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Viability of De-Minimis Exemptions in the Competition (Amendment) Bill 2022 in the Digital Market

Kunwar Arpit Singh [i]


The Competition Amendment Bill, 2022 (The Bill) has proposed deal value threshold provisions to ensure combination transactions in the digital markets do not escape CCI's scrutiny. However, it has not been clarified what the applicability of the de minimis exemptions (exemptions provided to agreements between firms having insignificant market shares with a negligible influence on the market) will be once the bill is enacted. The bill is silent on whether the combinations qualifying for De Minimis exemptions can escape the scrutiny of the Competition Commission of India (CCI) if they exceed the deal value thresholds proposed under the bill. Unlike the traditional market, companies in the digital market usually provide ‘free’ services with an ad-based revenue model, which limits their capacity to grow their operations to a huge turnover and assets. This helps them escape the scrutiny under threshold models, which are based on a company's financial might. The author has addressed the ambiguity and shortcomings surrounding the deal value thresholds in light of de minimis exemptions, especially when dealing with the digital market. By analysing the practices of other competition law authorities worldwide, the author has provided suggestions for CCI to ensure that any combination likely to cause an Appreciable Adverse Effect on Competition (AAEC) in the market cannot escape its scrutiny merely by claiming non-notifiability.

The Doctrine Of De Minimis: An Overview

De minimis exemptions apply to transactions where the target companies’ assets are valued at less than INR 350 crore in India or the target's turnover is less than INR 1,000 crore in India. These transactions will be exempt from the requirements of Section 5 of the Competition Act, 2002 (The Act) and thereby exempt from seeking the approval of the CCI. Section 5 plays an important role in invalidating any combination which is likely to cause AAEC in the market. It provides for assets and turnover-based thresholds for the parties involved in the combination. The CCI must be notified if any parties fall within these thresholds.

Reasons Behind The Proposed Amendments And The Ambiguities

Many large deals, for example, the acquisition of Myntra by Flipkart, TaxiforSure by Ola, and Freecharge by Snapdeal etc., escaped CCI's scrutiny because the entities to the deal did not exceed the applicable thresholds prescribed under Section 5 of the Act. These acquisitions were used as a strategy to consolidate market positions, eliminate potential threats or expand into new lines of business; hence, a deal value based threshold amendment was considered imminent. To empower the CCI against these transactions, the Bill has provided provisions for deal value threshold wherein any deal exceeding INR 2,000 crore (approximately USD 252 million), or if either entity to the deal has a “substantial business in operations in India”, then that deal will be liable to scrutinised by the CCI[i].

However, the conundrums with the deal value threshold provisions in the proposed bill are evident. The term “substantial business in operations in India” has nowhere been defined in the bill. Providing that the deals are only to be reviewed after crossing a fixed arithmetic threshold also seems to be an outdated assessment method, especially when looking at practices of competition authorities across the globe. The Austrian-German authorities have recently updated their joint guidance paper on deal value thresholds to include provisions for 'monthly active users' or 'daily active users' of the target company as another component to determine 'substantial domestic activity' for digital companies. The success of any digital company is based on the number of active users. The guidance paper’s foresightedness in including ‘active user base’ instead of just ‘user base’ has to be appreciated because users actively using the service bring revenue to the company. It’s common practice in the digital market for the users to sign up for a service to check it out but then abandon it. These ghosting users are of not much value to the service provider. An entity with a small but consistent user base can be said to be in a more dominant position than an entity with an inactive larger user base. So, the new update to the guidance paper is innovative against any company abusing such a dominant position in the digital market.

The Viability And Application Of The De Minimis Exemptions

The European Commission (EC) seems to be evolving from limiting its jurisdiction only to threshold-based notifications to exploring the realms of investigating any combination causing an anti-competitive effect in the market. The debate surrounding the so-called killer acquisition in Europe proves EC's broad approach[ii]. A killer acquisition is an acquisition where a sizeable digital firm purchases a younger or a smaller start-up that has not achieved its full potential. Such acquisitions are made to eliminate any potential future threats and competition. It is to be noted that the CCI is yet to take action against these killer-type acquisitions.

On the other hand, the EC has been stringent in dealing with such killer acquisitions. The EC issued new guidance in March 2021 that enabled mergers to be recommended by the National Commission Authorities to the EC. EC’s clampdown on killer acquisitions was again confirmed in July 2022 when the EU General Court delivered its judgement in the case of Illumina, Inc. v European Commission, concluding that an EU Member State may refer a combination to the EC under Article 22 of the EU Merger Regulation 139/2004 even if the combination does not exceed any threshold within that Member State’s national merger regime. This will allow the EC to review any combination agreement simply based on apprehension of its anti-competitiveness.

The European authorities have proved that they are willing to look beyond any traditional test to restrict anti-competitive practices in the market. In contrast, the CCI has no means to investigate the significant digital market deals at the moment and will be restricted by specific static tests even if the proposed amendments are to be brought into force. Moreover, CCI will also have to go a step further and evaluate and define killer acquisitions. So far, the CCI has acted aloof to the existence of such acquisitions. This approach of CCI can be detrimental to innovations in the ever-growing start-up culture in India.

Another glaring oversight by the CCI was seen in the recent PVR's acquisition of INOX, which gave the merged entity enormous market strength of more than 1,500 screens in the multiplex theatre sector. However, the combination did not require prior clearance from the CCI since it qualified and benefitted from the de minimis exemption. The Consumer Unity and Trust Society (CUTS), a public policy group, approached the CCI in August 2022, arguing that the merged entities would not have qualified for the De Minimis exemptions had it not been for the extraordinary circumstances of the COVID-19 pandemic. The CCI rejected the contentions of CUTS and held that apprehension of the likelihood of an AAEC by an enterprise yet to take form could not be brought under the purview of inquiry/investigation.

This ruling is in exact opposition to the arguments about the progressive approach for assessing anti-competitive practices in the market, which the author has laid out in this article. The only reasonable explanation for the CCI’s ruling is that it wants the growing digital market to take its natural course and minimise interference for the market to recover from the lows of the COVID-19 pandemic. Thus, it is evident that the CCI has taken a much narrower and more restrictive position when compared to the flexible approach taken by its European counterparts. In doing so, the CCI has limited its own power to review non-notifiable transactions and turned a blind eye to the combinations that are likely to cause AAEC in the future.

The Way Forward And Concluding Remarks

The MCA made its commitment to de minimis exemptions explicit by extending the exemptions to 2027. However, at the same time, the CCI must be empowered enough to bring forth a progressive and flexible approach when implementing the De minimis exemptions. The present law allows CCI to inquire into combinations under Section 20 of the Act. Nevertheless, these provisions can only be triggered if the given combination passes any threshold mentioned in Section 5 of the Act.

Therefore, the CCI will have to assess transactions falling under De Minimis exemptions on a case-by-case basis after the deal value threshold provisions are enacted. The CCI cannot allow transactions exceeding the deal value threshold to escape scrutiny by claiming de minimis exemptions. At the same time, CCI must also look beyond specific arithmetic values to assess anti-competitive deals and behaviours. It is the need of the hour for the CCI to come up with different tests and measures along with the existing and proposed parameters. This will allow competition law practice in India to evolve from a heavily restricted space to a much more developed one that protects consumer interests and restricts any anti-competitive activities in the market. The proposed amendments have been referred to the standing committee for its recommendations. The committee can be expected to provide more clarity on the ambiguity.

[i] The Competition (Amendment) Bill, 2022, § 6, No. 185, Bills of Parliament, 2022 (India). [ii] Directorate For Financial And Enterprise Affairs Competition Committee, The Secretariat, Start-ups, Killer Acquisitions and Merger Control – Background Note, OCED, (2020),


[i] Kunwar Arpit Singh is a Penultimate year law student at the School of Law, Christ University. His interests lie in Competition Law, Capital Market Law, and Mergers and Acquisitions. He has interned at various firms and advocates across the country, with his last internship coming at Dua Associates Corporate law team. For any discussion related to the article, he can be contacted via mail kunwar.singh@lawchristuniversity.


The Viability of De-minimis Exemptions in the Competition (Amendment) Bill 2022 in the Dig
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