On September 10, 2024, India made a landmark decision by mandating competition-law reviews for deals valued over ₹2,000 crore, regardless of whether they meet the turnover or asset-based thresholds. This amendment brings India into a select group of countries that require a value-based review of mergers and acquisitions (M&A) under competition law. With the Competition Commission of India (CCI) now required to review high-value transactions, the move is expected to have wide-reaching implications for ensuring fair competition and protecting consumer interests in India.
The shift from a turnover or asset-based threshold to a value-based criterion reflects the evolving nature of the global economy, particularly in sectors such as technology, e-commerce, and pharmaceuticals. In these industries, market influence doesn’t always align with company size. The introduction of the ₹2,000 crore threshold represents a recognition that deal value, rather than just company assets, can be an essential marker for competition concerns. The CCI’s tighter scrutiny is both necessary and timely, ensuring that the regulatory framework keeps pace with rapidly changing market dynamics.
Why the Shift Was Necessary
The new competition-law review mechanism is grounded in the changing nature of business deals. Traditional competition law has focused primarily on the size of the entities involved in a merger, typically measured by turnover or asset value. However, many sectors, especially the tech and digital economy, have companies that can wield significant market influence despite having relatively low turnover or assets.
In the tech industry, for example, a company’s market dominance is often linked to its user base, intellectual property, or its ability to access large amounts of data rather than physical assets or revenue. Therefore, a deal could have a substantial impact on market competition, even if it doesn’t meet traditional asset thresholds. By using deal value as a criterion, the CCI can capture these high-value, high-impact transactions that would have previously gone unnoticed under the earlier system.
Moreover, the move addresses the growing concern over “killer acquisitions,” where dominant firms acquire smaller competitors to eliminate future threats to their market position. These deals, often involving startups with little revenue or assets, might have flown under the radar of competition regulators. Now, such transactions will be subject to scrutiny if their deal value crosses the ₹2,000 crore mark, potentially preventing monopolistic behavior before it occurs.
Protecting Market Integrity and Consumer Welfare
The core mission of competition law is to preserve market competition and protect consumers from the adverse effects of monopolies or oligopolies. By tightening the review process for high-value transactions, the CCI can intervene before a deal distorts market dynamics or harms consumer welfare. This is particularly important in sectors such as telecommunications, e-commerce, and pharmaceuticals, where consolidation could reduce competition, increase prices, or stifle innovation.
For instance, mergers in the pharmaceutical industry can have far-reaching consequences for the availability and pricing of essential medications. When two large firms merge, there is often a reduction in competition, leading to higher drug prices or less incentive to innovate. Similarly, in the tech sector, large acquisitions can stifle new entrants and limit consumer choice. With a mandatory review of deals crossing ₹2,000 crore, the CCI is better equipped to prevent such outcomes, ensuring that consumers benefit from competitive prices, higher-quality goods, and more choices.
The move also helps address concerns over the growing concentration of power in certain industries. By scrutinizing high-value deals, the CCI is positioning itself to protect smaller players in the market and ensure that larger corporations do not dominate sectors through unchecked acquisitions. This is vital for fostering a competitive marketplace where innovation can thrive and where smaller companies have the opportunity to grow.
Challenges Ahead
While the move is undoubtedly a step in the right direction, it does come with its own set of challenges. One immediate concern is the potential delay in deal approvals. Mergers and acquisitions are often time-sensitive, and the additional regulatory scrutiny could slow down the process. This might be particularly frustrating for businesses that are pursuing legitimate mergers aimed at improving efficiency or expanding into new markets. For these companies, the costs of waiting for CCI approval could add up, especially if their deals are ultimately cleared without any modifications.
Another challenge is the strain this new policy may place on the CCI itself. With more deals requiring mandatory review, the commission will need to increase its capacity to conduct thorough and timely assessments. The CCI must ensure it has the resources, both in terms of personnel and expertise, to handle the anticipated rise in workload. A backlog of cases could emerge if the commission is unable to manage the surge in deal reviews, leading to further delays and potentially impeding the business environment.
Furthermore, there is the risk of overregulation. While it is critical to scrutinize large deals, it is equally important to allow businesses the freedom to grow and innovate. If the CCI becomes too stringent in its reviews or imposes excessive conditions on mergers, it could discourage both domestic and foreign investment in India. Striking the right balance between protecting competition and fostering a pro-business environment will be key to the success of this new regime.
The Global Context
India is not the first country to adopt a value-based threshold for competition review. Countries such as Germany and Austria have already introduced similar criteria, recognizing the limitations of turnover-based thresholds in certain sectors. The European Union is also increasingly using value-based metrics to review deals, especially in the tech industry, where traditional measures often fail to capture the market power of companies.
By aligning its competition law framework with global best practices, India is demonstrating its commitment to creating a modern, transparent, and efficient regulatory environment. This is particularly important as the country seeks to attract more foreign investment and position itself as a leading player in the global economy. A robust competition law regime not only protects domestic consumers but also enhances India’s credibility on the international stage.
A Balanced Approach to Market Regulation
The decision to impose mandatory competition-law reviews on deals valued over ₹2,000 crore is a timely and necessary step to safeguard competition in an increasingly complex market landscape. As the Indian economy continues to grow and evolve, particularly in digital and high-tech sectors, traditional competition law thresholds no longer suffice. The value-based threshold ensures that high-impact deals are subject to appropriate scrutiny, preventing anti-competitive behavior before it takes root.
While the move is not without its challenges—such as potential delays in deal approvals and the increased burden on the CCI—the long-term benefits of enhanced market regulation outweigh these concerns. A more proactive approach to competition law will protect consumers, foster innovation, and ensure a level playing field for businesses.
Ultimately, tighter CCI scrutiny of high-value deals is justified. It reflects the changing nature of business and competition in the modern economy, ensuring that the Indian market remains competitive, dynamic, and open to innovation.
Disclaimer: The thoughts and opinions stated in this article are solely those of the author and do not necessarily reflect the views or positions of any entities represented and we recommend referring to more recent and reliable sources for up-to-date information.
