Introduction: Why On-Market Purchases Needed a Legal Fix
In 2024, Parliament amended the merger control regime under the Competition Act, 2002, introducing one of the most significant procedural reforms to India’s antitrust framework in recent years. The amendment specifically targets on-market purchases, including open offers, and brings India’s regulatory approach closer to global best practices followed in jurisdictions such as the European Union and Brazil.
Before this change, every on-market purchase that crossed the jurisdictional thresholds under the Competition Act, and was not otherwise exempt, fell under the Competition Commission of India’s (CCI) suspensory regime. This meant acquirers had to wait for CCI clearance before completing the transaction, regardless of whether the purchase was a standalone deal or part of a larger, interconnected set of transactions. Completing a purchase without prior approval exposed the acquirer to gun-jumping penalties under the Act.
The Pre-Amendment Suspensory Regime and Its Practical Problems
The rationale behind the suspensory regime was straightforward: pre-emptively prevent transactions that could distort competition or cause irreversible market harm before the CCI had a chance to review them. In practice, however, this created serious friction for time-sensitive transactions, particularly hostile takeovers and open offers, where speed is often essential to commercial success.
Two Supreme Court rulings illustrate how strictly this regime was enforced.
In CCI v. Thomas Cook (India) Ltd. ((2018) 6 SCC 549), the Supreme Court upheld a penalty imposed on the parties for gun-jumping. Thomas Cook had proposed an open offer to acquire up to 26% of the equity share capital of Sterling Holiday Resorts, alongside on-market purchases of roughly 10% of Sterling’s shareholding. Before notifying the CCI, Thomas Cook went ahead and acquired that 10% stake from the open market. The CCI treated the on-market purchases as interconnected and interdependent with the larger transaction, and the penalty was upheld.
Similarly, in SCM Soilfert Ltd. v. CCI ((2018) 6 SCC 631), the Supreme Court affirmed a penalty against SCM Soilfert Limited and Deepak Fertilizers and Petrochemicals Corporation Limited for failing to notify the CCI before acquiring shares in Mangalore Chemicals and Fertilizers Limited from the open market.
These cases exposed a structural problem: acquirers pursuing legitimate, market-driven transactions faced standstill obligations that delayed timelines, exposed them to share price volatility, and often made the underlying commercial opportunity unviable by the time CCI approval came through. For a developing economy actively courting investment through ease-of-doing-business reforms, this was a clear point of friction.
The SEBI Framework Governing Open Offers
To understand why the amendment was necessary, it helps to look at the parallel regulatory track operating under the Securities and Exchange Board of India (SEBI).
Under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, specifically Regulations 3, 4, and 5, a mandatory open offer is triggered in three scenarios:
- Acquisition of 25% or more shares or voting rights, where the acquirer currently holds less than 25%.
- Acquisition of more than 5% additional shares or voting rights in a financial year, where the acquirer already holds more than 25%.
- Acquisition of control over the target company.
An open offer requires the acquirer to invite existing shareholders of a listed target to tender their shares at a specified price, giving them an exit option when control changes hands, particularly relevant in unsolicited or hostile takeovers where there is no pre-arranged agreement with management. Per Query 28 of SEBI’s FAQs on the 2011 Regulations, the minimum offer size for such an open offer is 26%.
The conflict was structural: SEBI’s framework pushed acquirers to act swiftly once a threshold was triggered, while the Competition Act’s standstill obligations required them to pause and wait for CCI approval before consummating the same transaction. Acquirers were caught between two regulators with opposing timing expectations, and the resulting delays frequently undermined the strategic and commercial intent behind the acquisition.
The Competition Law Review Committee’s Recommendation
The Competition Law Review Committee (CLRC), set up by the Ministry of Corporate Affairs in 2019, examined this exact problem. Its 2019 report (paragraph 7.2) noted that mature jurisdictions like the European Union and Brazil do not block the implementation of a public bid or a series of securities transactions where control is acquired from multiple sellers, even while merger review is pending.
Under the EU Merger Regulation 139/2004, an acquirer is permitted to proceed with such transactions but must refrain from exercising any ownership or voting rights attached to the acquired securities while approval is pending. Brazil follows a comparable approach (CLRC Report, paragraphs 7.6–7.7).
Based on this comparative analysis, the CLRC recommended (paragraph 7.8) that Indian acquirers be permitted to undertake on-market purchases, provided they surrender all beneficial rights attached to the securities until CCI approval is granted. This recommendation became the blueprint for the 2024 legislative change.
Section 6-A: The Derogation from Standstill Obligations
On 9 September 2024, the Government of India inserted Section 6-A into the Competition Act, 2002. This provision allows acquirers to derogate from standstill obligations specifically for open market purchases and other transactions undertaken on a regulated stock exchange, enabling them to act on market opportunities without waiting for prior CCI clearance.
A notice filed under Section 6-A is conditional on two requirements:
- The parties must file a notification with the CCI, using Form I (short form) or Form II (long form) as applicable, within 30 days of the first on-market acquisition.
- The acquirer must not exercise any ownership or beneficial rights or interest in the acquired securities, including voting rights, until the CCI approves the transaction.
The provision does carve out limited exceptions. The acquirer is permitted to receive economic benefits such as dividends, bonus shares, or stock splits during the pendency of approval. Voting rights may also be exercised, but only in matters relating to liquidation or insolvency proceedings. Beyond this, the acquirer is barred from influencing the target company or its affiliates, directly or indirectly, in any manner, while CCI approval is awaited.
What This Changes for M&A Practice in India
The practical effect of Section 6-A is that acquirers can now move on open offers and on-market purchases without the deal stalling for the entire CCI review period. This directly reduces the risk of gun-jumping penalties that previously deterred time-sensitive acquisitions, and it shortens the window during which a target’s stock price could move adversely against the acquirer’s commercial assumptions.
The 30-day notification window also has a secondary benefit: it compresses deal-closure timelines and reduces the holding costs that acquirers previously bore while waiting on regulatory clearance, which benefits both buyers seeking certainty and selling shareholders seeking liquidity.
So far, only a limited number of transactions have been approved under Section 6-A. These include the CCI’s approval in Abu Dhabi National Oil Co. P.J.S.C., In re (2024 SCC OnLine CCI 31), and the Amundi Asset Management S.A.S./ICG plc transaction, cleared via CCI press release dated 12 February 2026 (Case No. C-2025-12-1358).
Conclusion
Section 6-A represents a deliberate trade-off between regulatory caution and commercial pragmatism. It does not remove CCI oversight, it defers the exercise of ownership and beneficial rights until approval is granted, while letting the transaction itself proceed. For acquirers navigating parallel obligations under the SEBI Takeover Regulations and the Competition Act, this is a meaningful procedural fix to a problem that the Thomas Cook and SCM Soilfert rulings had made very clear was unworkable in its earlier form. A balanced approach, one that preserves operational flexibility for dealmakers without compromising competitive integrity, will determine how effective this reform proves to be over time.
The issues explored in Competition Law & Contract Liability in Indian Aviation highlight the broader significance of evolving merger-control and acquisition rules, particularly in relation to on-market share purchases and regulatory approval requirements under Indian competition law.
