In mergers and acquisitions (M&A) transactions, it is customary for a buyer to seek certain protective covenants to preserve the target’s value during the period between the date of execution of definitive agreements and the transaction’s completion date. The seller is prohibited from engaging in activities outside the ordinary course of business without the buyer’s consent.
Further, the seller is to keep the buyer updated on critical business or governance matters throughout this period. In some cases, the Competition Commission of India (CCI) has viewed such interim arrangements as partially giving effect to the transaction before receiving the approval of the CCI, i.e. “gun jumping”, particularly where the buyer gains a strategic advantage or the arrangement reduces the incentive for the target to compete in the market.
Parties involved in a transaction subject to CCI approval are required to ensure that it does not take effect for at least 150 days from notification to the CCI, or until receipt of approval from the CCI, whichever is earlier (the standstill period). Failure to do so could result in penalties for the buyer of up to 1% of the total turnover, assets or transaction value, whichever is higher.In 2018, while evaluating interim arrangements, the CCI imposed penalties on LT Foods for its acquisition of the rice processing and distribution business operated by Hindustan Unilever.
The transaction documents envisaged the handover of certain inventories, introduction and interactions with the target’s suppliers, restrictions on promotional spending, and restrictions on the seller to enter or exit territories during the standstill period. While it was argued that such measures were preparatory, the CCI concluded that the conduct constituted “gun jumping”, as the terms of the agreement also envisaged the payment of partial consideration during the standstill period.
In addition to scrutinising parties’ conduct during the standstill period, the CCI acknowledges that sharing commercially sensitive information (CSI) is vital for pre-transaction due diligence or post-signing integration planning.
In this regard, in 2017, the CCI, vide its compliance manual, provided guidance on the exchange of CSI to mitigate risks of gun jumping. The CCI recommended that the parties establish clean teams, whose members are not involved in pricing, marketing, sales, etc., of the parties, so that the businesses of the parties are ring-fenced from being influenced by the CSI during the standstill period. The CCI reiterated its recommendations in FAQs published in 2022 and 2025.
However, the mere presence of a clean team cannot vitiate claims of gun jumping. In 2022, the CCI imposed penalties on Adani Green Energy for gun jumping despite parties having established a clean team for exchanging CSI.
The agreement executed for the deal included clauses permitting the parties to discuss their ongoing business operations, allowed the acquirer to provide input on the business of the target, and required the target to take into account such input in the best interests of the target.
Furthermore, the mechanics and details of the clean teams exchanging CSI were not disclosed to the CCI. Consequently, one would need to analyse the conduct of the parties to establish whether or not they have jumped the gun.
The legislative intent behind the standstill period is to ensure that parties act independently before the CCI’s approval. Although the 2025 FAQs clarify that mere information rights do not lead to a presumption of control, the presence of information rights or access to CSI during the standstill period will still need to be evaluated for gun jumping violations.
Notably, the CCI, in its 2025 FAQs, provides an indicative list of matters constituting CSI, which includes information relating to pricing, profit margin, costs, sales, market shares, pipeline products, R&D, trade secrets, marks, patents, marketing plans, budgets, business plans, minutes of board meetings, etc., providing more clarity to mitigate gun jumping risks.
During the standstill period, any rights or obligations that risk diminishing market competition – such as granting access to CSI without adequate safeguards, conferring consultation rights, or imposing covenants beyond what is necessary to preserve the target’s value – are generally viewed unfavourably by the regulator.
Bharucha & Partners – Swathi Girimaji and Bhanusri Subramanian
