Private Equity and Roll-Up Transactions in Healthcare in India — PART I
ARTICLESCOMPETITION LAW2026
Akshat Joshi 3rd Year B.A. LLB (Hons.) | Rajiv Gandhi National University of Law, Punjab
8/21/20265 min read
I. Introduction
In recent times, India has seen rising investment by private equity firms. “Private equity giants’ growing presence in Kerala’s healthcare sector signals rising costs”, reads the headline of a leading national daily. Another newspaper publication notes a nationwide trend of private equity (PE) firms investing aggressively in hospital chains. A prominent law firm described the recent investments as “platform style consolidation led by global private equity investors”.
The PE model, with its primary duty to maximise investor returns, inherently conflicts with the healthcare sector’s fundamental duty of care to patients, more so than a regular business On top of that, the acquisition of competitors diminishes the parties’ incentives to price their goods and services competitively, to innovate, or to improve quality (the consumer welfare standard).
The primary focus of this piece, then, is to point out a blind spot in the merger control regime under the Competition Act (the Act) and Regulations framed therein, that do not adequately contend with the dangers of PE investment in healthcare in a country such as India. Specifically, it points out how “roll-up transactions” can be enabled by loopholes within the Act, as seen by recent hospital consolidation funded by PE firms in India. A roll-up is generally where a private equity firm buys a hospital, and then uses it as a platform to buy smaller practices.
Therefore, to argue its central aim, that the merger control segment of the Competition Act currently lacks an effective counter to this PE strategy, this article adopts a sectional approach. Firstly, it looks at the current merger control regime, the constituent elements of the framework, and where the blind spot lies. Secondly, it featuresa two-part discussion of the evidence of harm, legislative and judicial response, in US, EU. Thirdly, the causes for the vulnerability of the Indian healthcare sector has been discussed. Fourthly, solutions to plug the loophole are discussed, with their merits and demerits.
II. The Merger Control Framework in India: Sections 5 and 6
The Act was created to address the post-liberalisation scenario of encouraging competition, unlike its predecessor, which aimed to prevent monopolies and restrictive trade practices. Section 5 of the Act defines what exactly a combination is. In doing so, it provides fixed thresholds for the combinations that the CCI is to regulate, and importantly specifies what exactly qualifies as ‘control’. Section 6 sets out the procedure for an investigation by CCI if a merger has an appreciable adverse effect on competition (AAEC) and requires every combination above the thresholds to be notified.
A. The Problems of Formal Thresholds and The Deal Value Test
Firstly, what needs to be noted is that the current law focuses only on formal structural combinations. Therefore, enterprises need to file a notice only when the fixed threshold is exceeded. What this means is that any transactions which does not fit the narrow and rigid structural understanding of combinations (for example, even reverse acquihires) escape the net of the merger control regime.
As mentioned before, a roll-up transaction, is basically when a private equity firm initially buys a large hospital chain and uses it as a platform to serially buy multiple smaller regional practices. This is different from a killer acquisition because the goal here is not to kill the nascent competitor, but rather to consolidate businesses. The existing framework is ineffective because it only looks at the parties to the current transactions, without considering the cumulative and anti-competitive effect of a series of similar transactions by either of the parties to the transaction.
The other part of this conversation is the Deal Value Threshold (“DVT”) which was brought in through the insertion of Section 5(d) by the Competition (Amendment) Act, 2023. It is still inadequate. The DVT test is a two-pronged test: it requires that both the value of the transaction is over INR 2000 Crore and that the acquired or amalgamated entity has substantial business operations in India.
What is important about the second prong is that it covers a wider range of businesses, and that it also distinguishes between digital and non-digital sectors.
The De Minimis Exemptions (“DMEs”) notified in March 2024 broaden the dimensions of the problem. The exemptions discharged the responsibility of filing this notice when ‘the enterprise being acquired, taken control of, merged or amalgamated has (i) assets not more than INR 450 crore in India, or (ii) turnover of not more than INR 1250 crore in India.’ But importantly, according to the CCI, the DMEs do not apply to transactions that are covered by the DVT. Therefore, if the transaction is notifiable under the DVT test, the acquiring entity cannot rely on the DME to say that it is exempt from notifying the transaction.
The intent was ostensibly to reduce compliance burden and administrative costs for the CCI and small businesses, but it ends up leaving certain sectors particularly prone to exploitation. Specifically, this threshold-based standard is especially lacking in the case of Micro, Small and Medium Enterprises (MSMEs). The size of the MSMEs combined with the DMEs mentioned above means that acquisition in their case would almost certainly escape scrutiny.
B. Current Tools Which Are Inadequate
There are two tools that the CCI could potentially use, however, both of them have their own shortcomings.
Firstly, under Section 20(1), the CCI can on its own initiate an inquiry into a combination to assess whether it has caused or can cause an AAEC in the relevant market. But the proviso to the same section restricts the CCI from taking action if more than one year has passed from the date the combination took effect.
Secondly, the specific regulations under the Act that detail the manner and form of information required according to the Competition Commission of India (Combinations) Regulations, 2024, regulation 9(4), any transaction where multiple interconnected transactions are conducted, and the ultimate purpose of the smaller transactions would have been the same as a single, bigger transaction, a single notice needs to be filed for each step of the transaction. In Competition Commission of India v. Thomas Cook (India) Ltd. and Ors., the Supreme Court, while upholding the order of the CCI, held that even if the individual transactions were exempt, the factual matrix proved that all transactions were actually part of a single deal. Therefore, the entire arrangement had to be notified to the CCI; it noted that substance matters over structure and outcome over procedure.
Then, in 2024, the CCI updated the combination regulations, and inserted regulation 9(5) that the ultimate intended object or the substance would be the determining standard. The second part of regulation 9(5) is that if the transaction is structured in a specific way to escape the requirement of notification, then that specific structure would be disregarded and the transaction would be scrutinised in its entirety.
Recently, in Amazon.com NV Investment Holdings v Competition Commission of India, the Supreme Court while setting aside the orders of the CCI and the NCLAT, noted the contours of regulation 9(4) and 9(5). From that judgment emerges the conclusion that what regulations 9(4) and 9(5) cover is where there are multiple inter-connected steps of a single transaction. In that case, the CCI can look at the substance of the steps and determine if it was intended to circumvent the requirement to notify the transaction to the CCI. One other conclusion that can be drawn from this case is that the CCI cannot re-open a combination after giving approval (except the usual cases of fraud and misrepresentation).
But exactly because these transactions take place over months or years, so it is not a single transaction with several inter-connected steps. Say A is a private equity firm. It acquires B, the platform which has assets of Rs. 250 Crore and a turnover of Rs 600 Crore, in, say, Delhi. Now, it pumps money into B, and B buys 4 smaller hospitals C, D, E, and F (each individually, every 6 months, let us assume the assets of each are Rs. 100 and turnovers of Rs. 250 crores). The de minimis exemption applies and every single one of these transactions is exempt (of Sections 5(a), 5(b), and 5(c)) because it is below the DME thresholds, nor does the DVT apply.
From cases such as Jet/Etihad (2013), Mandala Rose/Jain Irrigation (2016), and Piramal/Shriram (2016), what has emerged is that the CCI looks at the mutual interdependence and simultaneity of the transactions and the kind of cross-linkages that exist, but it cannot look at transactions months apart to be part of one deal.
In the next part of this series, I will look at two things, first, the evidence of harm in India, USA and the EU, and second, comparative approaches against roll-ups and drawing inspiration from those, suggest potential changes to these rules that will combat the legal lacunae therein.