New Rs 2,000-Crore Deal Threshold For CCI Scrutiny Kicks In After A Year's Wait
This is especially important for large deals in digital markets where issues like big data and privacy are at stake.
A new rule under the Competition Amendment Act that introduces a deal-value threshold for reviewing mergers and acquisitions will come into effect from Sept. 10, according to a notification by the Ministry of Corporate Affairs on Monday.
Now, transactions valued over Rs 2,000 crore or involving companies with significant business operations in India will be closely examined.
The Competition Commission of India found that some M&As, especially in digital tech, asset-light businesses, and infrastructure, were avoiding scrutiny, according to Pranjal Prateek, partner at Khaitan & Co.
Concerns about "killer acquisitions", where companies buy smaller competitors to avoid competition, led to the 2018 Competition Law Review Committee's recommendation for a deal value threshold to include transaction consideration in notifications, he said.
This is especially important for large deals in digital markets where issues like big data and privacy are at stake.
The new deal value threshold will increase M&A notifications to the CCI, but early on, stakeholders might struggle with calculating transaction value due to the requirement to include all considerations, including commercial arrangements, as per Prateek.
In addition to the deal value threshold, the MCA has set new criteria for determining company affiliations. A company will be considered affiliated with another if the latter has access to its sensitive information, holds 10% or more of its shares or voting rights, or has a representative on its board of directors.
However, as per Nisha Kaur Uberoi, partner at JSA Advocates & Solicitors, the devil will lie in the details.
The enabling regulations and the need for the CCI to enhance capacity to keep up their efficient track record of clearing M&A deals will be key to ensure ease of doing business remains unimpacted, he said.
