ASSESSING THE GREEN CHANNEL ROUTE UNDER COMPETITION ACT, 2002

Akanksha Vishwakarma

I. Abstract

Mergers and acquisitions remain a strong pillar for any economy. The concept of merger control grew in world economy due to the adverse effect that hostile mergers can have on the market competition. In India, the merger control regime is undertaken under Competition Act, 2002 and its allied rules and regulation. The act provided for prior notice to be given to CCI for approval. The procedure was time consuming and burdensome. In response, the Competition Law Review Committee in 2019 recommended the introduction of a “Green Channel” route, which was subsequently incorporated to provide automatic approval for certain combinations deemed non-problematic based on party-led self-assessment. This blog analyses the evolution of merger control in India with a focused examination of the Green Channel mechanism from its introduction in 2019 to 2025.

 Keywords: Green channel route, Combination, Competition Law

II. Introduction of green channel route

The Competition Commission Law Review in its 2019 report introduced the idea of green channel in India. The committee argued that merger and amalgamations are an important element for a growing economy and delaying such merger due to procedural complexities may hamper the incentive for the companies to revive loss-making companies.

Two major factors compelled the Committee to introduce green channel route for genuine mergers, these are (a) majority of the notices given to the CCI for approval, get approved without any rejection or modification orders (b) to align the merger control regime with global practices best suited for business players. The green channel route, as underscored by the committee was meant to be an effective route for those mergers which are unlikely to have any adverse impact on the competition. This would allow genuine mergers not to wait for the 210/150 days period.

Following the report by the committee dated July 2019, the CCI through Notification Dated 13 August 2019, formally introduced the “Green channel route” by inserting Regulation 5A to the existing the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011. According to the amended regulation under Schedule III, if the parties after self-assessing comes to the conclusion that there exist no horizontal, vertical or complementary overlap, they can file FORM I with a declaration attached under Schedule IV confirming that the combination is not likely to adversely affect the market. The amended regulation under Schedule IV also gave authority to CCI to hold the approval void ab initio if any of the statements made by the parties is found to be incorrect. In the year 2023, Section 6(4) and section 6(5) were inserted which provided for Green channel route, which was earlier incorporated under Regulation 5A to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.

III. Reviewing Green channel notices and approvals from 2019-2025

Financial Year	Number of notices received under Green channel route/ total no. of notices received
2019-20	10/82
2020-21	17/88
2021-22	24/90
2022-23	25/99
2023-24	25/112
2024-25	22/139

In the initial phase (2019–20 to 2021–22), there is a clear and consistent increase in the use of the Green Channel route. Green Channel filings rose from 10 out of 82 notices in 2019–20 to 17 out of 88 in 2020–21 and further to 24 out of 90 in 2021–This represents more than a doubling of the Green Channel’s share within just two years. The second phase (2022–23 to 2023–24) reflects a period of stagnation of the Green Channel. In 2022–23, Green Channel filings marginally increased to 25 out of 99 notices. In 2023–24, the absolute number of Green Channel notices remained constant at 25, while total notifications rose to 112.

In the third phase (2024–25) Green Channel filings fell to 22, even as total notices increased sharply to 139. Consequently, the Green Channel’s share dropped to approximately 15.8%, nearly a ten-percentage-point fall from its peak in 2021–22.

When the Green channel approval mechanism was introduced in India for the first time in 2019, it provided relief to industries, and the move was welcomed by the business sector. However, as time passed, the complexities of automatic approval were gradually understood by the business sector, leading to a decline in the proportion of green channel applications. In the first phase, a clear and consistent increase is evident; however, in the second phase, the percentage of applications stagnated, followed by a reduction in the third phase. The primary reason behind such figures is the cumbersome requirements and the strict interpretation adopted by the CCI while approving automatic mergers. In the erstwhile 2011 Regulations, the automatic approval under the green channel was governed by Regulation 5A read with Schedule III. Schedule III provided the “no-overlap rule” specifying that the parties to the combination who are set to give application under automatic approval must not be engaged in any horizontal, vertical or compulsory activities. The strict “no-overlap” rule narrowed the scope of business entities eligible to apply under the erstwhile Regulation 5A of the 2011 Regulation. The parties under the erstwhile Regulations were also mandated to examine the “adverse effect on competition” of the proposed combination, which again burdens the parties and their liability. The prohibition on overlap, even the slightest, increased the ambit of scrutiny to be done by the parties. This exceptionally strict rule brought to be parties, the requirement to consider every kind of overlap. The burden on the parties was coupled with lack of information asymmetry in the market and fear of getting penalty imposed by the CCI.

In a recent case of Plume Investment and Bequest Inc, the CCI strictly interpreted the “no-overlap rule” and imposed a penalty of four lakh on the parties of the proposed combination. In this case, the target companies were engaged in the business of engineering and research development services relating to aircraft, their engines, cars and other machinery. Acquirer, on the other hand, through its group, was engaged in the business of asset management. In this regard, the Commission observed that the Acquirers, though not directly but through their affiliates, were engaged in certain activities which are prohibited under the horizontal overlap prohibition. Such a far-reaching examination to the extent of examining the activities of the affiliates of the shows the exceptionally high standard and strict interpretation adopted by the CCI in evaluating the combination for green channel approval.

The same strictness was formalised, or rather, imposed with more strictness through the Competition (Criteria for Exemption of Combinations) Rules, 2024. These rules further narrowed the accessibility to the Green Channel Route by introducing the concept of “affiliates” and “ultimate controlling person”. While the erstwhile 2011 Regulation restricted the prohibition of “no-overlap rule” to the parties to the combination and their respective group entities, the 2024 Rules made the eligibility more cumbersome. According to the Explanation to Schedule of the 2024 Rules, the acquirer or their group entities and their affiliates shall not be engaged in horizontal, vertical or complementary activities. Clause 13 of the Rules expands the scope of scrutiny to the “ultimate controlling person” of the acquirer and other entities “forming part of the same group”. That means if an individual who ultimately controls the acquirer has personal investments in other companies, those investments may now become relevant for determining eligibility under the green channel. Suppose Tesla acquires a business in India and wants to use the green channel route. Under the new rules, authorities may need to examine whether Elon Musk personally holds investments in any competing, vertically related, or complementary businesses. If such overlaps exist, the transaction may lose green channel eligibility even though Tesla itself may not have direct overlaps. These requirements, made the parties reluctant to choose Green channel filling even if the mergers are not likely to cause any adverse effect on the competition.  

IV. Critical analysis of the Green channel route

A. Self- assessment

Schedule III read with Schedule IV of the 2011 Regulations provided for an assessment to be done by the parties that the proposed combination will not cause any adverse impact on the market and that there is no overlap of activities between the parties to the combination. Unlike the Competition Act, wherein Section 19(3) provided for the factors to be considered while examining the adverse effect on competition for the purpose of Section 3, the 2011 Regulation did not provide for the scope of scrutiny or the guiding principle while determining the adverse effect, further expanding the scope of scrutiny to be done by the parties, therefore increasing the compliance burden. Analysing each possible adverse impact, without any specific guiding principles required appointment of persons specialised in the field. Since, predicting whether the transaction will have any impact on the market is based on the existing data and market structure, an absolute finding is uncertain. Furthermore, the burden was increased further by the lack of information available in the public domain. While the 2024 Rules do not contain any provision governing the self-assessment criteria, Rule 3 provides for the categories of combinations that are eligible for filling application under Green channel application. Through this, instead of providing clarity on the already existing provisions, the legislature has over-regulated and further narrowed down the pool of mergers which can avail green channel approvals.

B. No-overlap Rule  

The erstwhile Schedule III of the 2011 Regulation prohibited combinations that have any horizontal, vertical, or complementary overlap. That means two company or their group of companies, undergoing merger or acquisition, should not have anything in common, which includes producing similar/ same or identical products, engaging in any activities that are complementary to each other and engaging in any activity of production, manufacturing, etc., which are at different stages or levels of the production chain. This criterion limited the scope for combination under the green channel route for the majority of the companies.

At present, Rule 3 read with Schedule of the Competition (Criteria for Exemption of Combinations) Rules, 2024 provides for the criteria which were earlier given under Schedule III of 2011 Regulations. Where the 2011 regulation provided for considering “all plausible alternative market definition” to determine whether there is any horizontal, vertical or complementary overlap, the New 2024 Rules exempt consideration of such plausible market definition. Under the earlier Regulations, the obligation extended to all parties to the combination, their respective group entities, and any entity in which they directly or indirectly held shares or exercised control, with no clarification regarding the relevant shareholding thresholds or the parameters of “control.”. This resulted in an expansive and indeterminate scope of attribution, making it harder for companies to choose the Green Channel route, even where the transaction was unlikely to raise any real competition concerns.

The new Rules, instead of using the term “directly or indirectly, hold shares and/or control” uses “affiliates”, which includes an entity who holds (a) more than ten percent of the shares in another (b) the right to appoint or observe a member on the board of directors and (c) is able to access the other enterprise’s commercially sensitive information. Although this definition brings clarity, it significantly widens the range of relationships that must be examined while assessing Green Channel eligibility. The revised ‘affiliates’ criteria necessitate lifting the corporate veil of the acquirer as well as the target entity, including their group entities.  Given that such an exercise of lifting the corporate veil is a time-consuming process, operationalisation of this requirement runs contrary to, and fundamentally undermines, the very legislative intent of hurdle-free, less time-consuming, automatic approval of those mergers, which are not likely to cause adverse impact on the market.

Recently in an order dated 26.06.2025, the CCI found inadequacy in the assessment undertaken by the parties by observing that there were some “linkages” between the acquirers group and the target group. This led to the initiation of Section 43A and Section 44 proceedings. Plume investments gave a notification for the proposed transaction of acquiring minority shares in the target company through the Green channel route. However, upon careful review, CCI observed that there is likelihood of vertical and complementary overlaps within their affiliates. CCI noted that the consumers of the affiliates company are common thereby giving a possibility of overlaps. This observation led to the rejection of the combination and imposition of penalties. A similar observation has been taken in yet another case of Platinum Jasmine, where although there was insignificant overlap between the parties, the CCI took note that the “no overlap” rule is absolute and imposed penalty.

Taken together, these cases demonstrate that the Green Channel route operates under a regime of strict liability, where even minor or inadvertent errors in assessment can attract serious consequences. While this approach strengthens compliance discipline, it also raises concerns regarding proportionality and legal certainty, particularly for transactions that are substantively non-problematic. As a result, the risk of heavy penalties has emerged as a one of the factors discouraging parties from relying on the Green Channel route. The absence of a clear ex ante confirmation mechanism, coupled with the risk of retrospective invalidation and penalties, may discourage parties from relying on the Green Channel.

V. Way forward and conclusion

The introduction of green channel route was undertaken so as to provide a speedy and hassle-free route to genuine players. However, the strict and narrow regulations may undermine the incentives of genuine players. Since the assessment is directed to be done by the parties themselves, it compels the parties to be highly cautious. The provisions mandating “no overlap” further limits the parties to choose Green channel route. Shifting the approach and giving a flexibility would subsequently open the gate way for a huge number of players. In conclusion, while the Green Channel route represents a progressive regulatory initiative aimed at reducing procedural delays and promoting ease of doing business, its effectiveness is presently constrained by excessive rigidity and regulatory uncertainty.

Akanksha Vishwakarma is a fourth year student at Gujrat National Law University(GNLU), Gandhinagar.