Introduction
Big Tech's acquisition spree is back in full force. After a brief slowdown in 2023 amid economic uncertainty, startup acquisitions rebounded significantly through 2025 and early 2026, reigniting global concerns over so-called “killer acquisitions”. The term lacks a formal definition, but broadly refers to transactions in which dominant firms acquire nascent or potential competitors not to expand innovation, but to stifle future threats.
In innovation-driven sectors, acquisitions of startups may lead to loss of future innovation, strengthen monopoly power and change entrepreneurial incentives by encouraging startups to focus on being acquired rather than growing independently. Repeated acquisitions may create “kill zones,” that discourage new companies from entering markets seen as vulnerable to larger competitors.
India's startup ecosystem is increasingly marked by strategic acquisitions, consolidation, and exit-driven growth. However, the merger control regime is essentially based on certain thresholds under Section 5 of the Competition Act. Moreover, the Target Enterprise Exemption further shields acquisitions involving targets whose assets in India do not exceed Rs. 450 crore or whose turnover in India does not exceed Rs. 1250 crore from mandatory notification obligations before the Competition Commission of India (“CCI”). While intended to ease compliance for smaller transactions, this exemption may also create a regulatory blind spot where strategically significant startups escape scrutiny despite their potential as future competitors.
Where the Law Fails
This reveals a doctrinal problem with the very core of the Target Enterprise Exemption. The exemption is based on backward-looking metrics like assets and turnover. This does not fit well into competition concerns within the context of modern markets, which are increasingly forward-looking. It is not important whether or not the target is an enterprise of commercial significance at the time of the acquisition. What should really matter is its potential to be competitively significant in the future. The merger-control framework in India rests on the incorrect assumption that all competitive advantages can be measured with reference to previous financial indicators.
Dominant firms take advantage of this structural gap. Firstly, acquisitions tend to be made prior to monetisation, where the startups are acquired in a manner that they fall below notification thresholds. Secondly, market dominance can be gained through serial acquisition, each of which would be exempt from scrutiny but collectively eliminate the emerging threat. Thirdly, digital startups are typically asset-light businesses, relying more on data, software and manpower. This means that they naturally remain below statutory thresholds leading to no notification and no CCI scrutiny.
Deal Value Threshold: A Partial but Incomplete Fix?
Recognising this gap, the 2023 amendments introduced the Deal Value Threshold (“DVT”), enabling scrutiny of high-value acquisitions even when traditional asset or turnover thresholds are unmet. It provided that any transaction having a deal value of more than INR 2,000 crore would require an approval from the CCI, if the target of the transaction had substantial business operations (“SBO”) in India. The reform seeks to capture acquisitions of asset-light, innovation-intensive firms that previously escaped review under the de minimis exemption.
Yet, the DVT remains only a partial solution as many potentially anti-competitive acquisitions are not necessarily expensive transactions. It fails to address the deeper issue of identifying competitive significance before financial significance emerges.
Comparative Insight
The competition authorities across multiple jurisdictions increasingly recognise that traditional turnover and asset-based thresholds are not enough to detect killer acquisitions in innovation driven markets.
In the EU, concerns regarding under-enforcement resulted in review of below threshold transactions through Article 22 of the EU Merger Regulation. Although the Court of Justice stopped this approach in Illumina/Grail, the judgment has triggered discussions regarding the introduction of DVTs and formal call-in powers to examine acquisitions of nascent competitors. Similarly, the Digital Markets Act requires the largest technology platforms to report all acquisitions of firms in the digital market, reflecting a shift towards innovation-based merger assessment.
In the US, new merger guidelines clearly acknowledge the competitive risks that come from buying nascent and potential competitors. The UK has adopted a similar approach through the Digital Markets, Competition and Consumers Act, 2024 which requires firms with Strategic Market Status to report acquisitions involving specified ownership thresholds and transaction values, even where such transactions fall below formal merger-control thresholds.
China has gone a step further by empowering the State Administration for Market Regulation (SAMR) to investigate transactions that fall below mandatory filing thresholds whenever there is evidence of potential competitive harm. The SAMR has taken a relatively interventionist approach to killer acquisitions, challenging several high-profile transactions in recent years.
In contrast, the continuing existence of the Target Enterprise Exemption in India reveals that there is still much to be done.
Reform Proposals
India therefore needs a more nuanced regulatory framework for acquisitions involving nascent and innovation-driven firms.
A. Reforming the Target Enterprise Exemption
The current exemption should be reconsidered to include qualitative indicators of competitive significance like fast user growth, ownership of strategically important data and critical technology and involvement in the area of innovations while determining whether a transaction warrants notification.
B. Strengthening the DVT Regime
DVT's efficiency remains limited due to the relatively high transaction-value threshold and the vague definition of the term “substantial business operations”. The CCI should adopt a wider definition of SBOs, taking into account parameters like active users, data collection activities, presence of research and development and digital interaction. Furthermore, regular review of the threshold value will prevent strategically significant acquisitions from slipping through the cracks.
C. Institutionalising Ex-Post Review and Call-In Powers
Not all problematic acquisitions can be identified through ex-ante notification requirements. Consequently, the CCI should be granted stronger and more structured call-in powers enabling it to review transactions that fall below statutory thresholds where credible concerns regarding future competition arise. The absence of an institutionalised ex-post screening framework contrasts sharply with the UK Competition and Markets Authority which proactively investigates below-threshold acquisitions. A formal screening mechanism should, therefore, be established to identify acquisitions involving dominant digital platforms, emerging technologies, or sectors characterised by network effects.
D. Mandatory Acquisition Disclosure by Dominant Digital Firms
India should adopt a mandatory disclosure mechanism that would compel major players in the digital market space to disclose any acquisition activities made by them concerning startups and technological firms regardless of whether such acquisitions meet the notification threshold. This will provide CCI insights into the acquisition trends and enable detection of serial acquisitions meant to neutralize emerging competitors.
E. Enhancing Institutional Capacity and Digital Market Expertise
Effective enforcement relies on the ability of institutions. CCI still deals with limitations in staffing and analytical resources. The Annual Report of the CCI in 2022-23 highlighted that 99 combinations relating to crucial sectors such as Pharmaceuticals and Healthcare, Digital Markets, etc. were approved within a period of 21 days. This leaves little scope for economic analysis of the effects of innovations. Moreover, the CCI's Digital Markets & Data Unit remains severely understaffed.
The CCI must therefore strengthen its specialised expertise in digital markets, artificial intelligence, data driven business models and innovation economics that would improve the Commission's ability to determine non-price harms and innovation-related competition concerns. Further, greater collaboration between the CCI, sectoral regulators, startup incubators and technology experts can help in identifying emerging competitive threats before they turn into irreversible market concentration.
F. Introducing a Regulatory Referral Mechanism
A referral framework similar to Article 22 of the EU Merger Regulation should be considered. Authority should be granted to sectoral regulatory bodies like the RBI, SEBI, TRAI or other digital sector specific regulators to refer acquisitions that could have adverse competitive ramifications, even if not meeting statutory thresholds, to the CCI.
Such a mechanism would ensure that competition concerns are not overlooked merely because a transaction falls outside conventional notification requirements.
Conclusion
India's merger control framework was designed for an economy where market power is based on assets and turnover. However, innovation-driven markets challenge this assumption as startups often have significant competitive potential even before they generate substantial revenue. The DVT, on its own, cannot tackle the larger risks of killer acquisitions. A combination of targeted reforms such as modification of the Target Enterprise Exemption, strengthening call-in powers, improving disclosure obligations, and increasing institutional capacity, would help the CCI in preserving innovation and competition in the digital economy. Policymakers must continue refining frameworks to foster startup innovation while preserving market competitiveness, a balance vital for India's emergence as a global innovation hub.