By way of five separate notifications dated 9 September 2024, the Ministry of Corporate Affairs (‘MCA’) has notified the following provisions, rules and regulations under the Competition Act, 2002 (‘Act’).

1. Certain provisions of the Competition (Amendment) Act, 2023
   (‘Amendment Act’).
2. Competition (Minimum Value of Assets or Turnover) Rules, 2024.
3. Competition (Criteria of Combination) Rules, 2024.
4. Competition (Criteria for Exemption of Combination) Rules, 2024.
5. Competition Commission of India (Combinations) Regulations, 2024 (‘Combination Regulations’).

We discuss the key changes that have come into force from 10 September 2024, and their implications.

Amendments to the Act and Combination Regulations

1. Deal Value Threshold:

The value of the transaction threshold (‘DVT’) introduced by the Competition (Amendment) Act, 2023 has been notified. This threshold is applicable to all acquisitions, mergers and amalgamations where:

i. the combined value of the transaction exceeds INR 2000 crore (~ USD 240 million); and

ii. the target enterprise has substantial business operations in India.

Application of DVT:

1. Transactions where the deal documents have been signed but the transaction has not been closed before 10 September 2024.
2. Multi-step deals will not attract gun-jumping provisions if some of the intermediate steps/transactions have been closed but may still require notification to and approval from the CCI if the remaining steps attract DVT.

Explanations

1. Value of a transaction includes every valuable consideration
2. direct or indirect, immediate or deferred, in cash or otherwise;
3. for any covenants imposed on the seller;
4. for interconnected transactions, call options;
5. for licensing of intellectual property or technological assistance etc.
6. Substantial business operation test has been laid down as follows:

2. Post facto approval to open offers

Parties no longer need prior approval from the CCI to acquire shares through an open offer. The acquirer is required to file notice of such open market purchase or acquisition to the CCI in the prescribed form within 30 days from the date of such purchase and is prohibited from exercising any ownership, beneficial or economic right arising out of the transaction before obtaining CCI’s approval.

The Combination Regulations however clarify that the acquirer may avail economic benefits such as dividend, subscription to rights issue, etc. with respect to such shares, so long as the acquirer or its group entities do not, directly or indirectly, influence the target enterprise in any manner.

3. Reduction in Transaction Timelines

Timelines for all the intermediate steps have also accordingly been revised.

4. Ability to exercise material influence over strategic decisions implies control

The definition of control has been suitably amended to include the ability of an enterprise or group to exercise material influence over strategic decisions of another enterprise or group. This is in line with the decisional practice of the Commission. Previously, the Competition Act only provided for the ability to exercise material influence over the ‘management or affairs’ of the target.

5. Statutory recognition to modifications to combinations to alleviate competition concerns

The CCI has been expressly empowered to accept appropriate modifications offered by the parties to a combination or suo moto propose suitable modifications before forming a prima facie opinion regarding a notified transaction to mitigate concerns regarding Appreciable Adverse Effect on Competition (‘AAEC’).

6. Gun jumping penalty may take into consideration value of transaction

The penalty for consummating a notifiable transaction without obtaining prior approval from the CCI now includes the value of transaction as a factor. As such gun jumping penalties can now extend to 1% of the total turnover or assets or the value of transaction, whichever is higher, of the given combination.

7. Increased Filing Fee

Rules and Regulations

1. Competition (Minimum Value of Assets or Turnover) Rules, 2024 (‘De Minimis Rule’)

The MCA by way of the De Minimis Rule has codified the de minimis exemption from notification of combinations under the Act.

The De Minimis Rule retains the recently updated value of assets and threshold for the application of the exemption at assets of the value of INR 450 crore (~USD 54 million) and turnover of the value of INR 1250 crore (~USD 151 million) in India.

2. Competition (Criteria of Combination) Rules, 2024 (‘Green Channel Rule’)

In 2019, the CCI amended the erstwhile regulations dealing with combinations to introduce an automatic approval mechanism for combinations that require a technical filing on account of breaching the jurisdictional thresholds but do not have an impact on competition in the market as the parties do no exhibit any horizontal, vertical or complementary overlaps in their business operations (‘Green Channel’). Under the Green Channel mechanism, the transaction is deemed to have been approved upon filing notice with the Commission. This process is aimed at significantly reducing the time and cost of transactions in which there may not be any competition risks due to the nature of activities carried out by the parties to the transaction.

The Green Channel Rule codifies the Green Channel approval mechanism and clarifies its applicability criteria to include assessment of the business activities of the group and affiliate entities to map overlaps.

This rule is likely to restrict the availability of the Green Channel route by expanding the scope of overlaps.

3. Competition (Criteria for Exemption of Combination) Rules, 2024.

By way of these rules, certain transactions have been exempted from the requirement of notification to the CCI even when they cross the jurisdictional thresholds, as they are unlikely to have AAEC. A similar list of exemptions was previously covered under Schedule I to the erstwhile combination regulations.

These rules provide legal certainty and legitimacy to the CCI’s powers to grant exemptions that were previously unclear. These rules expand the list of exempted transactions and clarify the scope of several exemptions already contained in the Schedule.