Some sections within the government feel that DVT can be lowered to some extent, by Rs 500-1,000 crore, only if CCI builds additional capacity. But CCI largely feels a lower value may lead to inefficient use of resources.
The government is mulling to conduct a "market study" and take inputs from stakeholders, in the coming months, to re-assess the deal-value-threshold (DVT) of Rs 2,000 crore ($220 million) – a mandatory criteria to kick-in regulatory scrutiny by the Competition Commission of India (CCI) for mergers and acquisitions, Moneycontrol has learnt.
Some sections within the government feel that the DVT can be lowered to some extent, perhaps by Rs 500-1,000 crore, but only if CCI builds additional capacity, sources told Moneycontrol. Also, the lower threshold might not be applicable for all M&As, but be limited for only micro, small, and medium enterprises (MSMEs), they say.
In 2023, the CCI introduced the DVT concept, as an additional criterion for mergers and acquisitions that require prior notification and approval. This threshold is designed to capture transactions in emerging markets, particularly in the digital sector; and allows the CCI to scrutinize potentially anti-competitive acquisitions that were previously outside its jurisdiction, thereby enhancing its preventive capabilities.
Earlier this month, the Parliament’s Standing Committee on Finance suggested the Ministry of Corporate Affairs (MCA) and CCI, in its report, to review the Rs 2,000 crore DVT, to ensure the threshold does not inadvertently facilitate the acquisition of MSMEs by larger corporations without regulatory scrutiny, thereby preventing the creation of monopolies or duopolies that harm fair competition.
"A lower threshold for acquisitions involving MSMEs could be considered if market studies indicate so,"
the Committee said.
The Committee, on 20 January 2025, had informed CCI that the current (DVT) rule, which sets a minimum merger and acquisition value of Rs. 2,000 crore, appears "counter-intuitive". In Tamil Nadu, for example, many businesses are being acquired by larger corporations without requiring CCI approval, precisely because their acquisition value falls below this Rs. 2,000 crore cap.
"Considering that Tamil Nadu accounts for 44% of India's MSMEs, this DVT rule creates an 'inverted pyramid' effect. It enables large corporates to easily acquire MSMEs without regulatory scrutiny, potentially harming the MSME sector,"
the Committee had said.
The CCI, in response, had told the Committee that lowering DVT would mean reviewing cases where target entities may not have any impact on competition due to their insignificant presence in their areas of operations.
"Further, it may lead to inefficient use of resources, as this involves evaluation of more transactions of little or no significance from competition perspective. This may result in regulatory overreach and may cause inefficiency in the system,"
it had said.
The CCI also feels a lower threshold would enhance the compliance costs for companies, and the process can be cumbersome for MSMEs, sources say.
According to Moneycontrol, most experts believe that introducing a reduced deal value threshold (DVT) for transactions involving MSMEs is neither necessary nor advisable. They argue that the primary aim of merger control is to maintain competitive market structures, not to protect MSMEs from acquisition or offer them special regulatory treatment.
Some legal professionals highlighted that the DVT's original intent—to target digital sector transactions—has not been met, as many such deals still fall below regulatory radar. Instead, the DVT has drawn attention to sectors like manufacturing and infrastructure, which were not the intended focus.
However, a minority of experts support a lower DVT for MSMEs, provided it comes with procedural clarity and proportional enforcement. They point out that even smaller transactions can significantly impact competition in niche markets, especially in strategic sectors such as digital services and manufacturing.
Experts agree that any reduction in thresholds should be based on thorough market studies and economic evidence, aligned with the recommendations of the Competition Law Review Committee. A more targeted approach, such as applying lower thresholds in high-risk sectors or where MSMEs play a key role, is preferred.
Additionally, some suggest that the Competition Commission of India (CCI) could adopt a residuary clause to examine sub-threshold transactions that raise competition concerns. To ensure accountability, this would require clear internal guidelines and public disclosure of the reasons for such interventions.
Source: Moneycontrol
