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Select Topics
Relevant legislation and authorities
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  1. Is a merger control regulation in force?
  1. Which authorities enforce the merger control regulation?
  1. Relevant regulations and guidelines with links:
  1. Does general competition regulation apply to mergers or ancillary restrictions?
  1. May an authority order a split-up of a business irrespective of a merger?
  1. Other authorities that also require merger filing or may prohibit transaction
    (Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)
  1. Are any parts of the territory exempted or covered by particular regulation?
Voluntary or mandatory filing
show/hide chapter
  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
show/hide chapter
  1. Is there a general definition of transactions subject to merger control?
  1. Is "change of control" of a business required?
  1. How is "control" defined?
  1. Acquisition of a minority interest
  1. Joint ventures/joint control – which transactions constitute mergers?
Thresholds that decide whether a merger notification must be filed
show/hide chapter
  1. Which thresholds decide whether a merger notification must be filed?
  1. Special thresholds for particular businesses
  1. Rules on calculation and geographical allocation of turnover
  1. Special rules on calculation of turnover for particular businesses
  1. Series of transactions that must be treated as one transaction
Exempted transactions and industries (no merger control even if thresholds ARE met)
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  1. Temporary change of control
  1. Special industries, owners or types of transactions
  1. Transactions involving only foreign businesses (foreign-to-foreign)
  1. No overlap of activities of the parties
  1. Other exemptions from notification duty even if thresholds ARE met?
Merger control even if thresholds are NOT met
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  1. May a merging party file voluntarily even if the thresholds are not exceeded?
  1. May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?
Referral to and from other authorities
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  1. Referral within the jurisdiction
  1. Referral from another jurisdiction
  1. Referral to another jurisdiction
  1. May the merging parties request or oppose a referral decision?
Filing requirements and fees
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  1. Stage of transaction when notification must be filed
  1. Pre-notification consultations
  1. Special rules for acquisitions on stock exchanges and public takeover bids
  1. Forms available for completing a notification
  1. Languages that may be applied in notifications and communication
  1. Documents that must be supplied with notification
  1. Filing fees
Implementation of merger before approval – "gun jumping" and "carve out"
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  1. Is implementation of the merger before approval prohibited?
  1. May the parties get permission to implement before approval?
  1. Due diligence and other preparatory steps
  1. Veto rights before closing and “Ordinary course of business” clauses
  1. Implementation outside the jurisdiction before approval – "Carve out"
  1. Consequences of implementing without approval/permission
The process – phases and deadlines
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  1. Phases and deadlines
Assessment and remedies/decisions
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  1. Tests or criteria applied when a merger is assessed
  1. May any non-competition issues be considered?
  1. Special tests or criteria applicable for joint ventures
  1. Decisions and remedies/commitments available
Publicity and access to the file
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  1. How and when will details about the merger be published?
  1. Access to the file for the merging parties and third parties
Judicial review
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  1. Who can appeal and what may be appealed?

 
INDIA

Avaantika Kakkar
Partner (Head – Competition)

avaantika.kakkar@cyrilshroff.com

Tel: +91 8879756066

Anshuman Sakle
Partner

anshuman.sakle@cyrilshroff.com

Tel: +91 9833818023

Vijay Pratap Singh Chauhan
Partner

vijay.chauhan@cyrilshroff.com

Tel: +91 7428699494

New regulation proposed

The Ministry of Corporate Affairs in India (MCA) has invited public comments to a Draft Competition (Amendment) Bill 2020 including amendments to the merger control regime. Some of the main proposed changes are introduction of a deal value based threshold for merger notification, introduction of a delayed filing regime for certain on market purchases and open offers, adoption of the material-influence test formally to assess control, reduction in review timelines for a merger notification, inclusion of ‘income’ along with turnover for calculation of penalty, and exercising the right of appeal only upon depositing 25% or more of the penalty amount. The amendment bill is yet to be finalized by the MCA subject to the suggestions and comments received from the public.

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. The merger control regime in India is governed by the Competition Act, 2002 (as amended) (Competition Act) and the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations).

2) Which authorities enforce the merger control regulation?

The Competition Commission of India (CCI) is the main body that enforces provisions relating to merger control under the Competition Act and its related regulations. 

Appeals against orders of the CCI lie to the National Company Law Appellate Tribunal (NCLAT). The orders of the NCLAT can further be appealed to the Supreme Court of India (the apex court of India).

3) Relevant regulations and guidelines with links:

Please find mentioned below all relevant links to the Competition Act, Combination Regulations, other relevant regulations, guidelines, forms and notifications relating to the Indian merger control regime:

Competition Act, 2002

The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations)

Form I

Form II

Form III

Form IV

Frequently Asked Questions

Notification regarding (a) de minimis exemption and (b) relevant assets and turnover in case a portion of an enterprise or division or business is being acquired, taken control of, merged or amalgamated with another enterprise (S.O. 988(E) and 989 (E))

Revised Thresholds

The Competition Commission of India (General) Regulations, 2009

4) Does general competition regulation apply to mergers or ancillary restrictions?

The CCI may analyze ancillary restrictions such as non-compete or exclusivity clauses as part of the merger review process and may suggest adjustments to any of such clauses if it finds that they are likely to cause appreciable adverse effect on competition in India. The CCI may pass its approval order subject to the amendment of such problematic non-compete or exclusivity restrictions by the transacting parties.

5) May an authority order a split-up of a business irrespective of a merger?

Yes. The CCI has the authority to pass an order relating to the division of an enterprise enjoying dominant position under Section 28 of the Competition Act to ensure that such an enterprise does not abuse its dominant position. Further, Section 28 also provides for the following as a part of an order for division or split-off of the dominant enterprise:

  1. transfer or vesting of property, rights, liabilities or obligations;
  2. the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise;
  3. the creation, allotment, surrender or cancellation of any shares, stocks or securities;
  4. the formation or winding up of an enterprise or the amendment of the memorandum of association or articles of association or any other instruments regulating the business of any enterprise;
  5. any other compliances which may be necessary to give effect to the division of the enterprise.

However, the CCI does not have any express authority under the Competition Act, to pass an order for division or split-up of an existing business in cases dealing with cartelization or other anti-competitive agreements amounting to a contravention under Section 3 of the Competition Act.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

The CCI is the only authority responsible for enforcing merger control regulations in India. Nevertheless, transactions that occur in regulated sectors (e.g., banking, telecommunications, oil and gas, etc.) may also require an additional analysis by the respective regulatory bodies. In those cases, the CCI and the regulatory bodies usually conduct independent analyses according to their own specific rules but may cooperate with each other for analysing the impact of such transactions.

7) Are any parts of the territory exempted or covered by particular regulation?

The Competition Act is applicable to the whole of India except for the State of Jammu and Kashmir.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

The Indian merger control regime is mandatory and suspensory in nature. Notifiable transactions cannot be consummated (entirely or in part) before the CCI provides its approval. Inter-connected transactions must remain in abeyance till the CCI approves the transaction. 

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

The Indian merger control regime covers acquisitions of control, shares, voting rights or assets and also mergers and amalgamations under the Competition Act. 

Acquisition of shares or voting rights may be subject to merger notification even if the acquisition does not result in change of control. 

Any acquisition, merger or amalgamation that meets the jurisdictional thresholds, as provided under Section 5 of the Competition Act is a “combination” for the purpose of the Competition Act and requires to be notified to the CCI (in this guide “merger” is generally used as the broad term covering all types of transactions subject to merger control instead of “combination”). 

The thresholds relate to the assets and turnover of the parties to the merger, i.e., target enterprise and acquirer (or acquirer group) / merging parties (or the group to which merged entity would belong).

As per the Competition Act, acquisition means directly or indirectly, acquiring or agreeing to acquire

1) shares, voting rights or assets of any enterprise; or

2) control over management or control over assets of any enterprise.

Please see topic 23 for a detailed description of exemptions from the merger notification obligation and transactions for which only a Form III filing is required within seven days from the completion date.

10) Is "change of control" of a business required?

“Change of control” is not a mandatory criterion for a merger to be subjected to the suspensory merger review process of the CCI. It is one of the factors to assess the nature of an acquisition amounting to a combination under Section 5 of the Competition Act. Therefore under the Indian merger control regime, cases such as, cross investment among competitors in the same horizontal market, that does not lead to acquisition of any kind of control rights (such as voting or other kinds of affirmative rights), will be subjected to merger filing before the CCI, where the thresholds (see topic 14 (a)) are exceeded. Similarly, acquisition of minority stakes (not amounting to acquisition of control) by private equity investors, where the private equity investors hold certain portfolio investments in companies that are engaged in such business activities that may lead to potential horizontal, vertical or complementary links with that of the target, are also required to be notified to the CCI.

It is also an important factor to assess if a notifiable merger can be exempted from being notified to the CCI. For instance, an acquisition of additional shares or voting rights not exceeding 50% or more in an enterprise where the acquiring enterprise or its group already has 25% or more in the target enterprise, will be exempted from notification to the CCI only if such acquisition does not result in change of sole or joint control.

Similarly, a merger or amalgamation where enterprises within the same group hold more than 50% of each of the merging enterprises may be exempted from notification to the CCI only when the transaction does not result in change from joint to sole control.

Although a merger may result from a change of control over a business, it only requires a mandatory notification to the CCI under the Competition Act and its regulations if the financials of the transacting parties exceed the thresholds described in topic 14.

Also see topic 23.

11) How is “control” defined?

In Explanation (a) under Section 5 of the Competition Act “control” is defined, as including “controlling the affairs or management” of a target enterprise or group. Please note that the purpose of this definition is only to explain one type of transaction that may be subject to merger control.  

For the purposes of identifying transactions involving change of control rights, that may be subject to merger control, the CCI, in its decisional practice, has identified the following types of control: 

  1. “Material influence”, which gives an enterprise the ability to influence affairs and management of the other enterprise. In this regard, appointment of one director to the board of directors irrespective of what powers he/she acquires is considered as amounting to material influence, subjecting the merger to merger filing process before the CCI;
  2. “De facto control”, which implies a situation where an enterprise holds less than majority of the voting rights, but in practice controls over more than half of the votes actually cast at a meeting;
  3. “De jure” or “controlling interest” which exists where an entity has a shareholding conferring more than 50% of the voting rights. 
  4. “Veto rights” for approval of business plan/annual operating plan/ budget, commencement of a new line of business or to set up operations in new cities, discontinuation of an existing business, appointment of key managerial personnel including key terms of employment, influencing material terms of employee benefit plans and strategic business decisions, as acquisition of right amounting to control under the Competition Act.

Another scope of the term “control” applies in the revised Notes to Form I, according to which the parties are required to provide information in respect of only those affiliates/entities in which they hold shares and/or have control (including their group entities) if:

  1. they have direct or indirect shareholding of 10% or more; or
  2. have a right or ability to exercise any right (including any advantage of commercial nature with any of the party or its affiliates) that is not available to an ordinary shareholder; or
  3. have a right or ability to nominate a director or observer in another enterprise(s).

12) Acquisition of a minority interest

Acquisition of shares or voting rights may be subject to merger notification even if the acquisition does not result in change of control. However, acquisition of a minority interest shares that is made solely as an investment or in the acquirer’s ordinary course of business and does not lead to gaining of control over a business or any change of control over the business, is exempted from a merger notification to the CCI under Schedule-I of the Combination Regulations even if such a transaction triggers the small target and the jurisdictional thresholds.

If acquisition of a minority interest confers someone with de facto or de jure control of a business, the transaction will be subject to merger control regulations. This is, for instance, the case if the buyer is provided with veto rights regarding decisions that are essential for the strategic behaviour of the business or if the remaining shares are spread over a large number of shareholders and the acquired shares de facto confer the buyer with a decisive influence on general meetings.

Also see topic 23.

13) Joint ventures/joint control – which transactions constitute mergers?

Joint Ventures 

The Competition Act does not expressly cover joint ventures. Joint ventures created through transfer of assets by one or more enterprises (also referred to as brownfield joint ventures) may be notifiable provided the thresholds in topic 14 are met. Joint ventures formed afresh by capital contributions by one or more enterprises (also referred to asgreenfield joint ventures) are generally exempted from the requirement to notify to the CCI.

While determining the applicability of the thresholds in topic 14, the values of only the relevant asset, being transferred by the parent(s), and the turnover generated by such relevant assets, need to be considered.

Joint Control

Transactions involving transfer of joint control are notifiable to the CCI if they exceed the prescribed thresholds under the Competition Act and its regulations. Such notifiable transactions include:

  1. changes from joint to sole control;
  2. changes from sole to joint control; 
  3. transfer of ownership from one or more participant(s)/owner(s) to another/others;
  4. change in or extension of the activities of a joint venture; and 
  5. dissolution – provided (part of) the business of the joint venture is transferred to one or more of the businesses controlling the joint venture or a third party

These transactions do not benefit from the exemptions under Schedule I of the Combination Regulations

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?

a) Turnover thresholds

All transactions (including foreign-to-foreign transactions) that exceed the thresholds under the Competition Act are required to be notified to the CCI. The analysis of the thresholds consist of asset and turnover assessment, which is a three-pronged test, the first of which is based solely on the assets and turnover of the target whereas the second and the third limbs are based on the assets and turnover of the parties and their ‘group/s’, respectively. 

A transaction must be notified if the transaction is not exempt under the Small Target Exemption and the thresholds in either the Parties Test or the Group Test are met:

Small Target Exemption: 

A merger is exempt from notification to the CCI if the value of assets of the target in India does not exceed INR 3.5 billion or the value of the turnover of the target does not exceed INR 10 billion, respectively. This exemption is available pursuant to the notifications issued by the Ministry of Corporate Affairs dated 4 March 2011, 4 March 2016 and 29 March 2017. At present, this exemption is available until 27 March 2022.

Jurisdictional Thresholds:

Parties Test: The parties (i.e. the legal persons directly involved in the transaction) have combined assets in India of INR 20 billion or a combined turnover in India of INR 60 billion; or the parties have combined worldwide assets of USD 1 billion including combined assets in India of INR 10 billion or a combined worldwide turnover of USD 3 billion including a combined turnover in India of INR 30 billion.

Group TestThe group (i.e. the group that the parties will belong to after the transaction, including the parties, their ultimate parent(s) and all entities directly or indirectly controlled by the ultimate parent(s)) has assets in India of INR 80 billion or a turnover in India of INR 240 billion rupees; or the group has worldwide assets of USD 4 billion including assets in India of INR 10 billion or a worldwide turnover of USD 12 billion including a turnover in India of INR 30 billion.

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

The draft Competition Amendment Bill, 2020 (still under review) has proposed the inclusion of a deal value based threshold under the Competition Act.  

d) Assets requirements

See turnover thresholds under topic 14(a).

e) Other

N/A

15) Special thresholds for particular businesses

N/A

16) Rules on calculation and geographical allocation of turnover

The threshold analysis prescribed under the Competition Act must be conducted in reference to the audited financial statements of the financial year immediately preceding the year in which the transaction will be completed. If audited statements are not available, unaudited or best available estimates may be used.

The thresholds analysis is conducted using the consolidated audited financial statements of the parties, and group if the group tests are applied. Total assets must be based on the consolidated balance sheet (less depreciation) and total turnover must be based on the consolidated profit and loss statement including revenue from exports and net revenue from operations but excluding indirect taxes, other income not connected with operations, intragroup sales (only sales between Indian group entities are to be excluded while determining the Indian turnover). 

In asset acquisitions, business transfers, etc., the asset/turnover of only the true target (and not the seller) is to be considered when applying the Small Target Exemption, Parties and Group Tests.

17) Special rules on calculation of turnover for particular businesses

Banking

For banking undertakings, the value of the turnover is the sum of the following items: operating income i.e interest income of a baking enterprise and other income such as (i) commission, exchange and brokerage, (ii) income earned by way of dividends, (iii) profit (loss) on sale of investments, (iv) leasing income, (v) profit (loss) on exchange transactions.

Insurance

For insurance undertakings, the value of the turnover is the gross premium without deducting the reinsurance ceded, and other income such as income from investments in shares, securities, real estate and other assets is considered as a part of turnover where such investments amount to control (as per decisional practice of the CCI) over the enterprises involved.

18) Series of transactions that must be treated as one transaction

The parties may be required to notify a series of transactions or inter-connected transactions, one or more of which may amount to a merger that requires a mandatory notification to the CCI, through a single notice. In essence, steps of an inter-connected transaction or a series of multiple transactions that may not be notifiable as standalone transactions will also have to be notified to the CCI, and cannot be closed before obtaining CCI’s approval.

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

Under the Competition Act and its regulations no distinction has been made between temporary or lasting change of control. Any kind of change of control is regarded as an important factor in assessing the nature of an acquisition under Section 5 of the Competition Act or for assessing if any combination can be exempted from notification requirements under Schedule-I of the Combination Regulations.

20) Special industries, owners or types of transactions

The Competition Act specifies that there is no obligation to file a merger notification in the following situations:

  1. Amalgamations of regional rural banks have been exempted from the requirement to notify the CCI through a notification issued under the Regional Rural Banks Act, 1976.
  2. Reconstitution, transfer (whole or part), and amalgamation of nationalized banks have been exempted through a notification issued under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
  3. Acquisitions, mergers and amalgamations under the Petroleum Act, 1934 or the Oilfields (Regulation and Development) Act, 1948 that involve Central Public Sector enterprises and their wholly or partly owned subsidiaries have been exempted from the requirement to notify the CCI.

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no exemption for foreign-to-foreign transactions. All transactions, including foreign-to-foreign transactions, that exceed the thresholds under the Competition Act, are required to be notified to the CCI.

22) No overlap of activities of the parties

There is no exemption for transactions with no overlap of activities, but there is a simplified procedure available if there is no overlap. The CCI has introduced the concept of a 'Green Channel' approval route under the Combination Regulations which allows parties to file a simplified version of Form I and receive deemed/spot approval of the transaction immediately upon notifying the CCI. However, it applies to only those transactions where the acquirer (and the acquirer group) has no existing interests in companies:

  1. that may be seen as competitors of the target's business;
  2. that operate in markets with vertical linkages to the target's business; or
  3. with complementary linkages to the target's business.

23) Other exemptions from notification duty even if thresholds ARE met?

The following transactions are exempted from being notified to the CCI as per Schedule-I of the Combination Regulations:

Item No.

Type of Acquisition

Conditions

(Acquisition of 25% or less voting rights solely as an investment) 0 to 10% Shares or Voting Rights (solely as an investment)
  • The acquirer acquires ordinary shareholders' rights no special rights;
  • Acquirer does not become a member of the board of directors of the target;
  • Acquirer does not intend to nominate a director on the board of the target; and
  • Does not intend to participate in the affairs and management of the target enterprise.
0 to 25% Shares or Voting Rights (solely as an investment /ordinary course of business) The acquirer must not control the target (“Control” is a broadly defined concept that includes affirmative / veto rights).

Item 1A

(Acquisition of additional shares or voting rights not exceeding 50%)

Additional Shares or Voting Rights

  • Acquirer or its group already has 25% and acquires additional shares not exceeding 50% of target; and
  • Acquirer should not acquire control (sole or joint).

Item 2

(Acquisition in addition to 50% shares not resulting in change from joint to sole control)

Acquisition of Shares or Voting Rights

  • Acquirer or its group holds 50% and acquires additional shares; and
  • There is no change from joint to sole control.

Item 3

 

Acquisition of Assets

Acquisitions of assets are exempt if the acquisition is:

  • Not directly related to the business activity of the acquirer;  or
  • Solely an investment; or
  • In the ordinary course of business; and
  • Not leading to control over the enterprise whose assets are being acquired.

This exemption will not apply if:

  • The assets being acquired represent substantial business operations irrespective of whether the assets are organized as a separate legal entity.

Item 8

 

Intra-group acquisitions

  • The acquirer and target belong to the same group; and
  • The target is not a company jointly controlled by enterprises not within the same group.

(The concept of “group” is defined in the Competition Act as two or more enterprises which directly or indirectly, are in a position to:

(i) Exercise 26% or more of the voting rights in the other enterprise;

(ii) Appoint more than 50% of the members of the board of directors in the other enterprise; or

(iii) Control the management or affairs of the other enterprise.)

Item 9

 

Intra-group mergers & amalgamations

  • A merger or amalgamation where one enterprise already holds 50% or more of the other enterprise; or
  • A merger or amalgamation where enterprises within the same group hold more than 50% of each of the merging enterprises; and
  • The transaction does not result in change from joint to sole control.

Other exemptions:

Item No. / Provision

Exemption

Item 4

(Amendment or renewal of an open offer)

Amendment or renewal of an open offer (for a listed target) is exempt, where a prior notice is made to the CCI of such amendment.

Item 5

(Acquisition of current assets)

Acquisition of current assets are exempt, if it is made in the ordinary course of business.

Item 6

(Acquisition of shares through bonus issue, stock splits, etc.)

Acquisition of shares due to bonus issue, stock splits, consolidation of face value, buy back, or subscription to rights of issue of shares are exempt, provided that such acquisition does not lead to control.

Item 7

(Acquisition of shares by underwriters, stock-brokers, etc.)

Any acquisition of shares by persons in their ordinary course of business, like an underwriter or stockbroker are exempt.

 

Item 10

(Acquisition after CCI approval under Section 31)

Acquisition after transaction approved by the CCI under Section 31 of the Act. For instance, where a stockbroker or underwriter invests solely for the purposes of investment and not to acquire any control rights.

Section 6(4)

Share subscriptions or financing facilities, or any acquisition by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement. Such transactions are exempt even if they amount to acquisition of control or involves control rights. For such transactions, post completion, the parties are required to file a Form-III to the CCI providing the relevant and required details of this transaction.

Foreign institutional investor and venture capital fund have the meanings assigned to them in Section 115AD and the explanation to clause 23FB of Section 10 of the Income Tax Act, 1961 (as amended).

Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

Yes, the merging parties may voluntarily notify a transaction. This may be done in cases in which there is a reasonable doubt on whether the thresholds are met or not. However, this is not advised given that the parties can either do a pre-filing consultation with the CCI or a self-assessment to see if their transaction exceeds the thresholds in the Small Target Exemption, Parties and Group Tests.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

Yes, the CCI may initiate suo motu inquiries into mergers, amalgamations and acquisitions that have not been notified to it under Section 20(1) of the Act, to determine if such transactions were notifiable combinations or have caused or are likely to cause an appreciable adverse effect on competition in India. However, the CCI does not generally initiate inquiries after the expiry of one year from the date on which the combination has taken effect.

Referral to and from other authorities

26) Referral within the jurisdiction

A statutory authority when dealing with an issue which may have implications under the Competition Act can make a reference to the CCI for its opinion as per Section 21 of the Competition Act. Further, as per Section 21A of the Competition Act, the CCI can make a reference to a statutory authority for its opinion where a decision by the CCI could be in conflict with the statute whose implementation is entrusted with the particular statutory authority.

27) Referral from another jurisdiction

The CCI has signed memorandums of understanding with various competition authorities, including that of the US Federal Trade Commission, the European Commission, the Federal Antimonopoly Service of Russia, the US Department of Justice, the Canadian Competition Bureau, and the Australian Competition and Consumer Commission to enhance cooperation and communication between the competition authorities. It may consider references from or may refer issues to, such authorities in pursuance of these bi-lateral memorandums of understanding. 

28) Referral to another jurisdiction

See topic 27.

29) May the merging parties request or oppose a referral decision?

N/A

Filing requirements and fees

30) Stage of transaction when notification must be filed

Notifiable transactions must be notified to the CCI at any time after the occurrence of the trigger event, but before the transaction is completed/closed (entirely or partially).

Transactions are notified with the CCI upon the occurrence of one of the following trigger events:

  1. In case of acquisitions, the trigger is the execution of binding transaction documents, or any other binding document that indicates an agreement to acquire control, shares, voting rights, or assets. A subset of acquisitions are transactions involving takeover of listed companies pursuant to an open offer in terms of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (as amended). In such cases, the public announcement made to the Securities and Exchange Board of India is the trigger to notifying the CCI.
  2. In case of mergers or amalgamations (a court approved process in India), the approval of the transaction by the board of directors of the respective parties is the trigger event.
  3. In relation to acquisitions of distressed assets under the Insolvency and Bankruptcy Code 2016, the CCI must be notified upon finalization of the acquirer’s resolution plan.

31) Pre-notification consultations

Parties intending to file a notice with the CCI are encouraged to approach the CCI for an informal pre-filing consultation in case of any doubts/queries regarding the filing procedures or the information to be provided as part of the merger filing. However, the advice given during such pre-filing consultation is non-binding and may not necessarily reflect the views of the CCI.

A request for pre-filing consultation on substantive issues can be made by the parties intending to file a notice at least 10 days before the intended date of filing. The CCI also provides pre-filing consultation on interpretational issues relating to Sections 5 and 6 of the Competition Act and the Combination Regulations. 

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Mergers that are a consequence of acquisition of securities on a stock exchange or a public takeover bid must be notified after the acquisition/publication of the takeover bid. In cases where a public announcement has been made in terms of the Securities Exchange Board of India Takeover Code, regarding an acquisition (of shares, voting rights or control), the public announcement will be considered as the triggering event for filing the merger notification with the CCI. Further, under the Indian takeover regulations, the open offer for a takeover bid can be opened but cannot be closed before the receipt of the CCI approval.

33) Forms available for completing a notification

Parties can either file a short form (Form I) or a long form (Form II) with the CCI. 

If parties are competitors and hold a market share exceeding 15%, or if parties are vertically integrated and hold an individual or combined market share exceeding 25%, a Form II filing is recommended.

Form III (post completion notification) is prescribed to be filed as part of disclosure requirements for certain exempt transactions, such as acquisition by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan or investment agreement, within seven days from the completion of such transactions. 

If the CCI is of the prima facie opinion that a merger is likely to cause appreciable adverse effect on competition in India then it may direct the parties to file a Form IV to publish details of the merger to bring it to the knowledge of the persons affected or likely to be affected by it.

34) Languages that may be applied in notifications and communication

Hindi and English.

35) Documents that must be supplied with notification

Form I

Generally, the following documents are required to be filed along with the notice in Form I.

  1. Certified copy of the authorization in favour of a person signing the notice in the prescribed format.
  2. Copy of the proof of payment of filing fee.
  3. Copies of the relevant parties’ approval of the proposal relating to merger and their agreement/other document executed in relation to the merger.
  4. An authorization letter in favour of a person located in India who is authorized to receive communication on behalf of the notifying party(ies) from the CCI.
  5. Certified copy of any decisions passed in other jurisdictions where the merger has been filed and approved.
  6. Copies of the most recent annual report and accounts of the parties to the combination.
  7. Copies of all presentations analyzing the merger prepared by or for or received by management,  the board of directors, the supervisory board, the shareholders’ meeting or similar (only necessary in case the merging parties have overlapping activities or are engaged in vertically connected markets or supply of complimentary, non-competing but related goods/services).
  8. Two summaries prepared in accordance with sub-regulation (1A) and (1B) of regulation 13 of the Combination Regulations.
  9. An affidavit in support of the request for confidentiality as specified in regulation 42 of the Competition Commission of India (General) Regulations, 2009.

Form II

The following documents should be supplied along with the notice in Form II.

  1. Copies of the relevant parties’ approval of the proposal relating to merger and their agreement/other document executed in relation to the merger.
  2. Copies of analysis, reports, studies or surveys or any other document taken into account for the purpose of assessing the impact of the merger and any documents prepared for the purposes of analyzing the merger with respect to market shares, competition, competitors, markets, potential for sales growth or expansion of products or geographic markets and/or the rationale of the merger.
  3. Copies of memorandum and articles of association of all the parties to the merger.
  4. Copies of the most recent annual reports and accounts of the parties to the merger.
  5. List of holders of five percent or more of voting rights or shares, directly or indirectly, of the parties to the merger.
  6. List of CEO/CFO/directors/partners/trustees/person in charge/persons acting in concert during the last one year and a detailed organizational chart for each of the merging parties.

36) Filing fees

The filing fee for Form I is INR 2 million and the fee for filing Form II is INR 6.5 million.

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until it has been approved by the CCI. However, normal preparatory reversible steps are not prohibited (see topic 39).

Please also see topic 32 regarding public takeover bids and acquisitions on stock exchanges.

38) May the parties get permission to implement before approval?

No. The Indian merger control regime does not allow for any kind of implementation of the transaction before the issuance of the CCI’s approval.

39) Due diligence and other preparatory steps

Due diligence must be conducted in a way that prevents sensitive market information from being used for purposes other than assessing the viability of a merger. To this effect, the parties are required to sign non-disclosure agreements and execute ‘clean-team’ agreements, to limit the circulation of commercially sensitive information to a specific group of people. Such representatives must not be directly related to the sales or marketing teams of the parties and may not be directly involved in the execution of the transaction post the CCI’s approval. They must also be bound by any obligations imposed by the non-disclosure agreements and the clean-team agreements for a year after the closing of the transaction. 

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary course of business" clause that prevents the target company from taking decisions outside the course of its ordinary business until the closing date is generally considered acceptable.

The parties to any transaction must continue to be competitors and should keep their respective businesses in India separate and are required to operate and continue to take their respective business decisions independently. In this regard, the parties cannot exercise any veto rights upon each other till they receive the CCI’s approval.  

41) Implementation outside the jurisdiction before approval – "Carve out"

The parties to a global filing must ensure that they receive the CCI’s approval before the transaction closes globally and in India. 

An issue that is yet to be settled by the CCI is the question of whether carve outs / hold separate agreements would be treated as ‘gun jumping’ or premature completion under the Competition Act. The CCI, in its decisional practice, has observed that the parties’ independent behaviour had likely ceased after the transactions were completed globally despite the ‘carve out’ of the Indian businesses. 

It can be argued that carve outs/hold separate agreements may be allowed, if parties can establish that they would continue to operate independently in Indian markets.

42) Consequences of implementing without approval/permission

The parties may be fined if the merger is implemented without approval/prior to the approval of the CCI. The CCI can impose a penalty up to 1% of the combined assets or turnover, whichever is higher, of the merging parties. The maximum penalty that the CCI has imposed till date, is INR 50 million. The CCI can look back at the effects of a transaction that was not notified for a period of 1 year from the date of its completion even based on its own information or knowledge of any transaction. There is no time limitation to the CCI’s power to penalize parties for a failure to notify it.

The process – phases and deadlines

43) Phases and deadlines

Phase

Duration/deadline

Phase I investigation and prima facie review

The CCI is required to form a prima facie opinion on whether a merger would cause an appreciable adverse effect on competition in India within 30 working days of the parties notifying it.

In cases where the CCI reaches out to third parties, under Regulation 19 of the Combination Regulations, for the assessment of the impact of a transaction, an additional 15 working days are available to it.

If the CCI’s prima facie opinion is that the transaction does not, or is not likely to cause an appreciable adverse effect on competition in India, then the CCI passes an order approving the merger. This is loosely referred to as a Phase I investigation, whereby the CCI usually approves simple notifications within 30 working days (approx. 45-60 calendar days), concluding that these transactions do not cause an appreciable adverse effect on competition in India.

30 working days

Extension:

An extension of 15 working days is available where the CCI reaches out to third parties.

Request for additional information and clock stops

The CCI may request additional information from the merging parties. The assessment clock stops while the parties respond to requests for information from the CCI and the time taken by the parties to respond is excluded from the 30 working day timeline.

Excluded from the 30 working days timeline.

Show Cause Notice and Response to Show Cause Notice

If the CCI is of the opinion that there is likely to be an appreciable adverse effect on competition in the market, a notice under Section 29 of the Competition Act is issued,   inviting the parties to argue why a detailed investigation to assess the merger’s competitive effects should not be conducted. If the parties successfully address the CCI’s concerns in response to the show cause notice, which could include offering voluntary behavioural and/or structural remedies, then the CCI may approve the transaction. If the CCI’s concerns persist, it will commence a Phase II investigation.

 

Phase II

Where the CCI has started a Phase II investigation, the merging parties must provide certain required information in Form IV under Combination Regulations and if found relevant, the CCI may invite comments from any person or member of public on the merger by publishing the details provided in Form IV. 

It may take up to 210 calendar days for the CCI to review and approve a merger (Phase I or Phase II) from the date of filing of the notification excluding time taken by parties to respond to the CCI's information request. 

Extension:

An additional 60 working days may be available to the CCI in certain circumstances.

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

The CCI undertakes an appreciable adverse effect on competition (AAEC) analysis based on certain factors under Section 20 of the Competition Act while reviewing a merger. 

Under Section 20(4), the CCI assesses various negative and positive factors to determine the appreciable adverse effect on competition impact of a merger in a relevant market in India. The CCI specifically considers an assessment of AAEC in instances where the parties have horizontal or vertical overlaps and have substantial incremental market share in such overlapping markets. Some of the factors considered by CCI in its AAEC analysis are listed below:

  1. Actual and potential level of competition through imports in the market;
  2. Extent of barriers to entry in the market;
  3. Level of concentration in the market;
  4. Degree of countervailing power in the market;
  5. Likelihood that the merger would result in the parties to the merger being able to significantly and sustainably increase prices or profit margins;
  6. Extent of effective competition likely to sustain in a market;
  7. Extent to which substitutes are available or are likely to be available in the market;
  8. Market share, in the relevant market, of the merging parties individually and combined;
  9. Likelihood that the merger would result in the removal of a vigorous and effective competitor in the market;
  10. Nature and extent of vertical integration in the market;
  11. Possibility of a failing business;
  12. Nature and extent of innovation;
  13. Relative advantage, by way of the contribution to the economic development, by any combination having or likely to have an AAEC; and
  14. Any benefits of the merger that may outweigh the adverse impact of the merger.

45) May any non-competition issues be considered?

N/A

46) Special tests or criteria applicable for joint ventures

The criteria for assessment of joint ventures is similar to that of the other kinds of mergers. Therefore, parties to a brownfield joint venture must notify the transaction to the CCI where the thresholds specified under the Competition Act and its regulations are exceeded. 

The CCI will conduct an appreciable adverse effect on competition analysis as part of the competition impact assessment while reviewing a merger notification in relation to a joint venture, where the parties have horizontal or vertical overlaps and have substantial incremental market share in such overlapping markets.

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions/commitments or prohibited.

If the CCI has serious concerns about the merger, it is important that the parties enter into negotiations of possible commitments well before the expiry of the deadlines, as the CCI will normally only consider an approval with conditions if the parties have offered commitments.

Commitments may take any form and they can be either structural or behavioural and with or without time limitations.

The CCI may revoke an approval if at any time it becomes aware that incorrect or misleading information has been provided by the parties or if the parties do not comply with the conditions/commitments contained in the approval.

If a merger has been implemented without approval, the CCI may proceed against the parties to prohibit the merger, declare it to be void and treat it as if the merger never took place or was never consummated. In this case, the CCI will technically order a separation of the businesses (so that the parties act independently) or any other measure capable of restoring competition in India.

Publicity and access to the file

48) How and when will details about the merger be published?

The CCI requires the parties to submit a 500-word summary of the proposed merger (not containing any confidential information), for publication on the CCI’s website as soon as the parties file the merger notification.

Once the merger is approved, the CCI informs the parties by email or through an update on its Twitter account. The detailed approval order of the CCI only follows after a period of two to three weeks from the date of approval of the CCI and is subsequently published on its website.

The CCI directs the parties to submit a non-confidential version of the merger notification along with the confidential version of it in order to protect any confidential information provided by the parties in the notification. However, the CCI has discretion to include or exclude such confidential information as part of the final approval order published on its website.

49) Access to the file for the merging parties and third parties

The merging parties:

The parties to a merger have a right to access the merger notification and any third party submissions to the notification. 

Third parties:

While, legally, the CCI is required to provide access to third parties, confidential information provided by parties falls within an exemption under the Indian Right to Information Act 2005 (RTI Act). Therefore, third parties do not have access to the confidential information in the merger notification.

Confidential information and documents in merger notifications and subsequent submissions are not automatically granted confidential treatment by the CCI. The notifying parties are required to specifically identify such information and make a request for confidential treatment for an identified time period. The CCI usually grants confidential treatment only over commercially sensitive or price-sensitive information or business secrets, the disclosure of which would cause commercial harm to the notifying parties and which is typically for a duration of not more than three years. Under exceptional circumstances and in only limited cases, the CCI may grant access to third parties only in relation to the non-confidential versions of the documents of any merger filing.

Judicial review

50) Who can appeal and what may be appealed?

The parties may appeal to the NCLAT within a period of sixty days from the date of the decision of the CCI. 

Third parties cannot appeal any decisions of the CCI in merger control cases. However, if the merger results in the abuse of dominant position by the parties or causes appreciable adverse effect on competition in India, then a third party may file a complaint to the CCI. 


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