CCI to spell out norms on significant business operation

CCI to spell out norms on significant business operation

Subject: Economy

Section: National Income

In News: Competition Commission of India is likely to issue draft proposals this month on the calculation of deal value threshold (DVT) and what constitutes significant business operations (SBO).

Key Points:

• After the amendment of the Competition Act, 2002, in April this year, CCI’s nod is needed for Mergers and acquisitions (M&A) is needed if
  • the transaction is valued at over Rs 2,000 crore, and
  • if the target entity being acquired or merged has substantial business operations in India.
• Why was the change brought?
  • In the past, several transactions, especially in the digital space, were concluded without the CCI’s review, despite the potential impact on competition.
  • With so many companies being multinational, there is a need to have objective criteria for jurisdiction in competition matters.
• What is the SBO test ?
  • Tests for significant business operations to be similar to that applied in Germany, Austria.
  • For digital companies, the determinants could include monthly subscribers, unique visitors.
  • Turnover from India, market share, location and access to data of Indian customers are other factors.
  • For pharma firms an R&D centre or a contract manufacturing unit in India could determine SBO.