India Competition Act 2002: Merger Control & Compliance for Foreign Companies

Why the Competition Act 2002 Matters for Foreign Companies

Any foreign company planning a merger, acquisition, or joint venture involving Indian assets must navigate India's competition law regime. The Competition Act 2002, enforced by the Competition Commission of India (CCI), governs three core areas: merger control (combinations), anti-competitive agreements, and abuse of dominant position. The Competition (Amendment) Act 2023 introduced sweeping changes, including deal value thresholds, settlement and commitment mechanisms, and a leniency-plus program, making compliance more complex for cross-border transactions.

The CCI's extraterritorial jurisdiction under Section 32 means that even purely offshore mergers between two foreign companies can require CCI merger approval if the transaction has an appreciable adverse effect on competition within India. In 2024-2025, the CCI reviewed over 100 combination notifications and imposed penalties on multiple parties for "gun-jumping" (completing a transaction before obtaining CCI approval). Foreign companies that ignore India's merger control regime risk penalties of up to 1% of their global turnover or assets.

Merger Control Thresholds: When CCI Notification Is Required

Not every M&A transaction requires CCI approval. The Competition Act prescribes specific thresholds under Section 5, and only transactions that breach these thresholds constitute "combinations" requiring mandatory pre-closing notification to the CCI.

Asset and Turnover Thresholds (Revised 2024)

The Ministry of Corporate Affairs revised the Section 5 thresholds by 150% in 2024. The current thresholds are:

A transaction constitutes a combination if the combined assets or turnover of the acquirer and target (or the group to which the merged entity will belong) exceed any of these thresholds.

Deal Value Threshold (DVT) -- Effective September 2024

The 2023 Amendment introduced a deal value threshold that captures high-value transactions regardless of the target's financial size. A CCI notification is required when:

• The aggregate deal value exceeds INR 2,000 crore (~USD 240 million), AND
• The target has substantial business operations in India (SBO)

The SBO criteria are met if the target has:

• At least 10% of its global user base located in India, OR
• At least 10% of its global gross merchandise value (GMV) from India with Indian revenues exceeding INR 500 crore, OR
• Turnover from India exceeding INR 500 crore and accounting for at least 10% of global turnover

This threshold is particularly significant for technology and digital platform acquisitions where the target may have minimal revenue but substantial user bases in India.

De Minimis Exemption (Small Target Exemption)

Even if a transaction breaches the asset/turnover thresholds, it may be exempt from notification if the target enterprise has:

• Assets of not more than INR 450 crore in India, OR
• Turnover of not more than INR 1,250 crore in India

This exemption, notified in March 2024 for a period of two years, does not apply to transactions captured by the deal value threshold. It provides meaningful relief for foreign acquirers purchasing small Indian targets.

The CCI Approval Process: Step by Step

Once a transaction is determined to be a notifiable combination, the parties must follow a structured approval process before closing the deal.

Step 1: Determine the Filing Form

The CCI offers two notification forms:

• Form I (Short Form): Used for straightforward transactions with no or minimal competitive overlaps. This is the most common filing and covers approximately 90% of notified combinations.
• Form II (Long Form): Required for transactions with significant horizontal or vertical overlaps, or where the CCI specifically requests a detailed assessment.

Step 2: File the Notification

There is no statutory deadline for filing, but the transaction cannot be consummated until CCI approval is obtained or 150 calendar days have elapsed from filing without the CCI forming a prima facie opinion. The filing fee is INR 20 lakh for Form I and INR 65 lakh for Form II.

Step 3: Phase I Review (30 Calendar Days)

The CCI must form a prima facie opinion within 30 calendar days of receiving the complete notification. If the CCI finds no competitive concerns, it approves the combination. If 30 days elapse without a prima facie opinion, the combination is deemed approved.

Step 4: Phase II Investigation (If Required)

If the CCI forms a prima facie opinion that the combination may cause an appreciable adverse effect on competition (AAEC), it refers the matter for detailed investigation. The entire process, including Phase II, must be completed within 150 calendar days from the date of filing.

Step 5: Remedies and Conditions

The CCI may approve a combination unconditionally, approve it with modifications (behavioral or structural remedies), or reject it. In practice, outright rejections are extremely rare; the CCI typically negotiates remedies with the parties.

Green Channel Route: Automatic Approval

The Green Channel route, codified under the Competition (Criteria of Combination) Rules 2024, allows automatic deemed approval on the day of filing for combinations where there are zero overlaps between the parties. Specifically:

• No horizontal overlaps (parties do not compete in the same relevant market)
• No vertical overlaps (parties are not in a buyer-seller or supplier-distributor relationship)
• No complementary overlaps (parties' products/services are not complementary)

For foreign companies acquiring Indian targets in unrelated sectors, the Green Channel route significantly accelerates the transaction timeline. However, parties must accurately self-assess overlaps. If the CCI later discovers unreported overlaps, it can revoke the approval and impose penalties.

Anti-Competitive Agreements: Section 3 Compliance

Beyond merger control, the Competition Act prohibits anti-competitive agreements under Section 3. Foreign companies operating in India through wholly-owned subsidiaries, branch offices, or contractual arrangements must ensure their commercial agreements do not violate these provisions.

Horizontal Agreements (Section 3(3)) -- Per Se Illegal

Agreements between competitors are presumed to have an appreciable adverse effect on competition (AAEC) and are per se illegal. These include:

• Price fixing: Agreements to fix purchase or sale prices
• Output restriction: Agreements to limit production or supply
• Market allocation: Agreements to share or divide markets by territory, customers, or products
• Bid rigging: Agreements to manipulate the outcome of a bidding process

The CCI applies a strict standard to horizontal agreements. No efficiency defense is available, and the mere existence of such an agreement creates a presumption of AAEC. The burden shifts to the parties to rebut this presumption, which is extremely difficult in practice. Penalties for cartel participation can reach up to 10% of the average turnover for the preceding three financial years, plus disgorgement of profits. Individual officers who are responsible for, or knowingly permitted, the cartel conduct can also face personal penalties and, in certain cases, imprisonment.

Vertical Agreements (Section 3(4)) -- Rule of Reason

Agreements between entities at different levels of the supply chain are assessed under a "rule of reason" standard. The CCI must prove that the agreement causes an AAEC. Common vertical restraints include:

• Tie-in arrangements (requiring purchase of one product to buy another)
• Exclusive supply or distribution agreements
• Refusal to deal
• Resale price maintenance

Foreign companies entering India through subsidiary or branch office structures must review their distribution agreements, franchise arrangements, and supply contracts for potential vertical restraints.

Abuse of Dominant Position: Section 4 Compliance

Section 4 prohibits enterprises holding a dominant position in a relevant market from abusing that dominance. Dominance itself is not illegal; only its abuse is prohibited. Abusive conduct includes:

• Imposing unfair or discriminatory conditions or prices (including predatory pricing)
• Limiting production, markets, or technical development
• Denying market access to competitors
• Making contracts subject to unrelated conditions
• Using dominance in one market to gain advantages in another

For foreign companies entering India with significant market share in their sector, dominance assessments are critical. The CCI considers factors including market share, size and resources of the enterprise, entry barriers, countervailing buyer power, and the competitive landscape when determining dominance.

Settlement and Commitment Mechanism (2023 Amendment)

The Competition (Amendment) Act 2023 introduced settlement and commitment mechanisms for abuse of dominance and vertical agreement investigations, providing foreign companies with alternatives to contested CCI proceedings.

Commitments

After the CCI issues a prima facie order initiating an investigation, the party under investigation can offer commitments to address the CCI's concerns. Commitment applications must typically be filed within 45 calendar days of the prima facie order. The CCI may accept commitments that adequately address the competitive concerns without requiring a full investigation.

Settlements

After the Director General (DG) submits the investigation report, the investigated party can propose a settlement. Settlement applications must typically be filed within 45 calendar days of receiving the DG's report. A settlement order does not constitute a finding of contravention, making it attractive for companies seeking to resolve matters without an adverse finding on record.

Neither settlements nor commitments are available for cartel cases (horizontal agreements under Section 3(3)).

Leniency Program and Leniency Plus

The CCI operates a leniency program under Section 46 for cartel participants who disclose cartel conduct and cooperate with the investigation. The first applicant can receive up to 100% reduction in penalty, the second up to 50%, and the third up to 30%.

The 2023 Amendment introduced a leniency-plus provision: a cartel participant who is already a leniency applicant can receive additional penalty reduction by disclosing the existence of a second, previously unknown cartel. This provision incentivizes full disclosure and has been adopted from established competition law regimes in the EU and US.

Gun-Jumping: Penalties and Recent Enforcement

Gun-jumping occurs when parties consummate a notifiable combination before obtaining CCI approval. Under Section 43A, the CCI can impose penalties of up to 1% of the total turnover, assets, or deal value (whichever is higher) for gun-jumping violations.

Recent enforcement actions demonstrate the CCI's increasing vigilance:

• In 2024-2025, the CCI found gun-jumping in over 5 cases, with penalties averaging approximately INR 14 lakh per case
• Penalties have ranged from INR 5 lakh (nominal) to INR 200 crore (the Amazon/Future case, which also involved material non-disclosure)
• The CCI has penalized gun-jumping even in debt-to-equity conversions, stock pledge enforcements, and subscription agreements

Foreign companies must ensure that their transaction documents include appropriate CCI condition precedents and that no steps constituting "consummation" (including transfer of shares, change of board composition, or exercise of voting rights) occur before CCI approval.

Sector-Specific Competition Considerations for Foreign Entrants

Certain sectors attract heightened CCI scrutiny due to their concentrated market structures or strategic importance to the Indian economy. Foreign companies entering these sectors should factor in additional competition law considerations during their India entry planning.

Technology and Digital Platforms

The CCI has been particularly active in investigating technology companies. Major enforcement actions against global technology firms for alleged abuse of dominance in search, app marketplaces, and e-commerce have signaled that digital platforms face close scrutiny. The new deal value threshold was specifically designed to capture technology acquisitions where the target has significant Indian users but limited revenues. Foreign technology companies acquiring Indian startups or digital businesses should assume that most transactions will require CCI notification.

Pharmaceuticals and Healthcare

The pharmaceutical sector has seen significant CCI enforcement, particularly around reverse payment agreements (pay-for-delay settlements in patent disputes) and exclusionary practices by dominant manufacturers. Foreign pharmaceutical companies entering India through acquisitions must carefully map horizontal overlaps in therapeutic categories and consider potential concerns around combined market share in specific drug formulations.

Manufacturing and Industrial Inputs

Cartels in industrial inputs (cement, steel, chemicals) have attracted some of the CCI's largest penalties. The cement cartel case resulted in penalties exceeding INR 6,300 crore against major manufacturers. Foreign companies in manufacturing sectors should implement robust antitrust compliance programs and ensure that industry association participation does not involve exchange of competitively sensitive information.

Financial Services

Banks, insurance companies, and financial services providers operating in India face both competition law oversight from the CCI and sector-specific regulation from the SEBI, RBI, and IRDAI. The interplay between competition law and sectoral regulation creates complexity: certain conduct that may be permitted or even required by a sectoral regulator could still face CCI scrutiny under the Competition Act.

Practical Due Diligence Checklist for M&A Transactions

Foreign companies undertaking M&A transactions in India should include the following competition law items in their due diligence checklist:

• Threshold analysis: Calculate combined assets and turnover at both enterprise and group levels against current Section 5 thresholds. Check deal value threshold applicability.
• De minimis assessment: Determine whether the target qualifies for the small target exemption (assets under INR 450 crore or turnover under INR 1,250 crore in India).
• Overlap mapping: Identify horizontal, vertical, and complementary overlaps between the acquirer's group and the target, including overlaps through affiliated entities.
• Green Channel eligibility: Assess whether the transaction qualifies for Green Channel filing (zero overlaps across all categories).
• Historical compliance: Review the target's history of CCI proceedings, pending investigations, or prior penalty orders.
• Existing agreements: Review the target's distribution, supply, licensing, and franchise agreements for potential Section 3 violations that could become the acquirer's liability post-closing.
• Dominance assessment: If the combined entity would hold a significant market share in any relevant market, prepare a dominance and AAEC analysis.
• Timeline planning: Build 30-150 days for CCI approval into the transaction timetable, with appropriate long-stop date provisions.

Extraterritorial Application: Section 32

Section 32 empowers the CCI to take action against anti-competitive conduct occurring outside India if it has, or is likely to have, an appreciable adverse effect on competition in India. This extraterritorial reach has significant implications for foreign companies:

• Global mergers: A merger between two non-Indian companies may require CCI notification if the combined entity's Indian operations breach the Section 5 thresholds
• International cartels: The CCI has investigated and penalized international cartels affecting Indian markets
• Offshore vertical agreements: Distribution or licensing agreements executed outside India that restrict competition in India can be scrutinized

Foreign companies must conduct a thorough India competition law analysis for every global transaction, even when no Indian entity is directly involved as a party.

The CCI has demonstrated willingness to exercise this jurisdiction robustly. In recent years, the CCI has reviewed global transactions involving parties headquartered in the United States, Europe, China, Japan, and Southeast Asia. Even transactions where neither party has an Indian subsidiary but both have Indian customers generating revenues above the threshold have been caught by the merger control net. The practical implication is clear: any global M&A team must include India competition law as a standard item in their multi-jurisdictional filing analysis, alongside EU, US, and other major competition regimes.

Compliance Framework for Foreign Companies

Foreign companies operating in India should implement a comprehensive competition compliance program covering the following areas:

Merger Control Compliance

• Include CCI notification requirements in the M&A due diligence checklist for any transaction involving Indian assets, revenue, or user base
• Build CCI filing timelines (30-150 days) into transaction timetables
• Ensure transaction documents include CCI condition precedent clauses and anti-gun-jumping provisions
• Assess deal value threshold applicability for technology and digital platform transactions

Antitrust Compliance

• Review all distribution, franchise, and supply agreements for potential vertical restraints
• Implement cartel prevention protocols for sales teams, especially at industry events and trade associations
• Train employees on recognizing and reporting anti-competitive conduct
• Establish a competition compliance manual tailored to Indian law requirements

Dominance Compliance

• Conduct periodic market share assessments in relevant Indian markets
• Review pricing policies, discount structures, and loyalty programs for potential abuse
• Ensure non-discriminatory treatment of customers and trading partners
• Document commercial justifications for any conduct that could be perceived as exclusionary

Given the complexity of India's competition regime, foreign companies entering India through FDI advisory services should engage experienced Indian competition counsel early in the transaction planning process. The cost of non-compliance, in penalties, transaction delays, and reputational damage, far exceeds the cost of proactive compliance.

Key Takeaways

• The CCI's extraterritorial jurisdiction means that global mergers with Indian nexus require competition analysis, even when no Indian entity is a direct party to the transaction.
• The 2024 revised thresholds (150% increase) and the new deal value threshold (INR 2,000 crore with SBO in India) have expanded the scope of notifiable combinations, particularly for technology acquisitions.
• Gun-jumping penalties of up to 1% of turnover/assets make it critical to include CCI condition precedent clauses in transaction documents and avoid any consummation steps before approval.
• The 2023 Amendment's settlement and commitment mechanisms provide alternatives to contested proceedings for abuse of dominance and vertical restraint cases, but are not available for cartels.
• Foreign companies should implement comprehensive competition compliance programs covering merger control, horizontal/vertical agreements, and dominance abuse to avoid CCI enforcement actions.