DE MINIMIS EXEMPTION AND CCI’S JURISDICTION: TIME TO REVAMP?

[Pooja V and Bhawna Lakhina are third year students at National Law Institute University, Bhopal]


The de minimis exemption is a form of target exemption under the competition law regime wherein certain transactions falling below a given threshold are exempted from notification to the competition authority. The intent was to mandate notification for only those transactions that cause a significant reduction in market competition and therefore, require closer scrutiny. It was a means to clear the administrative burden of the CCI at the time when the institution was itself at a nascent stage.


The Indian competition regime takes into consideration the asset value and turnover of the target company to exempt a combination from the mandatory notification and competition assessment procedures. Accordingly, any combination which involves the target company having an asset value or turnover below 350 crores or 1000 crores respectively falls within the scope of the de minimis exemption.


In this piece, the authors underscore the problems inherent in the current regime while undertaking a cross-jurisdictional analysis. The authors press for granting residuary power to the CCI to assess below threshold transactions that are likely to cause appreciable adverse effect on competition (“AAEC”).

Problems Inherent in the Present Regime

The exemption, despite seeking to prune the administrative burden of the regulatory authority, raises serious concerns. A pivotal issue posed by the current format of the de minimis exemption is the gateway it provides for killer acquisitions. The term “killer acquisition” refers to an acquisition wherein a firm acquires a nascent competitor only to discontinue the target’s innovation projects, thereby pre-empting the emergence of future competition. The asset and turnover value of such acquired entity (the target company) is generally low, owing to it being a new entrant in the market, thereby exempting them from the CCI’s scrutiny.


However, such combinations pose crucial concerns in the market which have been highlighted in the OECD Report on Start Ups, Killer Acquisitions and Merger Control. This Report points out that such combinations lead to elimination of potential competition which not only affects existing competition in the market but also future prospects. This leads to a detrimental effect on the interests of the consumers who are deprived of newer and potentially better products in the market.

One such example is of the acquisition of Waze by Google. The former was a relatively small company and a nascent competitor to Google. Apparently, Waze had developed a mapping app which could significantly bolster its share in the market. Post its acquisition by Google, the mapping app was launched as “Google Maps”, achieving a dual objective: (a) securing Google’s market position, and (b) eliminating a competitor.

Thus, as of today, considering the new developments in the market, the de minimis exemption is going against the purpose for which it was introduced. This is particularly disturbing in the Indian context because the CCI does not have any residuary power to assess non-notifiable combinations, unlike competition regulators in other jurisdictions. However, in the recent case of Zomato-Uber Eats, the CCI was of the prima facie opinion that the combination would adversely affect the food delivery market and issued a show cause notice to the parties,[i]despite the fact that the combination enjoyed the de minimis exemption.

It is pertinent to note that the power of the CCI to issue a show cause notice is provided under Section 29(1); it requires the CCI to be of the prima facie opinion that the combination is likely to cause AAEC. While the basis for the CCI’s power to enquire in Zomato-UberEats case seems to emerge from this prima facie test, the same raises concerns as to whether such a test could also be extended to non-notifiable combinations.

Amidst this conundrum, there seems to be a provision which enables the CCI to assess even exempt combinations, i.e., Regulation 9(4) of the Combination Regulations. This Regulation relates to composite combinations, which are defined as “inter-related” or “inter-connected” transactions which may not necessarily be “inter-dependant”. Accordingly, if a series of transactions qualifies to be a composite combination, the CCI gets the jurisdiction to assess the same even if it would have otherwise enjoyed the target exemption.

In light of all these, the authors assert that the existing provisions can be utilised to provide residuary powers to the CCI even in case of non-notifiable transactions. This practise would not be peculiar as is it being increasingly adopted in other jurisdictions, as discussed in the subsequent head.

Practise in Other Jurisdictions

The practice in several jurisdictions broadly seems to tilt towards vesting residuary powers to the assessing authorities. For instance, in Australia, the notification procedure is informal and non-mandatory.