Role Of Deal Value Thresholds In Merger Control

Prerna Garg, Amity Law School, Noida

ABSTRACT

To keep up with the new age developments, business is striving hard to have access to maximum markets share, especially in this globalization and digitally connected world. Companies are adopting inorganic routes such as Mergers and Amalgamations to capture the market. Other reasons could be synergy creation, access to technology and data, gaining competitive edge, diversifying risk, R&D, tax benefits, etc. Merger between Vodafone India and Idea Cellular to form Vodafone Idea Limited, TATA Group acquiring Air India, PVR merger with INOX, Zomato acquiring Blinkit, Tata Steel acquiring Bhushan Steel, Walmart acquiring Flipkart are few of the examples of M&A. According to Statista “India's Mergers and Acquisitions market is experiencing a surge in activity driven by the country's booming tech sector”1. M& A activity in India witnesses a strong start with a 78% jump in deal value in January, 2024.

Mergers and Amalgamations are reviewed by the Competition Act 2002 because post mergers there are reduction in the number of players in the market and the chances are that remaining entities might cause barriers to new entrants and alter prices which would not only impact other players but also to the consumers.

The Competition Act, 2002 deals mergers and amalgamations under the heading Combinations. S. 5 of the Act provides the power of the CCI to review mergers and amalgamations ex- ante if they cross the desired threshold based on the assets and turnovers provided under section 5 (c) of the Act. Between FY 2022- 2023, 1007 merger filings were disposed or decided by the CCI.

The mergers and amalgamation take a different place when it comes to the digital space where the digital enterprises do not have significant assets or turnovers to meet the thresholds provided under the Act. The digital entities in their initial phases offers products and services at low or free of costs to increase customer base and get access to data. Also, the killer acquisitions are becoming common where the big giants are acquiring firms at the nascent stage to avoid future threats. Google, Apple, Facebook and Amazon have made hundreds of acquisition on the same line. Facebook acquiring WhatsApp and Instagram, Uber Eats by Zomato, BigBasket by Tata digital, PharmEasy acquiring Thyrocare are few of the other examples of killer acquisitions. This ultimately discourages innovation and new business formation in the market. Likewise, big data mergers and introduction of AI further raises competition concerns. Mergers and Acquisitions in digital space raises similar competition concerns in almost all sectors viz. e- commerce, edtech, fintech and pharma tech.

The problem was recognized by foreign states too and they modified the same in their domestic laws. The Competition Law Review Committee has a acknowledged this lacuna and recommended the introduction of additional thresholds in the Act. As a result, s. 5(d) was inserted through Competition (Amendment) Act, 2023 which states that if the value of transaction exceeds INR 2000 cr. and the enterprise which is being acquired or merged has substantial business operations in India is required to take approval from the CCI. The CCI has introduced The CCI Draft (Combinations) Regulations, 2023 which elucidates the calculation of ‘value of transaction’ and determination of ‘substantial business operation in India’. The current research deals with the role of Deal Value Thresholds in Merger Control.