Sun Pharma bought Ranbaxy for $4 billion. The CCI let it through — but only after ordering the parties to divest seven products first, and it barred the merger from taking effect until they had.
Cross the Section 5 asset or turnover thresholds, or the ₹2,000 crore deal value threshold with substantial business operations in India, and you must notify the CCI and wait. Closing before approval is gun-jumping, penalised up to 1% of total turnover or assets.
Sections 5 and 6 of the Competition Act, 2002 create a suspensory merger control regime, meaning the deal stays suspended until the regulator clears it. A transaction that must be notified cannot be completed until the CCI approves it or the statutory period runs out. This is not a filing you make on the way to closing. It is something you finish before you are allowed to close.
One test does the heavy lifting throughout: whether a deal causes an Appreciable Adverse Effect on Competition in India — whether it meaningfully harms competition, by removing a real rival, concentrating a market, or making it harder for others to enter.
The Competition (Amendment) Act, 2023, operationalised through the CCI (Combinations) Regulations, 2024 with effect from 10 September 2024, reshaped the regime. It added a deal value threshold to catch asset-light digital acquisitions that slipped past turnover tests, codified "material influence" as the control standard, and compressed review timelines from 210 days to 150 days.
The bottom line
Notify if the parties cross the Section 5 asset or turnover thresholds, or the transaction value exceeds ₹2,000 crore and the target has substantial business operations in India.
The small-target exemption covers targets below notified India asset and turnover levels — but not where the deal value threshold applies.
You must wait. The deal cannot be completed until approval. Closing early is gun-jumping, penalised up to 1% of total turnover or assets, whichever is higher.
Timelines: a first-look review within 30 calendar days, and deemed approval if the CCI passes no order within 150 days.
Control now means material influence — the lowest threshold, well below majority.
When you have to notify
Sections 5 and 6, with the CCI (Combinations) Regulations, 2024, set the gateways. A combination is an acquisition of control, shares, voting rights or assets; an acquisition of control by a person over an enterprise where that person already controls a competing enterprise; or a merger or amalgamation — in each case where the parties cross the prescribed thresholds.
The asset and turnover thresholds under Section 5 operate at two levels, the parties to the transaction and the group the target will belong to, and across two geographies, India and worldwide with an India leg. The figures are revised periodically by Central Government notification and adjusted for inflation, so check the current notification rather than assuming last year's.
The deal value threshold. Introduced by the 2023 Amendment and operative from 10 September 2024, it makes a transaction notifiable where both of these hold:
- the value of the transaction exceeds ₹2,000 crore, counting direct, indirect, immediate and deferred consideration; and
- the target has substantial business operations in India.
The Combinations Regulations, 2024 define substantial business operations by India-linked metrics. For digital-sector targets, thresholds tied to India users, subscribers or business users as a proportion of global figures. For other sectors, broadly where the target's India turnover in the preceding financial year exceeds 10% of its global turnover.
The threshold exists for a specific reason. Acquisitions of user-rich, revenue-poor technology targets — the archetype being a messaging platform with hundreds of millions of users and negligible turnover — escaped the traditional tests entirely.
The small target exemption, which lawyers call the de minimis exemption, applies where the target's India assets and India turnover fall below notified levels. It does not rescue a transaction meeting the deal value threshold: a company with few assets but substantial India operations must still be notified, however small its balance sheet.
One more point deserves emphasis because it catches investors rather than acquirers. The 2023 Amendment codified control as material influence — the ability to materially influence the management, affairs or strategic commercial decisions of an enterprise. That is the lowest of the recognised control standards, below de facto control and far below majority ownership. Board observer seats, veto rights over the business plan or budget, and significant minority stakes with special rights can all amount to it. A minority investment you consider passive may be a notifiable acquisition of control.
The process and the clock
Sections 6, 29, 30 and 31 carry the procedure.
- Notification in Form I, the short form, or Form II, the long form for higher-overlap transactions, after the trigger document is executed.
- Phase I: within 30 calendar days the CCI forms a first-look prima facie view on whether the deal harms or is likely to harm competition. Most transactions clear here.
- Phase II under Section 29: where the first look raises a concern, the CCI issues a show-cause notice, may call for a report from the Director General, and requires the parties to publish details of the combination for public comment — which invites objections from competitors, customers and industry bodies.
- Modifications under Section 31: the CCI may approve subject to modifications it proposes under Section 31(3), typically structural divestitures or behavioural commitments on access, pricing or information firewalls. Parties may propose amendments to that modification under Section 31(6), and where the Commission accepts, approval issues under Section 31(7).
- Outer limit: deemed approval where the CCI passes no order within 150 days, reduced from 210 by the 2023 Amendment.
Gun-jumping
Section 6(2A) prohibits completing a notifiable deal before approval or expiry of the statutory period. Section 43A penalises the breach — whether that is a failure to notify or a completion before approval — with up to 1% of the total turnover or assets of the combination, whichever is higher.
It is rarely deliberate defiance. It happens through:
- partial closing, completing one leg of an interdependent step transaction before approval;
- exercising rights early, appointing directors, taking board seats or using veto rights before clearance;
- integrating in advance, sharing competitively sensitive information, aligning pricing or combining sales teams during the review; and
- not notifying at all, on an incorrect view that a threshold was not met or an exemption applied.
The 2023 Amendment carved out a relaxation for certain stock-market purchases. Open-market acquisitions may proceed subject to conditions, including that voting rights are not exercised pending approval, which relieves a genuine practical problem for public-market transactions.
Sun Pharma and Ranbaxy
This is the definitive Indian merger-control case study, and the CCI's first-ever Phase II review. It rests on the CCI order dated 5 December 2014 in Combination Registration No. C-2014/05/170.
The transaction. In April 2014, Sun Pharmaceutical Industries announced the acquisition of Ranbaxy Laboratories by merger, at roughly $4 billion, creating India's largest and the world's fifth-largest generic pharmaceutical company. Notice was filed with the CCI on 6 May 2014.
Why it went to Phase II. Both parties were primarily generics manufacturers with overlapping portfolios across numerous molecules. Assessing combined market share, incremental share, competitor strength and market structure, the CCI took the view that competition was likely to be harmed in several specific markets — in some of which the merger would reduce the effective number of players from three to two. In September 2014 it escalated formally to Phase II and, for the first time in Indian merger control, required the parties to publish details of the combination for public scrutiny and comment.
The remedy. By letter dated 27 November 2014 the CCI proposed modifications under Section 31(3). The parties responded on 4 December proposing amendments under Section 31(6). The notable one concerned products containing Leuprorelin: rather than Sun Pharma divesting its Lupride brand, Ranbaxy would divest its Eligard distribution rights. The CCI accepted it, on the view that Ranbaxy held only distribution rights in that market and divesting them would eliminate the concern — while building in a safeguard, that if the Eligard divestiture was not achieved within the first divestiture period, Sun Pharma would have to divest Lupride after all.
On 5 December 2014 the CCI approved the combination under Section 31(7), subject to divestiture of products across seven relevant markets: Sun Pharma divesting all products containing Tamsulosin and Tolterodine, marketed as Tamlet, and Ranbaxy divesting six products. In the markets concerned, the parties' combined share ran as high as 90–95%. The CCI further directed that the merger should not take effect until the divestitures were carried out, and appointed a monitoring agency to oversee compliance.
What it established.
- Phase II is real. Practitioners had treated Indian merger control as a formality for years. Sun–Ranbaxy showed the CCI will open a full review, invite public objections, and hold up a marquee transaction.
- Remedies get negotiated. The Section 31(6) mechanism let the parties reshape the remedy, substituting a distribution-rights divestiture for a brand divestiture, and the CCI accepted because the competitive effect was equivalent. Engagement produces better outcomes than resistance.
- The analysis is product-level, not deal-level. A $4 billion merger cleared on the strength of divesting a handful of overlapping products. The CCI's unit of analysis is the relevant market, so a large deal with narrow overlaps is often more approvable than a small deal with a deep one.
- Closing can be conditioned on completing the remedy. The direction that the merger not take effect before divestiture is a powerful structural tool, and a timetable risk that transaction documents have to accommodate.
That last point is where deals actually go wrong. The Sun–Ranbaxy sequence took roughly seven months from notification to conditional approval, with closing further gated on completing the divestitures. Where portfolios overlap meaningfully, map the likely problem markets before signing, pre-identify divestible assets, and negotiate long-stop dates and risk allocation around them. A merger agreement drafted on the assumption of clearance in 30 days is a drafting failure rather than a regulatory surprise.
Two more precedents worth knowing
Holcim–Lafarge (CCI, 2015). The second Phase II review, following immediately after Sun–Ranbaxy. It required divestiture of cement plants to address overlaps, and established that the CCI will scrutinise the identity and viability of the purchaser of divested assets. A remedy only works if the buyer can actually compete.
The gun-jumping orders. The CCI has repeatedly imposed Section 43A penalties for failure to notify and for closing too early, including where parties treated linked steps of one deal as separate transactions, and where an acquirer exercised board rights during the review period. These orders, rather than any single leading judgment, define the practical boundary of the duty to wait.
A worked example
A global technology group agrees to acquire an Indian consumer app for ₹2,400 crore. The target has 40 million Indian users, negligible revenue and almost no assets.
Under the old regime: the target's India assets and turnover sit well below the small-target levels. No filing required, and the transaction closes.
Under the current regime: the deal value exceeds ₹2,000 crore, and with 40 million Indian users the target plainly has substantial business operations in India under the digital-sector test. It is notifiable, the small-target exemption does not apply, and the parties file and wait.
If they close anyway: Section 43A exposure of up to 1% of the combination's total turnover or assets — computed on the acquiring group's figures, not the tiny target's. On a large multinational acquirer that is a penalty measured in hundreds of crore, for a transaction the parties believed was exempt.
And it compounds. If the acquirer also takes board seats or exercises veto rights at signing, that is independent gun-jumping conduct even where a filing is later made.
Common mistakes
- Assuming the small-target exemption always saves a small target. It does not apply where the deal value threshold is met.
- Testing only asset and turnover thresholds and ignoring the ₹2,000 crore deal value threshold.
- Under-reading "control". The standard is material influence, and board observer rights and strategic vetoes can trigger it.
- Closing an interdependent step transaction in parts before approval.
- Integrating during the review — sharing competitively sensitive information, aligning pricing, combining teams.
- Exercising board or voting rights before clearance.
- Excluding deferred or contingent consideration when computing transaction value. The threshold includes it.
- Building the transaction timetable around a fast clearance where overlaps are material.
- Failing to pre-identify divestible assets in an overlapping-portfolio deal.
Frequently asked questions
When must a transaction be notified to the CCI? When the Section 5 asset or turnover thresholds are crossed, or the transaction value exceeds ₹2,000 crore and the target has substantial business operations in India.
What is the deal value threshold? A ₹2,000 crore transaction-value test introduced by the 2023 Amendment, operative from 10 September 2024, designed to capture asset-light digital acquisitions that escaped turnover-based tests.
What is gun-jumping and what does it cost? Consummating a notifiable combination before approval, or failing to notify at all. The Section 43A penalty runs to 1% of the total turnover or assets of the combination, whichever is higher.
How long does CCI approval take? A first-look view is formed within 30 calendar days, and if the CCI passes no order within 150 days, approval is treated as granted.
Can the CCI block a merger outright? Yes, under Section 31(2), where a deal harms competition in a way conditions cannot fix. In practice it has preferred approval with modifications, as in Sun Pharma–Ranbaxy.
What happened in the Sun Pharma–Ranbaxy case? It was the CCI's first Phase II review. The CCI approved the $4 billion merger on 5 December 2014, subject to divestiture of products across seven relevant markets, directed that the merger not take effect until the divestitures were completed, and appointed a monitoring agency.
Does a minority investment need notification? It can, where it confers material influence over management, affairs or strategic commercial decisions, or where the thresholds are otherwise met.
Primary sources
- Sections 5, 6, 6(2A), 20, 29, 30, 31 and 43A, Competition Act, 2002
- Competition (Amendment) Act, 2023
- CCI (Combinations) Regulations, 2024, effective 10 September 2024
- Ministry of Corporate Affairs notifications on Section 5 thresholds and exemptions
- CCI order dated 5 December 2014 in Combination Registration No. C-2014/05/170 (Sun Pharmaceutical Industries Limited / Ranbaxy Laboratories Limited), and order dated 17 March 2015
- CCI orders in the Holcim/Lafarge combination (2015)