India seeks to tighten rules for scrutiny of mergers and acquisitions under the proposed law, which could particularly affect global tech firms that do a lot of business there.
The resolution is part of changes to India’s competition law in a bill introduced in Parliament on Friday and could be passed as early as next week. Under the current law, the Competition Commission of India (CCI) reviews mergers and acquisitions that exceed assets or business limits.
But many high-value deals between technology firms with a large presence in India have escaped scrutiny because the companies involved have low assets and turnover.
For example, Facebook’s acquisition of WhatsApp for $19 billion in 2014 did not require CCI approval, even as WhatsApp counts India as a significant market, say, lawyers.
The draft law proposes that all deals over 20 billion rupees ($250 million) should be subject to antitrust scrutiny if the companies have substantial business operations in India.
“The hotly debated deal value test seeks to attract the scrutiny of transactions where parties do not meet the conventional asset and turnover thresholds, particularly in the tech space,” said Anisha Chand, a partner specializing in antitrust law at an Indian law firm Khaitan & Co.
“If passed in the present form, the incoming amendment may likely result in a jump in (the) number of transactions, particularly in new age markets to require prior clearance,” she added.
The deal value threshold for scrutiny is in line with antitrust regulations in Germany and Austria, public policy consulting firm Koan Advisory said in a note on Friday. The CCI did not respond to a request for comment.
New regulations from the CCI will lay out the process to determine whether an entity has “substantial business operations” in India, according to the bill, dated Aug. 2.
As part of the revamp of competition law, the government also proposes reducing the time limit for approving mergers to 150 days from 210 days.
In addition, it plans to introduce a mechanism for entities seeking to settle with the CCI, the bill says.
