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What legislation applies to the control of mergers?

Sections 5 and 6 of the Competition Act prohibit persons or enterprises from entering into combinations which have or are likely to have an appreciable adverse effect on competition in the relevant market in India. According to the act, these combinations are void. Section 20(4) of the act sets out the factors that the Competition Commission will consider when assessing whether a combination has or is likely to have an appreciable adverse effect on competition in India.

Under what circumstances is a transaction caught by merger control legislation?

Transactions that exceed the specified jurisdictional thresholds for assets and turnovers are caught by the legislation. These thresholds are set out in Section 5 of the Competition Act, as amended by the relevant government notifications.

Do thresholds apply to determine when a transaction is caught by merger control legislation?

Asset and turnover-based thresholds apply to determine whether a transaction is caught by the legislation. These are set out below.

Parties test:
Do the parties have combined assets in India of Rs15 billion ($240 million) or a combined turnover in India of Rs45 billion ($721 million)?

Do the parties have combined worldwide assets of Rs46.8 billion ($750 million), including combined assets in India of Rs7.5 billion ($120 million), or combined worldwide turnover of Rs140.3 billion ($2.25 billion), including combined turnover in India of Rs22.5 billion($360 million)?

Group test:
Does the group have assets in India of Rs60 billion ($962 million) or turnover in India of Rs180 billion ($2.9 billion)?

Does the group have worldwide assets of Rs187 billion ($3 billion), including assets in India of Rs7.5 billion ($120 million), or worldwide turnover of Rs561 billion ($9 billion), including turnover in India of Rs2.25 billion ($360 million)?

In this context, ‘group’ means two or more enterprises which are directly or indirectly in a position to:

  • exercise 50% or more of the voting rights in another enterprise;
  • appoint more than 50% of the board of directors in another enterprise; or
  • control the management or affairs of another enterprise.

If the parties test or group test is met, the transaction will qualify as a combination and must be notified to the Competition Commission.

The Ministry of Corporate Affairs has provided a de minimis target-based exemption under which any acquisition the target of which has Indian assets not exceeding Rs2.5 billion ($40 million) or Indian turnover not exceeding Rs7.5 billon ($120 million) need not be notified to the Competition Commission. This exemption will be in effect until March 2016. It applies only to acquisitions, not mergers or amalgamations.

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