Mergers and acquisitions (M&A) among existing companies may lead to anti-competitive practices. Regulation of combinations, M&A in common parlance, is a subject matter of enforcement for the Competition Commission of India (CCI) under the provisions of the Competition Act, 2002 (Act). It is mandatory upon the parties to a transaction to notify the combination to CCI before consummating it. Otherwise, failure to notify a proposed combination or a part thereof attracts penalty.

For instance, the Apex court in a recent judgment, CCI v Thomas Cook delivered on April 17^th, 2018, restored the penalty imposed by CCI on Thomas Cook for not notifying a part of a combination giving effect to the steps of the proposed combination prior to pre-merger filing. The current note offers an insight into the same by understanding how to ascertain if a particular transaction requires pre-merger notification with CCI or not.

Any acquisition[1], merger or amalgamations[2] that satisfies the jurisdictional thresholds is a combination as per Section 5 of the Act. Combination, as per the Act, comprises of the acquisition of control, shares, voting rights or assets; the acquisition of control by a person over an enterprise where such person has direct or indirect control over another enterprise engaged in competing businesses; or mergers and amalgamation between or amongst enterprises.

Legal Framework
 Entering into a combination which causes or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India is prohibited and such combination shall be void in terms of the provisions of the Act. It is mandatory upon the parties entering into combination to report the same with CCI for pre-merger approval before implementing or consummating the transaction by virtue of Section 6 of the Act subject to thresholds prescribed in the Act. However, there is no requirement of such prior notification for those combinations which fall under the target exemption, or do not meet the prescribed thresholds, or do not qualify for any exemption notified by Ministry of Corporate Affairs (MCA).

Target Exemption
The first test contemplates that such combinations in which target has total assets of value of not more than INR 350 Crores or turnover of not more than INR 1000 Crores in India are exempt from notification with CCI for a period of 5 years from the date of its notification, March 6th, 2016.

Thresholds test
In case the above test is not met, the combination is tested as per the thresholds stipulated for enterprises and group[4]. For an Indian transaction, the thresholds are set as under:

1. At enterprise level – assets > INR 2000 Crore or turnover > INR 6000 Crore, in India.
2. At group level, assets > INR 8000 Crore or turnover > INR 24000 Crore, in India.

For a transaction taking place between global entities or group with Indian presence, the thresholds are determined in terms of assets or turnover in India and abroad (along with Indian leg) which are set as under:

1. At enterprise level – worldwide assets including India > USD 1 Bn, with at least INR 1000 crore in India or turnover at worldwide level including India > USD 3 Bn, with at least INR 3000 Crore in India.
2. At group level – worldwide assets including India > USD 4 Bn, with at least INR 1000 crore in India or turnover at worldwide level including India > USD 12 Bn, with at least INR 3000 Crore in India.

Interestingly, where a portion of enterprise or division or business of an enterprise is being acquired or merged or amalgamated, the assets and turnover attributable to such portion or division or business shall be taken into account for the purpose of determining thresholds.

Exemptions
Pursuant to MCA notifications Regional Rural Banks, Nationalized Banks and Central Public-Sector Enterprises operating in the Oil and Gas Sectors, along with their wholly or partly owned subsidiaries operating in the same sector are exempt from the requirement of filing with CCI for a period of 5 years, 10 years and 5 years respectively from the date of the notifications. Certain other transactions as listed out in Schedule I of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 are not normally required to be notified to CCI.

Failure to notify
As mentioned earlier, failure to report a notifiable transaction with CCI attracts penalty which can extend up to 1 (one) percent of the total turnover or the assets of the combination, whichever is higher. Even when a combination consists of inter-connected transactions the requirement of notification arises even if a single transaction among the series of steps qualifies the thresholds.

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