New Delhi, Nov. 7 -- Fifteen years into India's merger control regime, the architecture of its jurisdictional thresholds sends a clear policy signal - small target entities with limited presence rarely warrant pre-merger scrutiny.
The de minimis (target) exemption excludes mergers and acquisitions from pre-clearance requirements where the target's Indian turnover or assets are below specified statutory limits, which have been periodically enhanced (most recently in March 2024).
To better capture acquisitions in the digital sector, India introduced a Deal Value Threshold (DVT) in September 2024. Transactions valued at over Rs 2,000 crore must be notified to the Competition Commission of India (CCI) only if the target has Substantial Business Operations in India (SBOI).
For non-digital businesses, SBOI is generally pegged to an Indian turnover of at least Rs 500 crore (about $48 million) and at least 10% of the target's global turnover. For digital services, monetary floors do not apply. Instead, the assessment is based on tests related to at least 10% of users, Gross Merchandise Value (GMV) or revenue.
Policy versus practice
Read together, the de minimis and DVT/SBOI thresholds convey a consistent policy message that if an enterprise fails to meet these floors, its acquisition is unlikely to materially alter competitive dynamics in relevant markets, even for high-value deals. The policy under both tests is philosophically coherent in determining reportability.
However, the practice often departs from this principle post-notification. Once a filing is made, the CCI typically requires exhaustive overlap mapping and detailed market assessments for every line of activity i.e., main, adjacent, pilot, or legacy across the entire acquirer and target group. This creates a process challenge, involving an onerous mapping of minor activities that may not have any competitive significance.
The time cost of compliance
Practitioners often find themselves identifying overlapping segments, conducting detailed market analysis and mapping every adjacent or minor activity, from pilot projects and legacy products to services offered by distant affiliates, and then preparing full market-by-market assessments for each.
The difficulty becomes particularly visible under the Green Channel route, which allows automatic approval for transactions where the business of the parties have no overlaps. The CCI has previously invalidated or penalised Green Channel filings for omitting even temporary or non-core supply relationships. While this strict standard is justified for the green channel clearances, the expectation of granular overlap mapping in ordinary filings creates unnecessary compliance constraints.
If less than Rs 500 crore of Indian turnover does not qualify as "substantial operations" for notification under the DVT, it is worth asking whether an overlap of Rs 50 lakh within a large conglomerate should trigger a full-blown market analysis. In practice today, it often does.
The practical cost: False precision and time
This hyper-granular approach imposes a significant practical cost on companies and advisors. Most companies track competitive dynamics around their core revenue drivers, not fringe activities. Constructing accurate market share data for legacy SKUs or small pilot runs for a merger filing is onerous, stretching internal teams and deal timelines. Equally, the attempt to quantify minuscule overlaps often produces false precision. Patchwork market shares for tiny overlaps, built from mismatched sources, can distract the CCI from the real competitive questions in areas where the parties compete.
A pragmatic path forward
The CCI can preserve analytical rigor while easing the process costs by introducing materiality filters consistent with statutory thresholds. This could be done through clarifications in its Form I guidance or through FAQs. For non-digital sectors, overlaps contributing less than a fixed monetary threshold, say, Rs 1 crore or less than 1% of either party's India turnover, could be filtered out. Below this threshold, parties could only need to provide a narrative explanation, rather than detailed market share data. Specific numbers can be consulted on in a public paper; the principle is what matters.
For digital businesses, materiality should similarly be guided by user base and GMV, consistent with the SBOI tests. If an overlap falls significantly below the SBOI markers, for instance, well under 10% of global users with a de minimis India base, a light-touch narrative should suffice.
Conclusion
India's merger regime has evolved through higher thresholds and the thoughtful introduction of the DVT. The next essential step is procedural pragmatism. The spirit of the de minimis exemption and the SBOI test should inform the depth of overlap analysis for small-value activities or micro-overlaps. Calibrated materiality screens, backed by sensible guardrails would conserve resources for the regulator and the industry and keep the focus where it belongs - on genuine competition risks. Aligning the process with policy will make India's merger review both efficient and effective.
*Anisha Chand is a Partner with Khaitan & Co. Views expressed are personal.
Published by HT Digital Content Services with permission from VC Circle.