Over a year since the Competition (Amendment) Act 2023 became law, the Corporate Affairs Ministry (MCA) has yet to notify the ‘deal value threshold’ rules for M&A transactions requiring CCI approval.

This delay in much awaited rules comes at a time when a U.S. lobby group, representing tech giants such as Google, Amazon, and Apple, has urged India to reconsider its proposed EU-like ex-ante approach focused digital competition law. 

As the MCA continues to work on the new digital competition law, the delay in notifying the rules for the Competition (Amendment) Act 2023 adds another layer of complexity to the evolving regulatory landscape for digital competition in India, sources said. 

This amendment law had received Presidential assent on April 11 last year.

The “deal value threshold” (DVT) refers to a criterion used to determine whether a merger or acquisition must be notified CCI for review and approval. 

This threshold is typically based on the total value of the transaction, rather than the turnover or market share of the involved companies. It aims to capture significant deals that might otherwise evade scrutiny under traditional “asset” or turnover-based thresholds, especially in sectors where market valuations can be very high despite lower “book value” or revenues, such as digital and tech industries.

Put Simply, DVTs require transactions above a certain deal value to be notified to the CCI, regardless of the asset or turnover of the companies involved.This aims to capture high-value transactions in the digital and other sectors, where companies like startups might have high valuations due to data or intellectual property but low traditional financial metrics.

Meanwhile, MCA is in the process of incorporating suggestions of stakeholders into the draft rules that were put on website for public consultations, official sources said.

“The prolonged delay in notifying the rules for the Competition Amendment Act 2023 for operationalizing deal value threshold also poses a threat to India’s burgeoning startup ecosystem. Without clear regulatory guidelines, startups may struggle to navigate the competitive landscape, potentially stifling innovation and deterring investment. 

This regulatory uncertainty could hamper the growth of new ventures, making it more difficult for them to compete with established tech giants” added a representative of a domestic startup. 

A competition law expert said that the DVT for high value transactions was introduced in the Competition Amendment Act  2023. “The stakeholders consultations on these DVTs was completed earlier this year. So, industry had had a long time to review and consider this new additional test for CCI approvals, and the time is ripe for the Government to notify these into law”, this expert said. 

The U.S.-India Business Council (USIBC), part of the U.S. Chamber of Commerce, had recently in a letter reportedly written to MCA expressing concerns over the proposed Digital Competition Bill. The draft bill, modeled after the EU’s Digital Markets Act 2022, aims to impose obligations on big digital firms with a global turnover exceeding $30 billion and at least 10 million local users. 

The proposed law seeks to prevent companies from exploiting non-public user data and favoring their services over competitors. Additionally, it aims to remove restrictions on downloading third-party apps. The USIBC warned that these stringent regulations could lead to reduced investments, higher user costs, and a narrower range of services in India. 

The council’s letter, dated May 15, argued that the draft Indian law is “much further in scope” than the EU’s, potentially impacting the strategies tech firms use to introduce new features and enhance security.

Last month, in her address at the 15th Annual Day event of the CCI in the Capital, CCI Chairperson Ravneet Kaur said that competition watchdog is in the process of notifying new merger control regulations that would among other aspects cover DVT too.

The MCA Rules and CCI regulation are expected to specify the procedure around ‘deal value threshold’ provision implementation.

Last September, the CCI had come up with draft regulations that sought stakeholders views on how ‘India nexus’ (Significant Business Operations) be determined for trigger of the ‘deal value threshold’ provisions.To determine SBO in India, the CCI’s draft regulations had outlined three key criteria: the number of users, subscribers, customers, or visitors; gross merchandise value; and turnover.

If any of these criteria exceed 10 per cent of the global figures during the twelve months preceding the relevant date, the transaction is considered to have SBO in India, necessitating merger control reporting.

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