NLIU LAW REVIEW

A ‘Material’ Solution: Material Influence As A Standard To Combat Common Ownership Concerns

Archita Satish

The 2023 Amendment to the Competition Act, 2002 codifies the “material influence” standard developed by the Competition Commission of India to allow for broader exante merger control review. The standard is the lowest level of control or influence granted by a proposed combination which triggers a requirement to notify the Commission. While the introduction of the material influence standard is an important step, its open-texture must be confined in order to walk the fine line of regulation. This paper is premised on the basis that a test case for the potential of this standard is seen against the growing concern of common ownership. Common ownership refers to the practice where an entity holds investments in multiple rival firms in a market purely for non-strategic purposes. In the age of investment firms and private equity, this type of investment is becoming increasingly prevalent. Microeconomics argues that common ownership can reduce the incentive to compete among rivals and allow for tacit collusion. This paper proposes that with suitable modifications and notifications of delegated legislation under the new provision of the 2023 Amendment Act, the material influence standard can address concerns about common ownership in India. For this purpose, the paper is presented in three main sections. While the first section lays down the development of the material influence standard in Indian jurisprudence, the second section analyses the issue of common ownership. While highlighting the nature of the concern as case specific, it also presents solutions which have been proposed for the issue. On this basis, the last section posits that through a better definition of situations which would amount to “material influence” provided through delegated legislation under the 2023 Amendment Act, common ownership can be tackled. In defining the same, due care must be given to industry concerns and minority investor rights to create an appropriate regime.