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Minimising False Positives And Negatives: The Next Step after DVT

Nachiketa Narain


The Indian economy is bustling with the rise of startups, with 1,12,718 DPIIT recognised startups as of 2023. Naturally, the incumbent players in the market would not want their position threatened by the rise of other players in the market. This stems into the problem of anti-competitive mergers or acquisitions or amalgamation arises; these anti competitive ‘combinations’ are undertaken by firms with the primary motive to maintain dominance or to enter in a particular sector by either killing a promising firm that may act as a competitor in the future or create barriers in the industry.

For instance, the acquisition of Whatsapp by Facebook led to the elimination of its potential competitor; similarly, Byjus’ acquisitions in the edtech sector did not come under the radar of the competition watch dogs. The Pharma industry is another industry where the giants have a propensity to kill their future competition.

The policymakers acknowledged the problem of killer acquisitions and its adverse effects for fair competition in the market. Consequently, The 2023 amendment to the Competition Act 2002 (“the Act”) specifically catered to the problem of killer acquisition by implementing the deal value based threshold (‘DVT’) and setting it at INR 2000 Crores.

The DVT would provide the Competition Commission of India (“CCI”) with combinations to analyse. It is then that the CCI undertakes comprehensive inquiry of combinations as per its power under section 29 of the Act to check appreciable adverse effects on competition (“AAEC”).

Deal Value Threshold

After the addition of DVT, the CCI, in order to check anti-competitive deals, follows a dual approach. This entails:

1) Assets and turnover value thresholds prescribed under the de minimis exemption coupled with Section 5 of the Act and;

2- The new DVT

The DVT is independent of the existing asset and turnover thresholds. It includes even those deals that come under the de minimis exemption meaning that deals that may be exempt under the existing thresholds shall still be required to seek the approval of the CCI if they cross the DVT.

The DVT, no doubt a progressive step, is still a threshold meaning that when a deal is being undertaken, the deal will either cross it or stay within it. This gives rise to the possibility of false positives and negatives.

False positives are those deals that are not anti-competitive yet they come under the scrutiny of the regulator since the deals’ monetary value is greater than the DVT while false negatives are those deals that are anti-competitive in nature but the transaction value of the deal falls below the threshold, hence, these deals do not come under the scrutiny of the CCI.

These false positives and negatives are bound to exist as long as there are thresholds in place. Thereby, in order to minimise the existence of false positives and negatives, there is a need to enhance the DVT with the two-pronged solution: one minimising the false positives; and the other minimising the false negatives.

Minimising False Positives Through Market Share Threshold

The Spanish Competition regime operates ‘market share threshold’ to check deals that might be anti-competitive. This threshold checks the resultant market share of the parties to the transaction and if the said deal breaches the threshold, it is bound to notify it to the Spanish Competition Authority (‘CNMC’). Currently, the Spanish Competition Act, as per its Section 8(1)(a), has set the threshold at 30% of the market share in the national market of Spain with respect to respective products or services.

Thus, it is clear that the threshold takes a look at three essentials:

1) resultant market share of the firms,

2) in the ‘specific’ market of a product or service,

3) In ‘specified’ geographical bounds

This makes the threshold highly receptive to the competitive landscape of individual sectors, thereby, making this approach better than the one-size-fits-all approaches.

When a deal crosses the DVT, it has to be notified to the CCI for its approval. Here, CCI undertakes comprehensive analysis of the deal by subjecting it to all or any of the provisions of section 20(4) of the Act. This provision also speaks about market share in clause ‘h’ in the same section. However, no specific limit as to the market share has been specified.

The market share threshold can be brought in the Indian regulatory realm to enhance the effectiveness of the regulatory regime. However, it is to be ensured that this threshold is brought with the intention to sieve-out false positives and not to amplify more scrutiny. Therefore, the value of threshold should be such that it serves its purpose of sieving out false positives rather than becoming an impediment to commercial dealings. The market share should be examined within the 1st phase of CCI inquiry rather than examining it in the later phase. Further, this threshold should not be an independent addition to the existing thresholds like the DVT; rather it should be a mechanism that is used when a deal crosses the DVT, in essence, it works as a next step after the DVT. Market share threshold will bring objectivity and legal certainty to the procedure of inquiry. Moreover, it would minimise the existence of false positives for they would already be sieved out in the phase one of the inquiry itself.

Minimising False Negatives

There might be commercial deals that are anti-competitive in nature yet they do not come under the radar of the DVT since the transaction’s monetary value is low but the competitive value is high. In order to catch these false negatives, a need arises to chalk out specific ways or mechanisms through which the CCI can take effective measures against such deals.

Presently, the CCI takes on the problem of false negatives by virtue of section 20(1) of the Act which enables it to take suo-motu cognisance or be informed by a third party about a particular combination and then undertake an inquiry on it within one year of that combination.

However, this mechanism is not totally reliable and leaves scope for loopholes. For instance, if the AAEC of that unnoticed combination are visible after the period of one year, the CCI cannot do anything for its power to conduct inquiry ceases after the period of one year of that combination.

Moreover, the wording of section 20(1) makes it clear that CCI can look into only those combinations that are defined by section 5 of the Act, thereby, meaning that only those combinations can be inquired upon by the CCI that have already crossed the thresholds prescribed under section 5 of the act.

Firstly, there is a need to reasonably extend the ex-post assessment period. This can alleviate the problem of false negatives as the impact of certain combinations might be visible after a certain time period. However, the ex-post assessment period should not be unreasonably widened like that of the Hart-Scott-Rodino Act (“HSR Act”) of the USA which works without any limitation period.

For instance, the Special Orders issued by the Federal Trade Commission (“FTC”) of the US under the HSR Act to the five tech giants which were meant to extract information about all those acquisitions undertaken by the five tech giants that might have gone unnoticed by the FTC from 2010 to 2019. This ex-post assessment would not change anything as whatever damage had to be done, has already been done. It will only serve as a punitive measure. However, the role of competition watchdogs is not to punish but to foster healthy competition in the market. Thus, the extension of ex-post assessment should be reasonable.

Secondly, section 20(1) of Act should include even those combinations that do not cross the relevant thresholds under section 5 of the Act or the DVT. This would enable the CCI to take cognisance of even those combinations that are falling below the thresholds but may have a great impact on the competitive landscape of a particular market sector.


The DVT is definitely a reformative step that caters to the problem of killer acquisitions. A threshold is important but it is not a cure-all. Therefore, it must be complemented with mechanisms and ways that can help in maximising the efficiency of the regulatory regime. The inclusion of market share threshold to minimise false positives and the reforms in ex-post assessment to minimise false negatives can be explored by the policymakers to ensure greater efficiency of the mechanisms already in place.