The Competition Commission of India has unconditionally cleared PayU Payments’ acquisition of BillDesk, marking the first time the authority has cleared a deal without extracting any remedies after raising preliminary competition concerns in a show cause notice.

The CCI revealed yesterday that it has cleared PayU’s €4.7 billion acquisition of IndiaIdeas.com, which trades as BillDesk. The merger will create the largest digital payments company in India and one of the 10 largest online payments providers globally. The companies announced the tie-up in August 2021 but filed with the CCI in April.

The CCI raised prima facie competition concerns in a show cause notice in July, warning that the deal would create a company with a market share above 40% in the digital payments sector. The authority sought an explanation as to why it should not launch a detailed Phase II investigation.

But PayU, advised by Nisha Uberoi at Trilegal, subsequently convinced the CCI to approve the deal without any remedies – the first time the authority has done so following a show cause notice.

The CCI has issued over a dozen of these show cause notices during past deal reviews, eventually demanding commitments to resolve its concerns in Phase I or Phase II.

In this case, the authority reportedly met with several rivals and other market participants that expressed concerns about the post-deal market share of the merged company.

PayU and BillDesk submitted in their filing that the deal does not give rise to competition concerns but said the relevant Indian markets are retail digital people-to-merchant payments; online people-to-merchant payments; and risk management for digital payments.

The companies argued that those markets are dynamic and highly competitive – with segments consisting of more than 100 rivals providing similar or substitutable products and services. There are also low switching costs for merchants in those markets, while the various products and services on offer are open and interoperable, the companies said. Finally, pricing, entry and participation in the relevant markets are regulated by the Reserve Bank of India and the Indian government, they argued.

BillDesk is a popular payment gateway in India while PayU parent Naspers has strengthened its position in the digital payments sector “by growing inorganically”, said Vivek Agarwal, a partner at DMD Advocates in New Delhi.

Given that the merger will consolidate the companies’ already leading positions, it was likely to receive detailed scrutiny, Agarwal said.

“However, the CCI’s view has been clear that it does not want to over-regulate digital markets to impede innovation and consumer welfare,” he said.

The authority has been conducting a detailed analysis of mergers in the digital economy based on traditional rules to ensure there are no immediate concerns, Agarwal said.

Given the dynamic nature of these markets, it may be difficult for the CCI to unwind any harm to competition through ex-post enforcement, he said. The authority sometimes asks for undertakings – which are different from remedies – to alleviate any non-price concerns, Agarwal added.

Those undertakings typically look to make sure that companies stick to statements made in their 􀀁lings following approval, especially in areas where there may be competition concerns – such as how the data of the parties would be consolidated and used post-merger, he added.

PayU did not respond to a request for comment.

Counsel to PayU Payments and parent company Prosus
Trilegal
Partners Nisha Uberoi in Mumbai and Gautam Chawla in New Delhi, assisted by Harshita Parmar, Mathew George, Rahat Dhawan, Shivangi Chawla, Aditi Khemani Samriddha Gooptu, Pramothesh Mukherjee, Ishan Arora, Rishi Kauntia, Madhav Kapoor, Akanksha Mathur and Varunavi Bangia

EconOne

Counsel to IndiaIdeas.com (BillDesk)
Shardul Amarchand Mangaldas & Co
Partner Aparna Mehra in New Delhi, assisted by Rahul Shukla and Kshitij Sharma

Counsel to the selling shareholders
AZB & Partners
Partner Bharat Budholia in Mumbai