Short Summary:
The Indian government is poised to implement the deal value threshold (DVT) provision from the Competition Amendment Bill 2023, which requires Competition Commission of India (CCI) approval for M&A deals exceeding ₹2,000 crore. This rule aims to enhance transparency and address concerns about market monopolies.
Complete Article:
The Indian government is on the verge of implementing a significant regulatory change that is expected to reshape the country’s mergers and acquisitions (M&A) landscape. The deal value threshold (DVT) provision, a key element of the Competition Amendment Bill 2023, will soon be notified, mandating that any deal surpassing ₹2,000 crore must receive approval from the Competition Commission of India (CCI).
This provision, aimed at ensuring transparency and fairness in the M&A sector, has been eagerly anticipated since the Competition Amendment Law 2023 was passed by Parliament and received presidential assent over a year ago. The delay in notifying this critical provision has sparked political controversy, with opposition parties, including the Congress Party, accusing the government of preferential treatment towards certain corporate groups and a lack of regulatory oversight for creeping acquisitions.
Sources have indicated that, 16 months after the new competition law came into effect, the DVT provision is expected to be implemented imminently. This is the final piece of the new law that remains to be notified, and its introduction is seen as a crucial step towards enhancing regulatory scrutiny in high-value transactions.
The development comes amidst ongoing criticism of the CCI for allegedly favoring the Adani Group in its recent acquisitions. Critics, including Congress leader Jairam Ramesh, have raised concerns about the CCI’s approval of all Adani Group’s acquisitions, which has reportedly led to monopolistic practices in critical sectors such as ports, airports, power, and cement. Ramesh has argued that such approvals may contribute to market failures and anti-competitive behavior.
Under the new law, all M&A deals valued at ₹2,000 crore or more will require CCI approval, eliminating the previous exemptions. For instance, high-profile deals like the Adani Group’s acquisition of Penna Cement and Zomato’s purchase of Paytm’s ticketing business will now fall under this scrutiny, which was not the case prior to 2023. Previously, deals where the target asset was valued below ₹450 crore or had a turnover less than ₹1,250 crore were exempt from CCI approval.
The DVT rules will apply to both digital and physical markets, marking a significant expansion in regulatory oversight. The Ministry of Corporate Affairs, the nodal body overseeing the CCI, is expected to implement these new regulations shortly, signaling a major shift in how large-scale M&A transactions are managed in India.
This anticipated move is expected to enhance regulatory oversight, ensuring that significant mergers and acquisitions are evaluated for their impact on market competition, and addressing concerns related to market concentration and anti-competitive practices.
