Merger Control Thresholds in India: Striking the Balance between Market Concentration and Business Facilitation

Written by Dhruv Singh Chauhan, currently pursuing L.L.B from Sushant University.

Introduction

Mergers and acquisitions (M&A) serve as a cornerstone of corporate strategy in modern market economies, facilitating operational expansion, technological transfer, and synergistic efficiencies. While predominantly pro-competitive, these combinations carry the inherent risk of distorting market health—specifically through increased concentration, foreclosure of competition, or the elimination of nascent rivals. This tension between the facilitation of capital redistribution and the regulation of market power lies at the heart of merger control regimes globally.

In India, the Competition Act 2002 (the Act) codifies the framework for assessing the competitive implications of combinations. The Act entrusts the Competition Commission of India (CCI) with the mandate to scrutinise combinations likely to cause an Appreciable Adverse Effect on Competition (AAEC). Central to this oversight are merger control thresholds—quantitative filters based on asset value and turnover designed to identify transactions warranting regulatory intervention.

However, the rapid digitalisation of the economy has exposed the limitations of traditional 'brick-and-mortar' metrics. The phenomenon of killer acquisitions, where incumbents acquire innovative start-ups with low assets but high strategic value—has permitted significant market consolidation to escape scrutiny. In response, the Competition (Amendment) Act 2023 introduced a Deal Value Threshold (DVT), mandating notification for transactions exceeding INR 2,000 crore where the target possesses "substantial business operations in India."

This explainer critically analyses the evolution and efficacy of India’s merger control thresholds. Section 2 examines the historical and theoretical underpinnings of the regime, tracing the shift from the structuralism of the MRTP Act to the effects-based approach of the 2002 Act. Section 3 interrogates the "digital gap" and the introduction of the DVT, assessing whether the new threshold effectively balances regulatory capture with investment facilitation. Section 4 provides a comparative analysis, drawing on jurisdictions such as the EU, US, and Germany to contextualise India’s reforms. Finally, Section 5 offers targeted policy recommendations to enhance legal certainty and procedural efficiency.

The Statutory Paradigm: From Structuralism to Economic Analysis

India’s approach to merger regulation has undergone a metamorphosis parallel to its economic liberalisation. The antecedent legislation, the Monopolies and Restrictive Trade Practices Act 1969 (MRTP Act), was predicated on a structural presumption that size inherently equated to public detriment. Under the MRTP regime, combinations were viewed with scepticism, subject to rigid bureaucratic approvals that prioritised the prevention of concentration over economic efficiency.

The enactment of the Competition Act 2002, following the recommendations of the Raghavan Committee, marked a paradigm shift. The Act repealed the MRTP Act, replacing the "prevention of monopolies" mandate with the promotion of competition. It introduced a mandatory and suspensory merger control regime, operationalised in 2011, which requires parties to notify the CCI and await clearance before consummating a deal.

I. The Jurisdictional Thresholds

To ensure regulatory resources are focused on transactions with material market impact, Sections 5 and 6 of the Act prescribe jurisdictional thresholds. These are currently categorised as follows:

• Parties Test: Combined assets in India > INR 2,000 crore or turnover > INR 6,000 crore.

• Group Test: Group assets > INR 8,000 crore or turnover > INR 24,000 crore.

• Cross-border nuances: Specific thresholds for global assets/turnover with an India nexus component.

Crucially, to safeguard the "ease of doing business," the central government introduced the De Minimis exemption. Renewed in 2022, this provision exempts transactions where the target enterprise has Indian assets of less than INR 350 crore or turnover of less than INR 1,000 crore.This exemption acts as a vital filter, ensuring that the CCI is not inundated with benign transactions involving Micro, Small, and Medium Enterprises (MSMEs).

II. Procedural Innovations: The Green Channel

Acknowledging that not all mergers pose risks, the CCI introduced the "Green Channel" route in 2019. This mechanism allows for automatic approval upon filing for combinations with no horizontal, vertical, or complementary overlaps. This innovation significantly lowers transaction costs and timelines, reflecting a mature regulator willing to trust self-assessment for low-risk deals.

The Digital Disruption and the Deal Value Threshold

While the asset/turnover thresholds served traditional industries well, they proved porous in the digital economy. In data-driven markets, a target company’s competitive significance is often derived from its user base, data, or intellectual property, rather than its revenue or tangible assets. The limitations of the pre-2023 regime were highlighted by high-profile exits in the Indian start-up ecosystem, which evaded scrutiny. For instance, the acquisition of WhiteHat Jr. by Byju’s in 2020 (valued at USD 300 million) was not notifiable because the target did not meet the asset/turnover thresholds, despite the deal consolidating two dominant ed-tech players. This mirrors global concerns regarding "killer acquisitions," where incumbents neutralise future threats by acquiring them in their infancy—a concern famously raised during the EU's retrospective analysis of Facebook/WhatsApp.

The 2023 Amendment and DVT

To plug this gap, the Competition (Amendment) Act 2023 introduced the Deal Value Threshold (DVT). A transaction is now notifiable if:

• The deal value exceeds INR 2,000 crore, and

• The target enterprise has "substantial business operations in India."

This amendment aligns India with mature jurisdictions like Germany and Austria. However, the efficacy of the DVT hinges on the interpretation of "substantial business operations." While the Competition Commission of India (Combinations) Regulations 2024 provide some guidance—citing user base, gross merchandise value (GMV), and turnover as metrics—the lack of hard quantitative floors for these metrics creates ambiguity. This raises the risk of "false positives" (over-notification), which could chill investment in the Indian start-up ecosystem.

Sectoral Trends and Judicial Scrutiny

The CCI’s decisional practice reveals a nuanced approach to sector-specific consolidation, balancing statutory thresholds with economic realities.

In the media sector, the CCI has navigated the line between consolidation and convergence. The Sony/Zee merger, initially scrutinised via a detailed Phase II investigation, underscored the regulator's concern regarding market power in the linear TV advertising market. Conversely, the Viacom18/JioCinema transaction, despite its massive scale in the OTT space, was cleared via the Green Channel. This dichotomy suggests that while the CCI is vigilant regarding traditional market overlaps, it is still developing its theory of harm regarding ecosystem-based digital power. In the pharmaceutical sector, the CCI has moved beyond simple market share analysis to consider "innovation markets." In the Sun Pharma/Ranbaxy merger, the CCI ordered significant divestments to address horizontal overlaps in specific formulations. However, the regime currently lacks a specific framework to assess pipeline products (drugs in development), a gap that allows potential innovation suppression to go unchecked.

Comparative International Frameworks

India’s integration of the DVT reflects a convergence with global best practices, yet distinct differences remain in implementation.

• European Union: The EU relies on turnover thresholds but utilises Article 22 of the Merger Regulation to call in cases that fall below thresholds but affect trade between Member States, as seen in Illumina/Grail. This provides flexibility without a fixed statutory DVT, contrasting with India’s hard financial threshold.

• United States: The Hart-Scott-Rodino (HSR) Act utilises a "size of transaction" test (currently > USD 119.5 million), adjusted annually. Unlike India, the US agencies (FTC/DOJ) possess robust powers to challenge consummated mergers retrospectively, a tool India lacks.

• Germany & Austria: Both jurisdictions implemented transaction value thresholds early (EUR 400 million for Germany). Germany’s guidance on "significant domestic activity" focuses heavily on user engagement and data traffic, a model India’s 2024 Regulations appear to emulate.

The key lesson for India is the necessity of guidelines that are distinct enough to provide certainty but flexible enough to capture novel forms of market presence (e.g., freemium models).

Challenges and Recommendations

Despite the progressive 2023 amendments, the Indian merger control regime faces implementation challenges that threaten to disrupt the balance between regulation and facilitation. The primary concern is the open-ended nature of the local nexus test for DVT. The CCI should also publish detailed, sector-specific guidelines with quantitative safe harbours (e.g., a minimum number of active monthly users or a specific GMV percentage derived from India) to prevent defensive filings. As India currently lacks a notification trigger based purely on the acquisition of material influence without meeting financial thresholds. Minority acquisitions by private equity firms or competitors can lead to "soft" consolidation or coordinated effects.

India should consider a "material influence" test similar to the UK’s Enterprise Act 2002, allowing scrutiny of minority stakes that confer strategic veto rights, regardless of deal value. Unlike the US or EU, India lacks a formal mechanism for ex-post merger review. Once a deal clears the threshold test (or the Green Channel), it is largely immune from structural challenge even if anti-competitive effects manifest later.

While retrospective dismantling of mergers may reduce certainty, the CCI should strengthen its post-merger monitoring of behavioural remedies (e.g., data silos or interoperability mandates) to ensure conditional clearances remain effective.

Conclusion

The introduction of the Deal Value Threshold marks a maturation of the Indian competition regime, acknowledging that in the 21st century, value is not always synonymous with turnover. However, the success of this reform depends on its implementation. A regime that relies on vague definitions risks becoming a bottleneck for investment; conversely, a regime that remains tethered to brick-and-mortar thresholds risks irrelevance. To strike the true balance between preventing market concentration and facilitating business, the CCI must pivot toward a more economic, evidence-based assessment framework. By clarifying the parameters of the digital economy thresholds and investing in specialised capacity to analyse innovation harms, India can foster a merger control regime that is robust, predictable, and conducive to legitimate economic growth.