Editorial. A big deal – The Hindu BusinessLine

The Ministry of Corporate Affairs has recently notified amendments to the Competition Act, 2002 which includes the introduction of deal value thresholds (DVT). Now, any M&A transaction exceeding ₹2,000 crore in value must receive prior approval from the Competition Commission of India (CCI), irrespective of the size of the company being acquired. This provision, which has already come into effect, marks a strategic shift to deal with M&As that could alter competitive dynamics, particularly in digital markets.

For corporates, this means a re-evaluation of acquisition strategies, especially in industries such as technology and pharmaceuticals, where companies command enormous market valuations despite minimal physical assets. The requirement to secure approval of the CCI for high-value deals introduces a layer of regulatory compliance. The amendment, however, also significantly reduces the review timeline for mergers from 210 days to 150 days. This change is aimed at enhancing India’s attractiveness as a business destination. For businesses, the shortened timeline could mean quicker deal closures and less uncertainty. However, this also places a premium on businesses being better prepared to engage with the CCI — requiring them to be more meticulous in their initial submissions to avoid delays within the tighter review framework. For the CCI, the ability to make thorough yet timely decisions will be critical to prevent bottlenecks, given the expected increase in the volume of transactions to be reviewed under the new thresholds. The exemptions list for the new merger control regime would have to be refined accordingly to exclude transactions that are benign. This revamp of the exemptions would allow the CCI to focus on significant transactions.

The move by the Ministry of Corporate Affairs to exempt acquisitions through the stock exchange route from “standstill obligations” is a welcome one. Put simply, standstill obligations implied that no part of the deal can be pursued without the CCI’s prior approval. This rule is arguably restrictive to the extent of threatening the viability of the acquisition. Now, the acquirer must apply for the CCI’s nod within 30 days of the acquisition. Under the erstwhile set-up, a merger deal that ignored “standstill organisations” would be hauled up for ‘gun jumping’ and be required to pay penalties. However, a post-merger approval process should not turn into a mere fait accompli. More clarity is needed here in terms of post-merger regulation.

With the introduction of the new thresholds, the CCI needs to augment its capacity. This involves not just increasing the number of staff but also enhancing their skills in complex economic and legal analyses. Revamping India’s merger control regulations is a timely step. However, the CCI, not otherwise known for swift action, must elevate its performance to meet the demands of a constantly evolving landscape – digital or otherwise.