Deal Value Threshold
Deal Value Threshold (DVT) is a new monetary ceiling introduced by the Competition Commission of India (CCI) to determine if a combination has to be notified prior to consummation. This new threshold was introduced by the Competition (Amendment) Act, 2023 through insertion of Section 5(d) and the CCI (Combination) Regulations, 2024 to deal with the dynamic digital regulation industry where certain loopholes were allowing innovative business practices to impede competition despite their assets and turnovers being below the Asset-Value Threshold. Essentially, due to several digital products/service companies being asset-light in nature, transactions involving highly valued companies were able to bypass the notification requirement since the asset threshold was not met. Additionally, the turnover threshold is also often not met in cases of newly developed and start-up businesses that are able to show low turnovers, but are otherwise valued highly because of the nature of their business. Moreover, de-minimis exemption previously allowed companies with minimal physical assets or turnover to bypass regulatory scrutiny.
This led to the introduction of the Deal Value Threshold which stated that any deal value of more than INR 2,000 crore (approximately USD 242 million) must be notified, provided that the target company had substantial business operations (SBO) in India. Hence, parties are now required to seek a prior mandatory approval from CCI if the deal value meets the DV threshold criteria irrespective of the total revenue earned by the target in India.
The following table can be used to understand the requirements of SBO criteria:
Parameters | For Digital Markets | For Other Sectors |
Gross Merchandise Value (GMV) in India in the 12 months preceding the transaction date | GMV in India is 10% or more of its global value | GMV in India is 10% or more of its global value AND exceed INR 500 crores (USD 60 Million) |
Turnover in India from all products and services in the 12 months preceding the transaction date | Turnover in India is 10% or more of its global value Turnover | Turnover in India is 10% or more of its global value Turnover AND exceed INR 500 crores (USD 60 Million) |
Number of business users or end users in India | Users in India are 10% or more of its business users or end users globally |
With digital markets on the rise, DVT is intended to regulate all kinds of sectoral impediments. The criteria helps CCI to scrutinize transactions which are likely to cause a huge impact on competition in the market. However, the approach of CCI has been ex-post scrutiny in all such transactions instead of ex-ante, which allows the transactions to affect markets by the time CCI starts its investigation in the matter.