The legislation was approved by the upper house of parliament on Monday. The lower house had ratified it last week. The bill will need a sign off from the president.
India’s parliament approved a revised legislation which gives the South Asian nation’s antitrust watchdog wider powers to review overseas mergers and acquisitions.
The changes in the competition law include a requirement for companies with “substantial business operations” in India to seek antitrust permissions for all deals where the transaction value exceeds 20 billion rupees ($243 million). Until now, the Competition Commission of India examined deals based on companies’ asset size and and turnover.
The introduction of the "deal value" criterion was recommended in the Competition Law Review Committee (CLRC) report in 2019. The report discussed that most acquisitions in digital markets derive value from data or some business innovation held by the target. The target may not have a huge asset base and may be offering products/services that are either free or generate insignificant turnover. This may be because the business model of companies in digital markets often does not generate significant revenue for a number of years, focusing initially on user growth.
“The current merger regulation criteria based on assets and turnover are very clear, but it deals primarily with traditional markets. In new age markets, assets and turnover, as recorded in the financial statements, may not reflect the complete market strength of the target,”
stated last year, Ashok Kumar Gupta, then chairman of the Competition Commission of India.
The regulations may define substantial business operations based on market-facing factors such as the number of users, number of contracts, aggregate amount of payment received, etc., in India. If companies do not have that kind of nexus in India, then they will not be covered under this provision.
The new competition law also cuts down the time for approval of mergers to 150 days from the previous 210 days.
New Delhi’s antitrust push echoes competition law in European nations such as Germany and Austria that follow the deal-value threshold for mergers in the digital space. Modi’s government has said it is revamping Indian laws to making the Internet safe, trusted and accountable for its more than 800 million users as well as boosting a thriving startup economy.
Sources: Business Standard, Financial Express
