[Swechha Gupta and Animisha Dwivedi are fifth-year B.A. LL.B. (Hons.) students at the National Law Institute University (NLIU), Bhopal]
The Competition (Amendment) Act, 2023 introduced a Deal Value Threshold (“DVT”) into India’s merger control regime. Under the framework, combinations with a transaction value exceeding ₹2,000 crore must now be notified to the Competition Commission of India, provided that the target enterprise has Substantial Business Operations in India (“SBOI”). The DVT addresses the limitation of traditional asset and turnover-based thresholds, where competitive significance is often disproportionate to current revenues or assets. The Competition Law Review Committee flagged this gap in its 2019 Report, noting that digital enterprises often derive value from user networks, data assets, and technological innovation. India’s approach largely draws on Germany and Austria’s Transaction Value Threshold(“TVT”) that relies, in part, on user presence as an indicator of substantial domestic operations in digital markets. India similarly adopted “end users” and “business users” as indicators of SBOI under regulation 4(2) of the Competition Commission of India (Combinations) Regulations, 2024. While the Regulations define these terms, they provide limited guidance on user counting, attribution, and territorial nexus, leaving significant interpretive gaps. By contrast, Germany and Austria have spent nearly a decade refining these concepts through guidance documents, administrative practice, and judicial decisions. This article examines that framework and its implications on India’s DVT regime.
The Position in India
The statutory basis for India’s DVT is contained in section 5(d) of the Competition Act, 2002. The provision requires notification where the value of a transaction exceeds ₹2,000 crore, provided that the enterprise has such substantial business operations in India as may be specified by regulations. The statute itself does not define either DVT or SBOI. Instead, regulation 4 of the Combination Regulations operationalises section 5(d). While this regulation uses three criteria to determine whether an enterprise has SBOI, a distinct test applies for digital services. Under regulation 4(2)(a), an enterprise providing digital services is deemed to have SBOI if the number of its business users or end users in India is 10% or more of its total global number of such users.
The explanation to regulation 4 defines the key terms where Digital service is defined as the provision of a service, digital content, or any other activity by means of an internet, whether for consideration or otherwise to the end user or business user.
A business user is defined as any natural or legal person supplying or providing goods or services, including through the use of digital services. An end user is defined as any natural or legal person using digital services other than as a business user, for informational or transactional purpose.
The Regulations further prescribe that the proportion of business users or end users is to be computed based on their average number for three hundred and sixty-five days preceding the relevant date.
Gaps In User-Based SBOI Framework
The definitions offered by the Regulations leave several important questions unanswered. They say nothing about how users are to be counted, whether indirect users are included, or what makes a user geographically attributable to India. The categories also overlap in practice. For instance, a small enterprise selling goods on an e-commerce platform qualifies as a business user, but when it purchases on that same platform for its own consumption, it becomes an end user. Regulation 4(2)(a) applies an identical 10% global share trigger to both categories without specifying how the measurement of each should differ.
Three structural gaps follow. The first concerns indirect users. Those who access a service through APIs, third-party integrations, or sub-licensing arrangements may represent a firm’s most substantial presence in India without ever interacting with its own interface. For example, a software licensed to a single enterprise may be used by thousands of authorised users and customers under a sub-licensing arrangement. Yet, the Regulations are silent on whether such indirect users are to be counted at all.
Second is the absence of any measurement standard. Without reference to Monthly Active Users (“MAU”), Daily Active Users (“DAU”), unique visitor counts, or any comparable benchmark, the same user base can satisfy or fail the SBOI test depending on the methodology adopted by the notifying party, producing unpredictable outcomes. Notably, the CCI has previously relied on MAU and DAU as indicators of market power in the WhatsApp Privacy Policy Update case, where the CCI held Meta liable for imposing a take-it-or-leave-it data sharing policy on its users. Therefore, incorporating this into the DVT framework would be a natural extension of existing practice.
Third is geographic attribution. Whether a user is “in India” based on their IP address, registered account location, or habitual residence has not been addressed.
Taken together, these gaps leave the outer limits of India’s merger control jurisdiction undefined. This contrasts with Germany and Austria, where nearly a decade of guidance documents, administrative practice, and judicial decisions have produced a coherent interpretive framework. This article now turns to that framework.
The German and Austrian Framework
The German and Austrian competition authorities have developed a sophisticated TVT framework. The German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) and the Austrian Cartel Act 2005 (Kartell- und Wettbewerbsrechts-Änderungsgesetz, “KartG”) were amended in 2017 to incorporate merger consideration as an additional criterion. Section 35(1a) of GWB and section 9(4) of KartG now contain both turnover and consideration-based thresholds.
TVT is triggered for transactions exceeding 400m EUR and 200m EUR in Germany and Austria, respectively, provided that the target is active domestically to a significant extent. Further, the Austrian Federal Competition Authority (Bundeswettbewerbsbehörde) and the German Federal Cartel Office (Bundeskartellamt) published a joint guidance paper which, though not binding on courts, forms the backbone for interpreting TVT.
Substantial Domestic Operations and the Joint Guidance Paper
The guidance paper lays down a three-pronged test based on local nexus, marketability and domestic significance of the activities, with sector-specific measurability criteria for each industry. Local nexus requires that the company’s activity be attributable to the place of actual use or consumption. Therefore, for digital markets, the footprint is user-based instead of a physical footprint such as offices or subsidiaries. The marketability limb looks at the market relevance of the activity regardless of its monetization. Digital users may end up ‘paying’ in the form of data supply or advertisement consumption, or the activity simply may not yet be monetized to build a user base. Lastly, the significance of domestic activity limb requires that the domestic presence be real, current and non-trivial, carrying potential competitive significance.
For the digital sector, both authorities refer to MAU, DAU and the access frequency of a website as sector-specific measures, assessed in the light of the three-pronged test.
Judicial Stance
The framework can be better understood through two crucial rulings.
First, Meta was set to acquire Kustomer, a US-based customer relationship management platform that enabled businesses to upload, process and manage consumer data. Despite having limited direct German business users, the platform regularly processed large amounts of data concerning German end users of its business users. The Federal Cartel Office found this sufficient to trigger TVT. The Higher Regional Court reversed the order, observing that Kustomer lacked “domestic competitive significance” due to insufficient direct German users.
The German Federal Court overturned the judgment, holding that an activity is attributable not just to the location of direct users but wherever it is capable of having competitive effects. Processing data of German end consumers was central to its business and sufficient to establish significant domestic activity.
Later, Facebook acquired GIPHY, a US-based platform providing GIFs and stickers across social media platforms, without notifying the Austrian authorities. The Austrian Federal Competition Authority (AFCA) discovered the acquisition through routine monitoring and initiated an investigation for failure to obtain the mandatory clearance.
The AFCA took into account not just direct users of GIPHY but also millions of Austrians who accessed it through third-party platforms such as Facebook, Signal and Snapchat that had integrated GIPHY via APIs. GIPHY was therefore found to have “significant domestic activity” following which Facebook agreed to a settlement. The deal was later given conditional approval by the Cartel Court and subsequently upheld by the Supreme Cartel Court.
What emerges is a coherent interpretive logic, consistent with the unique characteristics of the digital sector.
The Digital Competition Bill, 2024
The now-withdrawn Draft Digital Competition Bill, 2024 also relied on the concepts of “business users” and “end users” in determining whether an enterprise qualified as a Systemically Significant Digital Enterprise. Like the Regulations, however, it left unanswered important questions regarding user counting, the treatment of indirect users, and the basis on which a user could be regarded as being in India. The recurrence of these issues suggests that the uncertainty is not confined to the DVT framework alone.
Conclusion
The DVT is premised on the recognition that conventional asset and turnover-based thresholds may not adequately capture the competitive significance of digital enterprises. In such markets, users and data often provide a better indication of market significance. However, the effectiveness of a user-based threshold depends on the clarity of the concepts used to implement it. While India has incorporated “end users” and “business users” into its SBOI framework, the Regulations provide limited guidance on their interpretation in practice.
Since India’s DVT was modelled on the Austrian and German frameworks, the experience of these jurisdictions offers useful insight into the implementation of user-based thresholds. Since these uncertainties are not confined to merger control but extend across India’s digital regulatory framework, as reflected in the Draft Digital Competition Bill, 2024, many of these questions will have to be resolved through regulatory practice and adjudication.
– Swechha Gupta and Animisha Dwivedi