Pitfall of Deal Value Threshold: Lessons From the Indian Pharma

[By Monesh R B]

The author is a student of Tamil Nadu National Law University, Tiruchirappalli.



In the year 2018, the Ministry of Corporate Affairs of India constituted the Competition Law Review Committee (CLRC) in order to check and assess the implementation of the Competition Act of 2002 (hereafter ‘the act’). The CLRC submitted a report on 26 July 2019, highlighting the issues revolving around the current legislation, various policy changes, assessing new age markets and tackle mechanisms, etc. The report paved the way for introduction of the concept of ‘Deal Value Threshold’ (DVT) as the government brought in an amendment to the act, making it the Competition (Amendment) Act, 2023.

In the pharmaceutical industry, incumbents frequently conduct acquisitions and shut it down when the technology or innovation of the target is still in its infancy, also popularly termed as ‘Killer Acquisitions.’[i] The Organisation for Economic Co-operation and Development (OECD) defined Killer Acquisitions as “an incumbent firm acquiring an innovative target and terminating the development of the target’s innovations to prevent future competition.” In most cases, these types of acquisitions, especially in the Pharma sector, do not get notified to the Competition regulators as the value of these acquisitions will fall well below the traditional asset or turnover based threshold values as these target firms are in their nascent stage.

Even though the rationale behind introducing Deal-value based threshold was to tackle this issue,  due to the lack of sector specific threshold values, there remains a gap that needs to be addressed by the law makers. Thus, this article will attempt to critically analyse the role of DVT with regard to ‘Killer Acquisitions’ in the Indian pharmaceutical industry. It will try to address the issues surrounding the absence of sector-specific threshold values, especially by highlighting the issues in the Indian pharmaceutical sector.

What is Deal Value Threshold?

Following the recommendations made by the CLRC, the legislature by Section 6 of the Competition (Amendment) Act 2023, inserted two new clauses to the already existing section 5 of the 2002 Act by which mergers, acquisitions and amalgamations will trigger a notification to the Competition Commission of India (CCI), if; “(i) the value of the transaction exceeds rupees two thousand crores (i.e., for acquisition, merger or amalgamation) (Approx. USD 242 Mn.) and; (ii) the target enterprise has “Substantial Business Operations in India.” The Ministry of Corporate Affairs, from its submissions before the Standing Committee, clarified that DVT is primarily meant for digital and new-age markets, where the target entity may have minimal assets and turnover, but may possess significant potential in terms of data, technology, innovation, etc. However, the text of the amendment does not restrict the application of DVT to any particular sector.[ii]

Deal Value Threshold vis-á-vis  The Indian Pharma Sector:

In the Pharmaceutical Industry, firms developing innovative technologies are often purchased by larger firms which provide R&D space, resources and money to develop their innovation into drugs. However, these small firms may become a potential competitor to the larger firms due to their innovation and hence becoming the targets of killer acquisitions. Competition in the pharma sector is important because it can motivate brands to create new and advanced medicines and encourage generic companies to offer less expensive alternatives.[iii]

Taking a look at the deal value of pharma mergers that has taken place in India in the year of 2022 (as per data provided by the Times of India)[iv], except 2 out of 16 mergers, the rest of them will not meet this currently prescribed deal value threshold of INR 2000 crores (Approx. $242 Mn. USD). As per the CLRC’s report, the rationale behind this amendment was to bring the mergers/acquisitions under the ambit of CCI, that causes an Appreciable Adverse Effect on Competition (AAEC) in the Indian market but goes unnotified to the CCI as they do not meet the asset or turnover based threshold as prescribed in section 5 of the act. But this rationale is being completely defeated when it comes to specific sectors, like  pharmaceuticals, as the deal value of these mergers does not exceed the prescribed threshold values in most cases, because these firms are in their nascent stage and do not possess a significant market share. Thus, these mergers will not be under an obligation to notify the CCI neither under the asset and turnover based threshold nor the DVT.

One may pose an argument that Killer acquisitions may be curbed down within the ambit of section 4 of the Competition Act. But the problem in doing so is that, section 4 of the act can be brought in only when the damage has already been inflicted but not prevent such activity. Thus, there is a significant gap with regard to the currently prescribed deal value of INR 2000 crores when it comes to specific sectors like pharma.

If not Sector-based threshold, then what?

Even though one cannot assume that every merger or acquisition will result into a Killer Acquisition, it is necessary to take some steps, with a particular focus on specific sectors, by fixing certain requirements for examination by the Competition Regulators or granting them ‘Residuary Powers’ to investigate into mergers that does not meet the prescribed threshold values for mandatory notification. As of now, no country has sector-specific threshold values for notification of combinations. But, the Competition regulators and their respective legislatures across the world are implementing various measures, in order to curb down killer acquisitions and other such anti-competitive practices.[v]

In Europe, the European Commission (EC) has determined in the case of Novartis/GlaxoSmithKline Oncology Business, that drugs undergoing phase III clinical trials are potential competitors to the drugs existing in the market and thus, an incumbent acquiring the target firm in the same therapeutic category as the existing products of the incumbent, would be considered as a horizontal overlap. This is a very welcoming move in order to curb down or prevent killer acquisitions in the initial stage itself as this practice generally prevents any incumbent from acquiring a target which is involved in the R&D or production of the same category of drugs as the acquirer.[vi]

The CCI does not have residuary powers to investigate  non-notifiable mergers. But countries like China, Germany, Brazil, USA, etc. has residuary powers to review/investigate mergers that fall below the country’s mandatory notification threshold values. Last year, China amended its ‘Anti-Monopoly Law’ where it extended its Jurisdictional Rules and Reporting Threshold. Under this amendment, China’s competition regulator will now have the power to review mergers that do not meet the threshold value for notification.

In Canada, under the current framework, parties to a non-notifiable merger have no obligation to notify the Competition Bureau of Canada regarding their merger. But, the Bureau has the power to investigate  such a merger within an one-year time frame following its occurrence. The implementation of this proactive approach serves to mitigate the risk of overlooking potentially detrimental mergers, while empowering the competition authority to intervene in cases where a merger is determined to be anti-competitive.


In conclusion, the implementation of DVT within the framework of the Competition (Amendment) Act 2023 was a notable measure aimed at tackling anti-competitive practices. Nevertheless, although the DVT is intended to encompass mergers and acquisitions that may not satisfy conventional asset or turnover threshold values, but still have the potential to negatively impact competition, it is deficient in effectively tackling anti-competitive practices in certain sectors due to the absence of sector-specific threshold values.

This is primarily because  the currently prescribed threshold of INR 2000 crores is often out of step with the dynamics of certain sectors, like pharmaceuticals, where highly potential innovative startups may be acquired for lower deal values in an attempt to pull off a killer acquisition. Hence, it is imperative to establish sector-specific threshold values or confer the CCI with residual powers to examine mergers that do not meet the threshold values.

Taking cues from international competition regulators, such as the European Commission, China, Canada, and others, India can refine its competition law framework and address these kinds of sector specific issues or grant CCI the power to investigate/review non-notifiable mergers, to promote a healthy competitive environment that fosters innovation and benefits consumers.


[i] https://www.oecd.org/daf/competition/start-ups-killer-acquisitions-and-merger-control-2020.pdf

[ii] https://competitionlawblog.kluwercompetitionlaw.com/2023/04/18/2023-amendments-to-indian-competition-law-implications-for-ma-part-1/

[iii] https://unctad.org/system/files/official-document/tdrbpconf8d3_en.pdf

[iv] Also see: <https://www.cnbctv18.com/business/indian-pharma-sector-mergers–acquisitions-private-equity-activity-to-boom-in-coming-years-says-expert-17356081.htm>; <https://www.financialexpress.com/healthcare/pharma-healthcare/domestic-deals-dominate-ma-in-healthcare-and-pharma-trend-to-continue-in-2023/2958791/>;


[vi] Also see: <https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Killer_Acquisitions_in_Indian_Pharma.pdf>


Leave a Reply

Your email address will not be published. Required fields are marked *

Contact Us

Kerwa Dam Road., 
National Law Institute University, Bhopal
Madhya Pradesh, India. 462044​.

write to us at – cbcl@nliu.ac.in