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India’s plan to regulate global transactions, especially among tech firms with a local presence, as proposed in the Competition Amendment Bill, is set to undergo modifications so that deals that do not stifle competition aren’t bogged down in merger control rules.

The proposal to require approval of the Competition Commission of India (CCI) for global transactions valued above 2,000 crore with an India play is part of the Competition Amendment Bill that is making its way through the Parliament. The standing committee on finance led by the Bharatiya Janata Party’s Jayant Sinha is expected to finalize its report soon.

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Discussions among the ministry of corporate affairs, CCI and parliamentarians in the standing committee point to the possible inclusion of several key parameters of the revamped merger control framework within the Competition Act itself rather than leaving them to be defined in regulations so that businesses get clarity of provisions and unnecessary litigation is avoided, said a person privy to the talks.

This includes guidance on how the value of a transaction is to be computed, including ‘direct, indirect and deferred considerations for acquisition’, said the person, who spoke on the condition of anonymity. Also, discussions are on among policymakers that a key factor that would bring global transactions under CCI’s regulatory purview—the threshold of ‘substantial business operations in India’ or the local nexus—needs to be defined in the law rather than being left to regulations. These are factors such as customer base or the number of contracts in India.

“Inclusion of definition of local nexus in the Act itself, in addition to the deal value, will certainly bring more clarity and predictability to businesses," said M.M. Sharma, advocate and head of competition law and policy at law firm Vaish Associates.

The plan to broaden the definition of ‘control’ proposed in the bill may also undergo changes. This is not just limited to the digital economy but covers all transactions. Currently, control is defined in Competition Act as controlling the affairs or management of an entity. The bill proposed to redefine it as the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions of a company. There is an increasing preference for adopting the concept of ‘decisive influence’ rather than ‘material influence,’ said the person.

Decisive influence is considered to be a higher threshold in defining control of an entity.

An email sent to the ministry of corporate affairs and CCI on Wednesday remained unanswered at the time of publishing.

“The law could lay down the principles of framing regulations on key aspects of merger regulation, which have to be drawn up following the due process of law. The regulator should also be doing regulatory impact assessment, cost benefit analysis and transparent consultations," said Amol Kulkarni, Director Research, CUTS International, a non-profit, non-governmental organisation working on public interest issues.

The ministry is set to tweak the bill once the standing committee gives its recommendations. The idea is to revamp the two-decade-old competition law in light of the changes in the market, such as explosive growth in the digital economy and the experience so far, especially in compliance enforcement.

The bill also proposes the option for businesses to settle anti-trust cases by paying an amount without admission of guilt. The settlement and commitment provisions in this regard are also likely to undergo some modifications to make them fairer and more practical.

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ABOUT THE AUTHOR

Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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