You are on page 1of 13

A PROJECT REPORT ON - “REMEDIES UNDER COMPETITION ACT

RELATED TO COMBINATIONS”
SCHOOL OF LAW
MANIPAL UNIVERSITY JAIPUR

UNDER SUPERVISION OF: - SUBMITTED BY:-


Mr. DEEPANKAR SHARMA ARPIT DHAKA
ASSISTANT PROFESSOR 151301016

1
CERTIFICATE

This is certified that Mr. Arpit Dhaka student of B.A. LL.B(Hons.) eighth semester school of
Law Manipal University Jaipur has completed the project work entitled “remedies under
competition act related to combinations” under my supervision and guidance.
It is further certified that the candidate has made sincere efforts for the completion of the project
work.

SUPERVISOR NAME

(Mr. DEEPANKAR SHARMA)

ASSISTANT PROFESSOR

2
ACKNOWLEDGEMENT

I express deep sense of gratitude and indebtness to our teacher Mr. Deepankar Sharma under
whose guidance valuable suggestions, constant encouragement and kind supervision the present
project was carried out. I am also grateful to college faculty of law for their feedback and for
keeping us on schedule.
I also wish to express my sincere thanks to my friends who held directly or indirectly by giving
their valuable suggestions.

ARPIT DHAKA

3
TABLE OF CONTENTS

INTRODUCTION ........................................................................................................................................ 5
TYPES OF COMBINATIONS................................................................................................................. 5
Horizontal Combinations ...................................................................................................................... 5
Non-Horizontal Combinations .............................................................................................................. 5
Vertical Combinations .......................................................................................................................... 5
CHAPTER 4: REGULATION OF COMBINATIONS- ORDER OF COMMISSION ON CERTAIN
COMBINATIONS, REMEDIES UNDER THE ACT & APPEALS ........................................................... 6
REMEDIES................................................................................................................................................... 8
APPEALS ..................................................................................................................................................... 9
CASE .......................................................................................................................................................... 10
CONCLUSION ........................................................................................................................................... 12
WEBLIOGRAPHY..................................................................................................................................... 13

4
INTRODUCTION

Combination within the Competition Law is the merger between two or more enterprises or firms
or the business sector acquisitions (such as companies or firms) by other business enterprises.
The Government controls combinations or mergers and acquisitions within the country to
promote competition and thereby seeing to that small scale establishments are not overshadowed
and swallowed by more reputed industries. This is because the merger of big shot companies not
only reduce competition but also make it difficult and almost impossible for smaller firms to
grow or profit from their business. The accumulation of wealth in certain sectors of business and
the consumer concerns can lead to major economic and social discrepancies within the nation.

TYPES OF COMBINATIONS

Horizontal Combinations
Horizontal Combinations involve the merging of enterprises or firms with identical level of
production process, with substitute goods and are competitors. The horizontal combination is
primarily a friendly merger between companies, although it can be a takeout of one by the other.
Of course the synergy formed by this combination enhances the business performance, financial
gains and shareholder value in the long run. The cost efficiency with the staff cut-offs leads to
the increased margins of the company. However this tends to pave way for reduced competition
as a monopolist agenda emerges from the combinations of powerful enterprises, along with the
unemployment that follows which has a very drastic and adverse effect on the economy of the
country. It is also bad for the consumers as the reduced competition gives the companies a
“higher pricing power.” Therefore these merges are the chief focus and are often scrutinised by
the Competition Law Authority for the above given reasons.

Non-Horizontal Combinations
The non-horizontal combinations are of two types: Vertical and Conglomerate combinations.

Vertical Combinations
Vertical merging is “combining of business firms engaged in different phases of the manufacture
and distribution of a product into an interacting whole”. This leads to increased competitiveness,
a greater process control, wider market share, a better supply chain co-ordination and decline in
cost as this sort of integration is the structuring of supply chain of companies under a particular
company.

5
CHAPTER 4: REGULATION OF COMBINATIONS- ORDER OF
COMMISSION ON CERTAIN COMBINATIONS, REMEDIES UNDER
THE ACT & APPEALS

Order of Commission on Certain Combinations


Section 31(1) of the Act, provides that where the Commission is of the opinion that any
combination does not, or is not likely to, have an appreciable adverse effect on competition, it
shall, by order, approve that combination including the combination in respect of which a
notice has been given under Section 6(2).

Section 31(2) provides that where the Commission is of the opinion that the combination has,
or is likely to have, an appreciable adverse effect on competition it shall direct that the
combination shall not take effect.

Section 31(3) provides that where the Commission is of the opinion that the combination has,
or is likely to have, an appreciable adverse effect on competition but such adverse effect can
be eliminated by suitable modification to such combination, it may propose appropriate
modification to the combination, or to the parties to such combination.

Section 31(4) provides that the parties, who accept the modification proposed by the
commission under Section 31(3), shall carry out such modification within the period
specified by the Commission.

Section 31(5) provides that if the parties to the combination, who have accepted the
modification under Section 31(4), fail to carry out the modification within the period
specified by the Commission, such combination shall be deemed to have an appreciable
adverse effect on competition and the Commission shall deal with such combination in
accordance with the provisions of the Act (the Competition Act, 2002).

6
Section 31(6) provides that if the parties to the combination do not accept the modification
proposed by the Commission under Section 31(3), such parties may, within 30 working days
of the modification proposed by the Commission, submit amendment to the modification
proposed by the Commission under the sub-section.

Section 31(7) provides that if the Commission agrees with the amendment by the parties
under Section 31(6), it shall, by order, approve the combination

Section 31(8) provides that if the Commission does not accept the amendment submitted
under Section 31(6), then, the parties shall be allowed a further period of 30 working days
within which such parties shall accept the modification proposed by the Commission under
Section 31(3).

Section 31(9) provides that if the parties fail to accept the modification proposed by the
Commission within 30 working days referred to in Section 31(6) or within a further period of
30 working days referred to in Section 31(8), the combination shall be deemed to have an
appreciable adverse effect on competition and be dealt with in accordance with the provisions
of this Act.

Section 31(10) provides that where the Commission has directed under Section 31(2) that the
combination shall not take effect or the combination is deemed to have an appreciable
adverse effect on competition under Section 31(9), then, without prejudice to any penalty
which may be imposed or any prosecution which may be initiated under this Act [The
Competition Act, 2002], the Commission may order that the following shall not be given
effect to:
a. The acquisition referred to in Section 5(a); or
b. The acquiring of control referred to in Section 5(b); or
c. The merger or amalgamation referred to in Section 5(c).
The Commission may, however, if it considers appropriate, frame a scheme to implement its
order under this sub-section.

7
Section 31(11) provides that if the Commission does not, on the expiry of a period of 210
days from the date of notice given to the Commission under Section 6(2), pass an order or
issue direction in accordance with the provisions of Section 31(1) or Section 31(2) or Section
31(7), the combination shall be deemed to have been approved by the Commission.
Explanation- For the purposes of determining the period of 210 working days the period of
30 working days specified in Section 31(6) and a further period of 30 working days specified
in Section 31(8) shall be excluded.

Section 31(12) provides that where any extension of time is sought by the parties to the
combination, the period of 90 working days shall be reckoned after deducting the extended
time granted at the request of the parties.

Section 31(13) provides that where the Commission has ordered a combination to be void,
the acquisition or acquiring of control or merger or amalgamation referred to in Section 5,
shall be dealt with by the authorities under any other law for the time being in force as if such
acquisition or acquiring of control or merger or amalgamation had not taken place and the
parties to the combination shall be dealt with accordingly.

Section 31(14) provides that nothing contained in this Chapter (i.e. Chapter IV of the Act)
shall affect any proceeding initiated or which may be initiated under any other law for the time
being in force.

REMEDIES

Most of the possible/anticipated anti-competitive effects of Combination can be remedied


without holding back the Combination itself. The CCI has specific power to propose and
accept modifications to combinations in order to avert an appreciable adverse effect on
competition in the relevant market. Furthermore, the CCI may appoint ‘agencies’ to oversee
the implementation of such modifications or remedies where it considers that they required
supervision.

8
Combination analysis consists of assessment of the likely anti-competitive effect of the
merger under analysis and how such effect could be minimised or eliminated. Prohibition is
considered only when remedies are either not available or not feasible.
Remedies can be either structural or behavioural. Although behavioural remedy is
preferable, its implementation and monitoring is difficult. On the other hand, structural
remedy would entail requiring the combining enterprises to make structural adjustment which
could be in the form of sale of assets, divestment of a division or a unit or creation or
strengthening competitors through, for example, licensing of an Intellectual Property Right.

APPEALS

The Central Government has notified the Competition Appellate Tribunal (COMPAT) to hear
and dispose of appeals against any direction issued or decision made or order passed by the
Commission under respective sections of the Act, such as orders relating to notification of
combination, inquiry by the Commission and penalties An appeal has to be filed within 60 days
of receipt of the order/direction/decision of the Commission.

9
CASE

1. Competition Commission of India Vs. Thomas Cook (India) Ltd. and Ors.
Merger - Deletion of penalty - Challenge thereto - Sections 6(2) and 43 of Competition Act,
2002; Regulation 9(4) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011 - Whether Tribunal was right in setting aside order passed by Competition Commission
whereby penalty of Rupees One Crore was imposed on Respondents on ground of non-
compliance of provisions contained in Section 6(2) of Act?

Held, once a particular transaction or a series of transactions falls within purview of


combination, it was obligatory to report same to Commission under Section 6 of Act. Section
6(1) prohibited combinations which cause or likely to cause an adverse effect on competition and
such a combination shall be void. Section 6(2) of Act required that, advance notice had to be
given of proposal to enter into a combination and that had to be given within 30 days of approval
of proposal relating to merger or amalgamation, execution of any agreement or other document
or acquisition referred to in Section 5(a) of Act. Section 6(2) made it clear that, no combination
shall come into effect until 210 days had elapsed from the date on which notice had been given
to Commission under Section 6(2) and Commission had passed orders under Section 30(1),
whichever was earlier. It was apparent that, in notification made under Section 6(2) of Act, on
14th February, 2014 notifiable transactions were shown regarding merger and amalgamation.
Parties had also contemplated certain other transactions in view of notifiable transaction, they
were subscription of equity shares, SPA, open offer and market purchase. It was crystal clear
from application itself that, all these transactions were part of same transactions and even before
notifying transactions of purchase from market on 14th February, 2014, it was consummated
between 10th February, 2014 to 12th February, 2014. All transactions were intrinsically
connected and interdependent with each other and form part of one viable business transaction.
Regarding exemption that, market purchases did not qualify as a combination in view of the
target exemption notification which exempted an enterprise if 'assets' were of value not more
than INR Rs. 250 crores in India or 'turnover' of not more than INR Rs. 750 crores in India.
When series of transactions was envisaged to accomplish a combination, all transactions had to
be taken into consideration by the Commission, not an isolated transaction. While it was open for
parties to structure their transactions in a particular way the substance of transactions would be
more relevant to assess effect on competition irrespective of whether such transactions were
pursued through one or more step/transactions. Structuring of transactions could not be permitted
in such a manner so as to avoid compliance with mandatory provisions of Act. Provision of
Regulation 9(4) clearly acknowledged possibility of business transaction being inter-connected
or inter-dependent steps of such transactions. Technical interpretation to isolate two different
steps of transactions of a composite combination would be against spirit and provision of Act.
Market purchases were not independent and could not be used in isolation for purpose of any
exemption. Regulation 9(4) could not be interpreted to enable consummation by a composite
combination before giving notice to Commission. Market purchases were part of same
transaction of combination. Imposition of penalty under Section 43A of Act, was on account of
breach of a civil obligation, and proceedings were neither criminal nor quasi-criminal; penalty
had to follow. In the facts and circumstances of case, order passed by Commission was just and

10
proper and in accordance with law, which Tribunal set aside on wrong premises. Nominal
penalty had been imposed by Commission of Rupees One crore only considering facts and
circumstances of case and that there was a violation of provision. Resultantly, appeal filed by
Commission was allowed, order passed by Tribunal is set aside. Penalty of Rupees One crore
was restored.

11
CONCLUSION

Competition law (or antitrust law) is generally taken to refer to the laws that regulate private
anti-competitive conduct. Although, it is commonly said that competition laws are directed at
private commercial activities, a number of states including India apply the same rules to
government-owned business enterprises. This, however, is by no means a universal practice.
Additionally, competition law does not normally have constitutional status and hence its
content is not insulated from government interference.

12
WEBLIOGRAPHY

1. competitionlawblog.kluwercompetitionlaw.com/.../merger-remedies-in-india-having-a...

2. https://www.researchgate.net/.../272245266_Regulation_of_Combinations_Under_the...

13