April 2023

India to introduce significant amendments to its merger control and antitrust regimes

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Changes to the Indian merger control rules will include the introduction of new thresholds relating to deal value, new rules on the jurisdictional nexus with India of relevant transactions, and a reduced timetable for merger review. All of these will be relevant to US, European and other foreign buyers who are investing, or have operations, in India. Changes in relation to antitrust will make possible the imposition of higher fines for anti-competitive conduct and align the Indian regime more closely with other key jurisdictions internationally.

Context

Indian competition law is largely modelled on the EU and UK regimes and is enforced primarily by the CCI. Its key provisions will therefore be familiar to those in Europe. The following are some notable recent case trends and themes:

  • 2021 marked 10 years of the enforcement of India’s merger control law, and the CCI continues to review large numbers of mergers each year. Of particular note, the CCI is taking a hard-line against those who disregard the suspensory nature of the Indian merger control regime1 – last year, the CCI issued fines in 11 cases in relation to “gun-jumping” (i.e., completing a notifiable transaction without filing and receiving the required prior clearance).
  • In relation to behavioural enforcement, several “dawn raids” were carried out by the CCI between 2019 and 2021 across a variety of sectors and the CCI has recently published decisions leading to multi-million dollar fines, making clear that it should not be seen as a "soft" enforcer. In more than half of the cartel cases in which the CCI issued a decision in 2022, a leniency applicant (or leniency applicants) received a penalty reduction, further enhancements to the regime are planned (see further below).
  • The digital economy has expanded dramatically in India in the past few years: e-commerce is expected to grow to US$200 billion in 2026, from US$38.5 billion in 2017 and is being increasingly considered by the CCI in both merger assessments and enforcement cases. In this regard, the CCI has considered issues such as net neutrality, network effects and collection of data leading to accumulation of market power.2 In terms of enforcement, several large digital companies have come under CCI scrutiny, some more than once, as is the case in the US, EU and UK. In December 2022, an Indian parliamentary panel recommended the enactment of a Digital Competition Act to regulate anti-competitive business practices by “Big Tech” companies. Given trends in the development of regulation in Europe, including the EU Digital Markets Act, similar national laws in EU Member States, and proposed new UK competition legislation affecting the digital sector, there is an expectation that India will follow suit.
  • The CCI is also considering how its existing rules and procedures might need modernising to meet the challenges of today's global and digital economies.

Reforms

On 8 February 2023, India’s Central Government introduced the Competition (Amendment) Bill 2023 (Bill) in the Lok Sabha (i.e., the Lower House of Parliament) and proposed additional amendments to an earlier version proposed in 2022. On 3 April 2023, the Indian Parliament passed the Bill and, on receiving assent by the President of India, the Bill will become law. The reforms will amend the existing framework for competition law enforcement in India significantly in respect of merger control and behavioural aspects, both on substance as well as procedure. Key changes include the following:

  • In relation to merger control, the Bill provides for the introduction of new jurisdictional criteria and thresholds. In particular, where parties to the transaction have "substantial business operations in India", a new "global deal value" threshold will also apply – an approach seen as being better adapted to reviewing consolidation in digital markets and which is similar to other regimes around the world in capturing so-called "killer acquisitions".3 The current notification thresholds are based on asset and turnover values of parties to the transaction. The proposed "deal value" threshold will require any acquisition or merger that exceeds a global transaction value of INR 2000 crores (approximately USD 244 million as of the time of writing) to receive CCI approval. Further clarity is required on how the "global deal value" will be calculated and what will constitute "substantial business operations in India" (although local nexus will be evaluated with reference to the target enterprise). For instance, substantial operations might be defined by reference to market-facing factors such as the number of users or the existence of contracts in, or similar connections with, India. The Bill also envisages reducing the length of CCI merger reviews, amendments to the definition of "control", and the introduction of a limited exemption from the standstill obligation under the Competition Act in relation to stock market purchases.4
  • In relation to antitrust, the Bill provides for:
    • Higher fines for antitrust violations, including fines of up to 10% of total global turnover rather than fines based on turnover from sales of relevant goods or services in India;
    • A new framework for settlements and commitments regarding contraventions relating to vertical agreements and/or abuse of dominance (although the ultimate scope of the framework remains to be determined). If experience in Europe is any guide, the introduction of a regime for settlements and commitments in Indian antitrust cases is likely to have a significant impact on enforcement practice, allowing complex cases to be resolved earlier by means of behavioural undertakings;
    • Buyers’ cartels and “hub-and-spoke” cartels to be brought within the scope of the prohibition of restrictive agreements, and expansion of the kinds of behaviour which could be found to constitute abuse of a dominant position – again, this largely follows the approach taken by many other competition authorities; and
    • A strengthening of the leniency regime by introducing a "leniency plus" policy. This will allow a leniency applicant in respect of one cartel to disclose another cartel in respect of a separate product and gain a penalty reduction in respect of both cartels. This follows the approach taken by US and UK authorities on this matter (there is no leniency plus option under EU law).

The amendments to the Competition Act will be the subject of implementing regulations, to be adopted following a consultation process. It will be very much a case of staying tuned.


1 i.e. the Indian merger control regime requires clearance of a notifiable merger to be obtained from the CCI before the merger is completed.

2 See India E-Commerce Report. IBEF. June 2021 (accessible at: https://www.ibef.org/industry/ecommerce.aspx).

3 Certain transactions, with the potential to impact competition, are currently able to avoid merger control review because the relevant asset and turnover values are not met.

4 The acquirer will therefore be permitted to file a notice for stock market purchases but will be prevented from exercising any rights in the acquired shares until CCI approval is obtained.

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