The government proposes an amendment to the law on competition; Seeks to strengthen antitrust control rules

The government is aiming to tighten rules around merger and acquisition review under a bill that could particularly affect global tech companies that do a lot of business in India. The proposal is part of an overhaul of the country’s competition law in a bill that was introduced in parliament on Friday and could be passed as early as next week.

Under current law, the Competition Commission of India, or ICCreviews mergers and acquisitions that exceed the asset or revenue thresholds.

But many high-value deals between tech companies with a big presence in the country escaped scrutiny because the companies involved had few assets and low turnover there.

Facebook the acquisition of WhatsApp in 2014 for $19 billion (roughly Rs. 1,50,900 crore), for example, did not require any ICC clearance, even though WhatsApp saw India as a major market, the lawyers said.

The bill proposes all transactions worth more than Rs. 2,000 crores should be subject to antitrust scrutiny if the companies have significant business activities in the country.

“The agreement’s highly controversial value test aims to draw attention to transactions where the parties fail to meet conventional asset and revenue thresholds, particularly in the tech space,” said Anisha Chand, an antitrust partner at law firm Khaitan & Co.

“If passed in its current form, the incoming amendment could likely lead to an increase in the number of transactions, particularly in new age markets, requiring pre-clearance,” she added.

The transaction value threshold for review complies with antitrust regulations in Germany and Austria, public policy consultancy Koan Advisory said in a note on Friday.

The CCI did not respond to a request for comment.

New ICC regulations will define the process for determining whether an entity has “substantial business operations” in the country, according to the bill dated Aug. 2.

As part of the competition law overhaul, the government is also proposing to reduce the merger approval timeframe from 210 days to 150 days.

Additionally, it plans to introduce a mechanism for entities seeking to reach an agreement with the ICC, the bill says.

© Thomson Reuters 2022


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