Definition
The term 'control' is defined in Explanation (a) to Section 5 of the Competition Act, 2002 (Competition Act). It includes the ‘control’ by one or more enterprises, either jointly or singly, over the affairs or the management of another enterprise or group. This definition is sparse by design. It identifies the subject matter of control but does not prescribe the exact quantum of influence required. The degree of influence sufficient to trigger notification obligations has developed primarily through the Competition Commission of India’s (CCI) decisional practice. This has now been codified by the Competition (Amendment) Act, 2023. CCI jurisprudence now recognises several gradations of control. These range from material influence (the lowest threshold) to de facto control, decisive influence, and finally de jure control (a formal controlling interest).
Commentary
The CCI's Interpretive Journey and Decisive Influence
When the merger control provisions first came into force, the CCI’s early decisional practice relied on the standard of ‘decisive influence’ when assessing control. This standard was borrowed directly from the European Union Merger Regulation [139/2004] (EUMR) (Article 3(2)) and the European Commission’s Consolidated Jurisdictional Notice [2008/C 95/01], where ‘control’ is officially defined as the possibility of exercising ‘decisive influence’ on an undertaking. Decisive influence means having the ability to affect an undertaking's composition, voting, or commercial decisions. This encompasses the concept of negative control, which is the power to veto key strategic matters.
The CCI applied the ‘decisive influence’ standard in several foundational cases:
Independent Media Trust / Network 18 [C-2012/03/47]: The CCI ruled that acquiring the right to convert Zero Coupon Optionally Convertible Debentures (ZOCDs) into equity shares conferred the ability to exercise decisive influence over the target's management and affairs. This conversion right independently amounted to the acquisition of control.
Piramal Enterprises / Shriram Transport Finance [C-2015/02/249, Order under Section 43A of the Competition Act]: The CCI concluded an acquisition of joint control based on the acquisition of affirmative voting rights covering matters such as approval of the business plan, appointment of senior management, and alteration of charter documents. When this order was challenged before the erstwhile Competition Appellate Tribunal (COMPAT), the CCI contended that these rights were sufficient to confer ‘decisive influence’, as understood in the European Union. The COMPAT endorsed the CCI’s view and affirmed the gun-jumping penalties [Appeal No. 37 of 2016].
Even when the CCI did not explicitly cite the 'decisive influence' standard, it applied it in substance. In both SPE Holdings [C-2012/06/63] and Century Tokyo [C-2012/09/78], the CCI ruled that minority investors held joint control because they possessed veto rights over strategic commercial decisions, such as business plans, annual budgets, and key personnel appointments.
Correspondingly, across this period, the CCI consistently demonstrated that the nature of the rights being acquired, rather than the size of the stake, dictates ‘control’. In Jet Airways / Etihad [C-2013/05/122], the CCI held that a 24% stake combined with board nomination rights and the right to recommend senior management across a series of agreements constituted joint control. In Alpha TC Holdings / Tata Capital Growth Fund I [C-2014/07/192], reserved matter rights over capital structure and key personnel conferred control on a minority financial investor because they directed the strategic policy of the enterprise rather than merely protecting investment value. The same logic was applied in Caladium / Bandhan [C-2015/01/243], where a stake of less than 15% conferred joint control because the accompanying veto rights over capital, management, reorganisation and dividends were of a strategic rather than protective character.
UltraTech: The Shift to Material Influence
The formal shift to a broader standard and the articulation of a tripartite framework emerged from the CCI's order against UltraTech Cement [C-2015/02/246, Order under Section 43A of the Competition Act], which arose from UltraTech's failure to disclose its promoter group's shareholdings in competing enterprises. The CCI held that control is a matter of degree, but that all degrees and forms of control nonetheless constitute control, and identified three gradations:
De jure control: A shareholding conferring more than 50% of the voting rights of an enterprise.
De facto control: A minority shareholding where the holder in practice controls more than half of the votes actually cast at a meeting.
Material influence: The lowest threshold, defined by factors giving an enterprise the ability to influence the affairs and management of another enterprise, including shareholding, special rights, status and expertise of a person, board representation, and structural or financial arrangements.
The CCI further noted that these gradations are not exhaustive, and that other forms of control may exist alongside them, including negative control arising from the ability to block special resolutions, and operational control arising from commercial cooperation agreements. Critically, the CCI held that special rights and veto rights are not the only basis for inferring control, and that commercial realities can be more telling than formal agreements and structures.
Codification: The Competition (Amendment) Act, 2023
The Competition (Amendment) Act, 2023 officially codified 'material influence' as the operative statutory standard, defining control under Explanation (a) to Section 5 of the Competition Act as the ability to exercise material influence, in any manner whatsoever, over the management, affairs, or strategic commercial decisions of an enterprise.
The CCI's revised ‘frequently asked questions (2025) (FAQs) further clarify that control is not binary and can change in quality or degree. A change in the 'degree of control' involves structural shifts, such as crossing recognized shareholding thresholds, elevating rights from negative to positive control, or altering the control matrix through the entry or exit of a controlling shareholder. Conversely, a change in the 'quality of control' occurs when the exact same shareholders stay within existing shareholding thresholds but alter their internal controlling arrangements, such as amending a shareholders' agreement to recalibrate governance rights. This has significant practical consequences with respect to notifiability. Under the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (2011 Regulations), several exemptions were conditioned specifically on the absence of a change from joint control to sole control. The Competition (Criteria for Exemption of Combinations) Rules, 2024 (Exemption Rules), which replaced Schedule I of the 2011 Regulations, introduced a uniform and broader test across all exemptions, requiring that the transaction does not result in any change in control at all. The practical effect is a materially wider net of notifiable transactions, particularly for follow-on acquisitions and restructurings where the nature of an existing investor's control position evolves over time.
The FAQs also provide granular guidance on specific governance rights. Rights to appoint a board majority or the CEO, and affirmative rights over budgets and business plans, are treated as presumptively conferring control. Conversely, rights that do not ordinarily presume control include pure information rights or a right to appoint or nominate a single director or an observer to the target’s board of directors. However, board representation introduces a significant grey area since the practical influence of a single director’s rights depends heavily on the investor's proportionate presence and influence relative to the total board size. To add, the CCI may (and has) inferred ‘material influence’ based on even a single director’s expertise and influence. This safe harbour is not absolute - because the CCI conducts a holistic analysis, an observer right or a minority board presence may still constitute control if coupled with strategic veto rights when the complete bundle of rights is assessed together (ChrysCapital / Intas [C-2020/04/741]).
Comparative Perspectives: EU, UK, and US
Global jurisdictions utilise different frameworks to evaluate the concept of control.
European Union: As already discussed, the EUMR addresses control through the concept of decisive influence. The EU framework clearly distinguishes between ordinary minority financial protections, which do not confer control, and true strategic veto rights that do.
United Kingdom: The UK Competition and Markets Authority (CMA) evaluates control across three distinct gradations: material influence, de facto control, and de jure control. This UK framework is precisely where the CCI drew its direct guidance for the tripartite test established in the UltraTech order.
United States: The US treats ‘control’ as a bright line, binary concept. Under Hart-Scott-Rodino (HSR) Rules, 1978 (as amended) (specifically 16 C.F.R. § 801.1(b)), ‘control’ is strictly defined as holding 50% or more of the outstanding voting securities or having the contractual power to designate a majority of the board of directors.
From a review of CCI’s decisional practice, it appears that it has synthesised guidance from across these international frameworks, incorporating these diverse concepts into its own evolving jurisprudence. This flexible approach allows the CCI to deploy these global standards on a case-by-case basis, ensuring the assessment precisely fits the specific commercial realities of each transaction.
Control and the Minority Acquisition Exemption
The interaction between control and the minority acquisition exemption is highly consequential. Item 2 of the Exemption Rules exempt acquisitions of less than 25% of shares or voting rights if made solely as an investment and not leading to an acquisition of control. The acquisition of a right to appoint or nominate a director, or the right to access commercially sensitive information, independently disqualifies an investor from claiming this exemption. In Goldman Sachs / Biocon Biologics (M&A/10/2020/01/CD, Order under 43A of the Competition Act), the CCI held that rights conferring access to commercially sensitive information rendered an investment ‘strategic’, bringing it outside the minority acquisition exemption under the 2011 Combination Regulations. The Exemption Rules have since codified this approach.
For follow-on investments, Item 3 of the Exemption Rules exempts additional acquisitions provided the investor's total shareholding remains at 25% and no control is acquired. Unlike Item 2, acquiring director or observer rights is not an automatic disqualifier, provided the investor already possesses such rights. However, this safe harbour is not absolute. If additional board representation tips the balance of influence, it triggers a 'change in control' and voids the exemption. Consequently, the investor's final board count and overall bundle of rights must always be assessed post-acquisition to ensure no change in the 'quality of control' or 'degree’.
