India seeks to tighten rules on antitrust scrutiny of mergers and acquisitions

Band Aditya Kalra and Abhirup Roy

NEW DELHI, August 5 (Reuters)India is aiming to tighten rules around merger and acquisition review under a bill that could particularly affect global tech companies that do a lot of business there.

The proposal is part of an overhaul of India’s competition law in a bill that was introduced in parliament on Friday and could be passed as early as next week.

Under the current law, the Competition Commission of India (ICC) reviews mergers and acquisitions that exceed the asset or turnover thresholds.

But many high-value deals between tech companies with a big presence in India have escaped scrutiny because the companies involved had few assets and low turnover there.

Facebook’s acquisition of WhatsApp in 2014 for $19 billion, for example, required no ICC clearance, even though WhatsApp considered India a major market, the lawyers say.

The bill proposes that all transactions worth more than 20 billion rupees ($250 million) should be subject to antitrust scrutiny if the companies have significant business activities in India.

“The highly controversial deal value test aims to draw attention to transactions where the parties fail to meet conventional asset and revenue thresholds, particularly in the tech space” said Anisha Chand, an antitrust partner at Indian law firm Khaitan & Co.

“If passed in its current form, the incoming amendment could likely lead to an increase in the number of transactions, particularly in new age markets, requiring pre-clearance,” she added.

The transaction value threshold for review complies with antitrust regulations in Germany and Austria, public policy consultancy Koan Advisory said in a note on Friday.

The CCI did not respond to a request for comment.

New ICC regulations will define the process for determining whether an entity has “substantial business operations” in India, according to the bill dated August 2.

As part of the competition law overhaul, the government is also proposing to reduce the merger approval timeframe from 210 days to 150 days.

Additionally, it plans to introduce a mechanism for entities seeking to reach an agreement with the ICC, the bill says.

(Reporting by Aditya Kalra and Abhirup Roy Editing by Bradley Perrett and Mark Potter)

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