Green Channel Governance: India’s Reformed Green Channel Framework
Abstract: This paper critically examines the recent changes introduced under the Competition (Criteria of Combination) Rules, 2024, particularly affecting the Green Channel Route (GCR). While the GCR was designed to expedite non-contentious M&A approvals, the amendments risk undermining its utility by introducing vague definitions and expanding affiliate criteria. The paper analyses key cases, procedural developments, and potential regulatory overreach. It concludes by recommending targeted reforms to restore GCR’s efficiency and ensure a balanced regulatory framework.
Introduction
In lieu of propelling the growth and upholding the ease of doing business principle, the CCI in 2019 came up with the Green Channel Route framework introduced to expedite the approvals procedures of Mergers and Acquisitions (‘M&A’) that pose no threat to competition in the market.
Recently, the CCI proposed changes to certain competition rules, including those related to green channel approvals for mergers and acquisitions. The key position holders said that the focus is on advocacy efforts and capacity building, with efforts to curb unfair business practices in the marketplace. This article attempts to analyse two key aspects, firstly, the changes introduced by the Competition (Criteria of Combination) Regulations, 2024 (“Green Channel Rules”), and secondly, the potential consequences of these amendments, exploring how they may inadvertently undermine the effectiveness of the GCR by introducing stringent criteria that could deter businesses from utilizing this fast-track mechanism, ultimately slowing down non-competition-threatening transactions.
Efficiency, as Peter Drucker aptly put it, “is doing better what is already being done.” It is a principle that lies at the foundation of the GCR. GCR is a seminal mechanism introduced by the Government under the Act to create a fast-track lane for the approval of Mergers & Acquisitions that pose no risk to competition in the markets
However, recent amendments via the Competition (Criteria of Combination) Regulations, 2024, have raised concerns about over-regulation. While intended to curb misuse, the expanded scope of affiliates and vague overlap definitions may defeat the very purpose of the GCR, expediting non-threatening transactions. This article critically examines the recent changes and their potential to restrict legitimate M&A activity under the GCR framework. Since its inception, nearly 25% of all filings with the CCI have been channelled through the GCR.
Page Contents
ASSESSMENT CRITERIA UNDER GCR
Rule 3 of the Green Channel Rules lays down the criteria that a combination must satisfy to qualify for the GCR. The rules mandate that there should be no horizontal overlap among the parties. i.e. the parties, their group entities, or affiliates should not produce identical, similar, or substitutable products or services. Additionally, there should not be any vertical overlap meaning the parties should not be engaged in different stages of the production chain. Furthermore, the Rules also prohibit complementary overlap, where the parties offer products or services that complement each other in the market.
The earlier framework required the parties to analyse all plausible alternative market definitions to determine overlaps. The new rules, however, no longer recommend such scrutiny. Instead, if parties, their group entities, or their affiliates demonstrate any degree of horizontal, vertical, or complementary overlap, regardless of market definition, the combination will be ineligible for the GCR. Rule 3(2)(a) and Rule 3(2)(b) define parties, their group entities and affiliates respectively.
One key challenge in self-assessment is the vague definition of complementary overlap. The vague definition of complementary overlap under the GCR complicates self-assessment, diverging from the traditional focus of horizontal and vertical overlaps.
THE COMPETITION (CRITERIA OF COMBINATION) RULES, 2024
The Ministry of Corporate Affairs (‘MCA’) notified the Green Channel Rules on 9th September 2024 to implement the provisions related to green channel notification under the Competition Amendment Act, 2023. The Green Channel Rules have proposed significant changes, most importantly regarding the definition of “Affiliate” of the parties to the combination. These changes have expanded the assessment criteria for the combinations, and have raised concerns regarding the accessibility and practicality of GCR.
Change in scope of Affiliates under Green channel rules
Under the new Green Channel Rules, an “Affiliate” now includes an entity where a party has 10% or more shareholding or voting rights; the right to nominate a director or observer to the board; or the right or ability to access commercially sensitive information (‘CSI’) of the entity. Now, when determining whether a combination qualifies for applying under GCR, all such entities in which parties have access to commercially sensitive information will also be considered. According to the Rules, it can now be inferred that private holding by the Ultimate Controlling Person (‘UPC’) of a company in any potential entity will be deemed such an entity to be an affiliate of the acquiring entity.
Before these new additions, affiliates were identified by the “materiality threshold” criteria specified in item 6.6 of the Notes to Form – I. The earlier test included i) the right to nominate a director or observer to the board, ii) direct or indirect shareholding of 10% or more, and iii) the right or ability to exercise any special right not available to an ordinary shareholder. The new Green Channel Rules have replaced the last test with the right of ability to access commercially sensitive information. The inclusion of CSI has amplified the scope of affiliates, requiring businesses to thoroughly assess their relationship with other entities. Yet, the term CSI has nowhere been defined under the Green Channel Rules, and there are no judicial precedents that outline its definition.
DRAWBACKS
The Deemed Approval Paradox
The deemed approval under the GCR is not absolute and is subject to the scrutiny of CCI. The CCI is entitled to initiate an inquiry into a combination within one year from the date of filing the notice and not beyond this period. Thus, before submitting a notice under the GCR, parties must ensure that the proposed combination complies fully with the criteria laid down in Rule 3 of the Green Channel Rules.
However, if the CCI concludes that the combination does not meet the criteria, it has the power to declare the combination void ab initio and pass any order that it deems appropriate. The CCI has previously imposed penalties under Sections 43A and 44 of the Act for filing misleading notices under GCR. This deterrence acts as a double-edged sword. On one hand, it is necessary to ensure that parties do not exploit the GCR by filing incorrect or misleading information. On the other hand, it may discourage parties from availing of this route altogether, as they might be apprehensive of the hefty penalties and the vague definitions under the rules. This deterrence acts as a major drawback and goes against the very intent of GCR, which was to promote the ease of doing business.
From Fast-Track To Roadblock: How GCR’s New Rules Are Stifling Growth
The Law is not merely a set of rules but a framework guided by its underlying intent. The Green Channel Rules were proposed to foster a business-friendly ecosystem by reducing regulatory burdens for non-threatening overlaps, rather than imposing stringent scrutiny on combinations with minimal or no competitive concerns.
Previously, the Competition Commission of India has allowed combinations with negligible overlaps. This is evident in CCI’s 2021 approval of International Finance Corporation’s transaction with Dodla Dairy. Even though the latter held a minor shareholding in another retailer operating in the same market. Similarly, in 2022, the CCI permitted BW Investment Limited’s acquisition into Rabo Equity Management, noting the combined entity’s market share of less than one percent and the lack of AAEC.
These approvals underscored the GCR’s objective of streamlining approvals for non-threatening combinations, fostering business growth while maintaining the competitive integrity of the markets. However, there has been a subtle yet inconvenient shift in the CCI’s approval pattern under the GCR. 2023 CCI saw its first rejection of an application under the GCR for an acquisition by Platinum Jasmine A 2018 Trust and TPG Upswing Ltd into UP Sustainable Agri Solutions Limited. An order was passed against them under Sections 43A and 44 of the Act, further imposing penalties, invalidating the combination based on minimal overlap without a thorough AAEC assessment.
Further in India Business Excellence Fund-IV (Acquirer) filed a green channel notification for acquiring VVDN Technologies Private Limited (Target), part of Motilal Oswal group. The acquirer operates in financial services, the target specialises in electronic manufacturing and design services. The acquirer claimed no overlaps between its group entities and target. However, it later disclosed a temporary COVID-19-related supply arrangement. Even though the arrangement was ad hoc and not directly related to the target’s core business, the CCI penalised the acquirer for vertical overlap.
Further complicating matters, the CCI in its recent notification () now mandates detailed scrutiny of the Ultimate controlling person of the Company, or the UCP. The new rules now suggest that any UCP holding a 10% shareholding in a potential combination transaction would validate itself under the definition of Overlap, hence constricting the boundaries of combinations seeking GCR approval. It is surprising that these developments, rather than offloading the burden of the businesses, are introducing arguably unwarranted clauses discouraging the growth of the Green Channel mechanism within India’s Legal Framework.
When Green Turns Grey: Misuse Of The Green Channel Framework.
A bluff is a strategic misdirection, a way to alter perceptions. Some companies have turned the convenience offered by green channels into a playground for strategic bluff, attempting to game the system. Owing to the straightforward receipt of deemed approval status on application under the GCR, companies find open ground to providing misleading or incomplete information., suppressing material facts, or even executing deals before securing approval. Thus, exploiting the trust-based framework of GCR. Recent years have seen numerous such cases, for example in 2023, the Abu Dhabi Investment Authority and TPG Group were penalised for misrepresenting the scope of their acquisition of UPL SAS. Similarly in the year preceding, Train partners faced fines for “gun jumping” and consummating a deal before even notifying the CCI, while conveniently omitting that Trian’s directors held directory positions in Invesco’s BOD.
This trend is not just linked to the GCR Regulations, CCI in the landmark Amazon-future coupons case underscored the gravity of non-disclosure and suppression of material facts. In 2021, CCI withdrew its approval granted to Amazon’s acquisition of a 49% stake in Future Coupons Private Limited, imposing a heavy penalty of INR 2.02 billion. In the given case, Amazon had failed to disclose its strategic interest in the FRL, which held material to the deal transacted. Amazon strategically omitted to reveal its true intent for gaining control which was to acquire ownership over FRL’s retail assets. By withholding this vital information, Amazon not only violated Section 6(2) of the Act but also underpinned the very purpose of merger control, to assess market impact, prevent monopolies, and ensure fair competition protected under the act.
These instances, whether under the GCR or the general merger control framework, reveal to us a common practice, companies are increasingly resorting to bluffs and half-truths to bypass regulatory scrutiny. While CCI has taken a strong stance against such misuse it forces us to ponder over the question of whether the current rules are robust enough to deter such tactics. This discussion leaves us with the dilemma of whether the amendments while reflecting a commendable effort to curb misuse, risk undermining the very purpose of the Green Channel rules. CCI’s focus on the UPC as a criterion for assessing overlap might be well-intentioned but seems to miss the target. Treating UCP with a 10% shareholding as a potential overlap stands at disqualifying genuine combinations that pose no real threat to competition.
The solution seems in targeted reforms that balance ease of doing business with robust oversight. Drawing inspiration from global best practices, the following are some suggestions by the authors to refine the Green Channel Route ensuring efficiency.
CONCLUSION
The drawbacks of GCR limit its effectiveness. The zero-overlap threshold is extremely restrictive and disqualifies combinations even for minimal overlap. Ambiguity around terms like “CSI” and “complementary overlap” further complicates the process, forcing parties into costly pre-filing consultations. Furthermore, the risk of penalties under Sections 43A and 44 of the Act and the lack of a definitive timeline for CCI decisions create uncertainty, deterring parties from availing GCR.
However, the solution lies not in abandoning the GCR framework but in recalibrating it. By adopting risk-based assessment inspired by global best practices, implementing clear market share thresholds, and establishing definitive timelines for review, India can meet the delicate balance of regulatory oversight and business efficiency. GCR should not be reduced to a binary choice between speed and scrutiny, but rather as an opportunity to create an inclusive framework that serves both the protection of markets and business needs in a rapidly evolving economy.
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Author Details:
Surbhi Goyal, 3rd Year B.A. LL.B. (Hons.), National Law University Odisha
Mridula Singh Bhatti, 3rd Year B.A. LL.B. (Hons.), National Law University Odisha
