DISSERTATION- SYNOPSIS

Navigating the Regulatory Cross-Roads: A Detailed Analysis of the

Regulatory Framework Domestic M&As in India

Submitted by:
Rashmi Kumari
LLM
Semester-II
Batch: 2023-24 (Corporate Laws),
of

National law University, Jodhpur

In
February, 2024.

Under the guidance of

Dr. Mr. Anand Kumar Singh

INTRODUCTION

Anti-Trust Laws
"Without competition, consumers have little choice, innovators find little opportunity,
and workers lack bargaining power."
- Robert Reich,

If we bifurcate the terms- Anti and Trust, we get Trust which gets formed when two or more
people join hands to make joint decisions, like a union or cartel 1. And, anti means opposing,
therefore, antitrust means- against the formation of union or cartel.
Antitrust law is dealt under the Competition Act, 2002 under Section 3 and 4 of the Act.
Where section 3 deals with anti-competitive agreements and section 4 deals with abuse of
dominant powers.
The combination (mergers) is specifically dealt under Section 5 and 6 of the Act and the
Combination Regulations 2011. Section 5 of the Competition Act is the principle section
which states what a combination is:
".......Acquisition of one or more enterprises by one or more persons or merger or
amalgamation of enterprises shall be a combination of such enterprises and persons or
enterprises......."
Whereas section 6 states that any person or enterprise which is proposing to enter into a
combination must give notice to the Commission of the activity. The main purpose behind it
is to assess whether such combination will create AAEC on the market or not. The
submission must be done within 30 days of the approval of the merger. The newly amended
Section 2A which is a standstill clause under Section 6(2) provides for timeline and states that
that no combination will take effect for 210 days from the date of giving notice to the
Commission and until the Commission passes an order on the Combination 2.
The process is ex-ante, thereby meaning that the companies merging has to take prior
approval of the regulatory body, i.e, CCI. The Competition Commission after checking
required threshold bases on asset/turnover and their appreciable adverse effect on the market.
If there’s no AAEC3 on the market the CCI approves the merger, like in the case of Fincare
Small Finance Banks with AU Small Finance Banks. If there’s substantial AAEC in the
market then CCI suggests slight moderations to be done in the contract and then greenlights

1
Defined under Section 2(c) of The Competition Act, 2002
2
Akshit Gupta, Antiturst - A major issue in the modern M&A Regime, https://articles.manupatra.com/article-
details/Antiturst-A-major-issue-in-the-modern-MA-Regime Accessed on 8th February, 2024
3
Appreciable Adverse Effect on Competition
the merger, like in the merger of Sun Pharma-Ranbaxy in 2014 4. If there is found to be
significant AAEC in the market the CCI can disapprove the merger. Since its inception in
2009, the CCI hasn’t disapproved any merger.

Mergers and Acquisitions under the Act

Liberalization in 1991 has been a watershed moment for the Indian trans-border cooperative
economy .With several Foreign Companies investing in India, as well as Indian enterprises
merging or acquiring foreign entities. With the number of cross-border mergers rising from
156 to 236 from 1974 to 1994, the number of acquisitions rose exponentially from just 11 to
646 during the same time period. This prompted the Government to take some serious steps in
order to prevent the incessant inflow of foreign ventures as well as rampant takeover of Indian
entities by MNCs. The introduction of statues such as Foreign Exchange Management Act,
1999 (FEMA) along with Cross -border merger Regulations of 2018. The constitution of the
Securities Exchange Board of India (SEBI) for the regulation of listed entities introduced
concepts which were prevent in the western M&A domains, such as hostile takeovers, price
rigging, Listing Obligations of the participating entities etc 5. Furthermore, with the enactment
of the Competition Act in 2002, the fair competition regime was given a boost when the
erstwhile MRTP Act of 1969 was scrapped to introduce a modern, reinforced antitrust law to
ensure that M&A Transactions did not produce any adverse impact on the level of healthy
competition in the market. Public M&A in India saw a halt after the 2009 -10 Global
Financial Crisis, it bounced back just a few years, statistically, inbound mergers i.e. mergers
in which a foreign company mergers with an Indian company, with the resultant entity being
based in India majority of the times, accounted for 40% of the total Mergers in the year 2013.
The antitrust provisions to the act were added in 2009, and the regulations of combinations
took effect on 1rst June, 2011, in between the concerns of various parties primarily revolving
around the time for acceptance of transactions. Nevertheless a quick and transparent
assessment has eliminated the time and cost overruns, thereby making India's merger control
regime one of the most extolled in the domain of competition law.
In 2019, Competition Commission introduced the green channel route, symbolizing a new
approach in filing cases in a mandatory and suspensory regime. Moving further on a fiduciary
approach the commission introduced an automatic route for approval of combination in case
of no overlaps, be it vertical, horizontal or complementary, between the parties and the

4
M&A Critique, Sun Pharma Acquires Ranbaxy, https://mnacritique.mergersindia.com/sun-pharma-acquires-
ranbaxy/#:~:text=In%20April%202014%2C%20Sun%20Pharmaceutical,for%20each%20share%20of
%20Ranbaxy. Accessed on 8th February, 2024
5
Samir Gandhi, Hemagini Dadwal adn Indrajeet Sircar,”Antitrust and Competition in India”, Global Compliance
News (2020) https://www.globalcompliancenews.com/antitrust-and-competition/antitrust-and-competition-in-
india/ Accessed on 13th February, 2024
businesses. This move has significantly enhanced the ease of doing business as such
transactions can now be consummated immediately upon filling only.

Mergers & Acquisitions

"Mergers are like marriages. Two can live as cheaply as one, but it's twice the trouble."
- Warren Buffett
DOMESTIC MERGERS
When two Indian companies decides to merge is domestic mergers. Domestic mergers in
India have become a significant aspect of the country's corporate landscape, driven by various
factors including market consolidation, strategic expansion, and operational synergies. These
mergers involve companies within India's borders combining their operations, assets, and
resources to achieve specific business objectives.
One key motivation behind domestic mergers in India is to enhance market presence and
competitiveness. By consolidating their operations, companies can achieve economies of
scale, streamline processes, and optimize resource utilization, thereby strengthening their
position within the domestic market. Additionally, mergers enable companies to expand their
product offerings, diversify their customer base, and access new distribution channels, driving
revenue growth and profitability.
However, domestic mergers also present challenges, including regulatory compliance,
cultural integration, and organizational restructuring. Companies must navigate the
complexities of India's legal and regulatory framework, including approval processes
governed by the Companies Act, Competition Act, and Securities and Exchange Board of
India (SEBI) regulations.

REGULATIONS GOVERNING DOMESTIC MERGERS

 The Competition Commission of India- The merger and combinations are primarily dealt
by the Competition Act under its sections 5, 6, 20, 29, 30, 31. In addition to this the
Competition Commission of India (CCI) (Procedure in regard to the Transaction of
Business relating to Combinations) Regulations, 2011 (Combination Regulations) govern
the manner in which the CCI will regulate combinations that have caused or are likely to
cause an appreciable adverse effect on competition (AAEC) in India.
 The Competition Amendment Act 2023 introduces a new deal value threshold under
Section 5 of the Act, specifically for “Combinations”. According to this provision, any
transaction related to the acquisition of control, shares, voting rights, or assets of an
enterprise, merger, or amalgamation, with a deal value exceeding INR 20 billion, will
require approval from the CCI.
 Also recently, CCI amended its reporting requirements for companies planning to do
merger and for this Form-II has been revised.
 The amendment has also introduced penalty provisions under Section 43A for failing to
provide required documents.
 The Amendment Act mandates that the CCI must form a prima facie opinion on a
combination within 30 calendar days. If the CCI fails to form such an opinion within the
specified timeline, the combination will be deemed approved, and no separate order from
the CCI will be required.

PVR-INOX MERGER
The entertainment and media sectors have taken a keen interest in the proposed merger of
PVR and INOX, two of India's top movie theatre chains. This merger would establish a strong
company with a sizable market share in India's movie theatre industry 6. The purpose of the
merger is to take advantage of the synergies that exist between the two businesses, such as
increased scale economies, operational effectiveness, and negotiating strength with movie
distributors. The proposed merger between PVR and INOX aims to leverage the
complementary strengths of both companies to create a powerhouse in the Indian cinema
exhibition industry. By combining their extensive networks, resources, and expertise, the
merged entity would be better positioned to capitalize on economies of scale, streamline
operations, and drive operational efficiencies. Moreover, the merger would enhance the
bargaining power of the combined entity with film distributors and content producers,
enabling it to negotiate more favorable terms and secure premium content for its cinemas.
However, the proposed merger has raised concerns among industry stakeholders and
regulatory authorities regarding its potential impact on competition, market dynamics, and
consumer choice. Critics argue that the merger could lead to increased market concentration,
reduced competition, and higher ticket prices, ultimately harming consumer welfare.
Moreover, competitors in the cinema exhibition sector may face heightened competitive
pressures and challenges in maintaining their market share in the face of a dominant player.
In response to these concerns, the Competition Commission of India (CCI) is expected to
conduct a thorough review of the proposed merger to assess its compatibility with antitrust
regulations and ensure that it does not result in adverse effects on competition. The CCI will
evaluate various factors, including market share, concentration ratios, entry barriers, and the
likelihood of coordinated behavior, to determine the potential competitive impact of the
merger. Additionally, the CCI may impose conditions or remedies to mitigate any anti-

6
K R Srivats, PVR-INOX merger gets NCLAT nod, appeal against CCI order dismissed, The Hindu Business Line
https://www.thehindubusinessline.com/companies/pvr-inox-merger-gets-nclat-nod-appeal-against-cci-order-
dismissed/article67184028.ece Accessed on 13th February, 2024
competitive effects arising from the merger, such as divestitures of certain assets or business
units.

RATIONALE FOR THE STUDY

The rationale for conducting a detailed analysis of the regulatory framework for domestic
mergers and acquisitions (M&As) in India stems from the critical role that M&A transactions
play in shaping the corporate landscape and driving economic growth in the country. As India
continues to experience rapid economic development and market expansion, there is an
increasing need to understand and navigate the complex regulatory environment governing
domestic M&As. The regulatory framework surrounding M&A transactions in India is
multifaceted, involving various laws, regulations, and regulatory authorities, which can pose
challenges and uncertainties for companies seeking to engage in such transactions. Therefore,
a comprehensive examination of the regulatory crossroads faced by companies undertaking
domestic M&As in India is essential to identify key regulatory issues, gaps, and areas for
improvement.

OBJECTIVES FOR THE DISSERTATION

The objective of this dissertation is to study how domestic mergers are regulated and affirmed
by the regulatory body. To provide a comprehensive overview of the regulatory framework
governing domestic M&As in India, including an analysis of relevant laws, regulations, and
regulatory authorities and analyze the key regulatory challenges and uncertainties
encountered by companies navigating domestic M&As in India, with a focus on legal,
procedural, and compliance-related issues.

RESEARCH OBJECTIVES

1. Evaluating the effectiveness of Antitrust Laws in addressing concerns around Mergers

and Acquisitions in India’s evolving market landscape.
2. Analyze the impact of recent amendments to the Competition Act (2002) on the
regulations M&A in India.
3. Assess the Competition Commission of India approach to reviewing M&A.
4. Analyze the Antitrust Laws jurisprudence of India with USA’s Clayton Act and Sherman
Act. To analyze the new draft Combination Regulations of CCI with USA’s Hart-Scott-
Rodino Antitrust Improvements Act 1975.
RESEARCH QUESTIONS

1) What are the key laws and regulations governing domestic mergers and acquisitions
(M&As) in India, and how do they impact the M&A process?
2) What are the procedural requirements and compliance obligations for companies
undertaking domestic M&As in India, and how do they navigate these regulatory
hurdles?
3) How do regulatory authorities, such as the Competition Commission of India (CCI) and
oversee and regulate domestic M&A transactions, and what are their enforcement
mechanisms?
4) What are the major regulatory challenges and uncertainties faced by companies involved
in domestic M&As in India, and how do they address or mitigate these challenges?
5) How does the regulatory framework for domestic M&As in India compare to
international best practices and regulatory regimes in other jurisdictions?

RESEARCH GAP

Imagine being a consumer and wishing to watch cinema at big screen. But then you get to
know you don’t have many options to choose from as there’s only one single giant
dominating the cinema screens in the market. The ticket prices of movies are soaring high but
you have no choice but to pay the exuberant price and watch it. This has no inconvenience on
people hailing from upper class household but for a person coming from middle income
group cannot afford to watch it. This exactly comes under the domain of anti-competitive
practices and eliminating the competition. This leaves consumer with very less choice in
products and sellers and downsize is also the price. Despite having significant appreciable
adverse effect on the market, CCI approved the PVR-INOX merger which made them the
dominant cinema screening player in the market. The merger of PVR and INOX has created
a multiplex behemoth with 1,650 plus screens across 350 plus properties in more than 110
cities. It is the fifth largest listed multiplex chain globally by screen count. The merger also
got nod of the NCLAT by dismissing an appeal against the CCI for further investigation.
Even though the CCI have imposed certain conditions on the merger, how effective will it be
in preventing appreciable adverse practices and how the recent amendments on Competition
Act, 2002 will impact the merger control in India.

LITERATURE REVIEW
"Regulatory Challenges in Mergers and Acquisitions: A Study of Selected Indian
Cases" (Singh & Ravi, 2021): This study explores the regulatory challenges faced by
companies involved in M&A transactions in India through an analysis of selected case
studies. The authors identify key regulatory hurdles, procedural complexities, and compliance
issues encountered by companies navigating the M&A landscape in India, offering valuable
insights into the practical implications of the regulatory framework.

"Antitrust Enforcement in Mergers and Acquisitions: Evidence from India" (Gupta &
Mani, 2020): Gupta and Mani examine the enforcement of antitrust regulations in the context
of M&A transactions in India, analyzing data from merger cases reviewed by the Competition
Commission of India (CCI). The study investigates the factors influencing the CCI's decision-
making process, the outcomes of merger reviews, and the implications for market competition
and consumer welfare.

"Legal and Regulatory Framework for Mergers and Acquisitions in India: A Review"
(Kumar & Gupta, 2019): Kumar and Gupta provide an overview of the legal and regulatory
framework governing M&A transactions in India, discussing the relevant laws, regulations,
and regulatory authorities involved. The authors analyze recent developments, trends, and
challenges in the M&A landscape, offering insights into the complexities of navigating the
regulatory crossroads in India.

"Corporate Governance and Mergers and Acquisitions: Evidence from India" (Sinha &
Batra, 2018): Sinha and Batra examine the interplay between corporate governance practices
and M&A activities in India, focusing on the role of regulatory mechanisms in ensuring
transparency, accountability, and stakeholder protection. The study assesses the impact of
corporate governance standards on M&A outcomes and provides recommendations for
enhancing governance practices in the context of domestic M&As.

"Impact of Regulatory Changes on M&A Deal-Making in India: An Empirical

Analysis" (Sharma & Singh, 2017): Sharma and Singh analyze the impact of regulatory
reforms on M&A deal-making activity in India, using empirical data to assess trends,
patterns, and drivers of M&A transactions. The study evaluates the effectiveness of recent
regulatory changes in facilitating M&A activity and fostering a conducive environment for
corporate restructuring and growth.
RESEARCH METHODOLOGY

This research employs doctrinal research methodology to investigate the intricate

interplay between Competition laws and mergers. It utilizes primary sources, such as
law statutes, case laws, and regulations, alongside secondary sources including
scholarly articles, legal commentaries, and industry reports, the research aims to
construct a comprehensive understanding of the current legal frameworks and their
applicability to mergers and amalgamations in India. Review and study of existing
online as well as offline literature on Antitrust laws of India and around the globe
will be done. Commercial information sources like articles from newspapers and
magazines, academic journals and research papers, database from government
documents and reports, published books, online blogs and articles etc are some of
the secondary resources which would aid in the fulfillment of purpose of this
dissertation.

TABLE OF CONTENT

1. INTRODUCTION
This chapter will deal with the history and evolution of Competition Act, 2002 and its need
in the reformed Indian market after 1991 liberalisation. And the need for it to cover wider
scope of market dynamics and sectors in India. The evolution of the Competition Act in India
represents a significant milestone in the country's journey towards fostering competitive
markets and promoting consumer welfare. Enacted in 2002, the Competition Act replaced the
archaic Monopolies and Restrictive Trade Practices Act of 1969, signaling a paradigm shift in
India's approach to competition regulation. The new legislation introduced modern antitrust
principles aligned with international best practices, such as the prohibition of anti-competitive
agreements, prevention of abuse of dominance, and regulation of mergers and acquisitions to
prevent adverse effects on competition. Over the years, the Competition Act has undergone
several amendments to address emerging challenges and strengthen enforcement mechanisms.

2. OVERVIEW OF ANTITRUST LAWS IN INDIA

The Antitrust Laws are governed under sections 3 and 4 of the Competition Act which gives
power to the regulatory body to check whether or not any anti-competitive practices is being
done in the market. Antitrust laws aims to promote fair competition, protect consumer
interests, and ensure a level playing field for businesses operating in the Indian market. The
Competition Act, along with its subsequent amendments, establishes the legal framework for
regulating anti-competitive behavior, preventing monopolistic practices, and scrutinizing
mergers and acquisitions that may have adverse effects on competition.

3. THRESHOLD FOR MERGER NOTIFICATIONS UNDER THE COMPETITION

ACT

Under the Competition Act, mergers and acquisitions (M&A) that meet certain thresholds are
required to be notified to the Competition Commission of India (CCI) for approval before
they can be consummated. The thresholds for merger notification are outlined in the
Competition Commission of India (Procedure in regard to the transaction of business relating
to combinations) Regulations, 2011. If the combined assets of the merging entities exceed a
specified threshold, the merger is subject to mandatory notification. If the deal value threshold
of Rs. 2,000 crore, besides requiring that the enterprise being acquired, merged or being
amalgamated should have substantial business operations in India. To put it simply, any
merger or acquisition exceeding the threshold would mandatorily require CCI approval

4. REGULATIONS GOVERNING DOMETIC MERGERS

The Competition Act 2002 (Competition Act) is the principal legislation that regulates
combinations (mergers and acquisitions) in India. Sections 5 and 6 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 9 October 2018) (Combination Regulations). Along
with this Section 230-240 of the India. Section 230-240 of the Companies Act, 2013 and the
rules, orders, notifications, and circulars issued thereunder prescribe the general framework
governing companies in India, including the manner of issuance and transfer of securities of a
company incorporated in India and the process for schemes of arrangements of such
companies. The Merger Provisions (Sections 230-234) govern schemes of arrangements
between a company, its shareholders, and creditors. Section 233 of the Companies Act, 2013
covers fast-track mergers.
5. JURISPRUDENCE OF ANTITRUST LAWS IN INDIA INSPIRED BY THE USA

The jurisprudence of antitrust laws in India bears a notable influence from the United States,
particularly in its conceptual framework and enforcement mechanisms. Drawing from the rich
history and experience of U.S. antitrust regulation, India's approach to competition law
reflects a commitment to promoting competitive markets and protecting consumer welfare.
Key principles such as the prohibition of anti-competitive agreements, prevention of abuse of
dominance, and scrutiny of mergers for potential adverse effects on competition echo those
established in U.S. antitrust jurisprudence. Moreover, Indian courts and regulatory authorities
often look to U.S. antitrust case law for guidance in interpreting and applying these principles,
leveraging precedents from landmark cases to inform their decisions. Additionally, India has
adopted enforcement practices such as the use of economic analysis in antitrust investigations,
leniency and compliance programs to incentivize cooperation, and the promotion of consumer
welfare as a guiding principle. While India's antitrust laws have their unique characteristics
and considerations, the influence of U.S. jurisprudence underscores a shared commitment to
fostering competitive markets and ensuring a level playing field for businesses, reflecting a
convergence of interests in the pursuit of effective competition regulation.

6. CASE STUDY ANALYSIS OF RECENT MERGERS NAVIGATING ANTITRUST

SCRUTINY

A comprehensive case study of recent mergers approved by the CCI and conditions imposed
by the apex regulatory body on them.