Merger Control in India: Legal Framework and Competition Regulation
Overview of India’s Merger Control System
India’s merger control system is mainly governed by the Competition Act, 2002. Its main aim is to stop mergers, takeovers, or combinations that may harm fair competition in the market, also known as causing an Appreciable Adverse Effect on Competition (AAEC).
This system began working in 2011 and has since developed through new rules, court judgments, and the growing experience of the Competition Commission of India (CCI).
This paper explains both the substantive (what the law says) and procedural (how it works) parts of merger control in India. It covers important topics such as:
- Legal limits and thresholds for notifying mergers
- Situations where exemptions apply
- The process of notifying the CCI about a merger
- How the CCI investigates and reviews cases
- Penalties for breaking the law
It also looks at how the CCI tries to maintain a balance between market efficiency and fair competition, using key Supreme Court and CCI judgments that have influenced both Indian and international competition law practices.
Introduction to Merger Control
Merger control is an important part of modern competition law. Its main goal is to make sure that when companies join together—through a merger, amalgamation, or acquisition—they do not harm fair competition in the market.
According to Sections 5 and 6 of the Competition Act, 2002, the Competition Commission of India (CCI) checks such deals, known as “combinations,” to see whether they may have an Appreciable Adverse Effect on Competition (AAEC) in India.
Purpose of the Law
- To stop any one company from becoming too powerful
- To protect consumers from unfair prices or fewer choices
- To prevent excessive economic control by a few large companies
Example: If two large cement companies like Company A and Company B decide to merge, the CCI will study the deal. If their merger makes it hard for smaller companies to compete or allows price control, the CCI may ask for changes or block it.
Merger Control Law in India
Definition of “Combination” (Section 5)
The law defines a combination as one of three scenarios:
- Acquisition: When a company purchases another’s assets or majority shares to gain control, while both retain separate legal identities.
- Control-based Acquisition: When an acquiring company gains sufficient influence or shares to control management or policy decisions of the target company.
- Merger or Amalgamation: When two or more companies combine to form a single entity, transferring all assets and liabilities.
Financial thresholds based on assets or turnover determine if such a deal must be reported to the CCI for approval.
Anti-Competitive Deals (Section 6)
- Section 6(1) prohibits deals that harm competition in India.
- If a deal significantly reduces competition, it is invalid.
- Sections 6(2)–6(6) describe how to notify and seek approval from the CCI.
When Notification to CCI Is Required
Jurisdictional Thresholds
- Parties Test: Evaluates total assets or turnover of the merging companies (India and globally).
- Group Test: Evaluates assets or turnover of the broader group post-merger.
De Minimis (Small Target) Exemption
If the target’s assets are under ₹450 crore or turnover under ₹1,250 crore, notification to CCI is not required. This exemption helps smaller businesses avoid regulatory burdens.
Deal Value Threshold (DVT) — 2023 Amendment
Any deal with a value exceeding ₹2,000 crore must be reported to CCI, even if traditional turnover thresholds are not met. This targets digital economy transactions with low physical assets but high market influence.
Concept of Control and Group
Control
Defined as the ability to exercise material influence over management or strategic decisions. It was clarified in Sun Pharmaceutical Industries Ltd. v. CCI (2019) that control includes decisive influence, not just ownership.
Group
A “group” refers to enterprises where one entity controls management, holds over 26% voting rights, or appoints more than 50% of directors.
Procedural Framework for CCI Notification
Mandatory Notification
Where thresholds are met, transactions must be filed in:
- Form I: For minimal overlaps
- Form II: For overlaps exceeding 15% horizontally or 25% vertically
Timing of Notification
Notification must occur after binding agreements but before deal completion to avoid “gun-jumping” (Section 43A offence).
CCI Review and Investigation Process
Phase I Review
CCI reviews the notice within 30 working days to assess potential AAEC. If none, it approves under Section 31(1).
Phase II Investigation
If concerns persist, a deeper inquiry under Section 29(2) is conducted. Factors considered include:
- Market share and concentration
- Barriers to entry
- Buyer power
- Substitutability
- Innovation effects
Green Channel and Simplified Approvals
Introduced in 2019, this allows automatic approval for mergers with no competitive overlaps, promoting ease of business.
Avoidance, Remedies, and Penalties
Gun-Jumping and Penalties (Section 43A)
Failure to notify or partial implementation before approval can result in penalties up to 1% of turnover or assets.
Remedies and Commitments
CCI may impose structural (divestitures) or behavioural (conduct-based) remedies, or both.
Emerging Developments and Challenges
Digital Economy and Data-Driven Mergers
Deals involving data-rich startups are now under scrutiny through the Deal Value Threshold.
International Cooperation
CCI collaborates with agencies like the FTC and European Commission to align cross-border merger reviews.
Judicial Review of CCI Decisions
- Excel Crop Care Ltd. v. CCI (2017) — proportionality in penalties
- CCI v. Steel Authority of India Ltd. (2010) — adherence to natural justice
Comparative Insights
India’s merger control mirrors the EU model, with the AAEC test paralleling the EU’s SIEC test. It also compares with frameworks in the US, China, and Australia, showing global alignment in merger review standards.
Conclusion
India’s merger control system balances competition and growth through structured CCI oversight. With tools like the Deal Value Threshold and Green Channel, it adapts to digital and global challenges while protecting consumer welfare and innovation.
