Killer Acquisitions in India: Regulatory Gaps, Risks to Innovation, and the pathways to reform

Written by Bhavika Sikka currently pursuing BA.LLB (Hons) from Symbiosis Law School Pune and Rijul Tripathy currently pursuing BBA.LLB from Symbiosis Law School Pune

In the wake of India’s digital economy boom and its burgeoning startup ecosystem “Killer Acquisitions” have become a salient regulatory concern. These are deals in which large incumbents acquire nascent rivals not with the intention of scaling them but to pre-empt future competition. This creates “Kill Zones” that chill innovation and entrench dominance. India’s historic merger control regime is based on turnover/asset thresholds and a "small target” exemption often fails to catch such deals. The Competition (Amendment) Act, 2023 has for the first time introduced Deal-Value Threshold (DVT), this is an attempt to plug this blind spot in India. However, even today, significant doctrinal, institutional and evidentiary gaps remain in practice. This paper undertakes a critical analysis of India’s current framework as well as its inadequacies in detecting and remedying killer acquisitions. It further analyses the challenges of enforcement in practice. It then draws on comparative regimes across different countries to assess policy alternatives and proposes an intensive roadmap for India that preserves innovation and incentives while enhancing competition safeguards.

Introduction

Charles Darwin warned that natural selection rewards traits that help species adapt, not merely endure. Yet evolutionary biologists have long noted what happens when the process is skewed. Research shows that populations can drift toward “survival of the fittest” where weaker organisms limp on because the environment only challenges the strongest, which leads to their extinction, thereby hollowing out the gene pool and dulling future resilience.[1] Indian markets are witnessing a similar negative evolution where dominant platforms are buying promising rivals only to close them and their innovative products, which challenges the acquirer's position in the market. In such a case, the ecosystem survives but it loses the genetic variety that would have kept it vibrant.[2]

Economists of competition describe such takeovers as Killer Acquisitions" which refer to deals under which an incumbent takes over a nascent threat, chiefly in order to forestall[3] or defer overlapping innovations[4]. European regulators refined that definition when rejecting Illumina's bid to acquire Grail, deeming the "elimination of future competitive pressure" in precision oncology to be the very harm which heralds the existence of Killer Acquisitions[5] . The OECD has further commented that such mergers often hide under ordinary notification thresholds, representing a "stealth consolidation" that too often is discovered by regulators too late after the market's diversity has been reduced[6].

India's recent past is emblematic of that evolutionary backslide. In 2020 the Competition Commission of India (CCI) cleared the takeover by Zomato of the India business of Uber Eats, eliminating the country's third-largest food ordering player and leaving two firms in control of over 90 percent of a market that is forecast to reach $12.5 billion by 2025.[7] This transaction cleared unnoticed because India's merger controls still use asset-and-turnover triggers drafted in 2009, making data-rich but asset-light transactions effectively undetectable by the regulator. Even as the new Competition (Amendment) Act, 2023, sets out a "deal value threshold" as part of the net in order to capture such strategically valuable deals, the market was shaped over decades of such adverse development. In this article, we shall examine the same dynamic in the earlier context that applies to India, outlining the manner in which the very "gene pool" of the national innovation ecosystem is under attack, and the directions that reforms must take such that in the market, the fittest, and not the biggest, to survive.

Critical Analysis

Indian Framework

Under Sections 5[8] and 6[9] of the Competition Act, 2002, a “combination,” i.e., a merger, acquisition, or control acquisition, must be notified to the Competition Commission of India if the parties exceed certain turnover or asset thresholds. Historically, the CCI’s merger review focused on structural overlap, market shares, concentration and vertical constraints. Institutionally, the CCI handles over 90 combinations annually, most of which are cleared quickly under the “green channel”[10]. The Commission's investigative resources and expertise especially in the digital markets are still developing[11]. The CCI also faces judicial delays as many orders are stayed or challenged in NCLT and higher courts which slows enforcement.[12]

However, in the process of regulating combinations, the act prescribes precise numeric limits which exclude small-target acquisitions, in interest of saving time and resources of the Commission which could be free to focus on mergers which are more likely to have adverse effect on competition. This, small target exemption existed so that acquisitions with assets less than INR 350 crores or turnover less than INR 1,000 crores did not require a notification[13]. This carving out of a precise class of deals which were mostly nascent, low-revenue but high-potential firms provided “killer acquisitions’ their much-required cover.

Steps were made through the enactment of the Competition (Amendment) Act, 2023, which introduced a Deal-Value Threshold (DVT). This meant that a transaction must be notified if its value exceeds INR 2,000 crores and/or if the target has substantial business operations in India (SBO)[14]. Revised FAQs from the CCI clarified that “substantial Indian business operations” can range from revenues to employees, which may trigger DVT[15]. Furthermore, procedural rules define the review timeline, the suspensory effect and classification into Form I/Form II filings, depending on overlap and market share criteria[16]. This paradigm shift meant that for the first time India, high-value deals can be covered under the framework even where turnover is negligible theoretically bringing Killer Acquisitions within the ambit of the act.

Practice Review & Challenges

Historically, in significant deals such as Ola-Taxi & ForSure[17], MakeMyTrip & lbibo[18] and Zomato & Uber Eats, the Commission, based on multi-homing, entry conditions and complementary constraints, has cleared the mergers while rarely probing nascent competition risks. Notably, in Zomato’s acquisition of Uber Eats, the CCI approved the deal, reasoning that Swiggy remained a robust competitor; it did not consider Uber Eats’ limited Indian revenues and future potential[19]. The decision did not deeply examine whether Uber Eats could have evolved into an independent competitive strength or developed new service models threatening dominance.

However, despite the amendment in the Competition Act, the CCI has traditionally rarely invoked ex-post review powers and other measures which would allow it allay concerns or prevent killer acquisitions. The lack of a systematic ex-post assessment framework and a willing refusal to exercise powers and other institutional problems still plague CCI which means that many deals slip through entirely and the menace of Killer Acquisitions remains unchecked to a very large extent.

Residual Blind Spots

The “substantial business operations in India” test limits DVT application which means that foreign startup acquisitions with minimal Indian nexus may still escape scrutiny. Further, the small target exemption or de minimis carve-outs still persist which creates potential loopholes. Additionally, the acquirers may gradually increase their stakes via open market purchases or secondary transactions before thresholds which can end up evading the control tests. Finally, many acquisitions have already been consummated before DVT came into force and they remain immune under the old regime. The Parliamentary Standing Committee on Finance (2022) specifically warned that such exemptions are outdated in the digital economy, where data and innovation are not turnover-based and they determine the market power[20].

A. Limited Ex-post Review

Section 20 (1) of the Act empowers CCI to review non-notified combinations within one year of their consummation however this provision has been rarely invoked and never to unwind a completed merger. The absence of an institutionalised ex-post screening framework contrasts sharply with the UK Competition and Markets Authority which proactively investigates below-threshold acquisitions[21]. The CCI’s current ex-post toolkit lacks procedural mechanisms for systematic monitoring of unnotified deals which ultimately limits its deterrence capacity.

B. Inadequate Institutional Capacity and Sectoral Expertise 

Even though CCI has steadily built experience in merger control, its staffing and analytical bandwidth have remained constrained. The 2022-23 Annual Report indicates that more than 90 combinations were reviewed that year and most of them were reviewed within compressed timeframes[22]. This leaves little scope for economic analysis of the effects of innovations. Moreover, the CCI’s Digital Markets & Data Unit which was established after the recommendations from the Competition Law Review Committee (2019), remains severely understaffed[23]. This capacity gap weakens India's ability to evaluate complex data-driven mergers which involve algorithmic and platform competition.

C. Difficulty in Demonstrating Anti-Innovation Motives 

To prove that an acquisition was undertaken to eliminate a nascent rival rather than to achieve efficiencies remains an inherent challenge. Innovation suppression is a tricky concept, it is speculative and long-term which is unlike price-based competition. The OECD has also affirmed that even advanced jurisdictions have struggled to quantify the lost innovations resulting from pre-emptive acquisitions[24]. The Indian markets, which are characterised by volatile startup valuations, further complicate such assessments.

Global Best Practices

European Union

Under the EU Merger Regulation (EUMR) the thresholds are turnover-based. To address the competition risks of transactions which are below the threshold, the Article 22 referral mechanism allows Member States to refer such deals to the European Commission. This has been deployed in biotech and digital sectors[25]. Even though Article 22 helps plug gaps, it has been criticised for unpredictability as firms may not know in advance whether their deals could be referred. Further, ongoing EU reform proposals aim to formalise a deal-value threshold for digital and innovation sectors[26].

United Kingdom

The UK’s Competition and Markets Authority (CMA) has been one of the most proactive regulators in addressing nascent competitor acquisitions. In Meta/Giphy, it required full divestiture based on risks to display tech and media integration even post-closing[27]. The CMA also blocked Sabre/Farelogix despite other jurisdictions approving the deal[28]. The CMA’s Digital Markets Unit (DMU) is expected to add further proactive oversight[29]. Thus we see that UK’s approach emphasized on structural remedies and retrospective intervention to deter ex-post harm.

United States

The US antitrust agencies that is the Federal Trade Commission (FTC) and Department of Justice (DOJ) have been slower to develop formal tools for killer acquisitions but are increasingly active. The traditional US merger control relies on Hart-Scott-Rodino (HSR) thresholds which are also turnover based which helped many Big Tech acquisitions in escaping scrutiny under these rules. The recent 2023 Merger Guidelines[30] signals a doctrinal shift as it emphasizes on value-based filing requirement and nascent competition. However, the courts remain cautious demanding concrete evidence rather than speculative harm[31].

Conclusion and Recommendations 

Killer acquisitions represent a pressing but complex challenge for India’s competition law regime. The existing frameworks is ill suited to detect acquisitions of low revenue yet high-value startups in the markets. While empirical evidence remains contested the risk of entrenched incumbency and chilled innovation justified calibrated intervention. The comparative lessons show a spectrum of approaches that India must adopt to chart a middle path that should include deal-value triggers and sectoral scrutiny while strengthening ex-post and remedial powers. Institutional capacity building and inter-agency coordination are critical to avoid overreach. In conclusion, preserving India’s innovation ecosystem requires vigilance against acquisition that kill competition in the cradle while ensuring that legitimate acquisitions continue to fuel entrepreneurship, investment and growth.

Recommendations:

1. India could adopt a lower or mandatory threshold for a few sectors like digital platforms, biotech and pharmaceuticals which have a heightened risk of killer acquisitions.

2. India could enhance its ex-post assessment[32] powers by strengthening Section 20 (1) to allow CCI to review consummated transactions beyond one year where material innovations' harm is emerging. This practice will align with CMA’s retroactive powers.

3.  Amendments should be made to provide clarity regarding what constitutes “material influence” in minority acquisitions. These amendments should be made ensuring that data access and board rights are scrutinized without deterring passive investments.

4. CCI should be equipped with structural remedies like divestiture, unwinding as well as behavioural commitments like data-sharing to address identified harms.

5.  Cooperation between CCI, SEBI, DPIIT and other sector regulators should be formalised to share intelligence on startup acquisitions especially in digital and fintech organisations.

6. Lastly, the commission should conduct systematic studies on Indian startups' acquisitions, innovation outcomes and kill zone effects to come up with polices which are backed by evidence.

References

[1] Hersh, E. (2013). “Survival of the Weak.” BioScience, 63(11), 851–857.

[2] Brown, W. Jethro. “Law and Evolution.” The Yale Law Journal, vol. 29, no. 4, 1920, pp. 394–400.

[3] Killer Acquisitions, Journal of Political Economy, Vol. 129, No. 3, pp. 649–702, March 2021

[4] Bryan, Kevin A., and Erik Hovenkamp. “Startup Acquisitions, Error Costs, and Antitrust Policy.” The University of Chicago Law Review, vol. 87, no. 2, 2020, pp. 331–56..

[5] Illumina/Grail, European Commission C(2024) 6433 final

[6] OECD (2020), Start-ups, Killer Acquisitions and Merger Control,

[7] [7] Zomato Media Pvt. Ltd./Uber Eats India, Combination Reg. No. C-2020/01/737, Order (Competition Comm’n of India, Feb. 4, 2020).

[8] Competition Act, 2002, § 5, No. 12, Acts of Parliament, (India).

[9] Competition Act, 2002, § 6, No. 12, Acts of Parliament, (India).

[10] Competition Commission of India, Annual Report 2022–23, at 45–46 (2023).

[11] Parliamentary Standing Committee on Finance, Report on Anti-Competitive Practices by BigTech Companies, at 32–33 (2022).

[12] Abir Roy & Aman Abbas, CCI’s Enforcement Hurdles: The NCLAT Bottleneck, Bus. Standard (May 12, 2023).

[13] The Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011, Sch. I, Gazette of India, Extraordinary, Pt. III, § 4 (June 29, 2011).

[14] The Competition (Amendment) Act, No. 13 of 2023, § 6, Gazette of India, Extraordinary, Pt. II, § 1 (Apr. 11, 2023).

[15] Competition Commission of India, Frequently Asked Questions on Combinations under the Competition (Amendment) Act, 2023, at 5–6 (2024),

[16] The Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011, regs. 5–9, Gazette of India, Extraordinary, Pt. III, § 4 (June 29, 2011) (as amended up to Apr. 1, 2024).

[17] ANI Techs. Pvt. Ltd./TaxiForSure, Combination Reg. No. C-2015/02/246, Order (Competition Comm’n of India, Mar. 19, 2015).

[18] MakeMyTrip Ltd./Ibibo Group, Combination Reg. No. C-2016/11/456, Order (Competition Comm’n of India, Jan. 18, 2017).

[19] Zomato Media Pvt. Ltd./Uber Eats India, Combination Reg. No. C-2020/01/737, Order (Competition Comm’n of India, Feb. 4, 2020).

[20] Parliamentary Standing Committee on Finance, Report on Anti-Competitive Practices by BigTech Companies, at 33–34 (2022).

[21] Meta Platforms, Inc./Giphy, CMA Final Report (Competition & Markets Auth. Nov. 30, 2021).

[22] Competition Commission of India, Annual Report 2022–23, at 45–47 (2023).

[23] Ministry of Corporate Affairs, Gov’t of India, Competition Law Review Committee Report, ch. 5 (2019).

[24] Organisation for Economic Co-operation and Development, Start-Ups, Killer Acquisitions and Merger Control 10–12 (2020).

[25] Council Regulation (EC) No. 139/2004 of 20 Jan. 2004 on the Control of Concentrations Between Undertakings (EU Merger Regulation), art. 22, 2004 O.J. (L 24) 1.

[26] Case M.10188 – Illumina/Grail, Commission Decision, EUR-Lex (Eur. Comm’n Sept. 6, 2022).

[27] Sabre Corp./Farelogix, Inc., CMA Final Report (Competition & Markets Auth. Apr. 9, 2020).

[28] Cristina Caffarra & Fiona Scott Morton, The European Commission’s Article 22 Gambit: An Unwise Stretch of Jurisdiction, CPI Antitrust Chron. (May 2021).

[29] European Commission, Competition Policy for the Digital Era: Report by Special Advisers 37–40 (2019).

[30] U.S. Department of Justice & Federal Trade Commission, 2023 Merger Guidelines (Dec. 2023)

[31] Federal Trade Commission, Non-Reportable Acquisitions by GAFA Firms: FTC Study 3–5 (Sept. 15, 2021).

[32] Umakanth Varottil, “The Need for an Ex-Post Assessment Framework to Tackle Killer Acquisitions in India,” IndiaCorpLaw Blog (Aug. 2022).