CCI tightens oversight on digital mergers, mandates clearance for big deals

Digital mergers and acquisitions with at least 10 per cent of the global user base, gross merchandise value (GMV), or revenue in India now require approval from the Competition Commission of India

Mergers and acquisitions involving digital companies that account for at least one-tenth of their global user base, gross merchandise value (GMV) from the previous year, or annual revenue in India will now require approval from the Competition Commission of India (CCI). Such transactions will be considered to have "substantial business operations" within the country, according to a report by The Economic Times.

The CCI (Combinations) Regulations, 2024, which came into effect on September 10, follow a government announcement on Monday stating that deals exceeding a value of Rs 2,000 crore, where the target entity has "substantial business operations in India," will need regulatory clearance, the report said.

The CCI regulations also provide a framework for defining substantial business operations.

Mandatory regulatory approval

For non-digital firms, transactions with an annual GMV or turnover exceeding Rs 500 crore in India will also require mandatory regulatory approval under these new regulations. These rules will apply to transactions that have already been signed but are not yet officially concluded, clarifying their applicability, according to the CCI.

The deal value threshold, which was introduced in the amended competition law of 2023, is designed to allow the CCI to review significant deals, particularly in the digital sector, that might otherwise escape scrutiny under traditional asset or turnover-based criteria, the report said.

The report quoted Unnati Agrawal, partner at IndusLaw, as saying, "The parties will now have to carefully assess the consideration value ascribed to ongoing deals as the consideration would include all payments, whether direct or indirect, immediate or deferred, cash or otherwise, made within two years from the relevant date."

The parties must also consider any related agreements that might be interconnected, she added.

The turnover threshold of Rs 500 crore, along with the GMV or turnover criteria, is designed to prevent smaller businesses from being overwhelmed by the need for regulatory approval, she said.

Additionally, the CCI has shortened the review period for mergers and acquisitions transactions from 210 days to 150 days.