Mergers and Acquisition Under Competition Act, 2002

MERGERS AND ACQUISITIONS UNDER
COMPETITION LAW
Submitted By
Pintu Babu
Semester 7
Course : B.A.LL.B.
Section : C , Roll No. 110
Project Report
For
Competition Law (Optional Paper)
Submitted To
Mr. Mohd. Atif Khan
Assistant Professor
Hidayatullah National Law University, Raipur, Chhattisgarh

Submitted on : 25.10.2018
DECLARATION
I Pintu Babu, have undergone research of the project work titled “MERGERS AND
ACQUISITIONS UNDER INDIAN COMPETITION LAW”, as a student of Competition Law
hereby declare that- this Research Project is the outcome of the investigation done by me and
also prepared by myself under the supervision of Mr. Mohd. Atif Khan , Hidayatullah National
Law University, Raipur. The views expressed in the report are personal to the student and do not
reflect the views of any authority or any other person, and do not bind the statute in any manner.
I also declare that this report is the intellectual property of the on the part of student research
work, and the same or any part thereof may not be used in any manner whatsoever in writing.
______________________________
Pintu Babu
Roll No. 110
ID No. 1520151274
Semester – VII (C)
Hidayatullah National Law University, Raipur
CERTIFICATE OF ORIGINALITY
This is to certify that Mr. Pintu Babu, Roll Number-110, student of Semester- VII, Section C of
B.A. LL.B.(Hons.), Hidayatullah National Law University, New Raipur (Chhattisgarh) has
undergone research of the project work titled “MERGERS AND ACQUISITIONS UNDER
INDIAN COMPETITION LAW”, in partial fulfillment of the subject Competition Law. His
performance in research work is up to the level.
Place: New Raipur

Date: 25.10.2018 ……………………………………
Mr. Mohd. Atif Khan
(Faculty- Competition Law)
Hidayatullah National Law University,

Raipur, Chhattisgarh
ACKNOWLEDGEMENTS
I feel highly elated to work on the project “MERGERS AND ACQUISITIONS UNDER
INDIAN COMPETITION LAW”. The practical realization of the project has obligated the
assistance of many persons. Firstly I express my deepest gratitude towards Mr. Mohd. Atif Khan,
Faculty of Competition Law, to provide me with the opportunity to work on this project. His able
guidance and supervision in terms of his lectures were of extreme help in understanding and
carrying out the nuances of this project.
I would also like to thank The University and the Vice Chancellor for providing extensive
database resources in the library and for the Internet facilities provided by the University.
Some typography or printing errors might have crept in, which are deeply regretted. I would be
grateful to receive comments and suggestions to further improve this project.
Pintu Babu
Roll No. 110
ID No. 1520151274
Semester – VII (C)
Hidayatullah National Law University, Raipur
Aims and Objectives:
 To identify the status of mergers and acquisitions under various anti-trust laws.
 To understand the role of CCI in approving or disapproving any combination.
 To gather knowledge which type of combination may lead appreciable adverse effect
on market.
Research Design
a. Nature of Study
Doctrinal research has been carried out for the completion of this project report. Systematic
analysis of statutory provisions and of legal principles has been incorporated. Logical and
rational ordering of the legal propositions and principles has been used.
b. Sources of data
Secondary sources of data has been made into use. The sources of data are legal and appellate
court decisions. Due help of books, journals and articles has been taken.
Table of Contents
DECLARATION ...................................................................................................................................... 2
CERTIFICATE OF ORIGINALITY ........................................................................................................ 3
ACKNOWLEDGEMENTS ...................................................................................................................... 4
Aims and Objectives: ................................................................................................................................ 5
Research Design........................................................................................................................................ 5
Introduction ............................................................................................................................................... 7
1. Rationale for Merger Control ............................................................................................................ 8
1.1 Horizontal Mergers ................................................................................................................... 9
1.2 Vertical Mergers ..................................................................................................................... 10
1.3 Conglomerate Mergers............................................................................................................ 12
2. Remedies for Merger Control ......................................................................................................... 15
3. Competition Act in Reference to Mergers and Acquisitions .......................................................... 15
4. Analysis of Provisions of Competition Act Relevant to Mergers and Acquisitions ............................. 18
4.1 Combination............................................................................................................................ 19
4.2 Threshold Limits ..................................................................................................................... 20
4.3 Exemption from the Provisions of Section 5 .......................................................................... 22
4.4 Regulation of Combinations ................................................................................................... 23
4.5 Mandatory Reporting or Notification...................................................................................... 27
4.6 Exemption Gateway ................................................................................................................ 30
4.7 Assessment of Combination.................................................................................................... 32
4.8 Penalties under the Competition Act............................................................................................. 34
4.6.9. Appeals from the Order of CCI........................................................................................... 34
5. Cross Border Mergers and the Competition Act ............................................................................. 34
Conclusion .............................................................................................................................................. 37
Bibliography ........................................................................................................................................... 39
Title - MERGERS AND ACQUISITIONS UNDER INDIAN COMPETITION LAW
Introduction
We are living in a free market economy age where business entities are engaged in
competitive practices. This sometimes (if not always) leads to the monopolisation of the
market by way of anti-competitive agreements, abuse of dominance, mergers and takeovers
between business entities which result in distortion of the market. It becomes essential to trace
the history of competition law across the world at this point.1
Although the antitrust laws are very much new to the Indian regulatory framework but the
western countries likes US and Canada has this kind of regulatory framework since last decade
of the 19th century. Canada became the first country of world to enact the antitrust law i.e.
Combines Act of 1889, followed by the US in the form of the Sherman Act, 1890. The
Sherman Act was followed by the Clayton Act 1914 which expanded on the general
prohibition of the Sherman Act to price discrimination, exclusive dealing and mergers. In the
same year in US, the Federal Trade Commission Act, 1914 also declared unlawful unfair
methods of competition and unfair or deceptive acts or practices in or affecting commerce and
moreover, the Cellar-Kefauver Act, 1950 which has amended the Clayton Act and now both
stock as well as asset acquisitions are prohibited which would result in a restraint of commerce
or creation of monopoly.2
The United Kingdom, on the other hand, introduced the considerably less stringent Restrictive
Trade Practices Act, 1956, but later on more elaborate legislations like the Competition Act
1998 and the Enterprise Act, 2002 were introduced.3 India had antitrust legislation in the
form of the Monopolies and Restrictive Trade Practices Act, 1969 which was replaced by
Competition Act, 2002. The Competition Act regulates mergers and acquisitions which results
in distortion of the market. The Indian Competition Act is more in line with competition laws
across the globe with its focus on promoting and maintaining competition as well as consumer
welfare.
1
Neeraj Tiwari, “Merger under the Regime of Competition Law: A Comparative Study of Indian Legal
Framework with EC and UK”, Bond Law Review, 25 August 2011, Vol. 23, Issue 1, 117-141, p. 117.
2
For further details, see, Stephen Calkins, “Competition Law in the United States of America”, in
Vinod Dhall (ed.), Competition Law Today (Concepts, Issues and the Law in Practice), Oxford University Press,
New Delhi, 2007, pp. 401-425.
1. Rationale for Merger Control
A true (or full) merger involves two separate undertakings merging entirely into a new entity. 3
However, under competition law, the term ‘merger’ is used in a broad sense covering
combinations of enterprises in various forms e.g., a merger proper, amalgamations, acquisition
of shares, voting rights or assets, or acquisition of control over an enterprise.4 Mergers are a
normal activity within the economy and are a means for enterprises to expand business
activity.5 Mergers have numerous advantages, they provide business entities opportunity to
grow, to enter new markets and diversify without the need to start afresh and face many
related risks. As a consequence of their many benefits, mergers are not treated as per se anti-
competitive.6 In fact, Justice Dhananjyay Chandrachud commented in Ion Exchange (India)
Ltd., In re:7
“Corporate Restructuring is one of the means that can be employed to meet the
challenges and problems which confront business. The law should be slow to retard or
impede the discretion of corporate enterprise to adapt itself to the needs of the
changing times and to meet the demands of the increasing competition.”
But still mergers need regulation as they generally have implications for the concentration of,
and ability to use, market power, which in turn can impact negatively upon competition and
harm consumer welfare by foreclosing other players from entering the market. A merger
sometime can lead to a bad outcome if it creates a dominant enterprise that subsequently
abuses its dominance. In this way, merger attract the attention of competition policy makers
and need competition regulation. According to Goldberg, mergers impact upon the
concentration and use of market power as they lead to: 8
3
Reeti Sonchhatra, “Regulation of Mergers under Indian Competition Law”, Madras Law Journal, 2009, Vol. 5,
pp. 13-19, p. 13.
4
Richard Wish, Competition Law, 6th Edition, Oxford University Press, New Delhi, 2009, p. 798.
5
Vinod Dhall, “Overview: Key Concepts in Competition Law”, in Vinod Dhall (ed.), Competition Law
Today (Concepts, Issues and the Law in Practice), Oxford University Press, New Delhi, 2007, pp. 1-35, p.
15.
6
In fact, as many commentators have noted, most mergers pose little threat to competition for instance, an
OECD/World Bank Report states that most mergers pose little or no threat to competition. OECD/World Bank,
“A Framework for the Design and Implementation of Competition Policy and Law”, 1999, p. 41, available at
http://www.oecd.org/dataoecd/10/30/27/122278.pdf,
7
(2001) 105 Comp Cases 115 (Bom.)
8
Alan H. Goldberg, “Merger Control”, in Vinod Dhall (ed.), Competition Law Today (Concepts, Issues and
the Law in Practice), Oxford University Press, New Delhi, 2007, pp. 93-107, p. 93.
Reduction in the number of business entities operating in a market, and Increase in the
market share controlled by the merged entity.
In other words, if the motive of the merger is to create anti-competitive effects likely to reduce
the number of competitors or to create dominance in the market, it need to be regulated by
formulating a suitable competition policy. The principle for exercising merger control is that if
a merger is likely to give rise to market power, it is better to prevent this from happening than
to control the exercise of market power after the merger has taken place, that is to say,
prevention is better than cure. Also, the social and economic cost of de-merging the firms after
the merger is usually very heavy, and thus not an easy option for competition authorities.
Further, enterprises should not be allowed to evade the competition law by using the merger
route to achieve an agreement between themselves which would have been found to be anti-
competitive by a competition authority.9
1.1 Horizontal Mergers
These mergers are viewed as presenting a greater danger to competition than any other type of
mergers. They have effect on market concentration and use of market power as they lead to (a)
reduction in number of market players and (b) increase in market share of the merged entity.
Such increases in market power may result in turn in increased prices, restricted output,
diminished innovation, etc. which is damaging to the competitive process.
The possible anticompetitive effects of horizontal mergers are thus similar to what may occur
in case of cartels or horizontal anti-competitive agreements. The impact of horizontal mergers
on competition would be more adverse where there are fewer firms operating in the relevant
market or where the market shares of the acquiring or target or merged entity are high so that
the resulting entity would be the dominant firm in the market. The impact of horizontal
mergers on competition can be classified into unilateral effects and coordinated effects.10
(1) Unilateral Effects: A merger may lead to a monopoly (in an extreme case) or otherwise
create an enterprise with substantial or substantially increased market power. 11 The enterprise
can then over charge or increase its profit margin or able to reduce output, quality or variety.
9
Vinod Dhall, “Overview: Key Concepts in Competition Law” in Vinod Dhall (ed.), Competition Law Today
(Concepts, Issues and the Law in Practice), Oxford University Press, New Delhi, 2007, pp. 1- 35, p. 15.
10
OECD/World Bank, “A Framework for the Design and Implementation of Competition Policy and Law”, 1999,
retrieved from http://www.oecd.org/dataoecd/10/30/27/22278.pdf,
11
In this way, the enterprise can unilaterally abuse its dominant position.
(2) Coordinated Effects: A horizontal merger may decrease the number of competing
enterprises and make it easier for the remaining enterprises to co-ordinate their behaviour in
terms of price, quantity or quality i.e. a cartel-type arrangement.29 The co- ordination can be
tacitly or expressly to raise the prices. As a result, competitive prices may not be reached and
firms may earn monopoly or oligopoly profits. Many other factors also affect the ability to
coordinate. For example, all other things equal, it is easier for competitors to reach and
monitor agreements if the products are relatively homogenous and the pricing by individual
competitors is relatively transparent.30
1.2 Vertical Mergers
The adverse impact of vertical mergers on competition is comparatively less. They may also
bring benefits for the merging enterprises and for consumers which is less likely and less
convincing in the case of horizontal mergers. However, in certain circumstances, vertical
mergers can attract action by competition authorities. For example, if a dominant enterprise
acquires source of raw materials, this enterprise could deny access to raw materials to
competitors or potential competitor.12 Vertical mergers can result in following anti-
competitive effects:
(1) Fear of Fore Closure: Vertical integration can sometimes lead to foreclosure for the rival
firms. Foreclosure can take two forms: Input foreclosure and Customer foreclosure.
Input foreclosure has already been discussed above i.e. when dominant enterprise
acquires source of raw material and denies this to others.
Customer foreclosure occurs when the supplier integrates with a customer base
in the market, thereby depriving other player’s access to customers.13
(2) Entry Blocking: Monopolies can have the ability to prevent the entry of firms into the
market. Sometime it is claimed that even competitors can come together or prevent a potential
entrant. This is sometimes referred to as collective foreclosure. If through integration, firms
are able to internalise different levels of production, artificial barriers to entry could be
12
13
EC Non-Horizontal Merger Guidelines, 2007, Regulation 58.
created. This implies that because of the size of the incumbent, a potential entrants capital
requirements will be high.14
(3) Differential Pricing: If a firm has a monopoly over the supply of a particular input and it
integrates downstream into processing of the input into finished products, an anti- competitive
effect may arise if the firm charges a high price for the input supplies and a low price for the
finished products. This differential price jeopardises the economic viability of all the other
firms in the downstream finished product market. This practice mainly prevails in the steel
industry, where integrated steel manufacturers follow differential pricing in hot-rolled coils to
harm the interest of cold-rolled steel manufacturers, the downstream players.34
Vertical merger is forbidden if it causes or is likely to cause an appreciable adverse effect

within the relevant market in India. It will have such effect, if it results in foreclosure of
market, entry blocking or price squeeze. It will not have that effect if the administrative
direction rather than a market transaction forms the basis of cooperation. In that case there is
no fear of foreclosure, including collective foreclosure (entry blocking) and reduction in
output prices (price squeeze) and it also creates a favourable environment for collusive
behaviour. It may be administratively desirable as a business expediency or to create
efficiency, if a firm chooses, on the basis of relative costs, to sell its finished or unfinished
product to other firms who in turn sell it to the market with or without further processing,
rather to perform the activity by itself. But anti- competitive effects are likely when at the
vertical levels, there appears to be horizontal market power.35
An example of vertical acquisition affecting adversely the competition is found in the case of
United States v. E.I. du Pont de Nemours and Co.,15 where the du Pont acquired 23 percent of
stock interest in General Motors as a result of which General Motors purchased majority of
automotive finishes and fabrics from du Pont General Motors. It was held to be violating
section 7 of the Clayton Act, as it tended to create a monopoly as du Pont obtained an illegal
preference over other competitors. The Supreme Court of the United States observed:
“The bulk of du Pont’s production of automotive finishes and fabrics has always
supplied the largest part of the requirements of General Motors, the one customer in
14
Report of High Level Committee on Competition Policy and Law (The Raghavan Committee), para 4.70, as
quoted in H.K. Saharey, 2011, p. 43.
15
353 US 586 (1957).
the automobile industry connected to du Pont by a stock interest; and there is an
overwhelming inference that du Pont’s commanding position was promoted by its
stock interest and was not gained solely on competitive merit.”
1.3 Conglomerate Mergers
The theories for restraining vertical and horizontal merges are well-formulated. There,
however, is no clear mechanism for similar restraints on conglomerate mergers as these
mergers are not considered potentially anti-competitive as the structure of the competition in
the relevant market does not ostensibly change but on the other hand, it gives the additional
financial strength to the parties concerned. A considerable increase in the financial strength of
the combined enterprise could provide for a wider scope of action and leverage vis-à-vis
competitors or potential competitors of both the acquired and the acquiring enterprise and
specially if one or both are in a dominant position of the market power, enabling it to resorting
to predatory pricing (because of deep pockets), raising entry barriers and eliminating potential
competition.37
An example of conglomerate acquisition could be found in FTC v. Proctor and Gamble.16
Merger was found to be anti-competitive because the powerful acquiring firm, Proctor and
Gamble (P&G), could substantially reduce the competitive structure of the industry by
dissuading the smaller firms from competing aggressively, and also raising barriers to new
entrants who would be reluctant to face the huge P&G with its large advertising budget. As
these mergers are not considered potentially anti-competitive, but still there are some
objections to these forms of mergers which are due to the under mentioned competitive
effects.
(1) The Theory of Deep Pockets: Some competition authorities are wary of mergers that may
produce a conglomerate with great financial and market power and with deep pockets. 17 It is
believed that firms operating in many markets can devastate their rivals through their
potentially infinite capital resources.
(2) Reciprocal Dealing: These mergers can lead to increase in opportunity for reciprocal
dealing which arises in a structure where firms meet as seller to buyer in some markets and as
16
386 US 568.
17
Vinod Dhall, “Overview: Key Concepts in Competition Law” in Vinod Dhall (ed.), Competition Law
Today (Concepts, Issues and the Law in Practice), Oxford University Press, New Delhi, 2007, pp. 1- 35, p. 16.
buyer to seller in other to the disadvantage of the rivals.
(3) Mutual Forbearance: Conglomerate mergers may enhance the likelihood of mutual
forbearance, where each enterprise may independently decide to compete less vigorously with
the other in that section of the market where its position is relatively weak, thereby leading to
a situation of peaceful co-existence rather than vigorous competition, i.e. the development of a
‘live and let live policy’ that is comfortable for firms but harms consumers.
Apart from these, other impacts of mergers in general include increase in overall industrial
concentration and a danger of dilution of functioning of capital markets. Merger control is
necessary because mergers can lead to concentration of market power in a business entity and
can enhance a business entity’s (or a group of business entities’) ability to use market power in
a manner which impedes competition. In turn, this may lead to prices being raised above the
level that would otherwise exist in a competitive market, restricted output, diminished
innovation, increased barriers to entry and expansion, rival business entities being eliminated,
rivals costs being raised and other behaviour damaging to the competitive process. That’s why,
competition law seeks to prohibit mergers which are likely to bring about a concentration of
market power or an enhanced ability to use market power.
The law of merger in relation to competition law was elaborately discussed in the case of
United States v. Philadelphia National Bank,18 by the US Supreme Court. The appellants are-a
national bank and a State Bank of Philadelphia. They are the second and the third largest of
the commercial banks in the metropolitan area of Philadelphia and its three contiguous
countries and have branches throughout that area. Their board of directors approved an
agreement for their consolidation/merger under which the national bank’s stockholders would
retain their stock certificates, which would represent shares in the consolidated bank, while
the State bank stockholders would surrender their shares in exchange for shares in the
consolidated bank. After obtaining report from the Federal Reserve System’s Governors, the
Federal Deposit Insurance Corporation and the Attorney General under the Bank Merger Act,
1960, the Supreme Court observed that the proposed combination would violate Article 7 of
the Clayton Act as after the merger, the consolidated bank would control at least 30 percent of
the share of the relevant market and a significant increase in the concentration of
commercial banking facilities of 33 percent in the area and this is likely to lessen competition
18
374 US 321
substantially and the fact that commercial banking is subject to high degree of governmental
regulation and it deals with intangibles of credits and services and not the manufacture and
sale of tangible commodities do not immunise it from anti- competitive effects of undue
concentration.
However, mergers can also be an effective means of generating efficiencies and achieving
public-interest type benefits. For example, mergers can be an effective means of generating
economies of scale and of scope, resulting in the production of products at a lower cost or of
higher quality. Mergers can also help businesses to combine research and development in a
more effective manner to create new or improved products. Accordingly, merger control
regimes need to ensure that beneficial mergers are permitted to proceed and are not unduly
hampered by regulation.43
Merger control needs to be designed to prohibit mergers which are likely to be anti-
competitive and to permit mergers which are likely to be beneficial. This requires a delicate
balancing effect. Getting the balance between prohibition and permission right is important as
an overly restrictive approach to merger control can prevent beneficial mergers from
proceeding, entrench existing inefficient market structures and limit incentives for new
investment; whilst an overly permissive approach to merger control can entrench monopoly
elements.19
A number of approaches have been adopted by national competition regimes in their quest to
achieve the right balance between prohibition and permission in merger control. As nations
learn from their own and one another’s experiences, common trends are emerging,
particularity in the substantive concepts used to assess what types of mergers ought to be
prohibited and what types of merges ought to be permitted. Increasingly, competition policy-
makers are focusing upon harmonisation of merger control across nation, but significant
differences do remain. This is primarily due to the fact that competition policy is influenced
by a number of goals, only some of which are common across nations. Further, different
resources and levels of expertise dictate the extent to which national competition regimes can
employ complex and resource- intensive processes.45
19
For details, see, Michael S. Gal, Competition Policy for Small Market Economies, 2003, pp.195-6, as
quoted in Alan H. Goldberg, 2007, p. 94.
2. Remedies for Merger Control
Successful merger enforcement is defined by obtaining effective remedies, whether that means
blocking a transaction of settling under terms that avoid or resolve a contested litigation while
protecting consumer welfare. As it has been already submitted that provisions on merger
control/regulations in most competition laws essentially seek to prevent mergers that would
negatively affect competition. This is done either way:46
By reviewing the mergers to determine their effects on competition and undertaking

remedial measures to ensure that the anti-competitive impact can be averted.
Where such remedial measures are not effective enough, the mergers are prevented
from taking effect.
3. Competition Act in Reference to Mergers and Acquisitions
Throughout the last century, there has been a proliferation of competition laws in countries
across the globe and as of now, there are 106 of these. The mergers need to be regulated by
formulating suitable anti-trust legislation to protect the interest of the consumers and the whole
economy. Mergers and acquisitions are subject to competition law because they may result in
the modification of the existent market structure by giving rise to single firm dominance or co-
ordinated practices.
The practice of mergers and acquisitions has attained considerable significance in the
contemporary corporate scenario with the prevalence of family run business houses in India,
corporate restructuring is also widely used for reorganising the business entities, succession
planning and seeking tax advantages within the group.20 Thus, there was considerable pressure
from the industry representatives, various interest groups and trade association to bring out a
merger control regime to curb anti-competitive effects of combinations whereas the then
existing Monopolies and Restrictive Trade Practices Act was found to be inadequate in pursuit
of changes brought about by liberalisation.
The MRTP Act, in comparison with competition laws of many countries, was found
inadequate for fostering competition in the market and trade and for reducing, if not
eliminating, anti-competitive practices in the country’s domestic and international trade.
20
Kanika Goel and Jasreet Kaur, “Merger Control Regime-Old Game, New Rules”, SEBI and Corporate Laws,
19-25 September 2011, Vol. 109, pp. 44-48, p. 44.
Therefore, in the light of expanding global transactions and enhanced interaction of firms
across territorial bounds, the Indian competition regime underwent a paradigm shift, from a
reformist premise to one encouraging and promoting competition in the market.21
Thus, after a long and troubled gestation, India’s competition law and Competition
Commission of India came into existence. The Competition Act, 2002 came into existence in
January 2003 and the Competition Commission of India was established in October 2003.
The competition law seeks to promote efficiency and innovation in the market and protects
consumer interests by preventing the corporate entities from engaging in anti- competitive
practices such as raising prices abnormally.22 The law regulating mergers can be found under
sections 5 and 6. Mergers have been grouped along with amalgamations and acquisitions
under the wider category of combinations.53
In India, mergers are regulated under the Companies Act, 1956 and the Takeover Code, 2011
also. In the Companies Act, mergers are regulated between companies inter alia to protect the
interest of the secured creditors and the shareholders. The Takeover Code tries to protect the
interest of the investors. But under the Competition Act 2002, the objective is much broader. It
aims at protecting the whole market from the appreciable adverse effect of trade-related
competition in the relevant market in India. The Companies Act, 1956 and the Takeover Code
are the sub-sets of Competition Act, 2002 in so far as legal scrutiny of mergers is concerned.
Thus, the Competition Law prevents the misuse of modes of inorganic restructuring by
introducing a regulatory mechanism which governs mergers and acquisitions. The Act which
was passed to curb the anti-consumer activities in mergers and acquisitions, is the only
legislation in India, which examines the effect of M&A on competition in the relevant market.
Merger control under competition law involves ex-ante review i.e. to prevent a transaction
adversely affecting competition.23 It is based on preventive theory as practically de-merging
of entities after the merger transaction is very difficult and involves high costs which is not
feasible for competition and other regulatory authorities. On the other hand abuse of
21
Renuka Medury and Rinie Nag, “Cross-border Mergers: Implications under the Competition Act,
2002”, SEBI and Corporate Laws, 2-8 August 2010, Vol. 101, pp. 71-76, pp. 72-73.
22
H.R. Tuteja, “Cross-Border Mergers and Acquisitions under Indian Competition Law”, retrieved
from http://www.tpcc.in/DATA/CA086041.html,
23
Tejas K. Motwani, “Analysis of Merger Control under Indian Competition Law”, Project Report,
Competition Commission of India (CCI), 3 November 2011, p. 3.
dominance and anti-competitive agreements under competition law involve ex-post review.
The Competition Act soon after its enactment in January 2003, was embroiled in litigation
which went on for over twenty months till the Supreme Court delivered its final judgement in
Brahm Dutt v. Union of India,24 which paved the way for its amendment in 2007. The
Competition (Amendment) Act, 2007 provides that:
The Competition Commission of India shall be an expert body which would function
as a market regulator for preventing and regulating anti-competitive practices in the
country and also having advisory and advocacy functions in its role as a regulator;
One of the most important amendment as regards merger control is the mandatory
notice of merger or combination by a person or enterprise to the commission within
thirty days. Failing, a penalty can be imposed which can extend to one percent of the
total turnover or the assets whichever is higher;
The amended Act specifically provides that continuation of the Monopolies and
Restrictive Trade Practices Commission (MRTPC) till two years after the constitution
of Competition Commission of India (CCI), for trying pending cases under the MRTP
Act, 1969 after which it would stand dissolved.
Establishment of a Competition Appellate Tribunal (CAT) to hear and dispose of

appeals against any direction issued or decision or order made by the CCI.
The amended Act has how plugged a number of loopholes in the original act. The passage of
the Competition (Amendment) Act, 2007 set the stage for fully activating the Act and the
Commission. The provisions of the Competition Act have been notified in phases and it was
only in March 2011 that the merger control provisions have been notified and came into force
effective from 1 June 2011. It cannot be said that the merger control law has been introduced
in a hurry with the final notification coming atleast eight years after the enactment of the Act
in 2003. As a critical step to implementing the merger control regime, the Commission also
notified the implementing regulations titled “The Competition Commission of India
(Procedure in regard to the Transaction of Business Relating to Combinations) Regulations,
2011 (hereinafter called ‘the Combination Regulations’) as per the notification issued on 11
24
AIR 2005 SC 730.
May 2011. Further till date 6 Notifications has been introduced till October 2018 by CCI from
time to time. These regulations set out the relevant notice forms and details of the review
process. These regulations coupled with the relevant provisions of the Competition Act
completed the implementation of the merger control framework in India.25
These much-awaited regulations, which encompasses within them every large merger and
acquisition deal regulate all acquisition of shares, voting rights, control, merger or
amalgamation, which cause or are likely to cause an appreciable adverse effect on competition
in the relevant market in India. Since June 2011, till March 2013 the Commission has
scrutinised and approved fifteen combinations. Competition law in India, can thus be
successfully classified as a ‘means to achieve the end’ rather than just an end in itself.
4. Analysis of Provisions of Competition Act Relevant to Mergers and Acquisitions
Merger control provisions under competition law seek to prevent creation of mergers that will
negatively impact competition and unlike the other focus areas of competition law involves an
ex-ante analysis of the probable effects of the proposed merger. In India, the first competition
statute was the MRTP Act which was enacted pursuant to the recommendations of inter alia,
the Monopolies Inquiry Committee appointed in 1964. This legislation contained provisions
on Monopolistic and Restrictive Trade Practices (which included anti-competitive agreements)
and on the concentration of economic power. Chapter III of the MRTP Act which related to
the ‘concentration of economic power’, included provisions on mergers which required that
prior approval be obtained from the Central Government or any scheme of merger or
amalgamation involving undertakings, the assets of which exceeded certain threshold limits or
where the merged entity exceeded certain threshold limit.26 The object of this provision, was
to see among other things that “amalgamation is not used as a device to create new
monopolies or to bring about restrictive trade practices.”27 These provisions were, however,
deleted vide an amendment to the Act in 1991, brought about in the wake of structural reforms
introduced by the government through the new industrial policy.28
25
Pallavi S. Shroff, “Merger Control”, retrieved from http://www.globalcompetitonreview.com/reviews
/42/sections/196/chapters/1646/India-merger-control
26
Section 20 and 23 of the MRTP Act, 1969.
27
S. Krishnamurthi, Principles of Law Relating to MRTP, 3rd Edition, 1989, p. 85 as quoted in Mallika
Ramachandran, 2009, p. 44.
28
Abhijit Mukhopadhyay, “Merger and Amalgamation in India”, Chartered Secretary, 1997, pp. 780- 785, p.
These changes are noted to have given new freedom to companies from the stifling provisions
of the earlier law and led to an increase in merger activity.65 But gradually a need was felt to
have a new competition law having merger control provisions to regulate the adverse effects
of mergers. This lead to the enactment of modern competition law in India. The competition
law enforcement regime comprising of the Competition Commission of India, 29 and its
appellate authority, the Competition Appellate Tribunal have been established in accordance
with the Competition Act 2002, to provide institutional support to prevent practices having
adverse effects on competition to promote the interest of consumers and to ensure freedom of
trade carried on by other participants in markets.
The specific provisions of Competition Act, 2002 that deal with or regulate combinations are
section 5, 6, 20, 29, 30 and 31. Section 5 and 6 are the operative provisions dealing with
combinations. Besides mergers and amalgamations, the provisions pertaining to regulation of
‘combination’ for the purposes of Competition Act, covers acquisitions and takeovers also.
‘Acquisition’ for the purpose of combination is not only the acquisition of shares or voting
rights or control of management, but also acquisition of or control of assets of the target
company.30 The Competition Act sets a threshold below which a merger, acquisition or
acquiring of control is not regarded as a combination and is therefore outside the merger
regime of the Act. The threshold is fairly high and is defined in terms of assets or turnover.31
4.1 Combination
Section 5 of the Competition Act explains the circumstances under which acquisition, merger
or amalgamation of enterprises would be taken as ‘combination’ of enterprises. They are
enumerated here under:
1. The acquisition of one enterprise by another involves acquiring shares, voting rights or
assets of another enterprise to enable it to exercise control. If as a result, the value of
assets or the turnover of the combining enterprises or groups exceeds the specified
thresholds the combination is deemed to have potential of affecting the competition
781.
29
The Competition Commission of India CCI was established in 2003 which could not be made fully operational
due to the writ petition filed before the Supreme Court in Brahm Dutt v. Union of India, AIR 2005 SC 730.
30
See, Section 2(a) of the Competition Act, 2002; also see, Seth Dua and Associates, Joint Ventures and
Merges and Acquisitions in India, LexisNexis Butterworths Wadhwa, Nagpur, 2011, p. 43.
31
Vinod Dhall, “Competition Law in India”, Essays on Competition Law and Policy, retrieved from
www.cci.gov.in/images/media/articles/essay_articles_compilation_text 29042008new_2008071413 5044.pdf,
adversely.
2. Acquiring of control by a person over an enterprise when such person has already
direct or indirect control over another enterprise engaged in production, distribution or
trading of a similar or identical or substituted goods or provision of similar or identical
or substituted service, if the value of assets or turnover of both the said enterprises is
more than the amount mentioned in section 5(b). Thus, the combination of two
enterprises as a result of one having now been acquired, under the same control is a
combination having potential of affecting competition.
3. Merger or an amalgamation of enterprise is a combination in case the enterprise

remaining after merger or the enterprise created as a result of merger has more than the
assets or turnover above the prescribed thresholds.
4.2 Threshold Limits
Threshold limits in terms of assets or turnover are set out in merger control provisions of
competition statutes to determine which merger, acquisition or joint venture as the case may
be, will qualify as a combination or concentration or such transaction which is required to be
notified to or which may be reviewed by the competition authority. It may be noted that while
thresholds are essentially set out for the purpose of notification requirements, in India, they
form part of the definition of the term ‘combinations’. Goldberg observes that the application
of thresholds for notification lessens the administrative burden for competition authorities,
compared with mandatory notification for all mergers, also enabling competition authorities to
focus on mergers most likely to cause concern. The ICN”s recommended practices for merger
notification provide that thresholds should be clear, understandable, based on objectively
quantifiable criteria and on information that is readily assessable to the merging parties.32
Thresholds limits have been set out in various jurisdictions in terms of assets of the
undertakings involved, turnover and net sales. In addition the laws/regulations also set out
what is known as a local nexus provision which requires a certain minimum part of the assets
of the acquiring or target company to be within the territorial limits of the country, the
32
ICN Recommended Practices on Merger Notification Procedures, 2002, pp. 3-4, retrieved from
http://www.internationalcompetitionnetwork.org,
authority of which is reviewing the transaction.
Indian law has this local nexus provision while setting out the threshold limits. The section 5
of Indian Competition Act, 2002 sets out certain thresholds and as already explained only an
acquisition, acquiring of control, merger or amalgamation above these thresholds is covered
by the definition of combination. The thresholds are:
(1) Enterprise Level: Parties to the combination have, either combined assets of more than Rs.
1,500 crores or combined turnover of more than Rs. 4,500 crores in India. If both or any of the
parties to the combination have assets/turnover outside India also, then parties to the
combination have, either combined assets of more than $750 million including at least Rs. 750
crores in India or combined turnover of more than $2250 million including at least Rs. 2,250
crores in India. As certain part of turnover or assets is required to be in India, thus Indian law
has this local nexus provision which is in line with the recommended practices of the
International Competition Network.
(2) Group Level: The group to which the enterprise whose control, shares, assets or voting
rights are being acquired i.e. the target enterprise would belong after the acquisition or the
group to which the enterprise remaining after the merger or amalgamation would belong has
either assets of more than Rs. 8,000 crores in India or turnover of more than Rs. 18000 crores
in India. If the group has assets/turnover outside India also, then the group has assets of more
than $ 3 billion including at least Rs. 750 crores in India or turnover of more than $ 9 billon
including at least Rs. 2,250 crores in India.
Assets: Assets include fixed, current as well as intangible assets. Value of tangible assets is to
determined by taking the book value of the assets as shown in the audited books of account of
the enterprise of the financial year immediately preceding the financial year in which the date
of proposed merger falls as reduced by depreciation. For intangible assets value has to be
determined if not shown. There will not be much difficulty, it the enterprise has acquired the
asset by purchase. In that case the amount paid is spread over the economic life of the asset
and the value for the unexpired period is taken into account.
Turnover: As defined in section 2(f) of the Competition Act ‘includes value of sale of goods
or services’. Hence, the gross value of turnover has to be taken into account. In CIT v. Karur
Vysya Bank Ltd.33 it refers to total value of all sales effected by a manufacturer or trader, or the
amount of money turnover in a business.
These thresholds are displayed in tabular form in the following Table:

Table 4.1: Thresholds in Cases of Combinations.
Group Geographical Threshold Assets Turnover

Status Coverage
No group India Rs. 1500 crores Rs. 4500 crore
(Enterprise Worldwide US $ 750 million including atUS $ 2250 million of which
level) least Rs. 750 crores in India atleast Rs. 2250 crores in India
Group India Rs. 6000 crores Rs. 18000 crores

Worldwide US $ 3 billion including at US $ 9 billion including
least Rs. 750 crores in India atleast Rs. 2250 crores in India
Thus, combinations below the given thresholds are beyond the jurisdiction of the Commission
in so far as regulation of combination is concerned. Section 20(3) provides that these
thresholds are subject to periodic revision by the Central Government so as to account inter
alia for inflation and exchange rate fluctuations.34 The value of assets or turnover can be
enhanced or reduced by the Central Government in consultation with the Commission, after
every two years. There is, thus, no rigidity about the threshold monetary limit to define a
combination. But setting of thresholds does not solve all the problems because in some cases
small mergers which do not meet the monetary requirements can have adverse impact on
competition. On the other hand large conglomerates will have to incur heavy notification fee
and wait for 210 to acquire a small company that has no significant presence in the market and
where the acquirer alone meets the minimum thresholds. Moreover, setting of thresholds in
terms of assets and turnover as done under our Competition Act may prove to be troublesome
for capital intensive industries such as oil and gas which may lead to an in-consequential
merger covered under the provisions of the Act.
4.3 Exemption from the Provisions of Section 5
33
(2000) 109 Taxman 168 (Mad.).
34
Vinod Dhall, “The Indian Competition Act, 2002”, in Vinod Dhall (ed.) Competition Law Today: Concepts,
Issues and the Law in Practice, Oxford University Press, New Delhi, 2007, pp. 498-539, p. 526.
The Government of India vide two separate notifications dated 4th March 2011 has exempted
the following from the provisions of section 5 of the Act for a period of five years.
Keeping in view, the long standing demand of the industry to exempt small takeovers, the
Ministry of Corporate Affairs in a separate notification has introduced a diminimis target
based threshold and has given an exemption to an enterprise whose control, shares, voting
rights or assets are being acquired and having turnover of less than Rs. 750 crores in India or
assets of less than Rs. 250 crores in India. This notification is applicable only to combinations
in form of acquisition of control, shares, voting rights or assets only and is not applicable to
combinations in the form of mergers and amalgamations.
Through a separate notification, general exemption is granted for all groups exercising less
than 50 percent of voting rights in any other enterprise.
4.4 Regulation of Combinations
While the definition of combination is contained in section 5, the regulation thereof is

provided in section 6. Section 6 of the Competition Act deals with regulation of combinations.
It contains a prohibition against a combination which causes or is likely to cause an
appreciable adverse impact on competition and also provisions requiring pre-notification of
combinations.
The core component of any merger control regime is the assessment of proposed merger to
determine their possible effects on competition. Every system of merger control sets out a
substantive test to determine whether or not a merger ought to be blocked and must decide
upon a standard of proof required before a competition authority can block a merger. 35 A
substantive test usually involves the examination of various factors such as pre and post
merger market shares, market concentration, barriers to entry, extent of effective competition
etc among others to assess whether the proposed transaction will negatively impact
competition. Each of the jurisdiction employs various quantitative and qualitative criteria to
examine the effects of merger. But we shall focus our attention on the substantive test applied
in the Indian jurisdiction to reach a conclusion whether merger should be blocked or not. It is
contained in section 6(1) and 20(4) of the Competition Act, 2002. Section 6(1) states that no
person or enterprise shall enter into a combination which causes or is likely to cause an
35
Richard Whish, Competition Law, Oxford University Press, New Delhi, 2005, p. 788.
appreciable adverse effect on competition within the relevant market in India and such a
combination shall be void.
A combination leads to adverse effect only if it creates a dominant enterprise which is likely to
abuse its dominance. Market dominance need not necessarily lead to abuse. But when the
companies are too big, they can indulge in abuse and exploit the consumers through market
manipulation. But on the other hand, bigness has its own advantages in form of economies of
scale, accelerated growth and larger expenditure on research (such as in pharmaceuticals).
The basic assumptions which were the foundations of a closely regulated or controlled
economy have altered in the present day society. Today enterprises have to withstand global
competition. Therefore, a balance has to be struck between the advantages and disadvantages.
The likely abuse of bigness has to prevented in incipiency. Every type of merger whether
horizontal, vertical or conglomerate should be prohibited when it abuses its position to drive
competing business from the market.
A combination, whether horizontal, vertical or conglomerate is to be tested by the standard of

section 6(1), that is, whether it “causes or is likely to cause appreciable adverse effect on
competition within the relevant market in India” which requires a prediction of the
combination’s impact on present or future competition. Section 6(1), therefore, requires not
only an appraisal of the immediate impact of the combination on competition but also a
prediction of its effect on competitive conditions in future, to prevent the destruction of
competition.
Section 6(1) prohibits combination which causes or is likely to cause an appreciable adverse
effect on ‘competition within the relevant market in India.’ The objective of the regulation is
the maintenance of competition and preservation of the competitive structure of the relevant
market in India. A combination which adversely affects or is likely to affect it is void. Thus, in
order to assess whether a combination shall have that effect, it is necessary to determine that:
The combination has acquired a market power;
As a result of which the competition is, or likely to be effected adversely and

appreciably within the relevant market.
Section 6(1) aims at preventing the creation of enterprises, through acquisition or other
combinations which have the ability to exercise market power to adversely affect competition
within the relevant market in India. Therefore, it is first necessary to delimit the market in
which the enterprises compete and determine the relevant market in India before holding a
combination anti-competitive.
The term ‘relevant market’ itself has been defined in section 2(r) as “the market which may be
determined by the Commission with reference to the relevant product market or the relevant
geographic market or with reference to both the markets.” The terms ‘relevant geographic
market’ and ‘relevant product market’ have also been defined in the Act.
Section 2(s) states that the relevant geographic market ‘means a market comprising the area in
which the conditions of competition for supply of goods or provision of services or demand of
goods or services are distinctly homogenous and can be distinguished from the conditions
prevailing in the neighbouring areas. The factors which are to be considered while determining
the relevant geographic market have been listed in section 19(6) of the Act, namely (a)
regulatory trade barriers (b) local specification requirements (c) national procurement policies
(d) adequate distribution facilities (e) transport costs (f) language (g) consumer preferences
and (h) need for secure or regular supplies or rapid after sales services.
Similarly, the relevant product market is defined in section 2(t) as ‘a market comprising all
those products or services which are regarded as interchangeable or substitutable by the
consumer, by reason of characteristics of the products or services, their prices and intended
use. The factor that are to be considered while determining the relevant product market are
listed in section 19(7) namely:
 Physical characteristics or end-use of
 goods; Price of goods or services;
Consumer preferences;
Exclusion of in-house production; Existence of specialised producers; and
Classification of industrial products.
Once the relevant market has been determined, it would be necessary to determine whether the
combination causes or is likely to cause an appreciable adverse effect in that relevant market.
The factors which are to be considered by the Commission in making this inquiry are set out in
section 20(4), namely:
Actual and potential level of competition through imports in the market;
Extent of barriers to entry in the market;
Level of combination in the market;
Degree of countervailing power in the market;
Likelihood that the combination would result in the parties to the combination being
able to significantly and substantially increase prices or profit margins;
 Extent of effective competition likely to sustain in a market;
Extent to which the substitutes are available or likely to be available in the market;
Market share, in the relevant market, of the persons or enterprise in combination,

individually and as a combination;
Likelihood that the combination would result in the removal of a vigorous and
effective competitor or competitors in market;
Nature and extent of vertical integration in the market;
Possibility of a failing business;
Nature and extent of innovation;
Relative advantage, by way of contribution to the economic development, by any

combination having or likely to have adverse effect on competition;
Whether the benefits of the combination outweigh the adverse impact of the
combination, if any:
The factors listed in section 20(4) contain both negative and positive factors and the last factor
specifically states ‘whether the benefits of the combination outweigh the adverse impact of the
combination, if any.’ This recognises that a merger can have adverse effects, but it could also
have positive gains for the economy such as economies of scale and increased efficiency.
Thus, the Act prescribes rule of reason approach while inquiring into any combination.36
Moreover, the inquiry relating to the competitive effects of mergers is forward looking.
36
Vinod Dhall “The Indian Competition Act, 2002”, in Vinod Dhall (ed.), Competition Law Today
 Market definition and description;
 Identification of firms and their market shares;
 Potential adverse effects;
 Ease of market entry;
 Efficiencies that might arise.37

Under the efficiency defence, the ‘failing firm’ factor is also considered which is similar to the
factor in section 20(4) i.e. ‘the possibility of a failing business.’ In Staples Inc. and Office
Depot Inc.,38 the court noted that the proposed merger between Staples and Office depot will
lead to undue concentration in the market and allow Staples to increase prices or otherwise
maintain prices at an anti-competitive level. Further, the court noted the significant entry
barriers on account of extremely high sunk costs and difficulty in achieving economies of
scale and it considered and rejected the efficiencies defence. It would be observed that in this
case, several of the factors similar to those listed in section 20(4) were considered by the court.
4.5 Mandatory Reporting or Notification
Section 6(1), as aforesaid, prohibits a person or enterprise form entering into a combination
which causes or is likely to cause an appreciable adverse impact on competition within the
relevant market in India. Such a combination is void. There is however, an exception to this in
the form of section 6(2). Section 6(2) provides that any person or enterprise proposing to enter
into combination in terms of section 5 shall give notice to the Competition Commission of
India. The notice in the prescribed form with the fee as determined, is to be given within thirty
days of:
 Execution of an agreement or other document for acquisition or acquiring of control;
 Approval by the board of directors of the enterprise concerned with merger or

amalgamation;
Major amendments were made to the Act in 2007 which lead to the introduction of mandatory
notification system. In India, the Competition Act, 2002, as initially enacted provided for a
voluntary notification mechanism as Raghavan Committee felt that mandatory prior approval
37
Horizontal Merger Guidelines”, retrieved from http://www.usdoj.gov/atr/public/guidelines/horiz- book/toc.html
38
Federal Trade Commission v. Staples Inc. and Office Depot. Inc., Civ. No. 97-101 (TFH), as cited in
Vinod Dhall “The Indian Competition Act, 2002”, in Vinod Dhall (ed.), Competition Law Today
may lead to delays or unjustified bureaucratic interventions. Further, according to the
committee, this is likely to hamper the vital process of industrial evolution and restructuring. 39
In 2007, however, by an amendment, pre- merger notification was made mandatory.
Prior ‘Informal’ Consultation with CCI:

The current regulations do not expressly provide for pre-notification consultation with the CCI
before filing of notification, unlike the previous draft regulations. However, the CCI chairman
clarified in a press conference dated 11 May 2007,40 that the CCI shall conduct pre notification
consultations as and when necessary in accordance with international best practices. This is a
very welcome step as it seeks to alleviate the concerns and confusions that may exist before
any combination. Although the views expressed by CCI during such consultation may not be
binding on it, yet pre-notification consultations are often valuable in terms of establishing the
appropriate scope of a notification or resolving jurisdictional queries with a view to avoid
notification of deals outside an agency’s jurisdiction.
Form of Notice:
The form of notice to be filed for the proposed combination is given under the Competition
Commission of India (Procedure in regard to the Transaction of Business Relating to
Combinations) Regulations, 2011 as amended on 23rd February 2012. The notice related to the
proposed Combination can be filed with the Commission either in the Form I or Form II
specified in Combination Regulations.41
Filing Fee:
As per regulation 11 of Combinations Regulations, filing fee has been revised w.e.f. 23rd
February 2012, the amount of fee payable along with the notice filed in Form I is Rs. 10 lakhs
and Form II is Rs. 40 lakhs. There is no filing fee for Form III.
Obligation to File the Notice:
In case of an acquisition or acquiring of control of enterprise(s), the acquirer shall file the
notice in Form I or Form II, as the case may be42 and in case of a merger or amalgamation,
39
para 4.7.5 of the Report of the High Level Committee on Competition Policy and Law (the Raghavan
Committee) in H.K. Saharay, 2012, p. 44.
40
Excerpts of the press conference are available at http://www.thehindubusinessline.com/companies/
article 2008975.ece?homepage=true
41
Sachin Goyal, “Merger Control Regime in India”, The Chartered Accountant, June 2012, pp. 1874- 1881, p.
1879.
42
Regulation 9(1) of the Competition Commission of India (Procedure in Regard to the Transaction of Business
Relating to Combinations) Regulations, 2011.
parties to the combination shall jointly file the notice in Form I or Form II, as the case may
be.43
Time Period:
No combination shall come into effect until the Commission has passed order or two hundred
and ten days have passed since the notice has been given, whichever in earlier, 44 i.e. if the
commission fails to complete the investigation and pass an order regarding the combination
within the prescribed time period, the combination is deemed to have been approved.
Prima Facie Opinion:
The Commission has to form a prima facie opinion within a period of 30 calendar days of the
receipt of the said notice as to whether the proposed combination is likely to cause or has
caused appreciable adverse effect on competition within the relevant market in India. 45 For
forming such opinion, the commission may require the parties to the combination to file
additional information. It may also accept modification if offered by the parties to the
combination before the Commission has formed its prima facie opinion.46 The regulations
further provide that the time taken by the parties to the combination in furnishing the
additional information or offering modification shall be excluded in the above period of
30/210 days.47 If the Commission is of the prima facie opinion that the combination has caused
or is likely to cause appreciable adverse effect on competition, it will issue a show cause
notice to the parties as to why investigation in respect of such combination should not be
conducted.
On receipt of the response, if Commission is of the prima facie opinion that the combination
has or is likely to have appreciable adverse effect on competition, the Commission may initiate
investigation as per the provisions of the Act. In the course of inquiry conducted by CCI, if it
is found by the Commission that it requires additional information, it may direct the parties to
file such additional information.48 Further, in cases where the parties have filed notice in form
43
44
Section 6(2A) of the Competition Act, 2002.
45
Relating to Combinations) Regulations, 2011. Regulation 19(1) of the Competition Commission of India
(Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011.
46
47
Proviso to regulation 19(2) of the Competition Commission of India (Procedure in Regard to
Transaction of Business Relating to Combinations) Regulations, 2011.
48
Regulation 5(4) of the Competition Commission of India (Procedure in Regard to Transaction of Business
I and the Commission requires information in form II to form its prima facie opinion, it shall
direct the parties to file notice in form II.49 Similarly the time taken by the parties in furnishing
the additional information or filing notice in Form II shall be excluded from the period of
30/210 days.50
Where the Commission decides to commerce an inquiry, it will direct the parties to the
combination to file notice in form II which will be without any prejudice of its right to impose
any penalty on the parties.51
4.6 Exemption Gateway
The provision of section 6 discussed above are not applicable to:
A public financial institution; Foreign institutional investor; Bank;

Venture capital fund
These categories are exempted from the provisions of section 6 while entering into
combination in pursuance of any covenant of loan or investment agreement for share
subscription or financing facility or any acquisition.52
Deviating further from the strict interpretation of section 6 of the Competition Act which
requires all combinations except those mentioned in 6(4) and 6(5) to be notified to the CCI.
Regulation 4 of Combination Regulations provides the categories of combinations (mentioned
in schedule I of the combination regulations) which are ordinarily not likely to cause an
appreciable adverse effect on competition in India, and therefore not normally to be reported
to the Commission. These categories are summarized as below:
(1) 25 Percent Threshold Acquisitions: An acquisition of shares or voting rights, solely as an

investment or in the ordinary course of business in so far as the total shares or voting rights
held by the acquirer does not entitle the acquirer to hold 25 percent or more of the total shares
or voting rights of the target enterprise and also do not lead to acquisition of control of the

49
See in regulation 5(5) of the Competition Commission of India (Procedure in Regard to Transaction of
Business Relating to Combinations) Regulations, 2011.
50
Proviso to Regulation 5(4) and 5(5) of the Competition Commission of India (Procedure in Regard to
Transaction of Business Relating to Combinations) Regulations, 2011.
51
52
Section 6(4) of the Competition Act, 2002.
target enterprise. In the original combination regulation this figure was at 15 percent. It was
raised to 25 percent by the amendment to the regulations in 2012. The threshold for
acquisition was increased from 15 to 25 percent so as to bring the merger control regime in line
with the new Takeover Code. Further, the use of the word ‘entitle’ in the language of the
exemption indicates that convertibles would also be calculated under the 25 percent threshold.
However, this could potentially affect private equity transactions if a less than 25 percent
controlling interest were to be acquired and the transaction meets the prescribed thresholds for
notification under the Act.
(2) Acquisition Above 50 Percent: An acquisition of shares or voting rights, where the
acquirer already holds 50 percent or more shares or voting rights in the target enterprise,
except in the cases where the transaction results in transfer from joint control to sole control.
This would potentially impact exits in joint ventures and pre-emption rights, which meet the
prescribed thresholds under the Act. Further, acquisition of shares or voting rights between
25.01 percent and 49.99 percent is not addressed by the combination regulations and would
require notification to the CCI, even if not leading to acquisition of control. This could affect
all the private equity transactions and creeping acquisitions, where thresholds are met,
irrespective of whether control is being acquired or not.
(3) Acquisition of Shares or Voting Rights: An acquisition of shares or voting rights, where
the acquirer already holds 50 percent or more shares or voting rights in the target enterprise,
except in the cases where the transaction results in transfer from joint control to sole control.
(4) Asset Acquisition: An acquisition of assets, not directly related to the business activity of
the acquirer or made solely as an investment or in the ordinary course of business, not leading
to control of the target enterprise.
(5) An Amended or Renewed Tender Offer: An amended or renewed tender offer where a
notice to the Commission has been filed by the party making the offer, prior to such
amendment or renewal of the offer.
(6) Routine Business Acquisitions: An acquisition of stock-in trade, raw materials, stores and
spares in the ordinary course of business.
(7) Changes to Share Capital: An acquisition of shares or voting rights pursuant to a bonus
issue or stock splits or consolidation of face value of shares or buy back of shares or
subscription to rights issue, not leading to acquisition of control.
(8) Acquisition by Securities Underwriter: An acquisition of shares or voting rights by a

securities underwriter or a registered stock broker of a stock exchange on behalf of its clients.
(9) Intra-group Acquisitions or Amalgamation/Combinations: An acquisition of control or

shares or voting rights or assets by one person or enterprise of another person or enterprise
within the same group. A merger or amalgamation of subsidiaries wholly owned by
enterprises belonging to the same group.
(10) Others: An acquisition of current assets in the ordinary course of business and a
combination taking place entirely outside India with insignificant local nexus and effect on
markets in India.
4.7 Assessment of Combination
This section will make an analysis of how upon receiving notice of the combination or
otherwise, the Commission proceeds to make an assessment of combination i.e. the steps taken
by Commission to inquire and investigate into a combination to reach a decision on whether it
should be allowed, disallowed or needs modifications.
Inquiry into Combination [Section 20(1) and 20(2)]: Section 20 empowers the Commission
to make inquiries as to whether a combination causes or is likely to cause an appreciable
adverse effect on competition in India and also lays down factors which it has to take into
account for making such a determination.53 The Commission may inquire into whether a
combination has caused or is likely to cause an appreciable adverse effect on competition
within India, which relates to acquisition, acquiring of control, or merger or amalgamation as
referred to respectively in sub-clauses (a), (b) and (c) of section 5:
Upon its own knowledge or information [section 20(1)];
Upon receipt of a notice from a person or an enterprise who or which proposes to enter
into combination as referred to in section 6(2) [section 20(2)].
Procedure for Investigation of Combination Followed by CCI: Section 29 provides the

procedure for investigation. It lays down the detailed procedure for investigation of
53
combination if the Commission is of the opinion that any combination is likely to cause or has
caused an appreciable adverse effect on competition within the relevant market in India. It
provides that if in the prima facie,54 opinion of the Commission, the combination causes or is
likely to cause any adverse effect, then it would issue a show-cause notice to the parties calling
them to respond within thirty days of its receipt as to why any investigation regarding such
combinations should not be conducted.55
When the Commission receives response from the parities, it may call upon Director General
for investigation and report.56 If the Commission is prima facie of the opinion that the
combination is likely to cause adverse effect on the market, it may direct the parties to publish
the details of the combination in any manner prescribed within ten working days. It has to be
done by the Commission within 7 working days from the date of receiving information from
the Director General or response from the parties, whichever is earlier. The Commission may
then ask any affected person to file written objections against the combination within 15
working days from the date of such publication.57 The Commission may again ask the parties
within 15 working days from the completion of aforementioned 15 days to provide any further
or additional information as it deems fit.58 This additional information has to be provided by
the parties within 15 working days again, which is than furnished to the objecting person. 59
After the Commission has received all the relevant information, it will proceed under section
31 of the Act.
After receipt of all information and within forty five working days from the expiry of the
period specified in sub-section (5), the Commission shall proceed to deal with the case in
accordance with the provisions contained in section 31. The detailed procedure for the
investigation under the provisions of this section is also provided under regulation 19 to 23 of
the Combination Regulations 2011.
According to the Combination Regulations, the Commission is required to form the opinion
about whether the combination is likely to cause or has caused adverse effect on combination,
54
The word ‘prima facie’ inserted by the Competition (Amendment) Act, 2007.
55
56
Section 29(1A) of the Competition Act, 2002.
57
58
59
within thirty days of the receipt of the notice.60 For that purpose, the Commission may, if
considered necessary, require the parties to file additional information or accept modification,
if offered by the parties, before the Commission has formed prima facie opinion.61
4.8 Penalties under the Competition Act
Section 43A of the Competition Act deals with imposition of penalty for failure to give notice
under section 6(2). Failure is visited with a penalty which may extend to one percent of the
total turnover or assets, whichever is higher, of such combination. Further, the Act empowers
the CCI to ‘look back’ and inquire into a combination that has not been notified (suo moto or
on the basis of information received by it) for upto one year from the date of consummation of
such combination and if the combination causes an appreciable adverse effect on competition,
it can be held to be void.62 A penalty of between Rs. 50,00,000 to Rs, 1,00,00,000 can also
levied for making fake statements or omitting material information in the merger control
filing.63 The CCI may also impose penalty of upto Rs. 1,00,000 per day upto a maximum of
Rs, 1,00,00,000 on parties for contravention of its orders.64 Officers in charge the company’s
business would attract liability for contravention by companies of provisions of the Act, unless
they can prove lack of knowledge despite exercise of due diligence.
4.6.9. Appeals from the Order of CCI
An appeal against the order of the Commission may be filed with Competition Appellate
Tribunal within 60 days of the receipt of order/direction/decision of the Commission.65 The
Competition Appellate Tribunal is expected to dispose appeal as expeditiously as possible
within 6 months. A further appeal from the decision of CAT can be made to Supreme Court.
5. Cross Border Mergers and the Competition Act
60
61
62
Section 20(1) and (2) read with section 6(1) of the Competition Act, 2002.
63
Section 44 of the Competition Act, 2002.
64
Section 43 of the Competition Act, 2002.
65
Section 53B of the Competition Act, 2002.
Keeping in line with global practices, the competition law of India makes provision for extra-
territorial merger control. Justification for this form of extra-territorial application of laws is
found in the realisation that even mergers taking place wholly outside the borders of a country
can result in reducing or affecting the competition within a country, in numerous ways. 66
That’s why, section 32 provides that the Commission shall have the power to inquire into
combination even if it has taken place outside India or party or enterprise is outside India
provided that it has an appreciable adverse effect on competition in the relevant market in
India. Thus the governing factor is the effect in the domestic market, this is also referred to as
the ‘effects doctrine’.67
If the quantitative jurisdiction criteria based on the size of the enterprise is fulfilled, then
notwithstanding whether the principal business of the enterprise is carried outside India, it has
to be notified and approved by CCI. The international combinations may have effect in India if
the enterprises involved have subsidiaries in India. For example, a Japanese company
acquiring Brazilian company and if both the companies have their subsidiaries in India having
assets above the threshold limit and such an acquisition is expected to have certain adverse
effect on the relevant Indian market, then a merger that is, between two non-Indian companies
proposed in a foreign nation and approved by the laws of those nations is mandatorily required
to be reported to the Competition Commission of India.68
Overall, the rationale behind the introduction of extraterritorial provision in Competition Act
can be inferred from the Commentary of the UN Model Law an Competition:
“Mergers, takeovers or other acquisitions of control involving transnational

corporations should be subject to some kind of scrutiny in all countries where the
corporation operates, since such acquisition of control, irrespective of whether they
take place solely within the country or abroad, might have direct or indirect effects on
the operations of the other unit of economic activities.”69
66
Snighdha Pandey, “Concept Paper: Extra Territoriality and Merger Control: Study from Major Jurisdictions
(US, EU and Canada) and Provisions in Indian Competition Law”, A Project Report, Submitted to Competition
Commission of India (CCI), retrieved from http://cci.gov.in/images/media/
ResearchReports/Concept_20081202123940.pdf
67
Vinod Dhall, “The Indian Competition Act, 2002, in Vinod Dhall (ed.), Competition Law Today (Concepts,
Issues and the Law in Practice), Oxford University Press, New Delhi, 2007, pp. 498-539, pp. 530-531.
68
Shubham Khare and Niharika Maske, “Mergers, Amalgamations and Acquisitions under
Competition Act, 2002: An Analysis”, Company Law Journal, 2009, Vol. 4, pp. 49-65, p. 59.
69
Vinod Dhall, “Overview: Key Concepts in Competition Law”, pp. 1-35 and
Eleaner M. Fox, “World Competition Law: Conflicts Convergance and Cooperation”, pp. 224-248 in Vinod
Dhall (ed.), Competition Law Today (Concepts, Issues and the Law in Practice), Oxford University Press, New
The effects doctrine is now well accepted in competition law. It was first used in a significant
manner in the US where the position now is that US courts can intervene provided that there is
a direct, substantial and foreseeable effect on domestic or certain export commerce. Similarly,
courts in the EU have asserted the effects doctrine in several cases involving overseas firms.
The OECD Guidelines for Multinational Enterprises expressly caution these enterprises to take
into account the competition laws of not only the countries in which they operate, but also of
those countries where their acts are likely to have effect.153
But this extra territorial jurisdiction of competition law has its own criticism also. This extra
territorial application of domestic competition policies has been criticised for its undermining
of international principles relating to territorial jurisdiction of states. This principle in
international jurisprudence recognises the right of every state to exercise sovereign jurisdiction
over its national territory.154
Jurisdictional conflicts in the field of competition laws arise because of the inherent
differences in the legal policies adopted by nations to regulate competition within their
respective territories. Concomitantly, it may arise when a conduct stands validated under the
legal regime of one nation, while it simultaneously impacts the markets of another nation.155
The international tussle in the field of competition laws is aptly reflected in the statement of
the English House of Lords:
“Claims to extra-territorial jurisdiction are particularly objectionable in the field of

(competition) legislation because, among other reasons, such legislation reflects
national economic policy which may not coincide and directly conflict, with that of
other states.”70
Delhi, 2007.
70
Lord Frazer in Rio Tinto Zinc Corporation v. Westing House Electric Corporation (1978) 2 WLR 81 at p.
125.
Conclusion
Combinations whether in the form of mergers, amalgamations or acquisitions are very

important for a developing country like India. They provide numerous advantages to an
economy like India in the form of diversification of business, increased synergy, accelerated
growth, tax benefits, improved profitability etc. They enable foreign collaboration through
cross-border mergers and enable companies to withstand global competition. But on the other
hand, they may lead to monopoly or create barriers to entry and similar anti- competitive
practices. Therefore, they need regulation. The need to swiftly permit such mergers which are
beneficial to the economy and prohibit anti- competitive ones has led to the formulation of
merger control regime all over the world.
In India, mergers were regulated under the MRTP Act, 1969. But the Act had become obsolete
in the light of international economic developments and was replaced by the Competition Act,
2002. The provisions relating to combinations came into force recently on 1 June 2011. The
CCI also notified the implementing combination regulations effective from the same date.
The Act and the Regulations together constitute the merger control regime. The gradual
succession from the MRTP Act to Competition Act is one of the most important milestones as
far as economic reforms in the field of competition law in the country are concerned. By
shifting the focus from the stage of merely ‘curbing monopolies’ in the domestic market to
‘promoting competition’ the competition regime in India has attained recognition for its
progressive ways. It provides for pre-merger notification, review and remedies in the form of
modifications which if applied effectively can play a crucial role in regulating mergers. The
merger control provisions are designed in such a way to prevent mergers that are likely to have
an appreciable adverse impact on competition.
Mandatory pre-merger notification is provided which can help in ensuring that the CCI would
have relevant information of all proposed mergers above the threshold limit and would be able
to avert the competition problems that may arise in case of certain mergers. The merger
control law in India has all the elements of a progressive law and has imbibed several practices
from the EU and US regimes. The underlying theme in this new enactment appears to be
compliance with transparency. Despite its nascent existence, it has achieved tremendous
success. But there are certain problems which need to be addressed so that the law can
effectively regulate mergers. These areas which have been highlighted in the last chapter
entitled ‘Conclusion and Suggestions’ need to be deliberated upon and need further
modifications.
But overall, the efficiency of the CCI is commendable as it has been approving competition in
a time bound manner given the nascency and ambiguities that are prevalent in the regime.
Therefore, such lacunas and ambiguities in the regime should be removed at the earliest to
make it more effective. If the various problems and concerns raised by the current provisions
on merger regulation in the Competition Act are addressed, the act can be an effective
instrument in achieving its aim and preventing anti-competitive practices in the market.
Moreover, none of the merger control decisions that have been arrived so far have resulted in
any substantive legal issues, which have made the role of the Commission much easier. The
true test of the Commission will only arise when complex and substantial legal issues are
brought before it. But commission should be commended to correctly analyse most of the
decisions and to arrive at clearances ahead of the time limit set by Combination Regulations.
Thus the CCIs responsiveness to the industry concerns and its eagerness to develop a unique
body of jurisprudence comparable to that of more advanced jurisdictions, is encouraging and
puts to rest any fears of merger control acting a road block to M&A activity in India. Overall,
the Indian competition law is forward looking and intends to create an economy which will
enable all to enjoy the fruits of developments through vigorous competition.
Bibliography
1. Statutes/Acts:
 Bank Merger Act, 1960
 Cellar-Kefauver Act, 1950
 Clayton Act 1914
 Combines Act of 1889
 Companies Act, 1956
 Competition (Amendment) Act, 2007.
 Competition Act 1998
 Competition Act, 2002
 EC Non-Horizontal Merger Guidelines, 2007
 Enterprise Act, 2002
 Federal Trade Commission Act, 1914
 ICN Recommended Practices on Merger Notification Procedures, 2002
 Monopolies and Restrictive Trade Practices Act, 1969
 Notification No. S.O. 2039(E) dated June 29, 2017
 Notification No. S.O. 673(E) dated March 4, 2016
 Notification No. S.O. 93(E) dated January 8, 2013
 Restrictive Trade Practices Act, 1956
 Sherman Act, 1890
 Takeover Code, 2011

 The Competition Commission of India (General) Regulations, 2009
 The Competition Commission of India (Procedure in regard to the transaction of business

relating to combinations) Regulations, 2011
2. Reports:
 Report of High Level Committee on Competition Policy and Law (The Raghavan
Committee), para 4.70, as quoted in H.K. Saharey, 2011
 Report of the High Level Committee on Competition Policy and Law (the Raghavan
Committee) in H.K. Saharay, 2012
 Snighdha Pandey, “Concept Paper: Extra Territoriality and Merger Control: Study from
Major Jurisdictions (US, EU and Canada) and Provisions in Indian Competition Law”, A
Project Report, Submitted to Competition Commission of India (CCI)
 Tejas K. Motwani, “Analysis of Merger Control under Indian Competition Law”, Project
Report, Competition Commission of India (CCI)
3. Papers:
 Alan H. Goldberg, “Merger Control”, in Vinod Dhall (ed.), Competition Law Today
(Concepts, Issues and the Law in Practice), Oxford University Press, New Delhi, 2007
 Kanika Goel and Jasreet Kaur, “Merger Control Regime-Old Game, New Rules”, SEBI
and Corporate Laws, 19-25 September 2011, Vol. 109
 Neeraj Tiwari, “Merger under the Regime of Competition Law: A Comparative Study
of Indian Legal Framework with EC and UK”, Bond Law Review, 25 August 2011,
Vol. 23, Issue 1
 Reeti Sonchhatra, “Regulation of Mergers under Indian Competition Law”, Madras Law
Journal, 2009, Vol. 5
 Renuka Medury and Rinie Nag, “Cross-border Mergers: Implications under the
Competition Act, 2002”, SEBI and Corporate Laws, 2-8 August 2010, Vol. 101
 Sachin Goyal, “Merger Control Regime in India”, The Chartered Accountant, June 2012
 Shubham Khare and Niharika Maske, “Mergers, Amalgamations and Acquisitions under
Competition Act, 2002: An Analysis”, Company Law Journal, 2009, Vol. 4
 Stephen Calkins, “Competition Law in the United States of America”, in Vinod Dhall
(ed.), Competition Law Today (Concepts, Issues and the Law in Practice), Oxford
University Press, New Delhi, 2007,
 Vinod Dhall, “Overview: Key Concepts in Competition Law”, in Vinod Dhall (ed.),
Competition Law Today (Concepts, Issues and the Law in Practice), Oxford University
Press, New Delhi, 2007
4. Books:
 Abhijit Mukhopadhyay, “Merger and Amalgamation in India”, Chartered Secretary, 1997
 Michael S. Gal, Competition Policy for Small Market Economies, 2003
 Richard Wish, Competition Law, 6th Edition, Oxford University Press, New Delhi, 2009
 S. Krishnamurthi, Principles of Law Relating to MRTP, 3rd Edition, 1989
5. Websites:
 www.oecd.org
 www.tpcc.in
 www.cci.gov.in

Mergers and Acquisition Under Competition Act, 2002

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MERGERS AND ACQUISITIONS UNDER

Hidayatullah National Law University, Raipur, Chhattisgarh

Place: New Raipur

Mr. Mohd. Atif Khan

(Faculty- Competition Law)

Hidayatullah National Law University,

1.1 Horizontal Mergers

1.2 Vertical Mergers

Vertical merger is forbidden if it causes or is likely to cause an appreciable adverse effect

1.3 Conglomerate Mergers

By reviewing the mergers to determine their effects on competition and undertaking

3. Competition Act in Reference to Mergers and Acquisitions

Establishment of a Competition Appellate Tribunal (CAT) to hear and dispose of

4. Analysis of Provisions of Competition Act Relevant to Mergers and Acquisitions

3. Merger or an amalgamation of enterprise is a combination in case the enterprise

4.2 Threshold Limits

These thresholds are displayed in tabular form in the following Table:

Group Geographical Threshold Assets Turnover

Group India Rs. 6000 crores Rs. 18000 crores

4.3 Exemption from the Provisions of Section 5

4.4 Regulation of Combinations

While the definition of combination is contained in section 5, the regulation thereof is

A combination, whether horizontal, vertical or conglomerate is to be tested by the standard of

The combination has acquired a market power;

As a result of which the competition is, or likely to be effected adversely and

 Physical characteristics or end-use of

 goods; Price of goods or services;

Exclusion of in-house production; Existence of specialised producers; and

Classification of industrial products.

Actual and potential level of competition through imports in the market;

Extent of barriers to entry in the market;

Level of combination in the market;

Degree of countervailing power in the market;

 Extent of effective competition likely to sustain in a market;

Market share, in the relevant market, of the persons or enterprise in combination,

Nature and extent of vertical integration in the market;

Possibility of a failing business;

Nature and extent of innovation;

Relative advantage, by way of contribution to the economic development, by any

 Identification of firms and their market shares;

 Potential adverse effects;

 Ease of market entry;

 Efficiencies that might arise.37

4.5 Mandatory Reporting or Notification

 Execution of an agreement or other document for acquisition or acquiring of control;

 Approval by the board of directors of the enterprise concerned with merger or

Prior ‘Informal’ Consultation with CCI:

4.6 Exemption Gateway

The provision of section 6 discussed above are not applicable to:

A public financial institution; Foreign institutional investor; Bank;

(1) 25 Percent Threshold Acquisitions: An acquisition of shares or voting rights, solely as an

Relating to Combinations) Regulations, 2011.

(8) Acquisition by Securities Underwriter: An acquisition of shares or voting rights by a

(9) Intra-group Acquisitions or Amalgamation/Combinations: An acquisition of control or

4.7 Assessment of Combination

Upon its own knowledge or information [section 20(1)];

Procedure for Investigation of Combination Followed by CCI: Section 29 provides the

4.8 Penalties under the Competition Act

4.6.9. Appeals from the Order of CCI

5. Cross Border Mergers and the Competition Act

“Mergers, takeovers or other acquisitions of control involving transnational

“Claims to extra-territorial jurisdiction are particularly objectionable in the field of