Digital M&AS set to come under CCI ambit soon
Big mergers and acquisitions (M&AS) of digital businesses may soon require the Competition Commission of India’s (CCI’S) approval. The antitrust regulator is working on new rules that will mandate deals above a threshold to seek its nod.
At the moment, companies in the process of M&A must seek the CCI’S approval with relation to asset size and turnover, as defined in the Competition Act. It plans to introduce “deal size” or “deal value” as an additional criterion to bring M&AS in the digital space within its purview.
Several important deals in the digital space, like the Facebook-whatsapp merger, have escaped CCI scrutiny due to current regulations.
“The deliberations are underway to bring combinations of digital firms within the ambit of merger review. The regulator is examining global practices in this regard and may soon finalise the terms and thresholds of the parameter,” said a person privy to the discussion. This could be done through amendments to the Competition Act, which is expected to be tabled in the upcoming parliament session. Sources say the deal value threshold could be at par with that in developed jurisdictions.
Germany and Austria adopted alternative transaction-value thresholds in 2017, requiring the notification of acquisition of targets with significant activities in those countries by large firms, even if the targets generate no revenue there. In Germany, the new review powers extend to deals with a global value over euro 400 million and, for Austria, those with a global value over euro 200 million.
Over 50 countries have the discretion to conduct competition reviews of mergers below mandatory notification thresholds, and the European Commission, EU member states, the UK and others use this authority more frequently. “This is among critical issues for the regulator as highly valued targets in the digital sector may not have a significant asset base or generate a significant turnover. Instead, their valuations come from access to large customer bases and data/intellectual property,” said Vaibhav Choukse, partner & head of practice, competition law, at JSA.