Competition Act³²

Competition Law and Introduction

ndia’s competition law framework is governed by the Competition Act, 2002 which regulates combinations (including acquisitions, acquiring of control, mergers, and amalgamations) that cause or are likely to cause an appreciable adverse effect on competition within India. The Act prescribes certain financial thresholds based on the turnover and assets of the combined entity to determine the applicability of competition law provisions. If these thresholds are met, it becomes necessary to obtain prior approval from the Competition Commission of India (CCI) before proceeding with the merger or acquisition, unless expressly exempted under the 'de minimis' exemption

Scope of Competition Act

The Competition Act prohibits anti-competitive practices, which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India. For foreign companies entering India—whether through acquisitions, joint ventures, mergers, or strategic investments—the Competition Act is of critical importance. The Act regulates:

India follows a mandatory and suspensory merger control regime, requiring prior approval from the Competition Commission of India (CCI) for qualifying transactions before consummation, unless specifically exempted. Recent amendments, particularly through the Competition (Amendment) Act, 2023, have significantly modernized India’s competition framework, especially to address digital markets, data-driven businesses, and high-value transactions involving low-revenue targets.

a) What are Anti- Competitive Agreements?
Anti-competitive agreements under the Competition Act, 2002, prohibit enterprises, associations, or persons from entering pacts that cause or are likely to cause an appreciable adverse effect on competition (AAEC) within India. Such agreements are void under Section 3(2). The Competition Commission of India (CCI) evaluates AAEC based on factors like barriers to entry, foreclosure of competition, and consumer benefits Types of Agreements - Horizontal agreements occur between competitors at the same level, such as cartels, and are presumed anti-competitive if they fix prices, limit supply, allocate markets, or involve bid- rigging. Vertical agreements, between entities at different supply chain stages (e.g., producer and distributor), are assessed case-by-case for AAEC rather than presumed harmful

b) What is Abuse of Dominance?
Abuse of dominance under Section 4 of India's Competition Act, 2002, occurs when an enterprise or group in a dominant position exploits that strength to impose unfair conditions, distort competition, or harm consumers in the relevant market. Dominance itself is not prohibited; only its abuse, such as predatory pricing or denying market access, triggers action by the Competition Commission of India (CCI)

c) Merger Control Regime/Combinations India's merger control regime, governed by Section 5 and 6 of the Competition Act, 2002, requires prior approval from the Competition Commission of India (CCI) for "combinations" like mergers, acquisitions, or amalgamations that exceed specified asset or turnover thresholds and could harm competition. The regime is mandatory and suspensory, meaning deals cannot close until CCI clearance or 150 working days pass.

Transactions that require notification to the CCI

1. It qualifies as a “combination” under Section 5;and
2. The applicable asset, turnover, or deal value thresholds are exceeded; and
3. No exemption (e.g., de minimis or Schedule I exemptions) applies

Jurisdictional thresholds under the Competition Act

1. Traditional Asset and Turnover Thresholds (Section 5) Section 5 of the Competition Act, 2002 defines the transactions that qualify as a “combination” for Indian merger control purposes. Section 5 applies to the transaction that constitutes a combination if it involves following type and crosses the prescribed asset or turnover thresholds
   • Acquisition of control, shares, voting rights or assets of one or more enterprises
   • Acquisition of control where the acquirer already exercises direct or indirect control over another enterprise engaged in similar, identical or substitutable goods or services
   • Merger or amalgamation of enterprises

   If a transaction qualifies as a combination, it may require prior approval from the Competition Commission of India (CCI) under Section 6, unless an exemption applies. Jurisdictional Thresholds

   A transaction falling under any of the above categories constitutes a combination if any one of the following thresholds is exceeded:

1. Entity-Level/ Parties Thresholds India
   • Combined assets exceed INR 2,500 crore, or
   • Combined turnover exceeds INR 7,500 crore Global (with India nexus)
   • Combined assets exceed USD 1.25 billion, including at least INR 1250 crore in India, or
   • Combined turnover exceeds USD 3.75 billion, including at least INR 3,750 crore in India
2. Group-Level Thresholds (Post-Transaction) India
   • Group assets exceed INR INR 100 Billion, or
   • Group turnover exceeds INR INR 300 Billion Global (with India nexus)
   • Group assets exceed USD 5 billion, including at least INR INR 12.5 Billion in India, or
   • Group turnover exceeds USD 15 billion, including at least INR INR 37.5 Billion in India

   (Thresholds are prescribed in INR and USD terms for India- based and global transactions; practitioners typically refer to the latest MCA notifications when assessing applicability.)

2. De Minimis (Target Exemption) Acquisitions are exempt from notification if the target enterprise has:
   • Assets in India not exceeding INR 4.5 Billion, or
   • Turnover in India not exceeding INR INR 12.5 Billion
3. Deal Value Threshold (Introduced by the Competition (Amendment) Act, 2023)

   To address acquisitions of high-value, low-turnover targets (especially in the digital and technology sectors), the 2023 Amendment introduced a Deal Value Threshold (DVT): A transaction is notifiable if:

   • The value of the transaction exceeds INR 20 Billion, and
   • The target enterprise has “substantial business operations in India” (as defined under CCI regulations)

Penalties for contravention of the antitrust provisions of the Competition Act

1. Anti-Competitive Agreements & Abuse of Dominance (Section 27)
   • Penalty of up to 10% of the average turnover for the last three preceding financial years
   • In cartel cases, penalty up to three times the profit or 10% of turnover, whichever is higher for each cartel participant and each year of continuance of the cartel
   • Power to pass cease-and-desist orders and structural or behavioral remedies
2. Failure to Notify a Combination (Section 43A)
   • Penalty of up to 1% of the total turnover or assets, whichever is higher
3. Other Penalties
   • Penalties for furnishing false information
   • Daily penalties for non-compliance with CCI orders
   • Leniency provisions available for cartel participants making full and true disclosures

Recent Cases that triggered the Amendments:

1. Google was fined USD 21 million by the CCI in 2018 for abusing its dominant position in online technology and digital services sectors, a decision that was upheld by the Competition Appellate Tribunal in 2020. Data being considered more vital than the turnover of the entity, tech giants such as Google enjoy the opportunity to acquire significant firms in the data processing realm lacking turnover generation. Introducing a ‘deal value threshold’ under the proposed amendment would bring these instances under the purview of CCI. Furthermore,
2. Amazon was accused of engaging in predatory pricing and providing preferential treatment for certain sellers on its platform, which led to an investigation by the CCI and a finding that Amazon had violated Competition Act. The Facebook-WhatsApp acquisition also raised concerns about data privacy and competition in the messaging app market, and the CCI found that the acquisition had reduced competitive constraints in the market. However, due to threshold constraints, the CCI could not investigate the issue even though around 130 million users were affected. Acquisitions of such sorts are, per se, beyond the scope of the CCI as the target company is small enough to escape the Competition Act thresholds. Considering transactional value under the proposed amendment became crucial for expanding the investigative scope of the CCI.