed the
jurisdictional thresholds and do not benefit from any exemption must be notified to, and obtain,
the approval of the CCI before the transaction can be completed.

The Competition Act does not define the terms “merger” or “amalgamation”. The term
“acquisition” is defined to include the direct or indirect acquisition of any shares, voting rights or
assets of any enterprise, or the control over the management or assets of an enterprise.

The reason for such approval from the CCI is to prevent practices that have an adverse effect on
competition or to hinder abuse of a dominant position in the relevant market.

A notifiable transaction must be notified any time after the:

 Board approval of the proposed merger or amalgamation.

 Execution of any agreement or “other document” for the acquisition or acquiring of
control. The term “other document” refers to:
 any binding document conveying an agreement or decision to acquire control, shares,
voting rights or assets;
 in case of a hostile takeover, any document executed by the acquiring enterprise
conveying a decision to acquire control, shares or voting rights; or
 a public announcement for the acquisition of shares, voting rights or control under the
Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations 2011.
Control. The term “control” includes controlling the affairs or management by:

6
  One or more enterprises, either jointly or singly, over another enterprise or group.
 One or more groups, either jointly or singly, over another group or enterprise.
(Section 5, Competition Act).

“Group” means two or more enterprises which are, directly or indirectly, able to do one or more
of the following:

 Exercise 50% or more of the voting rights in the other enterprise.

 Appoint more than 50% of the members of the board of directors in the other enterprise.
 Control the management or affairs of the other enterprise.
The CCI has extended the meaning of the term “control” to include controlling the management
or affairs of an enterprise, by:

 The right to nominate a director on the board of directors.

 Affirmative voting rights such as the right to change or amend the memorandum of
association and/or articles of association, reorganisation or change in the nature of current
business or launch of any new business, appointment or removal of key managerial
personnel, among others.
No limitation period is prescribed for the CCI to pass an order or issue directions in relation to
mergers. The CCI clearance does not preclude a future antitrust investigation.

The jurisdictional thresholds for notification comprise two broad sets of tests:
 Parties test. The parties (that is, the buyer and the target (excluding seller)/or merging
parties) have a:
 combined domestic assets exceeding INR 20 billion (about USD 251.32 million);
 combined domestic turnover exceeding INR 60 billion (about USD 753.96
million);
 combined worldwide assets exceeding USD 1 billion, including domestic assets
of at least INR 10 billion (about USD 125.66 million); or
 combined worldwide turnover exceeding USD 3 billion, including domestic
turnover of at least INR 30 billion (about USD 376.98 million).
 Group test. The group (that is, either the buyer's group and the target (excluding seller)
or the group to which the merged entity will belong) have a:
 combined domestic assets exceeding INR 80 billion (about USD 1.01 billion);
 combined domestic turnover exceeding INR 240 billion (about USD 3.02 billion);
 combined worldwide assets exceeding USD 4 billion, including domestic assets
of at least INR 10 billion (about USD 125.66 million); or
  combined worldwide turnover exceeding USD 12 billion, including domestic
turnover of at least INR 30 billion (about USD 376.98 million).

The 2023 Act proposes (Later in assignment will be discussed in detail) to introduce a third test
to the existing jurisdictional thresholds: the deal value test. According to this test, if a
transaction value exceeds INR 20 billion (about USD 251.32 million), and the parties have
'substantial business operations' in India. The scope of what constitutes 'substantial business
operations' is expected to be clarified by the CCI, through regulations.
While examining whether the parties test is satisfied, the value of assets and turnover of the
immediate parties, including their subsidiaries to the transaction must be taken into account.
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 consolidation of value of assets and turnover is generally useful.
The proposed amendments suggest that while examining whether deal value test is satisfied, the
value of the transaction must include direct, indirect, and deferred consideration.

Notification:

Mandatory or Voluntary
Notification to the CCI is mandatory if the jurisdictional thresholds are met and no exemptions
are available.

Timing
The MCA has done away (by a notifications dated 16 March 2022) the requirement on parties to
notify transactions to the CCI within 30 days of the relevant trigger event until 29 June 2027.
Currently, transactions must be notified before being effected.

Pre-notification and Formal/Informal Guidance

The CCI offers informal, verbal and non-binding pre-notification consultation opportunities to
parties to provide clarification on the procedural and substantive issues before filing a notice.
Parties can arrange for a pre-notification consultation by following the procedure set out by the
CCI's guidelines.

CCI typically takes two to five business days to grant a meeting for pre-notification guidance.
Subject to the complexity of the proposed transaction, pre-notification guidance meetings
typically last for up to about two hours.

Pre-notification contact with the CCI is recommended in cases where there is uncertainty on
whether a transaction must be notified or where the parties are unclear on acceptable relevant
market definitions or the extent of corresponding data to be provided that impacts the choice of
form for notifying CCI (see below, Form of Notification). Increasingly, the CCI has also been
encouraging notifying parties to share drafts of the filing before notification to provide feedback
and secure a more complete draft on formal filing.

Responsibility for Notification

In an acquisition, the acquirer must file the notification. In a merger or amalgamation, it is the
joint responsibility of all the parties to file the notification.

Relevant Authority
The relevant authority is the CCI.

Form of Notification
Notification to the CCI is made either in Form I (shorter form) or Form II (longer form). These
forms can be downloaded from the CCI's website.

The CCI, by way of a gazette notification dated 13 August 2019 (2019 Amendment), has
amended the Combination Regulations and revised the scope of information which has to be
provided under Form I. It has also revised its guidance for filing Form I notifications (Revised
Notes) on 27 March 20207.

A notification to the CCI is typically filed in Form I. However, the CCI expects parties to the
transaction to notify a transaction using the longer Form II, where:

 The post-combination market share of the parties is more than 15% in any horizontally
overlapping market.
 The post-combination market share of the parties is more than 25% in any vertically
linked/overlapping market.
The CCI has also allowed notifications via the "green channel" route. This route is available for
transactions between parties that are:

 Not engaged in identical or similar business.

 Not vertically-linked businesses.
 Not complementary business activities.
Transactions notified to the CCI through the green channel route are deemed approved by the
CCI, upon receipt of the acknowledgement of filing the notification and the parties are free to
close the transaction immediately thereafter.

 in the case of a merger or amalgamation, a notification to the CCI can be following an

approval from the board of the parties to the proposed merger or amalgamation. In the
case of an acquisition, an obligation to notify the CCI arises following the execution of an
agreement or any other binding document which conveys an agreement or decision of the
acquirer to acquire assets of or control over the target. Therefore, even if the parties enter
into a binding term sheet, this can be used by the parties as the binding document to file
the notice with the CCI. Example of the same can be seen in the notice given by by
7
Notes to Form I, https://www.cci.gov.in/images/content/en/notes-to-form-11652806167.pdf
 Caladium Investment Pte. Ltd. (Acquirer or Caladium), pursuant to execution of two
agreements on 24th April 2015, namely, (a) Share Subscription Agreement (SSA)
between, inter alios, Bandhan Bank Limited (Bandhan Bank), Caladium, Bandhan
Financial Services Limited (BFSL) and Bandhan Financial Holdings Limited (BFHL)
and (b) Policy Agreement inter alios, between Caladium, Bandhan Bank, BFSL, BFHI,
International Finance Corporation (IFC) and Small Industries Development Bank of India
(SIDBI)8.

Filing Fee
The filing fees are INR 2 million (about USD 25,131.94) for Form I and INR 6.5 million (about
USD 81,678.81) for Form II (according to the CCI's notification dated 30 October 2019). In an
acquisition, the responsibility to notify, and therefore, the obligation to furnish the filing fee, lies
with the acquirer. In a merger/amalgamation, it is the joint responsibility of the parties to pay the
filing fees.

Obligation to Suspend
Transactions (inside or outside of India) subject to review by the CCI must not be consummated
until clearance is obtained, or a review period of 210 calendar days from the date of notification
passes, whichever is earlier. This obligation cannot be waived.

The 210 days period is inclusive of any "clock stops" (that is, the time taken by the parties to a
merger/amalgamation in providing information or a complete filing). However, it does not
account for the time taken by the CCI and the transacting parties to negotiate remedies, for which
an additional period of 60 working days is envisaged under the Competition Act. The 2022 Bill
proposes to reduce the review period of the CCI to 150 days, which is extendable up to 30 days if
the parties request additional time to furnish information or remove defects.

Procedure and Timetable

Various transactions (inside or outside of India) subject to review by the CCI must not be
consummated until clearance is obtained, or a review period of 210 calendar days from the date
of notification passes, whichever is earlier. This obligation cannot be waived.

The investigation into mergers and acquisitions by the CCI is in two phases.

Phase I
The CCI must issue a prima facie opinion on whether the transaction 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 transaction is unlikely to cause an AAEC, it will approve the transaction. The
30 working-day review period is referred to as Phase I.

8
The review period excludes:

 Time taken by parties to provide additional information required by the CCI.

 Saturdays, Sundays and public holidays.
 Time taken by CCI to ask third parties for their views on the transaction, up to a
maximum period of 15 working days.
Further, the CCI's review clock will re-start if the CCI invalidates a notice for being substantially
incomplete pursuant to which parties re-file. The CCI can require the parties to file afresh
resulting in resetting the review clock. Further, notably, the 2022 Bill proposes to reduce this
Phase I review period to 20 days after which, the transaction will be deemed to have been
approved.

Further, a merger or acquisition notified under the green channel is deemed approved once
notified to the CCI. Therefore, parties to such mergers or acquisitions do not need to wait for the
CCI's review before they can give effect to them.

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. Before a
Phase II investigation formally commences:

The CCI will issue a show cause notice for initiating a Phase II investigation into the
proposed combination to which the parties have 30 calendar days to reply. After the parties
have submitted their replies stating why the inquiry should not proceed, the CCI may direct
its Director General (DG) to submit a report in relation to the merger or acquisition, within
any period stipulated by the CCI. The 2022 Bill proposes to reduce the time available with
the parties to respond to 15 days.
 The CCI must form a prima facie opinion that the merger or acquisition has, or is likely
to have, an AAEC in India, within seven days from receipt of the parties' reply or the
report from the DG (whichever is later).

If the CCI is not convinced by the reasons provided by the parties, it will issue a formal order
commencing the Phase II investigation process, which involves the following steps:

 After the CCI issues its order for an in-depth investigation, the parties must publish non-
confidential details of the transaction in both four leading national daily newspapers (two
of which must be business newspapers) and their own website(s) within ten working days
(proposed to be changed to 7 days by the 2022 Bill) of the CCI's decision to investigate
the transaction. The CCI also publishes these details on its website.
 Third parties, including competitors, suppliers, customers and other market stakeholders
may be invited by the CCI to provide their views on the likely impact of the proposed
transaction on competition, within 15 working days (proposed to be changed to 10 days
by the 2022 Bill) of that publication.
  Within 15 working days (proposed to be changed to 7 days by the 2022 Bill) from the
expiry of the period, the CCI may call for additional information by the parties and the
parties can respond within 15 days (proposed to be changed to 10 days by the 2022 Bill).
 After considering the response of the parties, the CCI passes an order within a period of
45 working days either:
 approving the transaction;
 disapproving the transaction; or
 proposing modifications to the transaction.
 Where the CCI proposes modifications to the transaction, 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.
 Because of the proposed reduction of CCI's review timelines under the 2022 Bill, the CCI
would have a 130 days review time under Phase II, which is extendable by 30 days if the
parties request additional time to furnish information or remove defects.

Substantive Test:

The CCI generally approves a notified transaction if it reaches the opinion that the transaction
will not cause any AAEC within any relevant market in India.

The Competition Act sets out the following factors that the CCI may consider (all or any) to
examine whether the proposed combination results in 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 will result in the parties 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.
 Whether the benefits of the combination outweigh the adverse impact of the combination,
if any9.

9
Section 20(4), Competition Act.
Although there is no separate test for deciding whether to initiate a Phase II investigation, the
CCI typically considers the following factors:
 The parties' and competitors' market shares.
 Market concentration levels post-combination.
 The number of competitors remaining post-combination.
 Extent of barriers to entry.
 Extent of growth in the market and countervailing buyer power.
Some indicative examples on how the CCI assesses combinations is set out below:

 Portfolio effects. In a case concerning the acquisition of the film exhibition business, the
CCI considered that the post-combination market shares and increments, the lack of
efficiencies, the likelihood that the combination would result in the parties being able to
significantly and sustainably increase prices or profit margins, and the lack of incentives
to innovate further as sufficient grounds to determine that there would be an absence of
effective competitors. The CCI ultimately prescribed remedies after conducting an in-
depth investigation10.

The CCI has also looked into anti-competitive concerns arising out of portfolio effects and
bundled offerings, in a transaction concerning electrical products. The CCI observed that
generally there is a strong preference for use of products belonging to the same brand11

 Common ownership. In the pharmaceutical sector, the CCI approved ChrysCapital's 3%

investment in Intas Pharmaceuticals (Intas), on the condition that ChrysCapital would
remove its nominee director and give an undertaking that it will not exercise any veto
rights over certain "strategic" corporate actions in relation to competing portfolio
company, Mankind Pharma. In addition to its minority shareholding in Intas,
ChrysCapital would also acquire the right to appoint a director on the Intas board and
veto certain corporate actions (for example, in relation to charter documents,
commencement of new lines of business, and changes to the capital structure of Intas).
Considering ChrysCapital also had similar rights accompanying its minority investments
in other pharmaceutical companies, the CCI considered ChrysCapital's existing rights in
these other entities enabled it to "materially influence their strategic affairs".

Therefore, as these entities had over 150 overlapping products with Intas, including
consistently high market shares in some competing product categories, a closer review by
the CCI was considered necessary.In this case, the CCI's remedy sought to prevent a
concentration of market power in the hands of ChrysCapital emanating from
ChrysCapital's ability to "materially influence" the affairs of Mankind Pharma and Intas,
both of which exhibited high market shares in competing pharmaceutical products.

PVR Ltd and DLF Utilities Ltd, Combination Registration No. C-2015/07/288.
10

Schneider Electric India Pvt Ltd and MacRitchie Investments Pte Ltd, Combination Registration
11

No. C-2018/07/586.
 The CCI's remedy also sought to prevent potential co-ordination (market allocation,
pricing arrangements and so on) between the competing portfolio entities 12 (On the other
hand, in the acquisition of sole control over Bombardier Transportation by Alstom S.A,
the CCI did not find any concerns despite both the parties having high market shares,
taking into account the presence of significant players (including international suppliers),
limited common bids/projects between the parties and the strong countervailing buyer
power of the customers.

Remedies, Penalties and Appeal

The CCI can propose both structural and behavioural modifications where it believes that the
combination has, or is likely to have, an AAEC, but can be eliminated through suitable
modifications to the transaction.

Phase I
According to the amendments to the Combination Regulations dated 9 October 2018 (2018
Amendment), parties can now offer remedies up front during Phase I.

If measures are offered by the parties, the Phase I review period will be extended by 15 days
(Regulation 19, Combination Regulations). The parties can do so before the CCI forms a prima
facie opinion or while responding to a notice issued by the CCI.

The CCI has, for example, accepted remedies volunteered by the parties in the following cases:

 Northern TK and Fortis Healthcare, Combination Registration No C-2018/09/601. In

this case, the CCI was concerned that the acquirers, the target, and the acquirer group's
joint venture were competitors in the healthcare market and the joint venture could act as
a platform to facilitate collusion between the parties. To alleviate CCI's concerns,
voluntary commitments were offered to ensure that the competing hospitals operated
independently and did not have common directors, and commercially sensitive
information relating to pricing data and day-to-day operations was not exchanged or
disclosed.
 Tata Sons and GMR, Combination Registration No C-2019/07/676. In Tata's
acquisition of GMR Airports, the CCI was concerned that the acquisition could result in
vertical integration between airlines operated by Tata Group and GMR, the latter being
responsible for the management of various airports in India. To pre-empt and address
foreclosure concerns that may arise from the vertical integration between an airline
company and an airport management company, CCI approved the transaction subject to
the following commitments:
 that Tata Sons would not appoint any director in any airport entities (existing and
future) managed by GMR; and
 that there would be no exchange of commercially sensitive information between
GMR and Tata Sons.
12
Chrys Capital and Intas Pharmaceuticals, Combination Registration No. C-2020/04/741).
  Hyundai/Ola Combination Registration No C-2019/09/682. In order to address potential
concerns relating to Ola preferring its own drivers (who own Hyundai or Kia vehicles) on
its platform, the parties offered certain voluntary modifications which included:
 an undertaking that Ola would engage in strategic collaborations on a non-
exclusive basis; and
 an undertaking from Ola that it would ensure that its taxi marketplace algorithm
would not discriminate against any drivers based on the brand of their vehicle.
 Outotec/Metso, Combination Registration No. C-2020/03/735. The CCI viewed the
acquisition of Metso's mineral business by Qutotec as an integration of two close
competitors in the market for Iron Ore Pelletisation (IOP) Equipment Island in India.
To address the potential for an AAEC, the parties offered to sell the Indian Straight Grate
IOP capital equipment business to a suitable buyer. This involved transferring the right to
use the Indian Straight Grate IOP capital equipment drawings, including the related
registered intellectual property by way of an exclusive and irrevocable licence.

Phase II

Once the CCI has initiated its Phase II review, the parties can suggest amendments to the
modification which can only be proposed by the CCI. If the CCI accepts the counter proposal, it
approves the combination. However, if it does not accept the counter proposal, the parties are
given time to accept the modifications proposed by the CCI.

If the parties then fail to accept the modifications proposed by the CCI, the combination is
deemed to have an AAEC and is treated as void. However, there have been no such cases to date.

Remedies can be behavioural, structural or a combination of both. While the CCI typically
directs structural remedies further to Phase II investigations, in the following decisions, the CCI
has accepted behavioural commitments, often along with structural remedies:

 In Schneider Electric and Larsen Toubro13, the transaction involved the acquisition by
Schneider of the electrical and automation business of L&T and was approved pursuant
to a Phase II review by the CCI. The CCI observed that the 29 overlapping products
which were produced by the parties were not used on a standalone basis and were
complementary or supplementary to the other products used in a switchboard.
Accordingly, one or more of these products could be grouped into one or more clusters,
based on their functionality or utility. The CCI noted that the transaction would have
resulted in an increased concentration across 15 markets and provided the entity with
dominance in various markets, given that Schneider and L&T were major close
competitors. The parties were considered to be undisputed market leaders in two of the
products, as the combined market share of the parties ranged from 55% to 60%. More
importantly, the CCI noted that there was a strong consumer preference for the use of
products belonging to the same brands across a low-voltage electrical panel. Accordingly,

13
Combination Registration No. C-2018/07/586
 a large player, such as the combined entity providing a portfolio of products, was at an
inherent advantage.

To alleviate the likely anti-competitive effects arising out of the transaction, the CCI had
recommended divestments. However, it approved the transaction based on alternative
behavioural remedies which were proposed by the parties, without directing any
divestments.

 Similarly, the CCI directed the disinvestment of certain business of the parties as well as
a commitment to not acquire stake in the divested business for a period of ten years 14
Similarly, the CCI approved the WABCO/ZF transaction subject to a detailed
modification plan that included divestments and voluntary commitments by ZF
Friedrichshafen AG15
.

Compliance with commitments made during Phase II is usually monitored by an independent

agency (Monitoring Agency). The Monitoring Agency generally has to submit periodic reports
to the CCI, stating whether the parties to a merger or an acquisition have complied with the
modifications directed by the CCI. The appointed agent must report to the CCI either annually or
at regular periods specified by the CCI.

Failure to Notify Correctly

Various types of penalties are prescribed under the Competition Act on individuals and
companies.

 Gun-jumping and/or failure to notify. If the parties fail to notify a notifiable

transaction, or implement the transaction without approval, the CCI can impose a penalty
of up to 1% of the worldwide turnover or value of assets of the parties to the proposed
combination (whichever is higher). The highest penalty imposed for gun-jumping so far
is INR 2 billion (about USD 25.13 million).
 Material omissions. Where the parties make material false statements or omit to disclose
material facts in the notification, penalties between INR 5 million to INR 10 million
(about USD 62,830 to USD 125,660) can be imposed. The 2022 Bill proposes to increase
the maximum amount of penalty to INR 50 million (about USD 628,300). The fines are
administrative in nature.
 Non-compliance. If the parties fail to pay the above penalty, the Chief Metropolitan
Magistrate in Delhi can impose fines of up to INR 250 million (about USD 3.14 million)
and/or imprisonment of up to three years.

14
Linde and Praxair, Combination Registration No C-2018/01/545.
15
WABCO and ZF Friedrichshafen AG, Combination Registration No C-2019/11/703.
Implementation Before Approval or After Prohibition
The Indian merger control regime is suspensory in nature and a combination cannot be
implemented unless approved. Gun-jumping (that is, implementation before the receipt of
approval from the CCI) can involve a penalty of up to 1% of the total turnover or value of assets
of the combination (whichever is higher).

The CCI, taking a strict approach, assesses the potential competition effects of gun jumping to
decide cases. In Adani Green Energy Limited16, , the CCI held that exchange of commercially
sensitive information between parties, before CCI's approval will also be termed as gun jumping
and the parties have a strict standstill obligation unless the combination is approved.

As the CCI is yet to issue a prohibition order, it has not imposed any penalties for
implementation after prohibiting a merger. However, the Competition Act prescribes a fine of
INR 100,000 (about USD 1,257) for each day of non-compliance up to a maximum of INR 100
million (about USD 1.26 million) for contravention of the orders or directions of the CCI.

Failure to Observe
As with the above, where a person fails to comply with the CCI's orders or directions without
reasonable cause, the CCI is empowered to impose a fine of up to INR 100,000 (about USD
1,257) per day up to a maximum of INR 100 million (about USD 1.26 million) (section 42(2),
Competition Act). Failure to pay this penalty or continued non-compliance of the orders by CCI
can result in fines of up to INR 250 million (about USD 3.14 million) and/or imprisonment of up
to three years (section 42(3), Competition Act).

Although there have been no such cases to date, a failure to comply with any proposed remedies
could result in the combination being deemed to having an AAEC in the relevant market in India
and being blocked from taking effect. Further, non-compliance with such remedies could also be
treated in the same way as failure to comply with the CCI's orders.

16
Combination Registration No. C-2021/05/837
Changes Introduced by Competition Amendment Act, 2023 in the field of Mergers And
Acquisition:

Highlights of the Same:

 The Act seeks to amend the Competition Act, 2002, to regulate mergers and acquisitions
based on the value of transactions.  Deals with transaction value of more than Rs 2,000
crore will require CCI’s approval.  The Act has reduced the timeline for the CCI to pass
an order on such transactions from 210 days to 150 days. 

 The Act expands the scope of entities that can be adjudged to be a part of anti-
competitive agreements.  Currently, enterprises or persons engaged in similar businesses
can be held to be a part of anti-competitive agreements.  The Act expands this to also
include enterprises or persons who are not engaged in similar businesses.

 The Act provides a framework for settlement and commitment for faster resolution of
investigations of anti-competitive agreements and abuse of dominant position. 

 The amended Act decriminalises certain offences under the Act by changing the nature of
punishment from imposition of fine to civil penalties.  These offences include failure to
comply with orders of the CCI and directions of the Director General related to anti-
competitive agreements and abuse of dominant position.

Key Issues and analysis

 Acquisitions in the digital markets are valued based on data or certain business
innovation of the company being acquired.  Acquisition of such entities may not fall
under the purview of traditional thresholds of assets or turnover to evaluate their impact
on competition.  The act evaluates such deals based on the value of transactions. 
 The act expands the powers of the Director General for investigating contraventions
under the Act.  This includes the power to seek information and documents from legal
advisers also.  This may be at variance with the provisions of lawyer-client
confidentiality under section 126 of the Indian Evidence Act, 1872.

 The amended Act mandates depositing 25% of any amount levied by CCI prior to filing
an appeal against a CCI order before the NCLAT.  The question is whether specifying a
mandatory deposit in the law is appropriate.

 The Act allows the use of intellectual property rights as a defence in cases of anti-
competitive agreements.  This defence is not available in cases involving abuse of
dominant position.  The Bill does not address this gap.

Context:
 The Competition Act, 2002 was enacted to promote and sustain competition in markets, protect
the interest of consumers, and ensure freedom of trade for market participants 17.  It established
the Competition Commission of India (CCI) to eliminate practices having adverse effect on
market competition.  Under the Act, enterprises are not allowed to enter into anti-competitive
agreements which can cause an appreciable adverse effect on competition in India or abuse their
dominant position.  Persons and enterprises are also not allowed to enter into a combination
which causes or is likely to cause an appreciable adverse effect on competition within the
relevant market in India.  Combinations are defined as the acquisition, merger or amalgamation
of one or more enterprises.  Combinations that meet certain thresholds based on their assets or
turnover have to be notified for CCI’s approval.

Since the Competition Act came into force, Indian markets have grown significantly 18. There has
also been changes in the way businesses operate with the emergence of digital internet based
companies and new age markets involving technology.2  In 2018, the Ministry of Corporate
Affairs constituted the Competition Law Review Committee to ensure that the Competition Act
is in line with India’s economic fundamentals 19.  In its deliberations, the Committee noted that
certain market practices are not adequately covered by the current regulatory framework. The
Committee released its report in 2019 and suggested several amendments to the Act and changes
in the regulatory structure dealing with matters of market competition.  The Competition
(Amendment) Bill, 2022, was introduced after reviewing the recommendations proposed by the
Competition Law Review Committee.  The Bill seeks to broaden the scope of anti-competitive
agreements, provide for evaluation of combinations based on value of transactions, reduce the
time limit for approval of combinations, and introduce settlement and commitment framework to
reduce litigation. 

Key Features 

 Regulation of combinations based on transaction value: The Act prohibits any person or

enterprise from entering into a combination which may cause an appreciable adverse effect on
competition.  Combinations imply mergers, acquisitions, or amalgamation of enterprises. The
prohibition applies to transactions where parties involved have: (i) cumulative assets of more
than Rs 1,000 crore, or (ii) cumulative turnover of more than Rs 3,000 crore, subject to certain
other conditions. The Bill expands the definition of combinations to include transactions with a
value above Rs 2,000 crore.

 Time limit for approval of combinations: The Act requires the CCI to pass an order on an
application for approval of combinations within 210 days.  The Bill reduces this time limit to
150 days. 

 Definition of control for classification of combinations: For classification of combinations,

the Act defines control as control over the affairs or management by one or more enterprises
17
The Competition Act.2002.
18
 Report of Competition Law Review Committee, Ministry of Corporate Affairs, July 2019.  
19
 “Government constitutes Competition Law Review Committee to review the Competition Act”, Press Information Bureau,
Ministry of Corporate Affairs, September 30, 2018. 
 over another enterprise or group.  The Bill modifies the definition of control as the ability to
exercise material influence over the management, affairs, or strategic commercial decisions.

 Anti-competitive agreements: Under the Act, anti-competitive agreements include any

agreement related to production, supply, storage, or control of goods or services, which can
cause an appreciable adverse effect on competition in India.  Any agreement between
enterprises or persons, engaged in identical or similar businesses, will have such adverse effect
on competition if it meets certain criteria.   These include: (i) directly or indirectly determining
purchase or sale prices, (ii) controlling production, supply, markets, or provision of services, or
(iii) directly or indirectly leading to collusive bidding.  The Bill adds that enterprises or persons
not engaged in identical or similar businesses shall be presumed to be part of such agreements,
if they actively participate in the furtherance of such agreements. 

 Settlement and Commitment in anti-competitive proceedings: Under the Act, CCI may

initiate proceedings against enterprises on grounds of: (i) entering into anti-competitive
agreements, or (ii) abuse of dominant position.  Abuse of dominant position includes: (i)
discriminatory conditions in the purchase or sale of goods or services, (ii) restricting production
of goods or services, or (iii) indulging in practices leading to the denial of market access.  The
Bill permits CCI to close inquiry proceedings if the enterprise offers: (i) settlement (may
involve payment), or (ii) commitments (may be structural or behavioural in nature).  The
manner and implementation of the framework of settlement and commitment may be specified
by CCI through regulations. 

 Decriminalisation of certain offences: The Bill changes the nature of punishment for certain
offences from imposition of fine to penalty.  These offences include failure to comply with
orders of CCI and directions of Director General with regard to anti-competitive agreements and
abuse of dominant position.

PART B: KEY ISSUES AND ANALYSIS

Evaluating deal value for regulation of combinations  

Under the Act, combinations are defined as the acquisition, merger, or amalgamation of one or
more enterprises if they meet certain thresholds based on their assets or turnover.  Combinations
meeting these thresholds have to seek CCI’s approval.  The Bill seeks to add an additional
threshold of deal value of transactions for the notification and scrutiny of combinations.  
According to the provision, transactions with a value of more than Rs 2,000 crore will have to be
notified for CCI’s approval.  Value of transaction is proposed to include every valuable
consideration, whether direct, indirect, or deferred for any acquisition, merger, or amalgamation.

Of late, acquisitions in the digital markets, are valued based on data or certain business
innovation of the company being acquired (target).2  In such transactions, the target may not have
a large asset base and may be in a line of business where products/services are given free or
generate insignificant revenue.2  For instance, Facebook acquired the messaging platform
WhatsApp in 2014 for approximately USD 19 billion20.  Between January to June in 2014,
WhatsApp’s revenue was USD 15 million and it reported a net loss of USD 233 million 21.  While
such transactions may have an impact on market competition, the CCI currently lacks the legal
framework to evaluate them if they do not meet the stipulated criteria based on assets or
turnover.  

Certain countries have relied on evaluating the deal value of such transactions in order to assess
their impact on market competition.  In the US, premerger notifications have to be filed if a
transaction is valued over USD 200 million and does not attract any exemptions. For transactions
valued between USD 50 million and USD 200 million, premerger notifications have to be filed if
it meets certain other thresholds.  According to the Austrian Federal Cartel Act, 2005, if the
value of a merger transaction is greater than 200 million euro, it has to be notified to the Federal
Competition Authority22. Under the German competition law, there is a deal value threshold of
400 million euro for regulation of acquisitions, subject to certain other criteria.,2 

The Competition Law Review Committee (2019) had recommended the inclusion of a deal value
threshold for merger notification under the Competition Act, 2002. The Standing Committee on
Commerce (2022) had observed that widening the ambit of merger scrutiny was needed to
prohibit e-marketplace companies from engaging in anti-competitive transactions.

20
”Facebook to Acquire WhatsApp”, Meta Investor Relations, February 19, 2014. https://investor.fb.com/investor-
news/press-release-details/2014/Facebook-to-Acquire-WhatsApp/default.aspx
21
WhatsApp Inc. Interim Condensed Financial Statements.  WhatsApp Inc., Securities Exchange Commission,
Exhibit 99.2 UnauditedWhatsAppIncQ214 (sec.gov).
22
Federal Cartel Act,2005, as amended effective 10 September 2021.