In a significant development aimed at strengthening competition regulations, companies will now be required to notify any merger and acquisition (M&A) activity to the fair trade regulator if the deal value exceeds ₹2,000 crore and if the target firm possesses “substantial business operations in India”. The government has officially notified provisions of the newly-amended Competition Act, which includes the introduction of a deal value threshold. These provisions came into effect from May 18, marking a crucial step towards enhancing transparency and accountability in M&A transactions. However, the government has yet to announce the implementation date for certain other key provisions, such as the provision enabling the Competition Commission of India (CCI) to impose penalties on entities engaging in anti-competitive practices based on their “global turnover”.
The move to introduce the deal value threshold in M&A transactions signifies the government’s commitment to ensuring fair competition and safeguarding the interests of consumers and market participants. Companies involved in M&A deals with a transaction value exceeding ₹2,000 crore will now be obligated to inform the fair trade regulator, i.e., the CCI, about the details of the transaction. This notification requirement aims to provide the CCI with the necessary information to evaluate potential anti-competitive consequences and take appropriate action, if required, to preserve a competitive market environment.
Additionally, the amended Competition Act empowers the CCI to impose penalties on entities found to be engaging in anti-competitive practices, based on their global turnover. This provision expands the scope of the regulator’s authority, allowing it to effectively address anti-competitive behavior that may have international implications. By considering global turnover as a determining factor, the CCI will be better equipped to combat practices that have a detrimental impact on fair competition, regardless of the geographical origin of the entities involved.
While the provisions related to the deal value threshold and penalties based on global turnover have been notified and are in effect, the government is yet to announce the implementation dates for certain other important provisions. These additional provisions will further strengthen the competition regulatory framework in India. Their introduction will bring more clarity and efficiency to the process of evaluating and addressing anti-competitive practices, ultimately promoting fair competition and consumer welfare.
The implementation of the deal value threshold is expected to have a positive impact on the M&A landscape in India. By requiring companies to notify M&A transactions above a certain threshold, the CCI will have a comprehensive understanding of the market dynamics and potential impact on competition. This will enable the regulator to conduct thorough assessments and take appropriate measures to preserve fair competition and protect consumer interests.
Furthermore, the provision regarding penalties based on global turnover demonstrates the government’s proactive approach in addressing anti-competitive practices. The inclusion of global turnover as a determining factor underscores the need to tackle anti-competitive behavior that extends beyond national borders. This move aligns India’s competition regulations with global best practices and strengthens the country’s position in the international business landscape.
The effective implementation of these provisions will rely on the collaborative efforts of the government, the CCI, and the business community. Companies must ensure compliance with the notification requirements for M&A transactions exceeding the prescribed threshold to avoid potential penalties. Moreover, the CCI will play a pivotal role in conducting comprehensive assessments and taking appropriate actions to prevent anti-competitive practices and safeguard fair competition.
In conclusion, the government’s notification of provisions under the amended Competition Act, including the introduction of a deal value threshold, marks a significant step towards enhancing transparency and accountability in M&A transactions. Companies involved in M&A deals exceeding ₹2,000 crore will now be obligated to notify the fair trade regulator, enabling the Competition Commission of India to evaluate potential anti-competitive consequences. Furthermore, the provision empowering the CCI to impose penalties based on global turnover highlights the government’s commitment to combatting anti-competitive practices on an international scale. As these provisions come into effect, it is essential for companies to adhere to the notification requirements and for the CCI to exercise its authority diligently to foster fair competition and promote consumer welfare in India’s business ecosystem.
