Evaluating Combination And Its Challenges Faced By The CCI In The Digital Era - A Case Study Analysis
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Category: Technology, Cyber & Privacy
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EVALUATING COMBINATION AND ITS
CHALLENGES
FACED BY THE CCI IN THE DIGITAL ERA: A CASE STUDY
ANALYSIS
Ankit Vishwakarma, LLM (Business Law), Amity Institute of Advanced Legal Studies, Amity University Noida
ABSTRACT
After the report of the Raghavan committee, the government of India introduced a new Competition Act, 2002, which got the president's assent in Jan 2003. The main objective of this new act includes the prevention of market competition from the anti-competitive agreements, abuse of dominant position, combination like mergers, and acquisitions because it creates an adverse effect on market competition. But after some time, when the traditional market got digitalized by the big tech giant through various combinations. It creates various challenges for traditional competition laws to regulate this digital marketplace, particularly combinations like merger and acquisition assessments. So, this research paper examines the new combination challenges faced by the Competition Commission of India (CCI), which are created by this digital era.
Researcher also includes the traditional competition law frameworks related to combination under sections 5 and 6 of the said act. This research paper also includes the case study on previous landmark cases related to the combination. It also determines the challenges faced by the CCI in regulating combinations in the digital era and also provides suggestions that could help the CCI in regulating combinations. Keywords: Combination, Mergers and Acquisitions, Monopolies, Dominant positions, Threshold value, Amalgamation, CCI, Digital era, Pre-merger notification, Enterprises, Tech giants, Turnover, Assets, Appreciable Adverse effect on Competition, Competition Act, 2002 etc.
INTRODUCTION
In the era of digital ecosystems, traditional antitrust laws are facing various challenges while regulating the market combinations, mainly mergers and acquisitions.1 It has become an essential concern for the competition authorities worldwide. In India, the Competition Commission of India (CCI) is a responsible competition authority under the Competition Act,
2002.2 It has given power to regulate the market combinations and do investigations that may
create appreciable adverse effects on competition and impose penalties.3 This act also provides provisions related to combination under section 5 and their regulatory framework under section
6 for identifying and assessing combinations that exceed the specified limit of asset or turnover
thresholds. 4 Meanwhile, these provisions are created to regulate the physical marketplace and their combination, but the rapid development of the digital markets has introduced essential complexities in the enforcement of combination regulations. 5 It often generates missive value using user data, network effects, and non-monetary transactions that can’t be captured by the traditional asset limit and threshold based on the turnover of the enterprises. 6 If we discuss many high-profile acquisitions in the digital economy, such as startup and platform-based companies, then they may exist below the thresholds in spite of having significant competitive outcomes. 7 However, the combination of the new big tech giants in this digital era challenges traditional competition laws that used to define relevant markets, assess dominance, and evaluate consumer harm.
8 Also, the role of big data, the role of zero-price markets, and, most importantly, the concept of killer acquisitions raises a doubt whether existing combination regulation laws remain fit for the purpose of digital markets. 9
1 Padmavathy Nehru, “Digital Economy & Competition Law
A Conundrum” 2 IJLR (2022).
2 The Competition Act, 2002 (Act 12 of 2003), s. 7
3 Id., s. 18, 20, 43A
4 Id., s. 5, 6.
5 Vinod Dhall, Competition Law Today Concept, Issues, and the Law in Practice (Oxford University Press, New Delhi, 2007)
6 Ibid.
7 Government of India, “Report of the Committee on Digital Competition Law” 24 (Ministry of Corporate Affairs, 2024). 8 Abir Roy and Jayant Kumar, Competition Law in India 370 (Eastern Law House, New Delhi, 2th edn., 2014). 9 UNCTAD, “Enforcing competition law in digital markets and ecosystems: Policy challenges and options” 2 (24 April 2024).
Generally, a combination deal with the mergers, acquisitions, and amalgamations of various enterprises can be done by individuals or by groups that cross the specified financial thresholds. 10 These types of combinations are not illegal until they create adverse effects on competition in the market. 11 And if they create the AAEC in the market, then CCI declared them void. 12 A combination can be classified on the basis of two heads: First is legal classification, which is based on section 5 of this act. 13 This classification contains three types of combinations, which are acquisition, acquisition by a person already in a similar business, and merger or amalgamation. 14 Second is market-based classification, which includes horizontal, vertical, and conglomerate combinations.
15 This research paper explores the challenges faced by CCI during the regulation of combination in the digital context. Researchers use various case studies in this paper to explore how the CCI interpreted and applied the provisions given under sections 5 and 6 of the Competition Act, 2002, to regulate combinations in the digital era. 16 It also provides a threshold limit for the enterprise and regulatory frameworks of the combination. 17 Further, it suggests some policy and legal reforms for the development of new competition law in India. DEFINITION OF COMBINATION According to the section 5 of the above act combination means a certain types of mergers, acquisitions or amalgamation done by one or more persons or by enterprises that exceed the given financial thresholds under section 5 are known as combination.
18 This combination has significant potential to affect the market competition that’s why after observing this aspect CCI has recently introduced Competition Commission of India (Combination) Regulation, 2024 on
9 September, 2024.19
10 Supra note 2, s. 5.
11 Id., s. 20(1)(a).
12 Id., s. 31.
13 Id., s. 5.
14 Id., s. 5(a),5(b),5(c).
15 Supra note 8 at 370, 373, 380.
16 Supra note 2, s. 5, 6.
17 Id., s. 5.
18 Ibid.
19 Competition Commission of India (Combination) Regulation, 2024
PROVISIONS RELATED TO COMBINATION The provisions related to combination is given under section 5 of the Competition Act.20 Which are given below-
1. If Combination includes any acquisition which acquires control, voting rights, shares or
assets of any company or enterprise by another company, person or enterprise or acquired jointly and if combined value of assets or turnover exceed the prescribed threshold value then it constitutes a combination.21
2. If Combination includes any acquisition of control by a person or group or enterprise that
has already control over the enterprise in same kind of business and that person or group or enterprise want to acquires control over another enterprise and cross the threshold limits then it constitutes combination.22
3. If a combination includes any merger or amalgamation and these merger and amalgamation
includes two or more enterprise for merger or one company or enterprise amalgamates with another company or enterprise and both jointly exceed the prescribed thresholds limit then it constitutes a combination.23 THRESHOLD VALUE The threshold value is given under section 5 of the said act.24 Which are as follows- For individual: Threshold value for combination means the combined value of both party’s asset must exceed the asset of 1000 Cr or the turnover of these parties must exceed the value of 3000 Cr inside India then it constitutes a combination.25 And if same entity is working inside as well as outside India then the thresholds limit of asset must be above 500 million US dollars means at least 500 Cr or a threshold limit of turnover
20 Supra note 2, s. 5.
21 Id., s. 5(a).
22 Id., s. 5(b).
23 Id., s. 5(c).
24 Id., s. 5.
25 Id., s. 5(a)(i)(A).
must be above 1500 million US dollars means at least 1500 Cr.26 For group: In a combination if one party belongs to a group which have control and want to acquire another company or enterprise then threshold value for this type of combination is 4000 Cr in terms of assets and 12000 Cr in the terms of turnover.27 And if same entity is working inside as well as outside India then the threshold value limit is more than 2 billion US dollars, including at least 500 Cr in India for assets or more than 6 billion US dollars, including at least 1500 Cr in India for Turnover.28 REGULATORY FRAMEWORK OF COMBINATION The regulatory framework and procedure related to combination is given under section 6 of the said act.29 Which are given below-
1. According to the section 6 sub section 1 of the competition act any person or enterprise
having combination which may causes or likely to cause an AAEC in the market in our country then this type of combination will be void.30
2. If any person or enterprise decided to enter into a combination and cross the threshold limit
given under section 5, then it is mandatory to send a pre-combination notice to CCI within 30 days from when the combination proposal got the approval of the board of directors of the concerned enterprise.31
3. After sending the pre-combination notice to CCI, the commission has to pass an order under
section 31 after 210 days from the date the notice is given to CCI until this combination can come into effect.32
4. If CCI found that this combination will not create any appreciable adverse effect on
26 Id., s. 5(a)(i)(B).
27 Id., s. 5(a)(ii)(A).
28 Id., s. 5(a)(ii)(B).
29 Id., s. 6.
30 Id., s. 6(1).
31 Id., s. 6(2).
32 Id., s. 6(2A).
competition in market then CCI will approve this combination and then it came into effect.33 But if commission feel this combination may cause or likely to cause AAEC in market then CCI start an investigation under section 29 of this act.34 INVESTIGATION PROCEDURE OF COMBINATION The procedure for the investigation of combination given under section 29 which empower the CCI to conduct an investigation of combination if commission feel it may create an AAEC in market.35
1. Commission will issue a notice to both parties of combination and they have to respond
within 30 days and provide the reason that why commission will not conduct an investigation in respect of such combination.36
2. The commission will give the responsibility to Director General to investigate and submit a
report on this combination.37 On the basis of this report if CCI feel that this combination has an AAEC in market then commission may pass the following order: - • The commission can declare this combination void.38 • If the commission feels that the AAEC can be cured by doing some modifications in the proposed combination, then CCI will order some specific modifications, and parties to the combination have to do this within 30 days from the order passed and submit the modified combination to CCI.39 If the CCI is satisfied with the modified combination, then the commission will approve it.40 • If CCI feels this modified combination is also creating AAEC in the market, the commission will further grant 30 days to do the required modification suggested by the CCI.41
33 Id., s. 31(1).
34 Id., s. 29.
35 Ibid.
36 Id., s. 29(1).
37 Id., s. 29(1A).
38 Id., s. 31(2).
39 Id., s. 31(3).
40 Id., s. 31(7).
41 Id., s. 31(8).
If parties are still not able to fulfill the requirement of CCI for the approval of that combination, then CCI will declare it void.42 Commission also impose a fine on the parties, which will be 1 percent of the turnover.43
CASE STUDY There are many cases happened related to the combination but researcher will explain some landmark cases in this research paper which are given below.
1. Harshita Chawla v. WhatsApp Inc. & Facebook Inc. (2021-Ongoing)
Background
In 2021, WhatsApp pushed an update related to its privacy policy which give permission to WhatsApp to share the user data with its parent company Facebook. 44 This step created a serious concern about the privacy of people and also it creates a serious concern about the competition law because Facebook using WhatsApp data to strengthen its market dominance in the field of digital advertising and social media. 45 Issues Raised: In this case, issues were raised whether the agreement between WhatsApp and Facebook to share the data is anti-competitive or not. The second issue was whether users are being forced by WhatsApp to accept the new privacy policy, which creates abuse of dominance under section 4. And there is also another issue related to this combination, whether Facebook and WhatsApp notified the CCI for this competitive implication under section 6.
46 Observations by CCI: In this case, CCI took a Suo motu investigation in March 2021 and gave a statement that this privacy policy is neither voluntary nor fully transparent because the user has no choice. 47 CCI also said that sharing the data of users between WhatsApp and Facebook may create Facebook
42 Id., s. 31(9).
43 Id., s. 31(10), 43A.
44 Harshita Chawla v. WhatsApp Inc. & Facebook Inc. (01/2021)
45 Ibid.
46 Ibid.
47 Ibid.
dominance in the digital advertising market, which could cause harm to the digital market. Further, after critically examining this combination, in 2014 CCI said that the real competitive harm became clear after this privacy policy.48 It’s importance: First, this case is under investigation by the CCI, and the Delhi High Court allowed the CCI to further do the investigation.49 This case is important because it is the first case in which data sharing in combination was questioned under competition laws in India.50 That’s why it shows how traditional antitrust laws are finally adopting the digital platform dominance and taking it seriously.51
2. ITC Limited vs The Competition Commission of India on 27 April, 2023
Background
In this case, ITC acquired the trademarks ‘Savlon’ and ‘Shower to Shower’ from the company Johnson & Johnson by doing a combination, which is an acquisition.52 Issues: ITC did not notify the CCI about this acquisition by giving notice; that’s why the CCI imposed a penalty of 5 lakh rupees on ITC and said that ITC had done a violation of the mandatory notification requirement under section 6(2) of the act.53 Outcome: The National Company Law Appellate Tribunal (NCLAT) removed this penalty and said that this acquisition comes under the de minimis exemption because the value of the assets and turnover involved did not exceed the prescribed threshold limits.54
48 Ibid.
49 Ibid.
50 Ibid.
51 Ibid.
52 ITC Limited vs The Competition Commission of India (27 April, 2023)
53 Ibid.
54 Ibid.
Its Importance: This case clarified that the applicability of the de minimis exemption emphasizes that only the assets and turnover of the business being acquired should be considered, not the entire companies.55 After reviewing the above cases, the researcher found that there is a need for amendments or a new competition legislation because the traditional antitrust laws are not able to regulate the digital consequence properly, specifically in the area of combination.
MAJOR
CHALLENGES
FACED BY CCI WHILE REGULATING COMBINATION IN DIGITAL ERA There are many challenges which are faced by CCI while regulating the Combination specially Mergers and Acquisition done by various big tech giants like Facebook, WhatsApp and Instagram in this digital marketplace.56 So, researcher is going to explain some major issues which are given below.
1. If two parties entered into a combination and this combination does not exceed the threshold
limit given under Section 5 of the Competition Act, 2002, then there is no need to notify the CCI for this combination.57 However, many digital transactions escape scrutiny because of their low monetary value, but these digital platforms have significant competitive implications because they have control over a lot of data or user bases.58
2. The traditional competition laws provided the definition of the relevant market, but these
definitions are not able to cover the current multisided digital market platforms like Google and Facebook, where services are free and customers are not paying for them. So traditional tools like SSNIP are inapplicable and also ineffective in such conditions.59
3. The regulatory frameworks of the traditional antitrust laws related to the combination fail to
address issues related to data protection, privacy, cybersecurity, etc. because the jurisdiction of
55 Ibid.
56 Supra note 9.
57 Supra note 2, s. 5.
58 Competition Commission of India (Combination) Regulation, 2011.
59 OCED, “Market definition in Multi-sided Market” (2018).
these issues comes under the jurisdiction of MeitY or TRAI, which creates a jurisdictional overlap, and because of this, merger reviews or weakening enforcement got delayed.60
4. Many times, big tech giants do combinations outside of India, but those combinations affect
the Indian market because these foreign companies acquire the Indian user data, but the CCI has no power to regulate these kinds of combinations because they do not come under the CCI's jurisdiction, so traditional regulation of combinations given under the traditional antitrust laws faces cross-border jurisdiction issues.61
5. Our digital economy got developed rapidly, which created the issue for CCI related to
mergers and acquisitions because the merger review process takes a lot of time; that’s why CCI fails to keep up with the speed of market transformation.62
6. Our traditional Act does not recognize data as a source of market power, which creates issues
for the CCI to assess the consolidation of datasets post-merger, which leads to market foreclosure or acts as a barrier for the newcomers.63
CONCLUSION
Traditional competition laws face significant issues while addressing the current digital combination.64 The traditional antitrust laws created for the physical marketplace and the rapid transformation of the traditional market into the digital market create a lot of gaps and loopholes in the current regulation of the combination.65 In this research paper, the researcher is trying to include a definition of combination and their regulatory framework and CCI investigation procedure.66 This paper also includes the landmark case studies, which help in understanding the issues related to the combination.
60 Supra note 7.
61 Supra note 44.
62 Government of India, “Raghavan Committee Report” (2000). also CCI chairperson’s address at IIC Annual Conference, 2022 available at: https://www.iicom.org/wp-content/themes/iic/PDF-generator/?event_id=30306 (last visited on: 13 April 2025) 63 In Re: Proposed Acquisition of Fitbit Inc. by Google LLC, CCI, Combination Reg. No. C-2020/08/765, Order dated 17 December 2020.
64 Supra note 7.
65 Supra note 8.
66 Supra note 2, s. 5,6,29.
Further, this paper tries to convey the major issue faced by CCI while regulating the combination in the digital era.67 While explaining the issues, the researcher found that competition law fails to recognize data as a critical asset for influencing market power.68 Issues like the inadequacy of notification caused by the high limits of the threshold and also defining the relevant market and navigating technological opacity create a need for urgent reform in the competition laws.69 Further, the doctrine of data Dominance is not available in current laws, which create weak regulatory responses to the significant anti-competitive consolidation in the digital market.70 So, if India wants to make a fair competitive marketplace, then it is important to do global best practices that incorporate a forward-looking, data-sensitive, and also innovation-related approach to do merger control.71
KEY
RECOMMENDATIONS
After analysing all the provisions, some landmarks cases and major key issues researcher found some key recommendations which can be followed by policymakers to make amendments in current laws or enact new legislation. So, these recommendations are given below-
1. Introduced a new threshold limit which may be lower in nature and meets small combination
so that CCI can do scrutiny of low monetary value digital transaction done by tech giant in digital marketplace.
2. Amend the traditional relevant market definition and provide a new definition of relevant
market which covers all the digital market so that CCI can easily regulate and maintain a fair market competition.
3. Amend the current regulatory framework of combination and add provisions related to data
protection, privacy and cybersecurity so that it will not create jurisdictional overlaps with other legislation and CCI can easily do mergers and acquisition reviews.
67 Supra note 44.
68 Avirup Bose, “Merger control in the digital economy” 147 Journal of the Indian Law Institute (2021).
69 Supra note 2, s. 5.
70 Supra note 63.
71 UNCTAD, “Global Competition law and policy Approaches to digital Markets” (2023).
4. Make a legislation for cross border combinations or amend current provisions and add new
laws which regulate the cross-border combination and tackle the cross-border jurisdiction issues.
5. As we know that our traditional economy rapidly developing into a digital economy which
create issue for CCI in regulating merger and acquisition because it takes a lot of time while reviewing so make a fast-track review process for merger and acquisition and then CCI will able to match the speed of development of digital market.
6. Make data as essential source of market power and establish provision related to data so that
CCI will regulate it while sharing the Indian user’s data to foreign company which affect the Indian market.
7. establish a specialized digital economy department into CCI having an expert team which
can easily tackle the issues related to digital marketplace.
8. Do joint investigation in the case of cross border combination which create a jurisdictional
issue in global merger.
9. Also establish a stakeholders consultation unit under the CCI so that in the case of big tech
giant mergers CCI will take the opinion of public and stakeholders for ensure transparency and inclusiveness in the decision-making process.
10. CCI has to updates it guidelines related to combination like mergers and Acquisition time
to time to make a balance between the rapid growth of digital market and CCI regulations.