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Merger is only one of the several garbs in which corporate restructuring can take place.

It seems
prudent to begin an overview of the anti-competitive nature of mergers with an effort to determine
the specific definition of the term ‘merger’ and the manner in which it differs from other categories
of restructuring activities. A simplistic explanation of merger would usually mean a deal which results
into the assets of two different corporate entities vesting in one entity.1 The precise legal
nomenclature used in the Indian Companies Act, 19562 is ‘amalgamation’, wherein two or more
companies are joined into one by way of merger or by one of them being taken over by the other.3
Amalgamation can occur either by the two or more corporate entities being transferred so as to lead
to the creation of a new company, or by the one or more entities being transferred to an already
existing company. As such, amalgamation does not encompass within its scope a situation wherein
the share capital of one company is merely being acquired by another, leaving the former to carry on
with its business. Yet the different contextual usage of this nomenclature in relation to transactions
may indicate that even such an acquisition is covered well within its scope.4 Based on the underlying
objectives and modalities involved, further categorization of the various modes of corporate
restructuring can also be made, like Leveraged Buy-Outs and Management Buy-Outs, for instance.
Merger may also happen as an integral feature of ‘reconstruction’5 of two or more companies.
Takeover, on the other hand, despite its distinctiveness from merger as per the proportion of
acquisition, retention of control and the modalities involved, is often perceived as included within a
part of the wider expression ‘mergers and acquisitions’ or ‘M&A’. However, it should be noted that
certain types of restructuring, like ‘slump sale’6 and ‘divestiture’,7 are not covered by the term
‘merger’8, though they may come under the purview of ‘acquisition’. Thus there has never been any
dearth of nomenclature for the concept of merger to garb itself in –for instance, the counterpart which
has been widely used in Indian competition law is combination9.

As per Section 390(b) of the Companies Act, 1956, amalgamation will also include a reorganization of the share
capital of the company by the consolidation of shares of different classes, or by the division of shares into shares
of different classes, or by both those methods. In K.P. Jain v. S. K. Gupta [1978] 48 Comp Cas 774 (Delhi), the
court had said that when business goes to pieces and “things fall apart; the centre cannot hold” and “an
arrangement is proposed to revive, reconstruct and regenerate the company and to save it from being wound
up, if possible,” that is when an amalgamation becomes necessary. A more limited perspective of the
arrangement would signify a type of compromise that reasonable people acquainted with the subject-matter
under consideration can gauge as being favourable to the interests of all the parties involved in the transaction.
This view has also been upheld in In re Katni Cement & Industrial Company Limited [1937] 7 Comp Cas 348 (Bom).
Although this legislation has been recently amended by the Companies Act, 2013 very recently, yet most of the
provisions discussed in this paper in the context of mergers remain mostly unchanged and hence this paper
focuses for the most part on the 1956 Act itself.
In this context, it may prove useful to note the distinction between ‘acquisition’ and ‘take over’. The former is
a rather generalized term meaning buying of one company by another, whereas the latter generally refers to
the specialized form of acquisition of a public company that has its shares listed on a stock exchange.
Saraswati Industrial Syndicate Limited v. CIT, AIR 1991 SC 70.
A corporate reconstruction involves a transfer of corporate assets to another new body corporate, with the
existing members of the first company being given ownership of the shares of the second company and the first
company’s unpaid debenture holders being given ownership of the debentures of the second company, but with
the original undertaking being continued and preserved though in a modified fashion. SeeCIT v. Ganga Sugar
Corporation,[1973] 92 ITR 173 (Del.).
Sale of the whole of the stock is a slump transaction, and in a slump sale, the business must be transferred as a
whole. SeePremier Automobiles Ltd. v. ITO,[2003] 264 ITR 193 (Bom). The statutory definition of slump sale can
be found in Section 2(42C) of the Income Tax Act, 1961.
This is a transaction by which a company sells a portion of its assets to another company. Such asset reduction
is usually done pursuant to attaining certain financial goals.
Another such term is ‘demerger’, defined in Section 2(19AA) of Income Tax Act, 1961 to mean splitting up of a
company into two/more units, transfer of an undertaking of a company to another company.
For a definition of the term combination, refer to Competition Act, 2002, Section 5.
There can be several forms and guises in which mergers may occur, depending on the basis of
dissimilar parameters. An overview of a few of the commonly prevalent ones has been provided in the
following section:
The two foremost categories of mergers are referred to as cogeneric mergers and conglomerate
mergers, depending upon the identity of the industries wherein the merger is taking place. Cogeneric
mergers mean those taking place within the same industry, whereas conglomerate mergers refer to
mergers taking place between two companies, which belong to two different industries such as there
is no direct functional economic relationship between said industries. Cogeneric mergers can be
further subdivided into horizontal mergers and vertical mergers. The former refers to those mergers
taking place between two competing firms on the same level of the supply chain within the same
industry, like two manufacturers of the same category of products or two distributors in charge of
selling substitutes within the same geographical market. The latter refers to those mergers occurring
between two firms within the same industry, but situated on different levels of the supply chain, such
as say, between a real or potential supplier of goods/service and the receiver of the same.
Within the different categorizations of merger, the aforesaid forms are certainly the most relevant in
terms of the subject matter of discussion of the present paper. However, besides them, there can also
exist several other forms of merger, of which a brief glimpse can be provided in the following part:10
Cash Merger: In case of this transaction, cash is provided to certain shareholders of one of the merging
companies in return of them turning over their shares in said company.
Upstream Merger: Merger of subsidiary company into parent company.
Downstream Merger: Merger of parent company into subsidiary.
Sideways Merger: Merger of two subsidiaries of a holding company.
Triangular Merger: This transaction involves the target company being entirely absorbed into one of
the subsidiaries of the acquirer company, with the shareholders of the target company being given
shares of said subsidiary.
Reverse Triangular Merger: In this transaction, it is the subsidiary of a parent company that is entirely
absorbed into another company, so that the latter becomes a wholly owned subsidiary of the original
parent company.
Reverse Merger: In the Indian context, it means a type of merger by way of combination, with a profit-
making company merging itself into a sick company in order to get certain tax benefits under Section
72A of the Income Tax Act, 1961. In general, it is an alternative to the IPO method of going public. It
is a process used for the acquisition of a private company by a shell/defunct public company by way
of swapping of stock, which converts the private company into a public one.
Double Merger/Back-to-Back Merger: In this case, the initial step involves acquiring the entire
outstanding stock of the target company by the acquirer company by way of a reverse triangular
merger. This is followed by the resulting conversionof the target company into a wholly owned
subsidiary of the acquirer company. This subsidiary is then going to be merged with the parent
company through an upstream merger, or with another subsidiary of the parent company by ways of
a sideways merger.
Short-form Merger: For a wholly owned subsidiary merging into its parent company, sometimes there
may be special statutory procedures for expediting such mergers.


There exist different theories of mergers providing the commercial rationale behind the proliferation
of M&A transactions in recent times as well as associated economic phenomena like ‘merger waves’.
A synoptic impression of the most popular of such theories follows hereby:

Supra note 33.
Synergy Theory: Merged corporations produce a superior performance than their individual
constituents, said superiority stemming from controlling larger resource piles, economies of scale,
elimination of redundant workforce, lowering of research and development expenditure and wider
market reach.11
Neoclassical Theory: Mergers constitute an efficiency-enhancing answer to certain industry shocksof
the likes of anti-trust policy or deregulation. This theory has further been extended to postulate that
the imperfection of financial markets often lead to incorrect valuation of merging firms, but the
managers of the amalgamating entities make rational choices by using mergers as a form of arbitrage
to derive benefit from the market imperfection.12
Harvard Theory: Mergers act as self-disciplining mechanisms insofar as the capital market is
concerned, as well as value generators for corporate shareowners. Companies suffering from
inefficiency and waywardnesstend to fall prey to takeover bids, owing to their downward spiraling
book values and share values.13
Internal Capital Market Theory: Companies are liable to pay corporate tax and dividend distribution
tax both14 and to mitigate such dual expenditure, the Board of Directors may choose to declare low
payouts, use the excess profit to create internal cash flows and reinvest it to acquire new corporate
assets through mergers and similar transactions, thus creating internal capital market for the purposes
of generating funding and effecting diversification.15
Competition Theory: Amalgamation purports to provide a competitive edge to the amalgamating
companies over other players operating in same or different sectors of the market by way of risk
minimization, achieving stability in a volatile market, and gaining strategic advantages.
Tax Saving Theory: Certain mergers are accorded the benefit of tax exemptions owing to their
purported social advantages, such as the Indian version of ‘reverse merger’, involving the combination
of a profit-making company with a financially ailing unit that would allow the combined enterprise to
seek the benefits of the carry forward and set off provisions for tax purposes.16
EPS Theory: The Earnings per Share of a merged company is bound to rise as compared to that of the
merging entities, given the upward climbing theoretical book value of the merged company, which in
turn has been achieved at a relatively low purchase consideration.17The combination of large reserves
along with the limited equity capital base leads to increase in post-merger EPS.
Borrowing Capacity Theory: The borrowing capacity of an amalgamated company is much more in
comparison to its parent companies. So enhancing the borrowing capacity forms one of the rationales
for mergers, especially in case of finance companies.18
Linkage Theory: This theory posits that mergers provide a route for companies to form effective
linkages- forward linkages with purchaser companies, and backward linkages with producer

The main criterion for synergy lies in the ability of a business enterprise to leverage in resources to deliver
more than its optimum levels.
See generally Andrei Shleifer& Robert W. Vishny, Stock market Driven Acquisitions, available at (Last visited
August 8, 2013).
See generally P.S. Hariharan, Concepts of Mergers & Takeovers, XXXIV (12) Chartered Secretary 1850 (2004).
Dividend Distribution Tax or ‘DDT’ in the Indian context, under the provisions of the Income Tax Act, 1961.
See generally Michael C. Jensen, Agency Costs of Free Cash Flow, Corporate Finance & Takeovers, 76(2)
American Economic Review 323 (1986).
See Income Tax Act, 1961, Section 72A.
See Mergers and Acquisitions: Case Study involving Exchange of Common Stock in a Merger, available at (Last visited August 8, 2013).
SeeWhy Merge?available at (Last visited
August 8, 2013).
See Peter C. Carstensen, Buyer Power and Merger Analysis–The Need for Different Metrics, available at (Last visited August 8, 2013).
Q-Theory: This theory treats M&A transactions as ‘used-capital-market’ transactions, and companies
with higher market value to replacement costs ratio tend to take over companies with lower ratio,
thereby channeling capital flows to better projects and better management.20


In spite of mergers having the aforesaid beneficial side-effects, one must not forget that by way of
manipulative processes, mergers can and often do cause adverse impacts on the competitive
atmosphere in a free marketplace. For example, the value-addition to shareholders of the merged
entity as has been predicted by the Harvard Theory can be compensated for by the disadvantage
posed by resultant price increase leading to loss in consumer welfare.21Furthermore, mergers can also
be wielded as a potent scalpel by the merging entities to eliminate rivals with surgical precision and
form a concentrated market, which in turn can cause following undesirable effects22:
In a concentrated market, the number of firms being only a few, chances are high that they may
engage in collusive activities, either expressly by way of agreements or tacitly, through ‘coordinated
interaction’, to fix prices or limit supply. Mergers may even empowerone individual firm to obtain
enough market power to influence prices without having to coordinate with its rival firms.23 They may
also lead to creation of entry barriers in market. Such anti-competitive impact of mergers is more
common in cases of horizontal mergers than for vertical mergers, for the problem of concentration is
caused by the former to a greater extent than the latter. Vertical mergers often restrictsrival firms’
accessibility to a necessary component or mode of distribution, thereby causing a ‘vertical
foreclosure’24 or ‘bottleneck’ problem25, more so if the producer or supplier owns a large part of the
relevant market.26 Such threats to competition posed by the merger transactions bring forth the
necessity of a competition policy, and a law modeled on it. There can be a host of remedies prescribed
under competition law for errant mergers having anticompetitive impact on the relevant market –of
them, remedies having a structural dimension would include modification of the nature of distribution
of property rights, such as entire of partial divestiture of the merged entity, while remedies having a
behavioral or conduct-related dimension would include establishing commercial firewalls, prohibiting
discriminatory market practices by the merged entity, issuing compulsory licenses to mitigate the
monopoly effect of IP concentration, nondiscrimination, facilitating operational transparency and
framing provisions meant to act as counter against possible retaliation by the merged entity etc.Any
competition policy has the fundamental aim to nurture competition as the best possible method of

See Boyan Jovanovic & Peter L. Rousseau, The Q-Theory of Mergers, available at (Last visited August 8, 2013).
This problem is more common in cases of horizontal mergers, where the resultant firm may dominate the
market qua a particular product or service, and increase price unilaterally. For instance, after the merger
between office stationary giants Staples Corp. and Office Depot Inc., it was estimated that Staples was able to
increase price by 13% unilaterally than without the merger.
See generally Joseph Farrell and Carl Shapiro, Scale Economies and Synergies in Horizontal Merger Analysis, 68
Antitrust Law Journal 685 (2001).
Provided it has large enough market shares, and more so if it has removed its closest competitor by way of
It is possible for a market player to generate captive distribution channels by way of vertical mergers.
For instance, after the merger of Time Warner Inc. and Turner Corp., Time Warner could choose not to provide
(or to provide at exorbitant prices) popular video programming to firms rivaling Time Werner’s own or affiliated
cable TV companies. The U.S. Federal Trade Commission assented to the transaction with the qualification that
discrimination cannot be allowed in terms of accessibility at any level.
Another problem that would be faced in such a case would be ‘price squeezing’. This means the internalization
of the production procedure by way of mergers on a vertical level and the resultant allowance obtained by the
merged entity to bring down costs for itself and hence output prices, thus driving the rival firms out of the
ensuring efficient resource allocation27 and efficacious market conditions in free market economies.28
So if the market does not achieve any efficiency after the merger, but is affected adversely due to
various degrees of concentration and collusion, then the desirability and legality of such merger can
be seriously doubted. Presence of a competition law would thus help in assessment of the anti-
competitive effects of any merger contemplated by the parties based on fixed parameters, and
prohibition of the same if it is found to have grave and unfavourable impact on the market. This is
precisely the reason why competition regimes across the world, including jurisdictions such as the
U.S., the EC, South Africa, Japan and even India, have merger review and control as one of their
primary focus areas, based on economic, commercial and regulatory rationales, which forms the
subject matter of discussion of the present paper.

The entire process of reviewing a merger and determining its anticompetitive effects that would draw
the attention of competition law authorities and also the mitigating beneficial effects of the merger
that can be put forward as a defense in its favour, is a complicated one that involves several steps.
Such assessment therefore has its primary objective the identification of mergers that have the
potential to generate or increase market power, which can in turn be translated into the ability to limit
output or manipulate prices with the motive of reduction and subsequent elimination of competition
from the relevant market. The merger review process prevalent in the U.S. is the leading one in terms
of comprehensiveness and having a foundation supported by economical rationale, with several of its
counterparts like those in the EC and India drawing their inspiration from the same.29 The various steps
involved in the U.S. merger review have been delineated in the following part of this paper for a brief
overview of the entire process:30


The First Step

The first step involves identification and categorization of the relevant product market and the
relevant geographical market. In order to explain this step, first one needs to look into exactly what
market and market power are. Plainly speaking, market power can be looked upon as the capability
of a firm to earn a higher profit by way of decreasing its product supply and/or by increasing the price
of the products supplied by it higher than the competitive limit. More accurately, it is the power
wielded by a firm to increase the price of its product without ending up losing out on such a huge
number of customers as to be unable to garner an overall profit, which in economic terms, would
imply a firm’s capacity to deviate profitably from marginal cost pricing.31

In the context of competition policy, ‘efficiency’ can be categorized into four types: (1) Allocative Efficiency,
(2) Productive Efficiency, (3) Dynamic Efficiency and (4) Transactional Efficiency. See Jonathan B. Baker,
Responding to Developments in Economics and the Courts: Entry in the Merger Guidelines, 71 Antitrust Law
Journal 208 (2003).
OECD, Competition Policy and Efficiency Claims in Horizontal Agreements, available at (Last visited August 8, 2007).
The basic legal standard for merger review has been laid down in the U.S. v. Philadelphia National Bank, 374
U.S. 321 (1963) as: “A merger which produces a firm controlling an undue percentage share of the relevant
market, and results in a significant increase in the concentration of firms in that market, is so inherently likely to
lessen competition substantially that it must be enjoined in the absence of evidence clearly showing that the
merger is not likely to have such anticompetitive effects.”
See generally U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines, 2010,
available at, (Last visited August 8, 2013).
(Thomson Reuters, 2011).
One of the mathematical attempts to formalistically define market power with reference to marginal
cost has resulted in the formation of the Lerner Index, which is denoted by [(P-MC)/P], where P is the
price charged by the firm at the level of output which it must produce to maximize its profit and MC
is the marginal cost incurred by the firm at the said level of output.32 When perfect competition exists
in the market, the price will be equal to marginal cost, giving the Lerner Index as zero. Whereas on the
other extreme, the greater the price or the lesser the marginal cost, the more P will tend to one.
Therefore, if a firm can gain the maximum profit by pegging the price at three times the marginal cost,
for example, then the Lerner Index will be equal to 2/3. In an extended form, Lerner’s Index will be
equal to the reciprocal of the demand elasticity faced by a particular firm and therefore, if the latter
is known, by using this formula, the ratio of monopoly price and competitive price charged by the firm
can be determined –the higher the ratio, the greater is the market power enjoyed by the firm.33
Given the difficulties involved in correctly ascertaining the marginal cost or demand elasticity faced a
firm, reliance is placed instead on the assumption of thereexisting a positive correlation between
market share owned/controlled by a firm and market power wielded by it. Ceteris paribus, a firm with
a greater market share will enjoy a higher capacity of raising price and still earning profit, as compared
to another rival firm with lesser market share. Having said that, one must remember that the
correlation between market share and market power is not an absolute one –on the contrary, it
depends on a set of variables like the share of the market itself, the demand elasticity exhibited by the
market concerned and the supply elasticity exhibited by both competing firms as well as those in the
fringe.34 Hence in order to rely effectively on this correlation, all these variables need to be accurately
Insofar as the concept of relevant market goes, it can be perceived as the smallest possible assemblage
of sales exhibiting a demand and supply elasticity that is so low that it is possible for a hypothetical
monopolist with the entirety of said assemblage to reduce supply and/or raise price beyond the
marginal cost and still obtain a significant profit in the process. Such price increase may not be too
high (about 5%-10%), although it still needs to be significant and not merely temporary.35 This test of
determining the relevant market has also been referred to as the Hypothetical Monopolist Test or the
Small but Significant and Non-Transitory Increase in Price (SSNIP) Test.36 The theoretical rationale
behind such a test is that the monopolistic power, at least for the purpose of determining anti-
competitive impact, can be considered relevant for only that portion of the market wherein the
monopolist can gain the power to unilaterally or collusively manipulate price and supply conditions
with a profit motive. If despite a firm gaining monopolistic power following a merger, it cannot
manipulate said conditions without the consumers migrating to the nearest substitute, then it will not
be possible for the firm to abuse such power in an anti-competitive fashion. The popularity of this test

See Abba P. Lerner, The Concept of Monopoly and the Measurement of Monopoly Power, 1 Review of Economic
Studies 157, 169 (1934).
Id., 170-171.
The specific relationship can be approximated by the formula [{P(m) – P(c)}/P(m) = S/[e(d) + {e(s) x (1 - S)}],
where P(m) = monopoly price charged by the firm, P(c) = competitive price charged by the firm, S = market share
of the firm, e(d) = demand elasticity of the market, e(s)= supply elasticity of competing and fringe firms. Supra
note 66, 91.
The quantum of price increase is a policy matter as such, depending on how much market power the
authorities want to retain in the market and how much they want to weed out. Care must be taken, however,
of concerns such as the ability of almost every major supplier with a distinct brand to profitably raise price
slightly above the marginal cost, the not-inconsiderable institutional costs involved in reducing market power
and the difference in the respective sizes of the optimal increase in price in different sectors for the purpose of
ascertaining market power under competition law etc. Although 10% has often been pegged as the usual
acceptable increase, the 2010 Merger Guidelines of the U.S. prescribe a 5% increase only. The question that is
to be asked is not whether an increase of 10% is going to bring a profit still to the supplier, but whether the
profit-maximizing price increase stops at 10% or goes higher still.
This test has been accorded due acknowledgment by the U.S. Courts in decisions such as Kentucky Speedway,
LLC v. National Association of Stock Car Auto Racing, Inc., 588 F.3d 908, 916 (6th Circ. 2009).
also owes to the fact that it is much easier to calculate the approximate demand and supply elasticities
of the market as compared to the marginal cost or the demand elasticity exhibited by an individual
firm. Thus the competition authorities, when faced with a question about identifying the relevant
market, engage in figuring out the assemblage of sales wherein there is a dearth of close substitutes
and hence a low demand elasticity of the market and with respect to which, the supply elasticity is
also not a high one given the expense and time required to enter the supply side.37 Once the
assemblage is identified as the relevant market38, the authorities will then proceed to calculate the
share of the firm concerned in the said market, thereby obtaining an estimate of its market power.
Depending on separate parameters, the relevant market for the purpose of merger review under
competition law can be of two types, viz. the relevant product market39 and the relevant geographical
market.40 While determining the geographical market may be relatively easier owing to its direct
relationship with the cost of transportation that in turn is a measureable one, it may prove to be
difficult to accurately ascertain the extent of the relevant product market, since the latter depends
mostly on consumer preferences and substitutability from consumer’s perspective, which are not so
easily measurable, despite tools such as the rationality assumption and the utility maximization
motive being available on the consumer’s part. Moreover, while trying to get a fix on consumer
preference in order to determine the relevant product market, often one may commit inadvertently
the mistake of getting entangled in the Cellophane Fallacy, viz. that of finding high cross-elasticity of
demand at current prices owing to the seller of the one of the products under consideration already
possessing monopolistic powers.41

The Second Step

The second step of the merger review, following determination of the relevant market, involves an
attempt to identify and segregate market participants into committed and uncommitted entrants. By
uncommitted entrants, one refers to those firms that respond to a possibility of making profit in the
short run and enter the market with that motive, despite being aware of the fact that the possibility
may not last long after they have joined the market.42 The committed entrants, on the other hand, are

For further details on how to calculate the elasticities with respect to a particular product, see William J.
Baumol, The Empirical Determination of Demand Relationships, in E. MANSFIELD, MICROECONOMICS: SELECTED
READINGS 55 (W.W. Norton & Co., 1982).
Even if the size of the relevant market is quite big, that does not mean, however, that there cannot exist
smaller relevant markets (submarkets) within it. As the U.S. Supreme Court had said in Brown Shoe Company v.
U.S., 370 U.S. 294, 325 (1962): “The outer boundaries of a product market are determined by the reasonable
inter-changeability of use or the cross-elasticity of demand between the product itself and substitutes for it.
However, within this broad market, well-defined submarkets may exist, which, in themselves, constitute product
markets for antitrust purposes. The boundaries of such a submarket may be determined by examining such
practical indicia as industry or public recognition of the submarket as a separate economic entity, the product’s
peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to
price changes, and specialized vendors.”
Relevant product market is therefore the smallest group of products over which a hypothetical monopolist
might impose a small but significant, non-transitory price increase (a 5%-10% price increase lasting one year or
longer) without inducing so much substitution that the price increase is unprofitable.
Relevant geographic market is therefore the smallest region over which a hypothetical monopolist could
profitably impose a small but significant, non-transitory price increase.
This fallacy bears reference to the case of U.S. v. E.I. du Pont de Nemours and Company, 351 U.S. 377 (1956)
(also known as the Cellophane case), wherein the U.S. Supreme Court had held, somewhat inaccurately, that
the relevant product market must include “products that have reasonable interchangeability for the purposes
for which they are produced.”
The U.S. 2010 Merger Guidelines refer to uncommitted entrants as those who are not currently selling in the
market, but are preparing to do so within a year owing to the stimulus provided by a SSNIP and given their
advantage in being able to enter into the market without incurring significant amount of sunk cost. Since there
has not been any actual sale in the market by these firms, their market share needs to be determined on the
those whose aim is to secure profit in the long run and who do not anticipate an exit from the market
in the times to come.43

The Third Step

The third step in merger review is about calculating the participating firms’ share of the market and
trying to determine the pre and post-merger market concentration. Computation of market share
involves prima facie a relatively easy task of dividing the total firm output by the total market output
and expressing the quotient as a percentage –however, the question is which factors are to be
considered during this calculation i.e. revenue earned by the firm, number of units of output
generated or sold by the firm, manufacturing capacity or a mixture of all or some of these. Revenue
or the number of unites of outputs manufactured are the most commonly used factors, given their
ready availability. Usage of rival firms’ output may also be considered, but that involves several other
practical problems and hence it is not usually used for this purpose.44 With regard to the question as
whether it is sufficient for the merging firms to able to establish their failure to meet a market share
threshold or whether the competition authorities can also look into alternative evidence to infer
market power, the prevailing position, at least in the U.S. context, appears to be that mentioned in
Dimmitt Agri Industries, Incorporate v. CPC International Incorporated45, wherein the court had
exonerated the concerned firm from monopoly allegations merely owing to its market share being
around 25% of the relevant market, although there was sufficient evidence of the market exhibiting
oligopoly, with the concerned firm being the price leader.46
There is scarce little doubt that market concentration plays a significant role in determining the
possibility of collusive activities between the surviving firms in the market post-merger, given that the
fewer the number of remaining players, the more is the ease of cartel formation and price and supply
manipulation through collusion. While trying to affix a ceiling for market concentration that can be
used across all industries to establish prima facie undesirability of a merger, some factors that are not
related to market share are used too, such as whether the market concerned has entry barriers and if
so, the nature of such barriers, the degree of sophistication that is exhibited by the consumers,
suppliers and everybody else in the market who is in a position to discipline market participants, the
modes of sale, the costs involved in shipping and the existence of facilitating practices in the market
and the extent of product differentiation prevailing with the relevant market.47
The two measurements that are generally used for determining market concentrations are known as
the Four-Firm Concentration Ratio (hereinafter referred to as “CR4”) and the Herfindahl-Hirschman
Index (hereinafter referred to as “HHI”). CR4 is determined by adding the market shares of the four
largest players in the marketplace. The rationale is that it is most likely that collusion will take place,
if at all, between these four players and therefore, if between them, they own most of the market
share, then any price fixed by them will be similar to the monopoly price, whereas if between them,

basis of capacity. However, the notion of making a separate provision for such entrants has also received its due
share of criticism owing to its ineffectiveness in streamlining or expediting the process of merger review. For
further details, see Outline of Comments re “Uncommitted Entry”, available at (Last visited August 8, 2013).
See J.B. Baker and J.A. Ordover, Entry Analysis under the 1992 Horizontal Merger Guidelines, 61(1) Antitrust
Law Journal 139, 139 (1962).
For a detailed nature of such problems, see William M. Landes and Richard A. Posner, Market Power in
Antitrust Cases, 94 Harvard Law Review 937, 949-950 (1981).
679 F.2d 516 (5th Cir. 1982).
There does exist, however, a contrarian view, as expressed in Broadway Delivery Corporation v. United Parcel
Services, 651 F.2d 122 (2nd Cir. 1981), wherein the judiciary had concluded presence of market power despite
the firm possessing a relatively small market share.
Supra note 66, 564.
all four collectively own a relatively small share of the market, then collusive activities will not appear
so attractive an action. Although there is no unanimity about the specific level of CR4 that would
render the market deemed sufficiently fragmented for a merger to take place, as per the original U.S.
Horizontal Merger Guidelines of 196848, there was a presumption that any combination of two rival
entities with collective post-merger market share is 8% or more will be deemed illegal, provided the
CR4 is more than 75%, although the U.S. judiciary has held on several occasions mergers resulting in
lesser concentration anti-competitive too.49
CR4, however, is an archaic tool and it has presently been replaced by competition authorities by the
HHI as a measuring standard of market concentration. HHI is simply the sum of the squares of every
participant firm in the concerned relevant market. HHI is widely perceived to be more accurate than
CR4 in terms of acknowledging that the markets, despite having the same CR4, may exhibit differing
stages of competitiveness, depending on the relative disparity of size of the participant firms. HHI also
establishes so-called ‘safe-harbours’ for mergers based on pre and post-merger concentrations. Any
market showing a post-merger HHI of 1500 or less is supposed to be an unconcentrated market and
such mergers are not deemed adverse to competition. If the post-merger HHI is between 1500 and
2500, the market is deemed moderately concentrated and a merger in such a market will usually only
be challenged if it produces an increase in HHI by more than 100. In case of markets having post-
merger HHI more than 2500, i.e. highly concentrated markets, a merger causing an increase by less
than 100 is unlikely to challenged, though it may happen otherwise, and if the increase is between
100 and 200, then the merger may be perceived to have considerable potential for being
anticompetitive and if the increase is more than 200, then the presumption will be that the merger is
likely to increase market power, although such presumption is rebuttable subject to persuasive
evidence to the contrary.50 However, one of the prime criticisms of the HHI, despite all its advantages
and accuracy, is that a small mistake in calculating the market share of even a single minor participant
firm can skew and distort the resultant index beyond measure.51

The Fourth Step

The fourth and next step in merger review consists of assessing a merger and the market in which it is
taking place for the impact on competition that it may have. Such competitive effects can be further
classified into coordinated effect and unilateral effect. The former signifies the situation wherein the
remaining players in the market post-merger may find it conducive to engage in collusion amongst
themselves to fix price and supply conditions. Of the several factors that have a bearing on the
possibility of such a coordination taking place, the ones like the capability of the firms to reach at a
mutually profitable agreement, the chances of the coordination being detected by the enforcement
authorities given the existing degree of vigilance on their part and the prescriptions of the law for the
time being in force regarding punitive measures etc. bear mention. Unilateral effect, on the other
hand, is even more harmful to competition, although less likely to occur in a market –it signifies a
condition wherein the merged entity may find itself in possession of sufficient market power so as to
be able to manipulate pricing and supply conditions all by itself without feeling the need to coordinate

See U.S. Department of Justice Merger Guidelines, 1968.
See e.g., U.S. v. Von’s Grocery Company, 384 U.S. 270 (1966).
See U.S. Department of Justice Horizontal Merger Guidelines, 2010, Section 5.3.
The limitations of measures to determine market share and market concentration was clearly laid down in the
case of Philadelphia National Bank, supra note 64, wherein the so-called prima facie rule was established, i.e.
the onus is on the plaintiff (usually the competition authority) to establish high concentration and thus allege
illegality and the defendant firm(s) will then get the chance for rebuttal by turning up evidence not related to
concentration as such. However, this rule and the overwhelming reliance on concentration as such has been
diluted over the years, given the competition authorities nowadays are more concerned about increase in prices
and decrease in supply, as opposed to high concentration as such.
with any of the other remaining players in the marketplace. While considering unilateral effects of a
merger on competition, one must consider markets for both differentiated products52 as well as
undifferentiated products.53

The Fifth Step

The fifth and final step of the merger review involves an analysis of the barriers to entry in the market
concerned wherein the merger is purportedly taking place. The assumption is that it is unlikely for a
merger to result in the creation of dominant market power or exercise of the same by the merged
entity, provided the entry in the post-merger market remains sufficiently easy, without having to
confront high scale of barriers. Such entry must be timely54, likely (i.e. profitable at pre-merger prices)
and sufficient55. Among the factors that can constitute an entry barrier as such to the incumbent
entrants, thereby giving the merged entity the opportunity to engage in monopoly pricing, those
worth a mention include economies of scale, the risk and sunk costs involved in making any sizable
investment in the market concerned, brand-specific advertizing and marketing campaigns as well as
brand-loyalty of consumers, the associated product differentiation and last, but not the least,
restrictions of entry posed by government regulations, licensing requirements etc.56


Insofar as the treatment of mergers, especially horizontal mergers, under competition law is
concerned, one of the mitigating factors that is to be considered against any anti-competitive effect
of the merger is the possible efficiency that can be generated out of such merger. A careful study of
the antitrust jurisprudence will reveal as many as three different perspectives with regard to the
nature of consideration to be accorded to such efficiency57 –that the efficiency factor should not be
considered relevant while considering the impact the merger can have on market competition, that
efficiency generation ought to be considered as a valid defense against any allegation of the merger
having an anti-competitive impact in the market and that the very creation of efficiency ought to be

Where merging entities produce substitute products with respect to each other, in a manner that they rank
foremost and second foremost insofar as consumer preference is concerned, the merged entity may succeed in
increasing the price of the foremost choice and seize the “runoff” by selling the second choice. This coordinated
effect will depend on capacity of remaining players to reposition their products so as to provide reasonable
competition in a more direct fashion with the products of the merged entity. For further details, see Mark Ivaldi
et al, The Economics of Horizontal Mergers: Unilateral and Coordinated Effects, Report for DG Competition,
European Commission, 2003.
The player enjoying dominance in a market of undifferentiated products can perhaps increase price by cutting
down on output, because its rivals do not have sufficient capacity to respond to such an increase readily by
raising their own output owing to capacity constraints. A merger is said to have an unilateral effect only if the
combined firm has a minimum market share of 35% and the merger would not have occurred to begin with
provided the other market participants are likely to respond to a price increase by the merged entity by raising
their output within one year sufficiently to drive prices back down to pre-merger levels. For further details, see
Mark Ivaldi et al, The Economics of Horizontal Mergers: Unilateral and Coordinated Effects, Report for DG
Competition, European Commission, 2003.
This signifies that the entries to be considered will be those that can potentially take place within 2 years of a
post-merger price increase.
‘Sufficiency’ indicates that the new entry must be sufficiently large as to have the ability to bring back prices
to pre-merger levels.
Supra note 66, 583-587.
Supra note 66, 549-550.
counted against a merger58, since such creation puts the competitors of the merged entity at a
It is only when a presumption has been made with respect to the merger under consideration having
anti-competitive effects through an analysis of the same on behavioral and structural scrutiny, that it
becomes necessary to gauge the efficiencies facilitated by such merger (using models such as the
Welfare Tradeoff Model) so as to mount a successful efficiency defense.59
In this context, the researcher would like to refer to Williamson’s explanation of such welfare
tradeoff60 as has been illustrated in the following figure (Figure 1). It shows a merger wherein the
merged entity enjoys greater market power following the merger and hence it decreases its supply
output from Q1 to Q2 and raises price from P1 to P2. As one can seen the area of the triangle A1
determines the deadweight loss generating from such exercise of monopoly market power created as
a result of the merger. Again, because of the efficiency created by the merger, such as allocative
efficiency etc., the merged entity can reduce cost from C1 to C2 and hence the area of the rectangle
A2 helps one to determine the efficiency gains resulting from the merger. The merger can thus be
allowed if this efficiency gain offsets the effects of the deadweight loss, i.e. in other words, if A2>A1,
which according to Williamson’s analysis, was often the situation in reality.

However, the Welfare Tradeoff Model has also been subjected to its due share of criticism. Some say
that the merger actually involves social cost greater than that represented by A1. The post-merger
entity can actually perceive possible monopoly profits equal to (A2+A3) and hence to earn the same,
the merging entities will be willing to spend a considerable amount to effect the merger and achieve

This is the position that had been advocated in Brown Shoe Co. v. U.S., supra note 73, and In re Foremost
Dairies, Inc., 67 F.T.C. 282 (1965). However, such a perspective is criticized for its efforts to protect competing
rivals at the cost of sacrificing consumer welfare, although one must admit the Brown Shoe decision accurately
interpreted the 1950 amendments to Section 7 of the Clayton Act to reach at such a decision. For further details,
see Derek Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 Harvard Law Review 226,
234 (1960). There is, however, an existing view that threatens to counter the judgments in Brown Shoe and its
successor Von’s Grocery case, saying that if a merger of a mid-level firm with another existing firm is not allowed
to take place, the former may proceed to open new subsidiary firms of its own eventually, leaving the small-
scale firms unable to compete and incapable of merging with the mid-level firm owing to the merger prohibition
either, which in turn will make those small-scale firms bankrupt in the process. See RICHARD A. POSNER,
ANTITRUST LAW 129 (University of Chicago Press, 2001).
Supra note 66, 551.
See generally Oliver E. Williamson, Economies as an Antitrust Defense: the Welfare Trade–Offs, 58 American
Economic Review 18 (1968).
monopoly, even in modes that are not efficient in themselves, such as predatory pricing, prolonged
litigation etc. and hence the higher is the sum of money thus spent, higher becomes the cost of the
merger.61 Also, the model only assumes the monopolistic costs of a merger and does not focus on the
potential costs arising from the likelihood of post-merger collusion at all. Under such collusive actions,
while the efficiency gains will be limited to the merging entities only, even the other rival firms can
increase prices post-merger, which will drive the cost even higher.62
Another problem with the efficiency defense is that while the gains from a merger may theoretically
offset the losses, such gains may never trickle down to the level of the consumer, instead remaining
confined within the boundaries of the merging firms only.63 Thus, the distribution of the gains from
merger need also be converted, at least partially64, into consumer welfare for the defense to go
unchallenged from that direction. The more preferred option is perhaps for the merging entities to
produce evidence that while the merger under consideration leads to an increase in efficiency, it still
keeps the pricing and supply conditions in the market more or less unchanged (or at least does not
lead to an increase in price or a decrease in supply).65
Calculation of efficiency level with any acceptable degree of accuracy is yet another challenge faced
by those who propound the Welfare Tradeoff Model as an efficiency defense to a merger. Mention
may be made in this context of the matter of FTC v. H.J. Heinz Co.,66 wherein the merging entities
found it difficult to procure any mathematical evidence of the reduction in production cost that
prompted them to initiate the merger in the first place. Given the inevitable confusion between
achievement of efficiency and mere pecuniary gain, as well as the complexities of situations wherein
the efficiency gains from a merger in one particular market can actually be exhibited in another
market67, the judiciary has also often been on two minds whether to accept such a defense at all.68
There also exists an argument that the efficiency that can be achieved via a merger can also be
obtained through other means such as joint venture participation in research and development
activities by the existing firms or through intellectual property licensing etc.69, which would be free of
the adverse anti-competitive side-effects of a merger.


This defense is often used by the merging entities to rob a merger of its culpability, especially under
Section 7 of the Clayton Act, under which a merger may be prevented from taking place provided it
has an anticompetitive impact on the market. However, in case a so-called ‘failing firm’ is being

Supra note 66, 552.
See generally Alan A. Fisher et al., Price Effects of Horizontal Mergers, 77 California Law Review 777 (1989).
Obviously, if the entire efficiency gain gets converted into consumer welfare, then the merging firms will be
left with no incentive to combine in the first place.
Reference may be made in this context to the 2010 Horizontal Merger Guidelines of the U.S. which require
the efficiency gains from a merger to be “of a character and magnitude such that the merger is not likely to be
anticompetitive in any relevant market.” The antitrust authority will under such circumstances “consider
whether cognizable efficiencies likely would be sufficient to reverse the merger’s potential to harm customers
in the relevant market.” Supra note 65, Section 10; see also FTC v. University Health, 938 F.2d 1206 (11th
246 F.3d 708 (D.C.Cir. 2001).
See United States v. Bethlehem Steel Corporation., 168 F.Supp. 576, 618 (S.D.N.Y. 1958).
See FTC v. University Health case, supra note 139, wherein it was rejected and FTC v. Owens–Illinois,
Incorporated,850 F.2d 694 (D.C.Cir. 1988) wherein it had been accepted.
(Thomson Reuters, 2011).
acquired by a healthy existing firm by way of a merger, it can still be allowed to occur. Having said
that, the jury is still out on any specific definition of failing firms as such and the extent to which this
defense ought to find a foothold before the competition enforcement authorities. It seems obvious
that the focus of this defense is to facilitate distributive justice, as opposed to pure efficiency. If that
is indeed the case, then there is a chance that this defense may at times undermine its own objective.
For instance, if there exist two struggling competitors in the relevant market and one of them is
acquired by a healthy firm, then the remaining competitor will suddenly face the formidable task of
trying to compete with a stronger competitor, which may drive it away from the market altogether.70
However, there is no doubt that the failing firm argument can keep certain factors of production in
continuing operation when they would have otherwise been driven out of the scenario –while some
of the firms employing such factors can seek the route of insolvency laws to stay alive, that number is
unfortunately limited to a trickle.71 Therefore the failing firm defense does allow mergers facilitating
survival of productive assets. Its level of efficiency would depend on whether it has helped the ailing
firm and its creditors to avoid the high administrative and transactional costs involved in insolvency
proceedings and the whether it has actually allowed certain productive assets to remain in the market
that would not have been possible otherwise. To a certain extent, the social cost of the monopoly
created by a merger with a failing firm will be compensated by the social cost that would have been
incurred had the firm merely exited the market under financial compulsion.
When a firm is failing, it can either be taken over by new owners who would nurse it back to health,
or it can seek to reform through the insolvency door, or it can exit the market and its productive assets
or its entire self can be taken over by any rival firm, which in turn, may gain monopolistic power in the
market as a result of such acquisition.72 The first two options are always the most preferred. However,
when those two options are not available, the fourth option will make for greater efficiency as
compared to the third one that compels an existing player to leave the market altogether –this is
because the cost of acquiring a failing firm as a whole may prove to be less than that of acquiring only
the productive assets of that firm and at least some portion of this saved benefit ought to be converted
into consumer welfare.73 Acquisition of the whole firm may also cater to allocative efficiency insofar
as production by the merged entity is concerned.
In order for this defense to be successfully applied, though, the defendant has to prove that there
exists no better way to revive or restructure the sick firm and there does not exist a better alternative
than the current acquirer in terms of minimizing the anticompetitive impact on the market.74 Mention
should be made in this context of the 2010 Horizontal Merger Guidelinesof the U.S. that has not only
recognized the failing firm defense, but also extended it further to come up with a failing division
defense, which involves a firm abandoning any of its existing divisions after making all possible efforts
to stem the negative cash flow.75
This part of the paper can thus be concluded with the observation that be it in reviewing a merger
along with its associated market data, gauging the anticompetitive effects thereof, seeking to create
artificial possibilities revealing the beneficial and adverse impact of the merger, or providing defense
in favor of a merger before the antitrust authorities, the existence, usage and continuing evolution of
economic theories and tools are well-nigh invaluable and no competition law regime across the globe
that seeks to promote effective and efficient merger regulation can therefore afford to neglect the
same. The degree of their success will to a certain extent be reviewed in the next part of the paper

See e.g., the merger that was under consideration in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477
See Michael Bradley et al., The Untenable Case for Chapter 11, 101 Yale L.J. 1043, 1075 (1992).
See e.g.FTC v. Tenet Healthcare Corporation, 17 F.Supp.2d 937 (1998); FTC v. Harbour Group Investors, 1990
WL 198819 (DDC 1990).
See generally John E. Kwoka and Frederick R. Warren-Boulton, Efficiencies, Failing Firms and Alternatives to
Merger: A Policy Synthesis, 31 Antitrust Bulletin 431 (1986).
See Citizen Publishing Co. v. United States, 394 U.S. 131 (1969).
Supra note 65, Section 11.
that shall proceed to have a look at the various aspects of merger regulations under the competition
laws of several prominent jurisdictions.

Merger Regulation in Competition Law: A Look around the World

The preceding parts of this paper therefore dealt with the goals and evolution of competition law in
general, the need for merger regulation under competition law and certain economic factors, theories
and considerations involved in this process. This part of the paper is devoted towards taking a look at
the salient features of the merger control provisions of several competition law regimes across the
world. The aim is to exhibit that despite the several singular characteristics that each such regime
professes, there are certain approaches or features that are common to most of them and indeed,
there are a few characteristics that can be transplanted in a suitably modified manner into a
developing competition law regime like India and the merger control provisions of the same. The EC
and U.S. being the most developed antitrust regimes, one cannot possibly afford to leave them out of
this discussion.


As has been discussed earlier, insofar as the EC Treaty is concerned, Articles 81 and 82 were the key
provisions relating to competition law and by extensions, mergers and similar concentrations.
Decisions such as the British American Tobacco Company Limited& R.J. Reynolds Industries v. EC
Commission76 and the Continental Can Case77 had affirmed the applicability of these Articles to
regulate concentrations under the EC competition law. However, such applications were not without
their limitation, given that Article 81 could not be used for mergers that would not leave behind
independent entities and Article 82 could not be used for mergers wherein there was no prior
dominant position in the pre-merger market and also because none of these provisions allowed for
an ex-ante merger review. The need for having separate merger regulation was thus sorely felt, which
was heeded to subsequently in 1990, with the Council Regulation 4064/89 on the Control of
Concentrations between Undertakings78 (hereinafter referred to as the “1989 MR”) coming into effect.
The 1989 MR required prior notification of certain qualified mergers that would then be approved or
discarded by the EC Competition Commission depending on the effect that the merger is likely to have
on competition in the whole or a part of the common market –the primary test that such mergers
were subjected to was whether they were creating or reinforcing the dominant position in the
marketplace.79 Subsequently in 1997, certain amendments were introduced in the 1989 MR, such as
the increase of its scope to cover joint ventures and the introduction of alternate turnover threshold
The EC position on mergers was subsequently subjected to several challenges in 2002-2003, in cases
such as Airtours v. Commission81, Schneider Electric v. Commission82 and Tetra Laval v. Commission83,
which in turn led to the framing of the 2004 Merger Regulations84 (hereinafter referred to as “2004

[1987] ECR 4487
Europemballage and Continental Can v. Commission (I), [1973] ECR 215.
OJ 1989 L395/1.
See 1989 MR, Article 2(2).
Council Regulation (EC) 1310/97, OJ 1997 L180/1.
[2002] ECR II-2585; herein the problems of assembling evidence for establishment of a potential dominant
position were shown.
[2002] ECR II-4071; herein the burgeoning gap between Commission’s preliminary finding and its final decision
was spotted, which prevented the merging entities to build up an adequate defence.
[2002] ECR II-4381; herein the Commission’s analysis of potential conglomerate effects of a merger was found
to be incompatible with the existing law.
Council Regulation (EC) 139/2004, OJ 2004 L24/1.
MR”) that forms the current lynchpin of the EC approach towards mergers under competition law.
The main focus of the 2004 MR was to shift the earlier primary substantive test and instead have a
new one that would judge whether the merger would “significantly impede effective competition in
the common market or in a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position.”85
Only those mergers which satisfy the two criteria of being a ‘concentration’ and having a ‘community
dimension’86 would be subject to the 2004 MR. The definition of a concentration is an inclusive one,
covering the merger of two or more undertakings enjoying pre-merger lack of mutual dependence,
transactions involving acquiring of control87, direct or otherwise, of another undertaking either
entirely or partially, and getting joint control of full function joint ventures (hereinafter referred to as
“JVs”) behaving like an autonomous economic being on an enduring basis88. The community
dimension, on other hand, depends on the merger satisfying certain prescribed threshold limits under
the 2004 MR.
While defining the nature of mergers that fall within the purview of the 2004 MR, the term ‘control’
appears to play a pivotal role and it can mean any rights, contractual or otherwise, that can either
collectively or individually allow one undertaking to exert decisive influence over the activities of
another, which means the former can frame the corporate strategies employed by the latter. It can
be quite difficult to ascertain the precise point at which inter-organizational influence can assume a
decisive hue –even the purchase of a minority share cluster may be sufficient to give a company such
control over another, depending upon factors such as how fragmented the remaining shareholders
are, the degree of vetoing power granted to shareholder regarding prime business decisions and
appointment of management etc. The nature of control can be sole89 or joint –this in turn will be based
on whether post-merger, it is one undertaking or more than one undertaking, which gets to exercise
such control over the acquired undertaking. A significant change in the existing nature of control
applicable to an undertaking owing to, say, exit of one or more shareholders (or parent companies in
case of JVs) may also be looked upon as having equivalent impact as compared to a concentration,
insofar as the applicability of the 2004 MR is concerned.
The turnover thresholds specified by the EC regime90, for the purpose of determining the presence or
absence of a community dimension in the merger, are mostly jurisdictional tests applicable to the
countries to which the merging entities belong, the countries wherein the actual transaction is taking
place and the countries whose domestic laws may be applicable to the merger and similar factors,
without concerning themselves with any substantive concerns relating to the complexities of the

Supra note 158, Article 2(2). This was meant to prevent even those mergers that would have unilateral effects
not by creating a dominant position but due to the exit of competitors from the market.
Id., Article 1(1). For other mergers, the competition authorities of the respective Member States of the EC will
have jurisdiction. There are, however, exceptions to this rule. Member States may have jurisdiction to
investigate mergers having an impact on their respective legitimate national interests u/Article 21(4) or where
the Commission may refer the case to the Member States wherein the merger has a distinct effect on a specific
market within the Member State in pursuance to the German Clause as stated in Article 9. Similarly, the
Commission may investigate a merger that is devoid of the necessary community dimension, provided the same
is referred to the Commission by one or more of the Member States under Articles 4(5) and 22(1). The
Agreement on the European Economic Area also extends this jurisdiction of the Commission to the states of
Iceland, Liechtenstein and Norway.
This can be in a contractual fashion as well as by outright buying of assets.
For a JV to come within the ambit of merger regulations, two or more parent concerns involved in the JV must
be able to exercise aforesaid decisive influence over the JV, which in turn should operate for a sufficiently
prolonged period (seee.g. the case of John Deere Capital/Lombard, M. 823, 1996) and should be independent to
a certain degree from its parent companies insofar as its day to day operational requirements are concerned.
For other JVs that do not satisfy these criteria or lack the community dimension, the applicable law will be the
domestic competition laws prevailing in the Member States wherein the JVs are operating.
For further details on variations of acquisition of sole control, see Enso/Stora merger, M. 1225, OJ 1999 L254/9.
Supra note 158, Articles 1(2) and 1(3).
merger. The so-called one-stop-shop offered by the exclusive jurisdiction of the Commission for
mergers having community dimension is, however, subject to oversight by the General Court and the
European Court of Justice (hereinafter referred to as “ECJ”). The two sets of turnover threshold tests
envisaged under the EC competition law are Original Thresholds91 and Alternative Thresholds92
respectively. The “at least two of the undertakings part” ensures that the merger concerned cannot
escape the application of the 2004 MR merely due to the involvement of one or more undertaking
having a limited presence in the EC, which in turn has been balanced by the Two-Thirds Rule which
requires a merger primarily confined within a Member State to be judged according to the domestic
competition laws of that State. For the purpose of calculating turnovers, the undertakings that are
deemed to be involved in the merger may even include those which are not considered ordinarily to
be part of the transaction in a direct legal fashion, involving the piercing of corporate veils93. In case
of an undertaking that wields joint control over a JV, for example, the JV turnover will be equally
divided between all the controlling parents irrespective of their individual shares of voting rights or
financial stakes. Again, if the JV is being treated as a mere tool for acquisition by its parental concerns,
then the latter may all be included for the purpose of calculation of turnover thresholds.
As far as the definition and calculation of turnover are concerned, reference may be made to Article
5 of the 2004 MR as well as the Consolidated Jurisdictional Notice (hereinafter referred to as “CJN”)94.
As per Article 5, aggregate turnover means the amounts earned by the undertaking concerned from
the sale of its products and/or provision of services in an ordinary situation, minus the tax payable,
excluding the intra-group turnover95. The CJN provides for calculation of turnover by adjusting for the
acquisition and divestments that have occurred since the last audited accounts, the geographical
allocation of turnover to the Member State wherein the customer had been situated at the time of
the transaction96. Apart from this, a different set of provisions have also been introduced for credit
and financial institutions, insurance undertakings and hybrid groups having more than one type of

This involves the Worldwide Turnover Test (aggregate global turnover of all undertakings involved should be
greater than 5000 million euros), the EU Turnover Test (there must be at least two undertakings involved having
a turnover in EU greater than 250 million euros each) and the Two-Thirds Rule (the concentration will not be
deemed to have a community dimension if each of the undertakings involved has more than 2/3 of its total EU-
wide turnover confined within the same Member State). Supra note 158, Article 1(2).
This was devised to reduce the Original Threshold requirements and involves the Lower Worldwide Turnover
Test (aggregate global turnover of all undertakings involved should be greater than 2500 million euros), the
Lower EU Turnover Test (there must be at least two undertakings involved having a EU-wide turnover of more
than 100 million euros each), the Additional Three-Member States Test (in each of a minimum of 3 Member
States, the aggregate domestic turnover of all the undertakings concerned should be greater than 100 million
euros and that of each of a minimum of two of the undertakings should be more than 25 million euros) and the
same Two-Thirds Rule like the Original Threshold requirements. Supra note 158, Article 1(3).
A large number of considerations may be taken into account in this context, such as undertakings concerned
in the case of mergers, acquisitions of sole or joint control of a newly-established or already existing company,
acquiring of control by a JV (pre-existing or newly-created), change of joint to sole control or vice versa,
demergers, assets swaps and outsourcing agreements, acquisition of control by investment funds and several
Commission Consolidated Jurisdictional Notice under Council Regulation 139/2004 on the Control of
Concentrations between Undertakings, OJ 2008 C95/1
While the entire group of companies ought to be regarded as an aggregate whole for the purpose of calculating
turnovers, an exception has been made under Article 5(2) of the 2004 MR for acquisitions wherein the focus of
the transaction only lies in certain parts of a undertaking to the extent that the turnover of only that part is taken
into account and not that of the entire company or group of companies.
See CJN, points 157-220.
Supra note 158, Article 5(3).
The possibility of pre-notification referrals98 of mergers from the Commission to the domestic
antitrustenforcement authorities of the Member States and vice versa has already been referred to
earlier. Another interesting feature of the EC merger regulations is their applicability to mergers
occurring beyond EU too, in accordance with the established principles of international law and
echoing the so-called ‘Effects Doctrine’ that had stemmed from the U.S. This feature has been
discussed and reaffirmed in prominent Commission decisions such as the ones in Boeing/McDonnell
Douglas99 and Gencor/Lonrho100.
Insofar as the substantive standards used by the Commission to appraise mergers are concerned, the
test that is commonly used as per Articles 2(2) and 2(3) of the 2004 MR is whether the merger
concerned is leading to a significant impediment to effective competition (also known as the SIEC Test).
The reason behind this test replacing the earlier dominance test, as has been discussed earlier, was to
address the non-coordinated effects of a combination occurring in a situation demonstrating
oligopoly, wherein there is no clearly established dominant position in the market. For JVs that are
being appraised, another additional requirement of conformation to Article 101 of the TFEU is also
prescribed. A significant feature of the Commission approach towards mergers is its reliance on
economic tools and theories to ascertain the probable anti-competitive impact of the merger in the
marketplace –the shift from the dominance test to SIEC has not made any change to that. However,
in case the merger does not involve tacit or at least implicit possibilities of monopolistic or oligopolistic
dominance, then the Commission needs to furnish a high standard of evidence of the anticompetitive
nature of the merger so as to prohibit the same, especially given the oversight exercised by the ECJ.
The power of the Commission has also sought to have been controlled by introduction of a series of
safeguard mechanisms.101
Both Horizontal102 and Vertical103 Merger Guidelines have been laid down by the Commission to better
equip itself in dealing with the entire gamut of concentrations and impact thereof on the market
scenario. The Horizontal Merger Guidelines allow the Commission to dynamically compare between
the two scenarios wherein the merger has taken place and wherein it has not –for single firm
dominance situations, the Commission is supposed to determine unilateral effects104 by gauging the
degree of elimination of competitive limitations placed on the merging entities owing to the merger,
which would enable the merged entity to obtain market power; for collective dominance situations105,

This involves inter alia a voluntary notification process to the national competition authorities or to the
Commission by the merging entities through Form RS and specific time periods have been provided for each
stage of notification and referrals as per the provisions of Article 9 of the 2004 MR. While Article 9 remains the
most frequently used provision governing referrals to the Commission or to the Member States, there also exist
Article 21(4) of the 2004 MR (allowing intervention by Member States on grounds of public security, media
plurality and prudential norms for financial services), Article 22 of the 2004 MR (allowing Member States to refer
a merger without community dimension to the Commission) and Article 346 of the TFEU (allowing Member
States to stop merging entities from notifying details about a merger in the defense sector to the Commission).
M.877, OJ 1997 L336/16.
M.619, OJ 1997 L11/30.
Instances can be cited of the creation of a Chief Economist position with a standing staff of economists ready
to provide assistance in merger review and analysis, setting up Peer Review Panels in relation to complicated
mergers requiring Phase II analysis and other various procedural improvements as stated in the EC 2004 Best
Practices Guidelines.
See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ 2004 C31/5.
See Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ 2008 C265/6. These guidelines also deal with conglomerate mergers.
The analysis of such effects by the Commission would take into consideration factors such as input foreclosure
and customer foreclosure.
In Airtours v. Commission, [2002] ECR-II 2585, a three-pronged test was laid down for determination of
coordinated effects arising from collective dominance: it required all the members of the oligopoly to be aware
of the actions taken by all other members in the implementation of the common oligopolistic goal, which in turn
should include resistance towards external limitations such as ability of small firms to act as rivals, possibility of
the Commission is supposed to determine coordinated effects by gauging the possibility of the merger
giving rise to an oligopoly that would facilitate tacit collusive behaviour between the post-merger
players, leading to manipulation of price and/or supply conditions in the market. Factors such as
market structure, pre-merger history of the entities, availability of monitoring and deterring
mechanisms etc. are to be considered in the latter case.
In order to figure out the possibility of the market allowing a single-firm dominance or oligopolistic
dominance, the Commission has acknowledged the need to have a comprehensive designation of the
relevant product market as well as therelevant geographical market106. The importance of such a
definition has been clearly laid down in decisions such as SCPA v. Commission107 and Carnival
Corp./P&O Princess108. The considerations taken into account while defining the same are various in
nature, including whether the merging entities had been rivals of each other, the ease (or lack thereof)
of to enter the market and to expand operations within it, the actual or potential competition that is
to be faced by the merged entity both through domestic and imported substitutes, degree of
countervailing power in the hands of the consumer, the IP and innovation scenario within the market,
the nature of vertical integration exhibited by the market and the possibility of the merger eliminating
a strong competitor.109 In case the market shows itself amenable to oligopolistic behaviour, the
merging entities need to prove that the merger will not cause further distortion in the competitive
scenario that would facilitate collusion among the remaining post-merger players –the factors that
the Commission take into account for discerning such oligopolistic tendencies include homogeneity of
the product market with as little differentiation as possible, increasing transparency of the operation
of rival firms regarding their production activities, a demand curve that exhibits low elasticity and
aversion to volatility, slow growth of technological developments, high level barriers to market entry,
mutual dependence of the players in terms of business linkage as well as common trends and
capacities in terms of costs incurred, market shares, level of vertical integration and low countervailing
power in the hands of the consumers. The usage of the HHI to calculate market shares110 is yet another
example of the Commission’s reliance on economic considerations and global trends in merger review.
Insofar as vertical mergers are concerned, the Commission only gets interested if the merging entities
have considerable market power in some level of the supply chain and the merged entity as a result
can be in a position to adversely affect the consumer welfare.111 For conglomerate mergers, the

new entrants emerging and the consumer’s countervailing power to negate price/supply manipulation and that
the tacit collusion between the members must continue over a sufficient period of time. Mention may also be
made of decisions such as the Nestle/Perrier, M.190, OJ 1992 L356/1 and the Sony/BMG, M.3333, OJ 2005
The merging entities are supposed to provide information regarding the same to the Commission vide Form
CO. See also Commission Notice on the definition of the relevant market for the purposes of Community
competition law, OJ 1997 C372/5, which operates on a constraints approach, recognizing the limitations on
market power placed by supply and demand side substitutability and potential competitors. Among the supply-
side factors, the important ones include product-characteristics and use (delineated in cases such as
Nestle/Perrier, M.190, OJ 1992 L356/1, Airtours/First Choice, M.1524, OJ 2000 L93/1 and Tetra Laval v.
Commission, [2002] ECR II-4381), cross-elasticity of demand (delineated in Nestle/Perrier, Tetra Pack/Alfa-Laval,
M.68, OJ 1991 L290/35), usage of the SSNIP test and the replacement markets for original equipment products
and the distribution markets etc. For a detailed discussion on the supply-side factors and chain-substitutability,
refer to Carnival Corp./P&O Princess, M.3071, 2003.
[1998] ECR I-1375.
M.3071, 2003.
See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ 2004 C31/5.
For further calculation of market shares, determination of trend and volatility therein, refer to supra note
158, Recital 32.
Mention may be of certain landmark decisions in this context, such as the AOL/Time Warner, M.1845, OJ
2001 L268/28 (dealing with proprietary software concerns), the Boeing/Hughes, M.1879, OJ 2000 L63/53
(debating the possibilities of customer inducement) and GE/Honeywell, M.2220, OJ 2004 L48/1 (considering
creation of input bottleneck through vertical integration).
Commission has kept within its purview an assessment of the portfolio effect created by such mergers
through bundling or category management of goods, although the burden of proof that it has to satisfy
to prove competitive harm arising out of conglomerate mergers is considerably high.112
The EC merger regulation takes into account both the prominent defenses advanced by the merging
entities in favour of mergers that may be having a degree of anticompetitive impact on the market,
but such side-effects can be offset by the beneficial outcomes of the merger such as an increase in
efficiency or because of its role in allowing a failing firm to remain in the market. For the efficiency
defence to be applied, the burden of proof rests with the merging entities to establish that the
consumers are experiencing an increase in welfare, the efficiencies have to stem directly from the
merger under consideration and they should be capable of being verified independently.113 The failing
firm defence has already been discussed in earlier parts of this paper and has been recognized by the
Commission in a series of cases such as Kali und Sulz/MdK/Treuhand114.
The notification and filing procedures for a merger have been stated in great details in the 2004 MR
and the Commission exercises considerable authority over the same. The time for notification arises
after the agreement for the transaction has been concluded, or the public bid has been announced,
or the controlling interest has been acquired, although the merging entities can also notify the
Commission at a prior stage as a display of good faith when a Letter of Intent or a Memorandum of
Understanding has been signed in favour of the transaction, or when the entities have publicly
announced that a public bid would be forthcoming. The 2004 MR gives the Commission a wide range
of investigative powers, including seeking information from third parties, interviewing the latter for
the said purpose on their consent, inspecting official premises and examining books of account etc.115
The Commission also encourages116 pre-notification consultation by the merging parties with itself,
wherein the parties would inform the Commission about the basic features of the proposed merger
and engage in confidential discussions, minimum two weeks prior to the official notification taking
place, which would help the parties to obtain invaluable advice from the Commission on jurisdictional
issues, turnover calculation, pre-notification referrals, waivers, proposed improvements in the
transaction and even an early initiation of third party consultation by the Commission if the parties
consent to it –this entire process can greatly expedite the merger review as well as render it more
As per the Implementing Regulation to the 2004 MR, the formal notification occurs vide Form CO,
which needs a spate of extensive and detailed information regarding the merging entities, such as
summary of the proposed merger including its financial and economic structure, party identity and
background, nature and identity of the relevant and affected markets, supply and demand conditions
prevailing therein, cooperative impact of the proposed merger, nature of supporting documents and
so on and so forth. As many as 36 copies of the form must be provided along with an affidavit by the
merging entities about the accuracy of the information supplied. For mergers that are unlikely to have

See cases like Tetra Laval/Sidel, M.2416, OJ 2004 L43/13.
Supra note 158, paragraph 78. See also Proctor & Gamble/Gillette, M.3732, 2005.
M. 308, OJ 1994 L186/38. A three-part test was established in this case regarding applicability of this defence,
viz. whether the target entity would have been forced to exit the market had the merger not taken place,
whether given such exit, the market share of the target entity would have been taken over by the acquiring
entity as it is and whether any other alternate acquirer could be found who would present an option less
Supra note 158, Article 13.
See EC 2004 Best Practices Guidelines.
an anticompetitive effect117, the notification can be made using the Short Form in an expedited
manner in pursuance to Article 3(2) of Commission Regulation 802/2004118.
So long as a merger falls within the purview of the 2004 MR, as per the suspension requirement, its
implementation will depend on the Commission’s verdict regarding the merger’s compatibility with
the internal market, unless the Commission has issued an exempting derogation to the merger
depending on a reasonable and reasoned request from the merging entities or when in the case of a
public bid, the acquirer notifies the deal to the Commission without lapse of time and exercises the
voting rights in relation to the securities acquired to preserve the original worth of its investment.119
Any lack of conformity with this requirement can lead to penalty being imposed on the merging
entities, ranging from fines up to 10% of their aggregate annual turnover, to periodic penalty
payments of up to 5% of their aggregate average daily turnover for every day’s failure to comply, to
the entire transaction being declared void ab initio.120
After Form CO has been received, the Commission can either undertake a formal investigation (Phase
I Investigation) within 25 working days121 or request for more information under Article 11 of the 2004
MR. Phase I mostly consists of the Commission obtaining information from the different stakeholders
involved, including both merging entities as well as consumers and holding meetings for the said
purpose122. Following this stage, the Commission can either approve the merger, conditionally or
absolutely (depending upon its degree of satisfaction about the merger’s compatibility with the
internal market), or decide that the merger does not have community dimension, or refer it to the
national competition law enforcement agencies of the Member States under Article 9 of the 2004 MR,
or initiate Phase II investigation provided it believes that the proposed merger generates cogent
doubts regarding its suitability with the internal market.123
During the Phase II proceedings, the Commission, the merging entities and interested third parties all
play a significant role. Apart from the information gathering and visiting relevant sites and markets,
the Commission can also issue a formal Statement of Objectives to the entities seeking reply to its
continuing concerns and access to the information received by the Commission relating to the merger
(apart from confidential business secrets) has to be given to the entities to facilitate such reply.
Following such reply, an oral hearing will be arranged for by the Commission wherein all the interested
stakeholders can participate or intervene. Consultations must be held with the Advisory Committee
comprising the national competition authorities of the Member States before a final decision can be
made. State of Play meetings may also be held bilaterally between the representatives of the office of
the Directorate General of Competition and the merging entities to facilitate negotiations and
information exchange. On certain complicated Phase II investigations, the Commission may choose to
appoint a Peer Review Panel consisting of three or more office holders from the Commission who had
not prior exposure to the matter under consideration, so as to allow a fresh perspective on the case
and ensure that the reasoned decision as arrived at by the Commission can withstand subsequent
judicial scrutiny by the General Court and the ECJ. The Phase II decision has to be taken within 90
working days from its initiation, although the timeline can be automatically extended to 105 days

This includes merger between entities not conducting commerce within the same relevant market, or which
creates a JV with no actual or potential activities within EU, between entities whose combined market shares do
not exceed 15% for horizontal mergers and 25% for vertical mergers, change in nature of control of an
undertaking from joint to sole etc. For further details, see Commission Notice on a Simplified Procedure for
Treatment of Certain Concentrations, OJ 2005 C56/32.
OJ 2006 C251/2
Supra note 158, Article 7.
Id., Articles 8(4), 14 (2) and 15(1).
As per Article 10(1), this can be increased to 35 working days provided the Commission and the merging
entities are engaged in negotiations or if the Commission has received a referral request from a Member State
under Article 9(2).
These requests for information are commonly referred to as Article 11 Letters, since their issue stems from
Article 11 of the 2004 MR.
Supra note 158, Article 6.
provided the parties involved give commitments (within 65 working days from the beginning of the
Phase II proceedings) of more than 55 working days from the beginning of the Phase II proceedings.
Another 20 working days can be allowed to the Commission to reach its decision under complicated
circumstances provided the parties request for the same within 15 working days from the start of
Phase II. A significant provision regarding the timetables of these review proceedings is the provision
that can stop-the-clock on the deadlines if the merging entities themselves delay regarding
compliance with any requirement including supply of information. The Phase II decision will indicate
whether the merger is going to be allowed, conditionally124 or otherwise, or whether it is going to be
Another factor that features often in the EC merger regulation is the matter of ancillary restraints,
which essentially means that a decision of the Commission to allow a merger would also apply to all
ancillary activities associated with the merger, so long as such activities are “directly related and
necessary” for the execution of the merger concerned, such as licensing of technology, purchase and
supply agreements, etc.125 The prohibition of Article 101 (1) of the TFEU will not apply to such ancillary
activities, although all other restraints not ancillary can be thus prohibited for having an AAEC within
the EC.
The final aspect of the EC merger regulations is the matter of the amenability of the decisions taken
by the Commission to judicial review. As has been stated earlier, the General Court is the Court of First
Instance in the EU which has the reviewing authorityinsofar as the legal validity of every Commission
decision is concerned. Such appeals can be preferred before the General Court by the merging entities
as well as any other third party who is directly and individually affected by such decisions. While
preferring an appeal does not automatically lead to the suspension of a decision, interim measures
amounting to the same can be sought by the appellant. All sanctions imposed by the Commission,
monetary or otherwise, are also subject to the reviewing authorityof the General Court. Above the
General Court, lies the ECJ, to which further appeals can be preferred on the grounds of inadequate
competence on the General Court’s part, breach of procedures prevalent in the General Court to the
detriment of the appellant, or breach of the law applicable within the EU126.


A large part of the treatment of merger regulation under the U.S. antitrust regime has already been
discussed in earlier parts of this paper in relation to merger review. As has been mentioned earlier,
Sections 1 and 2 of the founding antitrust statute in the U.S., viz. the Sherman Act, can be construed
to have empowered the authorities with sufficient power to prevent the occurrence of a merger that
can have a direct or indirect adverse impact on market competition.
However, the primary authority of U.S. antitrust law to regulated mergers stems from Section 7 of the
Clayton Act that in turn validates the complete gamut of U.S. legislative approach to mergers.127 The
nature of Section 7 is similar to that of the constitution, given that it provides validity for the entire
substantive body of U.S. merger legislations. Each term provided for within Section 7 has therefore an

For such conditional approvals, the merging entities may appoint a trustee to ensure compliance therewith,
given that lack of compliance can attract hefty monetary penalties up to 10% of the turnover and even
dissolution of the entire transaction.
See the Commission Notice on restrictions directly related and necessary to concentrations, OJ 2005 C56/24.
International, 2009).
According to Section 7 of the Clayton Act, “No person engaged in commerce or in any activity affecting
commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no
person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the
assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of
commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may
be substantially to lessen competition, or tend to create a monopoly.”
underlying connotation to which the origin of the U.S. merger regulations can be traced.128 The
objectives of Section 7 have been the source of prolonged scholarly debates, ranging from maximizing
economic efficiency to safeguarding socio-politico-economic goals to including within its ambit
economic factors such as distributive justice.129 The provisions of the Clayton Act has since then been
amended by the enactment of the Hart-Scott-Rodino Antitrust Improvement Act, 1976 (hereinafter
referred to as the “HSRA”)130 and the rules framed under it (hereinafter referred to as “HSRA Rules”).
Together the HSRA and the HSRA Rules prescribe a reporting mandate with respect of certain mergers
satisfying the threshold criterion laid down under the HSRA that in turn is revised on an annual basis.
U.S. merger regulation may also seek to choose the indirect route of approach as is available under
Section 5 of the Federal Trade Commission Act, which seeks to prohibit unfair competitive methods
and deceptive practices lacking in fairness.131
Apart from these legislative instruments, the bulk of U.S. merger regulation rests on the shoulders of
the Horizontal Merger Guidelines (hereinafter referred to as “2010 MG”) issued by the U.S.
Department of Justice (hereinafter referred to as the “USDOJ”) and the Federal Trade Commission
(hereinafter referred to as the “FTC”) in August 19, 2010. For vertical and conglomerate mergers,
however, the 1984 Non-Horizontal Merger Guidelines read together with the 1992 Merger Guidelines
issued by the USDOJ and FTC still remain the primary source of regulation. The 2010 MG seeks to
prohibit mergers that may lead to “create, enhance, or entrench market power or to facilitate its
exercise,” which may be collectively referred to enhancement of market power. Such an enhancement
can occur through providing encouragement to its firms to manipulate pricing and supply conditions,
to curtail innovative growth and reduce consumer welfare by elimination of incentive and limitations
on competitive restraints.132
The prominent U.S. antitrust authorities would be the Antitrust Division of the U.S. DOJ and the FTC,
both of whom wield jurisdiction over merger reviews, depending upon within the ambit of whose
expertise lies the sector wherein the merger has been proposed. Apart from these two, the
competition authorities of the states within U.S. can also analyze the impact of a merger by the
subjecting the latter to the U.S. federal antitrust legislations as well as the state-specific antitrust rules
and on occasions, even private individuals can seek to question a merger under the federal antitrust
Given the predictive nature of Section 7134, any regulation that stems from this provision to control
mergers must take into account the possible future impact of a merger on the market economy, which

Mention can be made, for example, of terms such as “lines of commerce” and “section of the country”, which
can be perceived as precursors to the U.S. concept of the relevant market.
See HORIZONTAL MERGERS: LAW AND POLICY 6-9 (American Bar Association Antitrust Division, 1986). The
difference in objectives may assume significance while determining whether to allow a merger on the basis of
an efficiency defense despite having anticompetitive impact on the marketplace.
For the full text of the relevant provisions of the HSRA, refer to Annexure II.
For the full text of Section 5, refer to Annexure I. This position has been further confirmed in matters like In
re American Medical International, 104 F.T.C. 1 (1984).
See 2010 MG, Section 1.
Apart from these authorities, there can other sector-specific regulators having oversight power with respect
to merger occurring in those sectors. Mention may be made in this context of the Committee on Foreign
Investment in the United States that can review any merger that may be having national security implications.
One can also refer to the mandate prescribed by the Dodd–Frank Wall Street Reform and Consumer
ProtectionAct of the “golden parachute compensation scheme” being subjected to a shareholder vote of an
advisory nature in the pre-commencement stage of a merger and the power of the Securities Exchange
Commission regarding disclosure of such schemes when it comes to a tender contract.
SeeU.S. v. General Dynamics Corp.,415 U.S. 486 (1974).
in turn will need market information in considerable details for the purpose of simulations and
behavioral assumptions relating to existing and potential market players.135
Given the wordings of Section 7 that refer to reducing the competition “in any line of
any section of the country,” concepts of relevant product market and relevant geographical market
has for quite some time remained in the centre of focus of the U.S. antitrust regime.136 Concepts such
as demand substitution137, supply substitution138, price discrimination139 and supplier and customer
locations (for geographical markets) have often been used in the efforts of the antitrust authorities to
come up with a suitable definition for the relevant market. Although the merger guidelines have since
1982 onwards sought to assume a far stricter approach to submarkets as opposed to the liberal and
expansive interpretation in the Brown Shoe case, there have been several instances, wherein the U.S.
judiciary has neglected to adhere to the letter of the guidelines and proceeded to adopt submarkets
within the ambit of relevant market definition.140
The recognition of market players and computation of market shares by using measures such as the
HHI have already been discussed in earlier parts of this paper. However, such calculation does include
a degree of subjectivity despite the usage of mathematical, statistical and economic tools. For
instance, revenue earning firms in the relevant market, firms having committed to future market entry
and firms that can boost supply quickly without incurring a high sunk-cost when price is increased
(also termed as “rapid entrants”) are all considered as participants for this purpose.141 However,
according to the researcher, the inclusion of vertically integrated firms depending on whether such an
action provides a correct reflection of the competitive importance of such firms (also known as the
“Captive Use Provision”)142 is what brings in considerable amount of subjectivity. Unless and until the
entire production capacity of such vertically integrated firms are also considered instead of merely
taking into account a market-specific measurement of their potential and actual competitiveness, such
inclusion is going to create and has in fact actually created a wide range of ambiguities in practice.143

For the most part, a rational profit maximizing motive can be ascribed to the merging entities, although there
can exist exceptions to this rule; see J. Stiglitz, Principal and Agent, inJOHN EATWELL ET AL. (eds.), ALLOCATION,
INFORMATION, AND MARKETS 252 (W.W. Norton & Co., 1989)
See e.g., Brown Shoe Case, supra note 73 and E.I. du Pont Case, supra note 76.
Demand substitution is usually calculated by cross-elasticity of demand or tests such as the Elzinga-Hogarty
Test [using product inflows and outflows, as was evidenced in FTC v. Freeman Hospital, 69 F.3d 260 (8th Cir.
1995)] or the Hypothetical Monopolist Test as has been discussed in earlier parts of this paper. One of the
significant of the 2010 MG seems to be that while it does allow a deviation from the usual 5% price increase as
envisaged under the Hypothetical Monopolist or SSNIP Test, it does not mention any situation wherein such a
deviation will be deemed appropriate and to what extent, which in turn provides considerable amount of
flexibility to the analyzer. Other questions have also been raised as to the ambiguity of the provisions regarding
the duration, uniformity and base prices for the purpose of the price increase. Supra note 203, 121-123.
Theories have been propounded as to whether during identification of relevant market, only demand side
criteria or both supply-side and demand side criteria ought to be used or whether the supply-side criteria ought
to be used only for the purpose identifying the market players and calculating market shares (this is the stance
taken by the 2010 MG). Id., 110-116. In cases such as Carter Hawley Hale Stores, 587 F. Supp 246 (C.D. Cal. 1984),
supply substitution has been recognized as a bona fide factor to be involved in market identification for
accuracy’s sake.
The imposition of discriminatory price increase on any additional relevant product and geographical markets
can also be perceived as an indicator for the purpose of obtaining a definition of the relevant market with respect
to a merger. However, such perception is entirely left to the discretion of the analyst in question.
See Cardinal Health case, infra note 225 and FTC v. Staples, 970 F. Supp. 1066 (D.D.C. 1997).
See 2010 MG, Section 5.1.
See J. Rill, 60 Minutes with the Honorable James F. Rill: Speech before the American Bar Association, 8
(American Bar Association, 1992).
Durability of products144, supply substitution scenario prevailing in the marketplace145, choosing the
proper statistical proxy for measurement146, adjusting the results obtained for foreign firms,
committed capacity147, financial weakness148 and evolving market conditions may also become other
significant considerations in the determination of the relevant market, its participants and their
respective shares.
The analysis of the impact of a merger on market competition, provided, of course the merger lies
outside the safe harbour range delineated by the HHI, may pose a set of interesting questions, of the
likes of the possibility of coordinated interaction between the post-merger market players149,
unilateral effects on market position owing to unilateral pricing or supply manipulations undertaken
by the dominant merged entity150, the existence and operations of the so-called ‘power buyers’151, the

See U.S. v. Aluminum Company of America, 146 F.2d 416 (2d Cir. 1945), wherein market for scrap aluminum
was not considered a part of the relevant market for aluminum, which has subsequently sought to have been
corrected by the merger guidelines by including recycled products within the ambit of the product market.
Rapidity of supply responses, sunk costs incurred therein and the issue of entry are all taken into
consideration by way of this factor. See 2010 MG, Section 5.1.
The proper statistical proxy for measurement needs to be chosen carefully, lest distortion takes place in data
analysis –this may range, depending on circumstances and nature of the relevant market, production and supply
capacity of firms, profits earned by it, rate of sale, capacity and capital in reserve, duration of measurement
(especially for volatile product markets), specific characteristics exhibited by markets showing generational
competition in terms of technological development etc.
The degree of adjustment required in terms of firm capacity has not been properly represented, nor has a
clear picture emerged yet regarding the duration of commitment and adjustment necessary.
The Guidelines and existing legislations have been ambiguous on this point to the extent of having allowed a
defense similar to the Failing Firm defense to be fashioned out of this issue.
For the efforts of U.S. judiciary to affix the circumstances under which the possibility of such collusive behavior
becomes strong, see Philadelphia National Bank case, supra note 64. The 2010 MG also lays down several factors
such as product homogeneity, pricing and market practices standards, data availability and accessibility
regarding market and other rival firms, limited interaction between rival firms to dissuade possibilities of
cheating etc. as conducive to such behavior. Although most of the analysis is based on game theoretical models,
the nature of the models used has, however, not been specified in the 2010 MG or any other U.S. merger
The 2010 MG discusses different categories of unilateral effect in great details, such as unilateral price effects
in a product market exhibiting product differentiation (see 2010 MG, section 6.1), in a product market wherein
buyer-seller transactions occur through negotiations or auctions (see 2010 MG, section 6.2), effects in relation
to a fall in output or market capacity even products displaying homogeneity to a certain degree (see 2010 MG,
section 6.3), effects stemming from stagnation of innovation and diminishing variety of available products (see
2010 MG, section 6.4). Apart from this, the merger may also lead to other sorts of unilateral effects such as
exclusionary unilateral effects and dimensional categories of such effects (say, for instance mergers causing price
to rise in the short-run, but having no adverse effect on innovation in the long run). The relevance of market
definition may also be questioned in relation to the approach (for a differentiated product market) prescribing
non-uniform competition depending upon the degree of closeness of the substitutes to the original product
(First and Second Choices). This approach also requires collection of market data that is difficult at best to obtain.
See New York v. Kraft General Foods, Inc., 926 F. Supp 321 (S.D.N.Y. 1995). Another approach is to consider for
a non-differentiated product market is to perceive the merger as to provide a sales platform having a much
wider range to the merging entities, so that potential rival for diversion of sales from the merging entity gets
removed from the equation. Determining feasibility of expansion by an entity that is not merging as well as
difficulty in conciliating the market definition with this approach can, however, prove to be tricky at best. For
more detailed discussion on unilateral effects, see cases like U.S. v. SBC Communications, Incorporated, 1999 WL
1211458 (D.D.C.) and U.S. v. Vail Resorts, Incorporated, 62 Fed. Reg. 5037 (1997).
While the U.S. Judiciary has often rejected merger defenses based on the presence of large-scale buyer firms
in the market who would not allow unilateral manipulation of the market by the merged entity, as seen in cases
like FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34 (D.D.C. 1998), the role played by such buyers in destabilizing
collusive behavior between the post-merger market players cannot be denied, as stated in Herbert Hovenkamp,
Mergers and Buyers, 77 Virginia Law Review1369 (1991).
onus and standard of the burden of proof152, the manner in which a potential prima facie case
presented in front of the antitrust authorities can be rebutted on the basis of the Sliding Scale
Theory153, etc.
The 2010 MG has also to a certain extent modified the traditional 5-step merger review, instead
allowing the authorities to concentrate on the most pertinent issues relating to a merger and diluting
the significance of the definition of the relevant market by terming it as a means and not the end of
the procedure154.
The procedure advocated by the 2010 MG at present involves ascertaining the relevant markets on
which the impact of the merger can be felt, look into the entry conditions regarding said market and
the possibility of the merger having an anticompetitive impact through manipulation by the merged
entity of pricing or supply conditions and reviewing the defenses put forth by the merging parties. The
sort of evidence that can be evidenced in course of the merger review has also been delineated in the
2010 MG in the part termed “Evidence of Adverse Competitive Effects.”155
While looking into the concept of ease of entry into the relevant market and comparing the related
pre-merger and post-merger scenarios, one conclusion that can easily be formed is that a greater ease
of post-merger entry will prevent exercise of manipulative pricing power by the merged entity. From
an initial overt reliance on the possibility of whether entry could occur, that had taken precedence
over even market concentration156, the antitrust concern gradually moved on whether entry would
occur and possible incentivizing of such entry. There was also the question of whether the entry would
need to be “quick and effective” for it to serve as a sufficient defense in markets characterized by high
concentration, but such qualification was deemed unnecessary.157 The 2010 MG assumes the
following stance regarding what can be regarded as sufficient ease of entry in this context: “A merger
is not likely to enhance market power if entry into the market is so easy that the merged firm and its
remaining rivals in the market, either unilaterally or collectively, could not profitably raise price or
otherwise reduce competition compared to the level that would prevail in the absence of the merger.
Entry is that easy if entry would be timely, likely, and sufficient in its magnitude, character, and scope
to deter or counteract the competitive effects of concern.”158With regard to the appropriate manner
in which the entry is to be treated, which is scheduled to take place irrespective of the occurrence of
the merger under consideration, however, the 2010 MG and the U.S judiciary have not always seen
eye-to-eye.159 The arbitrary requirement of the entry needing to take place within two years from the
effective date of merger, as was specified under the 1992 MG has since then been removed under the

For the most part, U.S. antitrust law places the burden of proof squarely on the complainant, who has to
show evidences of the anticompetitive impact (actual or potential) of the merger. Once that burden is
discharged, the merging entities can proceed to adduce proof in favor of the defenses they are arguing. See
Cardinal Health case, id.
According to this theory, the greater the chances of the merger being amenable to presumptions of having
anticompetitive, the higher ought to be the standard of evidence required to be furnished by the merging
entities to establish otherwise. Especially if a prima facie infringement of antitrust provisions by a merger can
be determined on the sole basis of market concentration, then this theory is going to be relied upon by the U.S.
judiciary, as was seen in U.S. v. Baker Hughes, Incorporated, 908 F.2d 981 (D.C Cir. 1990).

See 2010 MG, Section 4.
See 2010 MG, Section 2. These would include “for consummated mergers, evidence of actual competitive
effects, evidence that the parties currently set their prices above incremental cost, natural experiments or ‘direct
comparisons based on experience’, market share and concentration in one or more relevant market(s), the
closeness of competition among the parties and whether the transaction would eliminate a “maverick” player
in the market.”
SeeStaples case, supra note 214 and Baker Hughes case, supra note 227.
See generally J.B. Baker, The Problem with Baker Hughes and Syufy: On the Role of Entry in Merger Analysis,
65 Antitrust Law Journal 353 (1997).
See 2010 MG, Section 9.
SeeUnited States v. Long Island Jewish Medical Center, 983 F. Supp. 121 (E.D.N.Y. 1997).
2010 MG160 and in matter such as the Baker Hughes decision, mere threat of entry too has been
recognized as sufficient deterrent for anticompetitive activities by the merged entity within the
relevant market. On certain occasions, fringe expansion by existing firms has also been used by the
U.S. antitrust authorities to determine market concentration and competitive effect on the market,
chiefly owing to its expedited impact, as compared to a new entrant.
The efficiency defense161 and the failing firm defense162 have also been successfully used in U.S.
antitrust law to mitigate the potential anticompetitive impact of the merger.
Insofar as vertical mergers are concerned, the number of occasions where they have been challenged
under antitrust provisions is considerably small, with the earlier 1984 Guidelines being the primary
governing statutory instrument. The two theoretical rationales for such mergers posing a threat to
market competition are foreclosure of rival firms getting access to the customer base and to inputs
respectively. Mention may be made in this context of cases like the E.I. du Pont case163 and the Brown
Shoe case,164 wherein the judiciary named the factors to be considered for analysis of anticompetitive
effects of vertical mergers as the substantial nature of the affected market and likelihood of
competition across a substantial market part getting foreclosed. The 1984 Guidelines, under the aegis
of “Horizontal Effects from Non-Horizontal Mergers,” have pointed out four issues relating to vertical
mergers that may lead to anticompetitive effects, such as removal of potential entrants, raising
barriers to entry, facilitating collusive firm behavior and creating monopolistic entities capable of
bypassing pricing regulation etc. by manipulating costs.165
A considerable amount of importance must be accorded to the HSRA Act, which addressesmerger
notification and examination in the U.S., with the FTC’s Premerger Notification Office having taken
upon itself the mantle of administering the entire procedure on the behalf of the federal government.

See 2010 MG, Section 9.1.
Although U.S. judiciary had rejected the efficiency defense on several occasions like the Philadelphia National
Bank, supra note 64 and the Brown Shoe case, supra note 73, there are also more recent instances wherein
efficiencies have been considered during merger review, such as University Health case, supra note 139, despite
the evidentiary requirements of this defense proving to be difficult for the merging entities. Section 10 of the
2010 MG acknowledges the efficiency defense in details (recognizing merger-specific efficiencies, which means
“those efficiencies likely to be accomplished with the proposed merger and unlikely to be accomplished in the
absence of either the proposed merger or another means having comparable anticompetitive effects”).
However, the 2010 MG is silent on both the nature of acceptable alternative means to the merger as well as on
whether the benefits of the efficiency enhancement are transformed at least partially into consumer welfare.
For recognition of this defense by the U.S. judiciary, see Citizen Publishing case, supra note 148. The 2010 MG
requires three elements to be satisfied for successful application of this defense, viz. that “(1) the allegedly failing
firm would be unable to meet its financial obligations in the near future; (2) it would not be able to reorganize
successfully under Chapter 11 of the Bankruptcy Act; and (3) it has made unsuccessful good-faith efforts to elicit
reasonable alternative offers that would keep its tangible and intangible assets in the relevant market and pose
a less severe danger to competition than does the proposed merger.” See 2010 MG, section 11. The question as
to whether the acquiring entity needs to be literally the sole buyer for the failing firm or the sole buyer with a
reasonable price offer is to be determined by Footnote 16 to the Section 11 of the 2010 MG, which states that
“Any offer to purchase the assets of the failing firm for a price above the liquidation value of those assets will be
regarded as a reasonable alternative offer. Liquidation value is the highest value the assets could command for
use outside the relevant market.” However, the researcher believes that usage of liquidation value can lead to
less than optimal social welfare, ambiguity owing to subjectivity of the concept, and temporal fluctuations.
Supra note 76.
Supra note 73.
See 1984 Guidelines, Sections 4.20-4.23. For the position of the U.S. judiciary on vertical mergers, see In re
Martin Marietta Corp., 59 Fed. Reg. 37,045 (1994) and In re Cadence Design System, Inc., 62 Fed. Reg. 26,790
(1997) (relating to product complements); see United States v. AT&T Corporation, 59 Fed. Reg. 44,158 (1994)
(relating to discrimination); see In re TRW, Inc., 63 Fed. Reg. 1866 (1998) (relating to misuse of information), etc.
Provided a merger involving acquisition of assets166, voting securities167 or other specified non-
corporate interests168 trigger the threshold limits specified by the FTC and does not belong to the
exempted categories, the merger would be mandated to be notified under the HSRA Act.
The HSRA requires a transaction to satisfy each of three different tests in order to fall within the
notification ambit, viz. the Commerce Test169, the Size of Parties Test170 and the Size of Transaction
Test171. However, certain categories of combinations have been provided exemptions from the
notification requirement under Section 18a(c) of HSRA172.
The concept of control through acquisition over one entity by another that would be sufficient to
attract the attention of the HSRA provisions has also been clearly provided for, whereby an acquirer
in possession of at least 50% of the voting shares (or in the absence of voting shares, right to at least
50% of the profit or assets, or right to determine at least 50% of the composition of the Board of
Directors) of the target company is considered to be in control of the latter. The determination of
whether such control has indeed been acquired assumes further significance in relation to
transactions involving unincorporated entities and foreign companies or individuals acquiring the
stocks of foreign companies and triggering the HSRA threshold in the process.
In case the transaction is occurring via multiple interlocking steps, they will be still be considered as
part of the same transaction, provided they stem from the same binding agreement between the
entities or depend on each other for their implementation. Every stage that triggers the HSRA

The HSRA or HSRA Rules does not provide a specific definition of assets, which, however, have been broadly
referred to by the USDOJ and the FTC to include both tangible and intangible forms.
These are defined under the HSRA Rules as “any securities which at present or upon conversion entitle the
owner or holder thereof to vote for the election of directors of the issuer, or of an entity included within the
same person as the issuer,” with unconverted convertible securities, options and warrants being exempted from
the scope of the filing mandate.
As per the HSRA Rules, a “non-corporate interest” is defined as “an interest in any unincorporated entity
which gives the holder the right to any profits of the entity or, in the event of dissolution of that entity, the right
to any of its assets after payment of its debts”.
One of the merging entities ought to be involved in the flow of commerce between two or more American
states or any activity relating to the same. See HSRA, Section 18(a)(1).
The total annual net sales and assets of at least two of the merging entities (including the parent company as
well as its controlled subsidiaries) ought to be at least 131.9 million U.S. dollars and 13.2 million U.S. dollars
respectively. See HSRA, Section 18a(a)(2).
During the post-acquisition scenario, the acquiring entity must possess at least 66 million U.S. dollars worth
of voting securities or assets of the target entity. See 16 C.F.R. Section 801.12.
These combinations would include “certain acquisitions of goods or realty in the ordinary course of business”,
“certain acquisitions of real property assets, including office and residential property, hotels and motels and
related improvements (but not ski facilities or casinos), golf courses, swim and tennis clubs, agricultural property,
retail rental space, and warehouses”, “acquisitions of carbon-based mineral reserves below certain dollar
thresholds”, “acquisitions of investment rental property”, “certain acquisitions involving federal agency approval
or supervision”, “acquisitions solely for the purposes of investment, regardless of dollar value, if the acquiring
person will hold ten percent or less outstanding voting securities of the issuer”, “acquisitions involving less than
$15,000,000 of assets and voting securities, so long as the acquiring person will not hold assets with a value of
more than $15,000,000 or voting securities that confer control of an issuer which, together with the issuer’s
controlled entities, has annual net sales or total assets of $25 million or more”, “acquisitions in which the
acquired and acquiring persons are commonly controlled by reason of holdings of voting securities”,
“acquisitions of convertible voting securities, which are defined as a voting security which presently does not
entitle its owner or holder to vote for directors,” “certain acquisitions by employee trusts,” “certain acquisitions
of foreign assets or voting securities by U.S. persons”, “acquisitions by foreign persons of assets located outside
the United States,” “certain acquisitions by foreign persons of foreign voting securities or of assets located in
the United States,” “certain acquisitions by foreign government corporations,” “acquisitions by foreign states
and foreign governments, other than through their corporations engaged in commerce, are generally exempt
by virtue of the regulations’ definition of “entity,” “certain acquisitions by creditors, insurers, and institutional
investors,” “acquisitions subject to divestiture order in a government antitrust case” and “acquisitions resulting
from gift, intestate succession, testamentary disposition, or irrevocable trust.”
threshold limits will have to be notified by the acquiring company to the authorities, provided, of
course, it does not fall within the ambit of exemption provided by the HSRA or HSRA Rules.
The notification procedure under HSRA initiates with all the merging entities173 filing the notification
vide the prescribed Notification and Report Form174 and then await developments for the next 30
days175, which can be shortened or prolonged by the authorities concerned. Insofar as the fees for
filing the notification is concerned, it depends on the entire worth of the transaction under
consideration –for those valued between 66 million and 131.9 million U.S. dollars, the fee if 45,000
U.S. dollars, for those between 131.9 million and 659.5 million U.S. dollars, the fee is 125,000 U.S.
dollars and for those above 659.5 million U.S. dollars, the fee is 280,000 U.S. dollars. Wherein the
merger under consideration involves the existence of written binding document(s) confirming both
the parties’ intention to engage in such a transaction, the notification can be filed as soon as the said
document(s) have been executed. Wherein the transaction involves acquisition by entity A of entity
B’s voting shares from entity C, A has to notify B of his intention to effect such acquisition and affirm
A’s good faith to finalize the same, before A can file the HSRA notification. In case of tenders, public
announcement has to take place before the filing. In case the authorities have requested the merging
entities for additional information (“Second Request”), then the parties concerned can submit the
information within any reasonable time period, provided the merger does not occur in the meanwhile;
once they have furnished the requisite information, the authorities will get another 30 days to come
up with their decision (15 days and 10 days respectively for cash tender offers and other tenders and
acquisition of voting shares).176 The authorities may, if deemed necessary, seek information or opinion
from third-party stakeholders too in course of their examination.177 In course of reviewing the
notification, the authorities can also make requests for provision of voluntary information by the
merging entities, for meeting the senior level representatives of the entities to procure further
clarification and also allow the counsels representing the entities to meet the authorities for
discussion and furnishing further evidence. Provided any of the authorities under the HSRA chooses
to investigate the merger beyond the prima facie level, the merging entities will have a right to make
their case heard. In case the authorities do not intimate the merging entities of its decision within the
prescribed period, the merger is deemed to have been approved178. All the information provided by

In case of transactions involving tender offers or acquiring of voting shares, it is the acquiring entity that
needs to notify the target company and then file the notification. See Section 801.30
There is no short version of this form, although the amount of essential information sought may vary
depending upon the nature of the transaction and party identities. The present version of the form seeks
information pertaining to “associate entities” as well as the parent entity, the nature of products sold by the
entities in the U.S., but produced on foreign soil, “all confidential information memoranda and other offering
documents produced within one year of the date of the filing, all studies, surveys, analyses, and other reports
prepared by investment bankers, consultants, or third party advisors prepared for the same purposes of
documents relevant” and “analyses of synergies or efficiencies concerning the transaction.” The “Base Year”
concept has also now been done away with, which means the reporting ought to extend to only the current year
For cash tender offers, the filing needs to be done within 10 days of the target entity sending the receipt of
notification to the acquiring entity and in case of other tender offers or acquisition of voting shares, the period
is 15 days long.
See 15 U.S.C. Section 18(e); 16 C.F.R. Section 803.20.
In this process, the consumers more than the competitors are paid more attention to. Furthermore, third
party intervention in terms of comments on possible remedies as stated in consent orders has also been
provided for under the FTC procedures and the Tunney Act (applicable to USDOJ). Apart from that, aggrieved
parties can always file civil suits for injunctions and/or damages before the State or Federal courts under the
Clayton Act or the Sherman Act.
However, such an approval cannot be deemed to apply unconditionally or imply permanent lack of opposition
on the part of the antitrust authorities towards the merger or its ancillary proceedings –the right to issue a
subsequent challenge is always retained by the authorities concerned.
the merging entities during HSRA filing can be considered as confidential business information179,
although if the authorities are investigating the circumstances surrounding that merger, the
information can often be inferred from the issues which the authorities have inquired into specifically.
In case a notification regarding a merger that has triggered the threshold limits has not been filed,
such failure can attract heavy penalties including fines up to 16,000 U.S. dollars per day of default,
compelled divestiture of the merged entity and annulment of the entire transaction.180
Apart from the notification procedure under the HSRA, the FTC has the authority181 necessary to
initiate an investigation of a merger and a host of procedural powers including subpoenaing power
and getting access to corporate reports in course of the same, as does the USDOJ182. Furthermore,
even the transactions that do not trigger the threshold limits under the HSRA can be looked into by
the antitrust authorities183, although such an occurrence is quite rare.
If the FTC decides to prohibit a merger following its review owing to anticompetitive impact on the
market place, it will have to file an administrative complaint before a judge appointed by the FTC to
be specializing in deals such as these; at the same time, it will also initiate a proceeding before a federal
district court so as to secure a preliminary injunction to restrain the merger till the date of decision of
the administrative matter. While the option of filing a federal suit is also available to the USDOJ when
it chooses to restrain a merger, the administrative proceeding is not available to the USDOJ. The
decisions of the federal district court on injunctions can be appealed from by the aggrieved parties
before the Court of Appeals, with the U.S. Supreme Court being the apex decision-maker. At times,
the merging entities may also enter into an arrangement with the antitrust authorities to arrive at an
acceptable solution (such as creation of a new competitor by way of divestiture184, licensing of IP etc.)
by way of negotiation vide a consent decree185 or order186.
Last but not the least, mention may also be made of considerable progress that has been made by the
U.S. antitrust authorities towards securing cooperation in merger review and control, including
participation in the International Competition Network and bilateral and multilateral treaties allowing
coordination with foreign antitrust authorities from countries such as EU, Canada, Australia, Israel,
Japan and several others187. However, these international commitments cannot eclipse the U.S.
domestic antitrust provisions relating to mergers, such as the requirements under the HSRA, at least
insofar as sharing of confidential information provided by the merging parties via HSRA notification is
concerned, which can only be done with prior consent of the parties.

As per HSRA, Section 7A(h), such confidential information lies beyond the purview of the Freedom of
Information Act and can only be revealed in course of bona fide judicial or administrative proceedings and
Congressional hearings.
The authorities, viz. USDOJ and FTC, have been keen to issue sanctions for infringement of the HSRA
provisions, despite attempts having been made to bypass the obligations by the entities seeking to effect a part
of the transaction without waiting for the decision, so long the part in isolation does not trigger the threshold
limits. See the decision involving acquisition of Discovery voting securities by the CEO of Discovery Holding
Company for the stringent measures adopted by the authorities, leading to imposition of fine of 1.4 million U.S.
dollars’ penal sanction. See also U.S. v. Mahle GmbH, 1997-2 Trade Cas. (CCH) ¶ 71,868 (D.D.C.).
See 15 U.S.C. Section 49 and 15 U.S.C. Section 57b-1.
15 U.S.C. Section 1312(a)
See U.S. v. United Tote, Incorporated, 768 F. Supp. 1064 (D. Del. 1991).
Such a solution ought to include references to the following concepts, viz. the duration of completion of
divestiture, appointment of trustee in case of failure to adhere to timeline, making provisions for the business
to be divested to continue operation in pre-divestiture period.
This option is available to USDOJ vide the provisions of the Tunney Act. The proposed decree along with a
statement delineating the potential adverse effects of the transaction on market competition has to be
published by the USDOJ in the Federal Register and in the public domain.
This option is available to the FTC that does not have to file its proposed order in a court of law, but simply
make it available for public inspection for 30 days to attract stakeholder opinion.
See William Blumenthal, Merger Analysis under the U.S. Antitrust Laws, available at (Last visited August 8, 2013).
Merger Control under the Indian Competition Law Regime



Given the rapidly evolving nature of the Indian corporate scenario and the frequent corporate
restructuring necessitated by the same, there is little doubt as to the growing importance of mergers
and similar corporate restructuring in India and the necessity to subject the same to regulatory
supervision under legal regimes like competition law. The mandate of combating anti-competitive
activities in the marketplace has been given the Competition Commission of India (hereinafter
referred to as “CCI”) under the provisions of the Competition Act, 2002 (hereinafter referred to as the
“2002 Act”). A combined reading of the provisions under Sections 6(2), 6(5), 64(1), 64(2)(b), 64(2)(c)
and 64(2)(f) of the 2002 Act may give the reader with an understanding of the authority from which
the powers of the CCI to create delegated legislations emerge. On the basis of said power and
propelled by the need to govern mergers and amalgamations in India under the Competition Act, the
CCI has framed a series of regulations that is referred to as the Competition Commission of India
(Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011
(hereinafter referred to as “Combination Regulations” or “2011 Regulations”). By virtue of a
notification of the Ministry of Corporate Affairs, titled Notification S.O. 479(E) and dated March 4,
2011, most of the provisions of the Act that deals with combinations had come into effect, such as
Sections 5, 6, 20, 29, 30 and 31, along with these Combination Regulations that had become
operational on June 1, 2011.
While the aforementioned sections of the Act do provide the overarching umbrella under which
merger control has been sought to be undertaken by the Indian competition law authorities, the
Combination Regulations seek to address the various associated issues and regulatory conundrums in
much greater details. The Act itself had come into being as early as 2002, but the process of
streamlining the regulatory supervision of combinations had continued unabated through the
Competition (Amendment) Bill, 2007188 and the Competition (Amendment) Bill, 2009189 that had
allowed the Competition Appellate Tribunal to assume the jurisdiction to try all the cases that had
been pending before the MRTP Commission, by using the governing provisions of the MRTP Act,
despite the latter having been repealed at this point of time.190 The Combination Regulations emerging
in 2011 can be perceived as the culmination of such a process.
From the manner in which combinations have been defined in Section 5 of the 2002 Act191, one can
glean that there are several different kind of combinations that have been envisaged under the Indian
competition law, viz. mergers and amalgamations, acquiring right to vote or control or shares and/or
other assets of one undertaking by another and gaining control by one enterprise over another that is
involved in generating identical or at least substitutable goods/services in the marketplace. In case
such a combination triggers the threshold limit prescribed, the Combination Regulations require it to
be notified to the CCI, a process that will be described in greater details in the following parts of this

Available at (Last
visited August 8, 2013)
Available at LSBillTexts/PassedBothHouses/competition.pdf (Last visited
August 8, 2013).
See Press Release, Ministry of Corporate Affairs, Parliament passes the Competition (Amendment) Bill, 2009
available at (Last visited August 8, 2013).
For the full text of Section 5 of the Competition Act, 2002, refer to Annexure XI.
paper. From its genesis, the Combination Regulations have generated a considerable amount of
debate about their effectiveness in the market, but there can be little doubt that the CCI has been
involved in making regular efforts to take into consideration the varying concerns raised by various
stakeholders, both in the domestic as well as global arenas, and incorporate the same to a certain
extent in the text of the Combination Regulations. Mention can be made in this context of the Joint
Comments of the American Bar Association Section of Antitrust Law and Section of International
Law192 that had been obtained by the CCI on an earlier draft version of the 2011 Regulations and the
manner in which parts thereof have been included in the subsequent versions of the Regulations.
The efforts of the CCI to render the process of notifying qualified combinations simpler and expedited
have led to amendment of the Combination Regulations in 2012 and 2013, sooner than the passage
of a year since their operation has begun.193 The alterations that have been introduced in the
Combination Regulations by way of the 2012 Amendment are meant for the most part to provide
procedural clarifications. However, the introduction of certain new provisions vide this Amendment
has sparked a new debate, viz. whether by way of introducing new forms of law by way of a subsidiary
legislation that the Regulations are, instead of carrying out corresponding changes in the parent 2002
Act itself, the CCI has been guilty of exceeding its mandate –this is because what the Combination
Regulations were aimed to do was to supplement and enforce the contents of Sections 5 and 6 of the
2002 Act and not replace them with new provisions of their own. CCI may counter this criticism,
however, by saying that the practical know-how that it has gained from reviewing a large number of
combinations and the issues associated with them has prompted it to update the Combination
Regulations in order to align them better with industry reality and market expectations. The extremely
steep hike in the fees required to file a notification for a combination and the possibility of CCI sitting
on such a notice and delaying the entire process, given the considerable time allotted to it for
processing the same, are amongst the other features of the amended Regulations that have drawn
The three basic aspects that are addressed by the Regulations with respect to combinations are
identification of certain combinations as being exempted from the purview of mandatory notification,
the threshold requirements that will need to be fulfilled for a combination to lie beyond such
exemptions and the modalities of review of such notifications received by the CCI. Clear deadlines
have been prescribed for such notification to take place in the Regulations, although dividing lines
have been drawn between specific types of transactions involving an institutional participation which
can be notified in an ex-post format, as opposed to notifications that have to be made before the CCI
ex-ante insofar as the operationalization of the acquisition is concerned. The precise contents of the
notification as well as the three different forms that need to be filled up under specified conditions
have also been provided for. The forms mostly differ from each other regarding their informational
content and the type of combinations that mandate their filing, as well as the necessary degree of
examination by the CCI that they are subjected to –simpler and less detailed the form, more closely
will the combination itself be looked at by the CCI before approval can be granted. On the one hand,
the CCI has firmly placed the ball on the parties’ court to notify any combination that they are going
to be engaged in, while on the other, sufficient procedural leeway has been provided to the parties,
with the end objective being an efficient manner of filing of notification that would involve an
expedition of the entire approval and clearance process that the CCI is required to engage in.
As has been stated earlier in this paper, the Indian competition law scenario obtains the validation of
its objectives from the socio-economic mandate guaranteed under the Directive Principles of State

Available at
SAL-SIL-Comments-on-India-draft-Combination-Regulations-final-w-apps.pdf-58k-2011-03-24 (Last visited
August 8, 2013).
See generally Rishi Shroff and AshwitaAmbast, Sections 5 and 6 of the Competition Act, 2002: Demystifying
the competition implications of mergers and acquisitions in India, 20(1) Journal of Financial Crime 88 (2013).
Policy in the Constitution of India.194 A cursory glance at the Statement of Objects and Reasons of the
Competition Act, 2002 will also reveal similar legislative intention to prohibit undue concentration of
economic power and productive capacity.195 In pursuit of such objectives, the Act has prohibited, inter
alia, combinations that cause an appreciable adverse effect on competition (hereinafter referred to
as “AAEC”) within the relevant market with respect to India. Given the fledgling nature of legislative
tools for combination regulation in India, it is of no surprise that they remain in a state of constant
flux till date and are being made subject to regular amendments regarding issues like exemptions from
filing requirements, the quantum of fees and the extent of details in which notices for combination
has to be filed by the parties involved before the CCI. With the economic growth necessitating periodic
modifications to the corporate structure by way of various modes of combinations, such amendments
have assumed further significance at present.
Combination or its counterpart was conspicuous in the lack of importance accorded to it under India’s
first competition legislation, viz. the MRTP Act, 1969. The MRTP Act had also created the MRTP
Commission (hereinafter referred to as the “MRTPC”), the predecessor to the CCI, as a quasi-judicial
investigative authority with respect of matters involving unfair and restrictive trade practices.196 The
term ‘combination’ was in fact entirely absent from this Act, which is in stark contrast with the
importance accorded to it under the Competition Act, 2002, viz. Sections 5 and 6 thereof, along with
a completely separate set of regulations termed the Combination Regulations, 2011, whose sole
objective is to oversee the manner in which combinations can be controlled under the Indian
competition law regime.
Insofar as the MRTP Act is concerned, it was not entirely silent about the matter of combination
control, although the treatment accorded to the same was of merely a basic and elementary nature
at best. Part A of the Chapter III of the MRTP Act contains Sections 20 to 26 that purportedly address
the matter of regulating mergers and amalgamations.197 Although these provisions were subsequently
removed by way of MRTP (Amendment) Act, 1991198, they nonetheless remain an important milestone

See e.g., Article 38 of the Constitution of India, 1950: “State to secure a social order for the promotion of
welfare of the people: (1) The State shall strive to promote the welfare of the people by securing and protecting
as effectively as it may a social order in which justice, social, economic and political, shall inform all the
institutions of the national life; (2) The State shall, in particular, strive to minimize the inequalities in income, and
endeavor to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also
amongst groups of people residing in different areas or engaged in different vocations.”
See also Article 39 of the Constitution of India as has been referenced in the introductory section of this paper.
As the Statement goes, it is “An Act to provide, keeping in view of the economic development of the country,
the establishment of a Commission to prevent practices having adverse effect on competition, to promote and
sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on
by other participants in markets, in India, and for matters connected therewith or incidental thereto.” See
Competition Act, 2002 (No. 12 of 2003), available at (Last visited August 8, 2013).
See Section 5, the MRTP Act, 1969: “Establishment and Constitution of the Commission: (1) For the purposes
of this Act, the Central Government shall establish, by notification, a Commission to be known as the Monopolies
and Restrictive Trade Practices Commission which shall consist of a Chairman and not less than two and not more
than eight other members, to be appointed by the Central Government.”
See KartikBajpai, History and Dynamics of the MRTP Act and Competition Act in the Realms of Mergers and
Acquisitions, available at (Last visited August 8, 2013). See also
TanayaSanyal&SohiniChatterjee, Combination Control: Strengthening the Regulatory Framework of Competition
Law in India?5 NUJS Law Review 425 (2012).
Part A of Chapter III of the MRTP Act containing the merger control provisions were omitted in 1991, for it
was felt that: “..with need for achieving economies of scale for ensuring higher productivity and competitive
advantage in the international market, the thrust of the industrial policy has shifted to controlling and regulating
MRTP rather than making it necessary for certain undertakings to obtain prior approval of the Central
Government for expansion, mergers and amalgamations, etc…pre-entry restriction under MRTP Act on the
in the field of Indian merger regulations. Of these provisions, Sections 23 and 24 were perhaps the
most important in understanding the overriding power of the government with regard to merger
control, even overriding the MRTPC’s authority if necessary. Section 23, seeking to authorize the
government to prevent concentration of economic power, prescribed a basic manner of merger
regulation by subjecting such transactions to a host of stringent requirements as well as prior Central
Government approval. Section 24, on the other hand, provided that any purported infringement of
Section 23 can lead to the government having a consultation with the MRTPC (such consultation was
not, however, mandatory) and issuing directives to the merging entities against continuing with such
transaction. The MRTP Act’s complete omission of extra-territorial operability was also another
weakness on its part that made it unsuitable to remain the chief governing legislation for combination
control in India.
A notable merger review that had taken place under the aegis of the MRTP Act following liberalization
of the Indian economy was the one between Hindustan Lever Ltd. and Tata Oil Mills Co. Ltd. The
contentious issue in that case was whether the lack of any statutory requirement of merger
notification before the government on the part of the two merging companies could be deduced as a
logical corollary following the amendments in the MRTP Act in 1991, which deprived the MRTP
Commission the mandate to sanction any merger. The Supreme Court opined that there existed no
further mandate on the part of the merging companies to issue such notification under the
competition law after the 1991 amendments and the only way a merger could at that point of time be
challenged was if it fell afoul of the regulatory provisions of the Companies Act, 1956, viz. Sections 391
to 396A thereof, or if the merger proposal involved elements of fraud or manifest illegality.199 The
significance of this decision is inherent in the manner in which it signaled the beginning of the end of
the MRTP era at least insofar as merger control was concerned, especially in the light of the
surrounding economic liberalization and consequent large-scale corporate restructuring activities.
As can be gleaned from the decision above, apart from the MRTP Act, the Companies Act, 1956, viz.
sections 391-396 thereof200, have also been instrumental in addressing merger regulation from the
companies’ perspectives. The High Court having territorial jurisdiction over the registered office of a
company has been empowered under Sections 391 and 392 to authorize or reject any compromise or
arrangement that may be proposed between the company and its members or creditors, as well as
enforce and oversee such compromise or arrangement provided they have been approved.201 For a
corporate reconstruction or amalgamation, the companies involved need to apply before the said High
Court, which in turn can pronounce upon the respective rights and liabilities of the stakeholders to
such amalgamation, as well as the rights of the creditors of those companies, vide Section 394.202 Upon
majority shareholder approval, the shares of the dissenting minority not amenable to such schemes
can be acquired by virtue of Section 395, while Section 396 provides for the circumstances wherein
the government can effect a corporate amalgamation for the sake of the national interest.203
The eventual repeal of the MRTP Act in 2009 in its entirety and its replacement by the Competition
Act, 2002 was chiefly owing to the belief that the excessive State intervention in corporate
investments and transactions as mandated by the MRTP Act was having an adverse impact on the
national industrial growth, especially in the light of the change in approach in global competition

investment decision of the corporate sector has outlived its utility.”See Statement of Objects and Reasons to
MRTP (Amendment) Bill, 1991.
Supra note 303.
Apart from these provisions, Sections 230-239 of the recent Companies Act, 2013 has also dealt with issues
pertaining to mergers, especially cross-border mergers, as well as simplification of the procedure of
amalgamation of small companies. For a detailed analysis on the pertinent provisions of the Companies Act,
2013, seeEY Transaction Tax Alert, available at
Bill_19Dec.pdf (Last visited August 8, 2013).
See Companies Act, 1956, Sections 391 and 392.
See Companies Act, 1956, Section 394.
See Companies Act, 1956, Sections 395 and 396.
regimes from being averse to monopoly to being favorable to competition.204 The Report of the
Raghavan Committee released in 2000, which went on to play a pivotal role in bringing about this
replacement, contained a host of suggestions regarding merger control under competition law in India
–it stated, “Mergers need to be discouraged, if they reduce or harm competition. The committee,
however, cautions against monitoring of all mergers by the adjudicating authority, for the reason that
very few Indian companies are of international size and that in the light of continuing economic
reforms, opening up of trade and foreign investment, a great deal of corporate restructuring is taking
place in the country and that there is a need for mergers, amalgamations, etc., as part of the growing
economic process before India can be on an equal footing to compete with global giants, as long as
the mergers are not prejudicial to consumer interest.”205
However, the gradual introduction of the 2002 Act in phases created the ambiguous scenario wherein
both the legislations shared jurisdictional oversight over situations pertaining to competition law
during the period between 2002 and 2009 –it was to erase the traces of such ambiguity that the
Combination Regulations were introduced in 2011 to effect the provisions relating to control of
combinations as mandated under Sections 5 and 6 of the 2002 Act206, replacing the rigid approach of
Indian competition law towards mergers in general as advocated by the 1969 Act. The 2002 Act and
Combination Regulations sought to inter alia empower the CCI to be the sole arbiter of combinations,
as opposed to its earlier subservient position vis-à-vis the Indian government.

The idea of an integrated National Competition Policy had germinated in India in 2007 and the draft
statement was finalized in 2011 to be presented before the Ministry of Corporate Affairs. The draft
itself does acknowledge the need for regulating combinations, which as per the draft is an instrument
to effectively implement the policy of preventing anticompetitive behavior under the existing Indian
regime.207 One can identify this policy-level stance being reflected in the Combination Regulations
when the latter was drafted in the same year.208
The first official draft of the Combination Regulations was released by the CCI on March 1, 2011, calling
for comments from the stakeholders as part of an advocacy campaign before the regulations could be
finalized.209 This draft actually sought to introduce quite a few promising changes in terms of

See Rahul Goel, Crossroads of Regimes- Competition Law and Intellectual Property Rights, available at 2a41-4c81-8ea5-
600cf8ee4b1b&txtsearch=Subject:%20Competition%20/%20Antitrust (Last visited August 8, 2013).
See Report of High Level Committee on Competition Policy & Law, 2000. For a detailed version of the merger
related recommendations made by this Report, refer to Annexure X.
MCA, Notification S.O. 496(E), March 4, 2011.
See Draft National Competition Policy, 2011, Section 7.1.
It may be insightful in this context to have a look at some of the combinations that had been reviewed by the
CCI under the 2002 Act, but before the 2011 Regulations had been notified, such as the acquisition of Daiichi by
Ranbaxy and the merger of the Bank of Rajasthan into the ICICI Bank. It is rather obvious from these two case-
studies that while the different regulators were trying their best to gauge all possible impact emerging from the
combinations, in the absence of proper guidelines and market analysis tools that are the features of merger
regulations under competition law, it was at best an uphill struggle. When compared with the combinations that
have taken place post-2011 Regulations, such as the Bombay Burma Trading Corp. Ltd./NHK Automotive
acquisition, the Pantaloon/Peter England transaction etc., it will be apparent how the review process has been
smoothened owing to the introduction of the Combination Regulations in 2011. For a closer look at these case
studies, refer to Annexure XIII.
See PWC Newsletter, The Competition Commission of India issues draft regulations in relation to the
transaction of business relating to Combinations, March 11, 2011, available at http://www.
CCI_issued_draft_regulations_in_regard_to_the_transaction_of_business_relating_to_ Combinations.pdf (Last
visited August 8, 2013)
regulating combinations under the Indian competition law210 –these included the combining entities
to mandatorily opt for an informal pre-notification consultation with the CCI that would clarify
possible ambiguities and develop the knowledge base amongst the entities, the commencement of
the review period to be postponed till the date of receipt of a notice without defect, the requirement
of the CCI to form a prima facie opinion about the AAEC in the relevant market resulting from the
proposed combination if any, within 30 days from the receipt of said notice and enhancement of the
CCI’s power to seek information from any entity to facilitate reaching at such an opinion.
When the Combination Regulations were finalized, they reflected for the most part the earlier draft,
but strengthened by the various informative suggestions put forth by the stakeholders to plug the
legislative lacunae. Having said that, the result was not entirely fault-free, which in turn led to the
subsequent amendments of the Regulations in 2012 and 2013. However, the notification of the 2011
Regulations did make India one of the nations having a concrete merger control procedural framework
established under the aegis of competition law.
One significant change introduced by the final version of the 2011 Regulations was that while even
the earlier draft version had sought to apply the new mandates to all pending combinations211 as they
stood on the effective date of notification of the Regulations, the final version, on the other hand,
contained certain ‘transitional provisions’ that restricted such application only to those combinations
whose transactional binding documents were executed on June 1, 2011 or after that date, thus
curtailing possible ambiguity and relieving the burden on the CCI’s shoulders. The 2011 Regulations
also played a pivotal role of representing an exercise of the extra-territorial jurisdictional powers of
the CCI mandated under Section 32 of the 2002 Act with respect to anticompetitive combinations.
However, the pre-merger consultation process was done away with in the final version212, which can
be considered to be one of the drawbacks of the Regulations, given the beneficial effects of such
consultations. The original deadline of 210 days (from the date of filing) given to the CCI for completion
of review and the automatic sanction of the combination in the absence of a CCI order within that
time period213 was also modified under the 2011 Regulations, which now requires to CCI to ‘endeavor’
to make a decision within 180 days from the date of filing214. However, the researcher would herein
opine that the mandates of a set of regulations that itself derives its validity from a parent legislation
cannot override the mandates of the said legislation and hence the statutory deadline still ought to
remain 210 days, instead of the reduction being legally effective.
There were several reasons why the 2011 Regulations had to be subjected to amendments within a
year of their issue. Similar to the provisions of the SEBI Takeover Code, 2011 that had increased the
threshold trigger for open offers to 25% shareholding or voting rights of a body corporate from the
previous 15%215, the amended Combination Regulations issued in 2012 have also modified the trigger
limit for notification of combinations accordingly, so that those resulting in acquisition of shares or
voting rights up to 25% of a corporate entity are exempted from application of the notification
requirements under the Combination Regulations216. Another reason why the Regulations needed to
be amended was to concentrate the resources of the CCI to review only those combinations that

See Vinay Kumar Sanduja, Competition Law: Draft regulations on regulation of competition, India Law Journal,
available at by_vinay.html (Last visited August 8,
See Draft Combination Regulations, Regulation 28.
See Biyani et al., Indian Merger Control Regulations Finally Notified, available at (Last
visited August 8, 2013).
See 2002 Act, Section 31(11).
See 2011 Regulations, Regulation 28(6).
See SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Regulation 3(1).
See 2011 Regulations, Schedule I, Clause 1.
would have an adverse impact on market competition in India217, instead of spending precious time
and resources on transactions having little or no antitrust implications –as can be gauged from the
Press Release that the CCI had issued during the pre-amendment period, the focus was therefore to
relieve the existing burden on the CCI, make the combination controlling provisions of the 2002 Act
and the 2011 Regulations more transparent and unambiguous and streamline and expedite the filing
and other procedural aspects relating to mergers218.
Some of the changes inserted by the 2012 amendments include the timer for the duration within
which the CCI has to review the combination starting anew from the date when the Form II is filed
with the CCI219 –this is a change from the earlier position wherein the timer would have started from
filing of Form I and the time taken to provide supplementary information under Form II would simply
have been excluded from the duration. While this change is beneficial towards the CCI, it actually
increases the delay incurred in getting a combination approved where the combining entities have
initiated the process by filing the default Form I option. Another change that has been made by the
2012 amendments is that while the merging entities still retain the choice of filing summary
information under the Form I, a range of combinations, based on their respective size or that of the
merging entities, have been specified wherein the CCI would prefer direct filing of Form II with more
detailed information220, such as those matters wherein a horizontal or vertical overlapping between
the combining parties and size of the market can be observed or predicted following the
combination.221 Moreover, the modifications mandate the combining entities to file a summarized
version of the combination of at least 2000 words, containing information such as the
products/services produced by the parties, the prevailing state of competition in the relevant markets
concerned, asset value of the parties etc.222 Another loophole plugged by the amendments is to
prevent an indirect manner of asset transfer to a newly formed entity solely to avoid triggering the
threshold limits prescribed for notification –this has been achieved by mandating in case such an asset
transfer is occurring in a phased manner, then while determining the total asset and turnover value
of the transferee entity, that of the transferor entity will also be taken into consideration.223 A huge
increase in filing fees has also taken place by way of amendment224 and the CCI has sought to justify
such a step by citing conformity with international norms, satisfying the costs incurred in scrutiny of
combination notifications and to ease the pressure on CCI by curbing the number of notifications filed
–however, perhaps increasing the fees in a series of steps instead of this sudden steep hike would
have been a better option. Intra-group partial exemptions have also been granted on certain
occasions, along with issue of clarificatory provisions like Regulation 5(9), so as to maintain the level
of compliance mandate.225
Therefore, the researcher is of the opinion that the combination regulation mechanism under the
Indian competition law is on the whole an evolving and dynamic one, responding to industry stimuli
and market conditions. Given the CCI’s expeditious resolution of the combination applications that

See VivekAgarwal, Special Report: India fine-tunes merger control, March 5, 2012, available at html (Last
visited August 8, 2013).
See SachinGoyal, Merger Control Regime in India, June 23, 2012, available at http://220.227.161.
86/26892cajournal_june2012-23.pdf (Last visited August 8, 2013).
See Amended Regulations, Second Proviso to Regulation 5(5).
See Amended Regulations, Regulation 5(2).
See Amended Regulations, Regulation 5(3).
The parties, however, can choose to exclude information considered confidential for business purposes from
this summary. See DhruvManchanda& Anjali Sheoran, CCI Amends Merger Control Regulations, available at (Last visited August 8, 2013).
See Amended Regulations, Regulation 5(9).
See Amended Regulations, Regulation 11. The filing fee for Form I has been increased to Rs. 10,00,000 from
Rs. 50,000 and that for Form II to Rs. 40,00,000 from Rs. 10,00,000.
See Amended Regulations, Schedule 1, Clause 8A.
had been filed before it so far226, it seems unlikely that the flexibility accorded to the CCI in increasing
the time period within which it has to furnish a decision is going to be subjected to any abuse on the
CCI’s part, which in turn should assuage the industry apprehension. However, the possibility still exists
and together with the sudden steep hike in filing fees required by the CCI, it may give rise problems
unseen hereto.


The 2002 Act and the 2011 Regulations collectively mention certain specific threshold criteria that
have to be triggered by a combination for it to be mandatorily notified before and requiring the prior
approval of the CCI. The entities involved in the merger are referred to as the acquirer/buyer
enterprise and the target enterprise respectively and the threshold specification takes place according
to the value of the assets and turnover of said enterprises, or those of the corporate groups to which
such enterprises belong or will belong in the post-merger scenario.227
However, besides these criteria, there is a specific MCA notification that has subsequently modified
the trigger limits for mandatory filing and allowed certain combinations to remain in safe harbor.228 A
list of certain other transactions has also been provided for in the 2011 Regulations that are unlikely
to result into AAEC in the Indian market and hence need not be notified under ordinary events. 229
However, the position remains unclear as to what can the CCI do in case the exempted combinations
actually are proven to have an AAEC in the market and whether under such circumstances, the
combining entities have an obligation to notify the combination to the CCI.
The onus of filing the notification lies on the acquirer enterprise in case of an acquisition or even a
hostile takeover and jointly upon all the enterprises involved in case the combination is taking place

See CCI, Orders of the Commission, available at (Last visited August 8, 2013).
For individual enterprises, either the combined assets of the enterprises in India have to exceed Rs. 1,500
crores or their combined turnover in India have to exceed Rs. 4,500 crores. In case any of the enterprises possess
asset or turnover outside India too, then their combined assets in and out of India have to exceed 750 million
dollars, of which a minimum of Rs. 750 crores have to be within India, or their combined turnover in and out of
Indian have to exceed 250 million dollars, of which a minimum of Rs. 2,250 crores have to be within India. For
groups of enterprises, the group the target enterprise or the merged entity will become a member of post-
combination needs to have assets exceeding Rs. 6,000 crores in India or turnover exceeding Rs. 18,000 crores in
India. In case the group possesses asset or turnover outside India too, then its combined assets in and out of
India have to exceed 3 billion dollars, of which a minimum of Rs. 750 crores have to be within India, or their
combined turnover in and out of Indian have to exceed 9 billion dollars, of which a minimum of Rs. 2,250 crores
have to be within India. See 2002 Act, Section 5. The turnover that has been stated has to be calculated on the
basis of the price at which the goods/services produced by the entities are sold in the market, while the asset
value, including the valuation of brand, goodwill, intellectual property rights etc., is calculated on the basis of
the book value as mentioned in the audited accounts of the enterprise concerned in the financial year
immediately preceding the one on which the proposed merger is sought to be carried out. Any amount of
depreciation that has taken place in that year will of course be deducted from the asset value. See 2002 Act,
Section 5, Explanation (c).
See Ministry of Corporate Affairs, Notification S.O.-480(E), March 4, 2011; later amended by notification no.
1218(E), dated May 27, 2011. According to this de minimisexemption notification, if the enterprise concerned
does not have assets in India exceeding Rs. 250 crores or turnover in India exceeding Rs. 750 crores, then the
filing of the combination will not be mandatory –this exemption is operative for a period of 5 years. The Indian
nexus therefore has assumed considerable significance under the merger control provisions of Indian
competition law, even more than the global cumulative asset/turnover of the enterprises involved.
See 2011 Regulations, Schedule 1 and Regulation 4.
by way of a series of inter-connected steps as is likely to happen in case of mergers or
amalgamations230. The forms need to be signed by the parties representing the enterprises as
specified in Regulation 11 of the Competition Commission of India (General) Regulation, 2009. In case
the enterprise fails to furnish all the information deemed necessary by the CCI within 15 days of the
date of filing, the CCI may issue directions to the enterprise to do so.231
Under the 2002 Act, the filing requirement mandates the entity that has proposed the combination in
the first place to file the notification thereof in the applicable form along with all necessary
information about the combination within 30 days from the date on which said transaction has
received the seal of approval from the Board of Directors of the entity concerned or any legally
enforceable document has been executed to that effect.232 In case the filing occurs after the
prescribed period, the CCI has the discretion whether to accept it without imposing the penalty
prescribed under Section 6(2) of the 2002 Act.233
With regard to the triggering event for notification, mention can be made of the CCI’s decision in the
Aditya Birla/Pantaloons Case234. It is clear that the notification should be filed only after the Boards of
Directors of the merging entities have given their seals of approval to the merger concerned,235 which
seems a good way of not bothering the CCI with those transactions that may subsequently be rejected
by the parties themselves. Regarding the provision that permits a single notice to be filed for a series
of intertwined transactions that collectively aim to give effect to a single combination236, the correct
position would be that each of such isolated transactions can by itself trigger the filing mandate and
should therefore require a separate approval from the Board of Directors or a legally enforceable
document authorizing the same237.
The different forms that need to be filed to notify the CCI about the combinations include Forms I, II
and III. Under ordinary circumstances, the combining enterprises will have to file Form I, with the
choice to file Form II, both of which need to be filled up, verified and the necessary payment of fees
made along with238. Form II, however, needs to be mandatorily filed provided under circumstances

See 2011 Regulations, Regulations 9(1), 9(2) and 9(3).
See 2011 Regulations, Regulations 9(2).
See 2002 Act, Section 5, 6(2)(a) and 6(2)(b)
See 2011 Regulations, Regulation 7. Once again, by seeking to relax the penalty clauses prescribed under the
parent statute, the 2011 Regulations can be argued to have exceeded their statutory mandate.

This transaction involved the Aditya Birla Novu Limited seeking to acquire the retail format business of
Pantaloons Retail India Private Limited through one of its subsidiary companies PEFRL. The transaction would
also have included a demerger and investments into optionally convertible debentures of the target enterprise.
The question was whether the signing of the MoU and Subscription and Investor Rights Agreement could have
triggered the notification mandate. The parties contended that such was the case, given the intertwined nature
of the transactions involved and hence the filing onus was jointly upon both the enterprises concerned. The CCI
decided otherwise, citing as reasons that such signing of the MoU was merely a negotiating step between the
parties and did not finalize the transaction, that the MoU was not a binding document (as required by Section
31 of the 2002 Act), but merely a temporary stopgap agreement that could easily have been terminated had the
transaction not been approved by the Board of Directors of either or both enterprises and that the joint notice
filed by the parties was invalid given it did not contain the seal of approval of the Boards concerned. See Notice
under §6(2) jointly filed by ABNL, PEFRL, ITSL, PRIL and FVFRL Combination Registration No. C-2012/07/69.
See 2002 Act, Section 6(2) and 2011 Regulations, Regulation 31.
See 2011 Regulations, Regulation 9(4).
See Maheshwari et al., Triggering the Combination Regulations, available at Law%20Hotline_Sep0812.htm (Last
visited August 8, 2013). However, one must note that the exact definition of the “binding document” that is
necessary to be executed has not been clearly provided either under the Act or under the Regulations.
See 2011 Regulations, Regulations 5(2) and 5(3). Part I of Form I contains information about party identity and
evidence of payment of filing fees, while Part II should contain summary of combination and an affidavit of
having supplied accurate information. Form II, on the other hand, contains much more detailed information
wherein the combining enterprises are “engaged in production, supply, distribution, storage, sale or
trade of similar or identical or substitutable goods of provision of similar or identical or substitutable
services” and the post-combination cumulative market share of the entities exceeds 15% of the
relevant market concerned239. As has been stated earlier, the filing fees for these two forms are Rs.
1,000,000 and Rs. 4,000,000 respectively240. CCI may also direct an enterprise to specifically file Form
II, provided it has a prima facie belief that the combination can have AAEC within the relevant
market241. In case of combinations involving public financial institutions, foreign institutional investors,
banks or venture capital funds in pursuit of investment or loan agreements, share subscription or
financing facility or other acquisition, the form that needs to be filed within 7 days of the acquisition
is Form III.242
In case the combining enterprises fail to adhere to the notification requirement, the CCI may by itself
initiate an inquiry into whether the combination has resulted or is likely to result in causing AAEC
within the relevant market in India.243 In pursuance of such inquiry, CCI may direct the enterprises to
provide the relevant information vide Form II within a period of 30 days.244 If the enterprises fail to
provide requested information in full or submits a faulty or incomplete form within the duration
prescribed by the CCI, then the notice shall be deemed invalid.245 In case there is any significant change
in the information furnished during the review period, the enterprises are supposed to inform the CCI
of such change and the latter may accept the change or in case the change can possibly have an
unfavorable impact on the determining factors of AAEC, reject the original notice as invalid. Before
such invalidation, however, CCI has to give the parties concerned a fair reasoning, to be followed by a
reasoned decision. In case the parties can file a renewed notice within 30 days of such a decision
regarding the same combination, then no further filing fees will be required.246
Sections 20, 29 and 30 of the 2002 Act collectively address the CCI’s power and methods to scrutinize
the notices filed by the combining enterprises –in case it is of the prime facie opinion that the

about the combination, regarding inter alia its purpose, transactional details, financial statements of the
enterprises, ownership and governance structures thereof, nature of the relevant market etc.
See 2011 Regulations, Regulation 5(2).
See 2011 Regulations, Regulation 11. In case Form II needs to be filed after Form I, the fees already paid for
Form I will be deducted from Form II fees.
See 2011 Regulations, Regulation 5(5). Apart from this, CCI may require the enterprises concerned to furnish
any additional information deemed necessary during review of the concentration, as per Regulation 5(4).
See 2002 Act, Section 6(4). Such combinations are therefore exempted from the mandate of Section 6(1).
Form III has to contain information about the acquisition including control details, the situations under which
said control is to be exercised and the possible consequences arising from default in payment relating to said
loan/investment agreement etc. Form III does not require any filing fees, however.
See 2002 Act, Section 20(1). This initiation has to take place within one year from the date on which
combination has taken effect and the combination, if found to have or likely to have AAEC in the relevant market,
may be declared void. Deliberate failure to notify the CCI about a combination triggering the prescribed
threshold limit can have a host of consequences, mostly penal in nature, the statutory provisions (of the 2002
Act) regarding which include Section 43A that empowers the CCI to impose monetary penalty on such errant
enterprises up to 1% of the total turnover or the assets, whichever is higher, of such a combination. Such penalty
can be recovered by the CC by virtue of its powers under Section 39. Furthermore, as per Section 42, “if any
person, without reasonable clause, fails to comply with the orders or directions of the CCI issued under sections
43A of the Act, he shall be punishable with fine which may extend to Rs. 100,000 for each day during which such
non-compliance occurs, subject to a maximum of Rs. 100,000,000. Failure to comply with the directions issued
by CCI is also punishable with imprisonment for a term which may extend to three years, or with fine which may
extend to Rs. 250,000,000, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit.”

See 2011 Regulations, Regulation 8.
See 2011 Regulations, Regulation 14.
See 2011 Regulations, Regulation 16.
combination can have AAEC on the market247, then a show-cause notice will be issued to the
enterprises concerned as to why the combination should not be further investigated; the enterprises
will have a period of 30 days to answer this notice.248 If the CCI still persists with its prima facie opinion
regarding the combination, then the enterprises will be directed to publish the details of such
combination so as to make the knowledge available to the stakeholders involved.249 Within 15 working
days of such publication, any affected stakeholder may be invited by the CCI to file written objections
to the combination250 and within another 15 working days, the CCI may direct the enterprises to
furnish any additional detail that it deems necessary, which on receipt are intimated to the concerned
stakeholder within yet another 15 days251. Once all the information has been received, within 45
working days from the expiry of the duration specified in Section 29(5) of the 2002 Act, the CCI will go
ahead with the investigation and decide the fate of the combination in exercise of the authority
conferred upon it under Section 31 of the 2002 Act.

Once the CCI has finished review of a notification, it has three options in front of it –it may reject the
combination on the ground of having AAEC on the relevant market, it may allow the combination on
the ground that it does not have such AAEC, or it may prescribe certain modifications in the
combination proposal which it believes can mitigate the AAEC posed by the combination.252 In case
the enterprises agree to make such modification, they are given 30 working days to submit the
modified proposal253 and if the CCI does not deem such modification to have satisfied its requirements,
it will permit the enterprises another 30 working days to submit a renewed proposal254. If the
enterprises fail to do so, then the combination is deemed to have been rejected on the ground of
having AAEC.255 In case the CCI does not come up with any of the three decisions as envisaged under
Section 31 within 210 working days of the original notification having been filed, then combination is
deemed to have been approved256.
One of the chief problems of assigning a timeline for review to the CCI has always been the delays
made by the combining enterprises in furnishing all the requisite information; it is to address such a
problem that a provision for ‘stopping the clock’ has been made vide Regulations 5 and 19 of the 2011
Regulations, which would mean that when a defect in the notification needs to be amended or
additional information deemed relevant by the CCI needs to be furnished by the enterprises, then the

Among the different factors that the CCI would take into consideration while determining the possibility of a
combination having or being likely to have AAEC in the relevant market, a few prominent ones include market
share of the combining enterprises, actual and potential level of competition through imports in the market,
extent of entry barriers, level of combination in the market, degree of countervailing power in the market,
likelihood of significant and substantial increase in prices or profit margins by the parties to the combination,
extent of effective competition likely to sustain in a market, substitutable products, nature and extent of vertical
integration in the market, nature and extent of innovation, relative advantage, by way of the contribution to the
economic development, by any combination having or likely to have appreciable adverse effect on competition,
whether the benefits of the combination outweigh the adverse impact of the combination, if any etc. See 2002
Act, Section 20(4).
See 2002 Act, Section 29(1).
The CCI’s direction should be made within 7 working days from receiving the show cause notice’s response or
the Director General’s investigation report, whichever is later. The publication ought to be made within 10
working days from the date of issue of direction, vide Form IV in all Indian editions of four leading dailies
including at least two business newspapers and also to be hosted on the CCI official website. See 2011
Regulations, Regulation 22 and 2002 Act, Section 29(2).
See 2002 Act, Section 29(3).
See 2002 Act, Sections 29(4) and 29(5).
See 2002 Act, Sections 31(1), 31(2) and 31(3).
See 2002 Act, Section 31(6).
See 2002 Act, Section 31(8).
See 2002 Act, Section 31(9).
See 2002 Act, Section 31(11).
time taken by the said enterprises to fulfill such responsibility will be excluded from the total time
period of 210 days that has been assigned to the CCI for the completion of review.257


While the procedural framework established by the 2011 Regulations regarding combination control
is a positive step in the right direction, yet owing to certain inconsistencies continue to plague the
various provisions of these Regulations –they neither adhere to the fundamental objectives of the
parent statute, nor do they concur with the internationally established norms of merger control under
competition law.258 In fact, there are certain situations wherein the 2002 act itself provides an
ambiguous mandate, something which no number of amendments to the subordinate Regulations can
possibly clarify. Some of these inconsistencies have been delineated in the penultimate part of this

The Ambiguity surrounding the Issue of ‘Control’

The concept of controlling an enterprise by way acquisition or some other route, as envisaged under
corporate and securities legislation of the likes of the SEBI Takeover Code, is amenable to entirely
different interpretation as compared to ‘control’ for the purposes of competition legislations is
concerned. As per the provisions of the 2002 Act259, “‘control’ includes controlling the affairs or
management”, which can be exercised either by an independent enterprise in its sole capacity, or by
a joint endeavor of a group of enterprises. However, the Act remains silent about the precise nature
of the transaction that would signify acquisition of effective control by one enterprise over another,
perhaps allowing the CCI to make case-specific decisions according to its own discretion. The matter
gains further importance owing to the exemption granted under Schedule I, Clause 1 of the 2011
Regulations, which allows acquisition of up to 25% of voting rights or shares to be exempted from
notification so long as such acquisition does not lead to the acquiring enterprise to gain control over
the target enterprise.260 Depending on the degree of liberalism with which the definition of control is
going to be interpreted, the CCI is going to face the burden of either a spate of transactions which
would have no discernible effect on market competition, or too few transactions, with several
transactions having escaped the CCI radar under the cover of this exemption.261 However, despite such

Supra note 300.
See MCA, CCI Releases Regulation of Combinations for Corporate Sector, available at (Last visited August 8, 2013).
See 2002 Act, Section 5, Explanation (a).
Supra note 303.
Mention may be made in this context of the CCI’s order in theKKR FII/Magma acquisition (Combination
Registration No. C-2011/11/10), wherein despite the post-acquisition shareholding of KKR FII in Magma reaching
up to 24.95% of the latter’s equity base, the acquisition was held not be resulting into a change of control, given
that the Board of Directors of Magma retained its original composition.
Another important CCI decision was in the matter of the Network 18 order (Combination Registration No. C-
2012/03/47), wherein a series of transactions were deemed by the CCI as to be aimed to effect a single
combination, with IMT, a trust having the RIL Group as the chief beneficiary being one of the key parties. IMT
had sought to obtain optionally convertible debentures of the target enterprise that in turn owned 40% equity
share in the Network 18 Group. CCI mooted with the dual idea of immediate control vis-à-vis ultimate control.
It held that the transaction provided IMT the opportunity to exercise ‘decisive influence’ over the target entity
and hence control over the same, as well as indirect control over the Network 18 Group. The ultimate control,
however, was vested in the RIL Group, which was the ultimate beneficiary of IMT and also had a subsidiary acting
as the protector of the trust deed on which IMT was founded. The decisive influence test was the significant
matter under discussion in this order, given that it expanded the scope of control by including the option to
convert debentures into equity within its ambit.
decisions, several questions remain as to the nature of the control, such as the precedential value of
these orders on subsequent matter, the effect of positive or negative voting rights or mere veto
powers on the decisive influence test and so on and so forth. The Regulations therefore need to be
more explicit on this issue.

The Elusive Pre-Notification Consultation

Another point of contention regarding merger control under Indian competition law has always been
the lack of sufficient initiative to provide for a stable framework of pre-merger consultations. While
the original draft regulations that had been issued by the CCI did contain references to such a process,
it was subsequently removed from the final version of the 2011 Regulations, despite CCI’s assurance
of having such a mechanism subsequently by way of notification in its official website in concurrence
with international standards. Currently, the website does provide a brief glimpse into the mechanism,
but the entire process remains strictly optional and lacks formal validity owing to its absence from the
2002 Act or the 2011 Regulations. Although the combining enterprises can engage in consultations
with the CCI representatives either in a written or an oral mode, any advice tendered by such
representatives will not be considered mandatory on the enterprises when a subsequent review of
the combination is taking place, which in turn has made the efficacy of the entire mechanism
suspect.262 The reason such consultation becomes necessary is to save time while seeking CCI approval
for the combination as well as to mitigate some of the problems faced by the CCI when a post-
combination challenge is filed before them, given the difficulties involved in restoring the market to
its pre-combination state and the costs associated with such an attempt. However, owing to the lack
of clarity in the current mechanism in the absence of specific provisions, considerable confusion exists
regarding the nature of queries that can be posed before the CCI263 or whether the enterprises can
channel their queries in the presence of select industry experts. The notion of anonymity that is
extremely important given the sensitive nature of business information that is provided to the CCI
during the consultation, is not emphasized upon either, despite the confidentiality requirement having
found its way earlier into the draft Regulations264. Given the potential benefits of the legislative
acknowledgement of the pre-combination, it is high time that the CCI not only provides for the same
in the next amendment of the 2011 Regulations, but also incentivize the entire process through means
such as exempting the consulting enterprises from the onerous requirements of filing the more
detailed Form II, which will also be in consonance to the prescriptions given by the International
Competition Network to render greater flexibility and ease to the merger review process in whole.265

See CCI, Consultation prior to filing of notice of the proposed combination under sub section (2) of section 6 of
the Competition Act, 2002, available at http://
(Last visited August 8, 2013).
The current practice is posing only procedural and not substantive queries before the CCI. See Pallavi S. Shroff,
India: Merger Control, The Asia-Pacific Antitrust Review 2012, available at
(Last visited August 8, 2013).
Draft Regulations, Regulation 12(9).
ICN has recommended allowing the merging entities to choose whether “to seek a waiver of the obligation to
produce requested information”, provided the entities can produce sufficient evidentiary proof of the costs of
producing said information before the authorities to be greater than the usefulness of such information
regarding the review of the proposed merger.See Recommended Practices for Merger Notification Procedures,
Recommended Practice V.C., available at pdf, 13 (Last visited August 8,
2013). The ICN suggestions regarding pre-notification consultation also include leaving it to the enterprises’ and
the authorities’ discretion whether the consultation can be extended to cover substantive questions along with
procedural ones or whether to allow submission of documentary information to facilitate informed consultation.
Exempting Intra-Group Transactions from the Notification Requirement

Next in line is the issue of the 2002 Act and the 2011 Regulations offering certain exemptions to
transactions occurring within the same group of companies, also referred to as intra-group
exemptions. The current position is going to be explained through a series of orders given by the CCI
in specific cases.
First came the decision on Alstom Holdings (Combination Registration No. C-2011/10/06), wherein
AHIL and APIL (being direct and indirect subsidiaries of the Alstom Group respectively) had notified a
combination under Section 6(2) of the 2002 Act.266 Considering that the ultimate control of the
combining enterprises would still rest with Alstom and there would not be any change in the
composition of top-level management of the combined enterprise, CCI had approved the transaction.
Despite such approval, the decision had faced criticism on the ground that CCI had no reason to
examine it in the first place given its lack of anticompetitive effects as a mere transfer of ownership
within the same corporate group.267

Next was the turn of the TCL-Wyoming matter (Combination Registration No. C-2011/12/12)268,
wherein Wyoming 1 was sought to be merged into TCL and the entities questioned the need for the
notification requirement, given that the amalgamation was taking place between a holding company
and subsidiary, which have been collectively considered under the 2002 Act as a “single economic
enterprise”. Also, had the combination been occurring in the form of an acquisition, it would have
been exempted under Schedule I, Item 8 of the 2011 Regulations and hence the benefits of the said
exemption ought to have been extended to the transaction under consideration. CCI, however, did
not agree to either argument and upheld the need for such transactions to be subjected to the
notification mandate. Reading together Sections 2(h) and 2(l) of the 2002 Act, CCI interpreted the
definition of enterprise strictly as to refer to an enterprise’s ability to perform its functions not in
isolation, but also through its subsidiaries, rather than the enterprise and the subsidiary being treated
as the same economic entity. To strengthen its argument, CCI referred to the way a ‘person’ has been
defined as to include a company, but not subsidiary thereof. The exemption under Schedule I, Item 8
was also held to be limited to only inter-group acquisitions and not amalgamations of the like of the
present transaction. However, the transaction was finally approved by the CCI, given its lack of AAEC.
A similar position was also adopted by the CCI in the matter of the SOVL/SIIIL merger (Combination
Registration No. C-2012/02/30).269
Subsequent to these decisions, CCI caved in to the demand of the market to offer exemptions to intra-
group combinations including certain acquisitions, mergers and amalgamations (usually involving
companies and/or wholly-owned subsidiaries within the same group) as per the current Schedule I in
the amended Regulations.270 This action by the CCI has finally, in the researcher’s opinion, put all
speculations regarding this issue of offering exemptions to only certain intra-group transactions at
rest, thereby providing much-needed clarity to the interpretation of legislative intent.Furthermore,
the current scope of exemptions also makes sense from the perspective of competition theory, since
those transactions that have been specifically exempted under Schedule I of the Regulations are the
ones least likely to have any AAEC on the relevant market. However, the researcher would argue that
the exemptions ought to have been extended to cover not only wholly-owned subsidiaries, but also

See ICN, Information Requirements for Merger Notification, available at http://www.internationalcompetition-, 22 (Last visited August 8, 2013). The researcher believes that such a
model, if formally adopted by the CCI, will improve the efficiency of combination review to a great extent.
Supra note 303.
Supra note 300.
See 2011 Regulations, Schedule I, Clause 8A.
substantially-owned ones, so long as the controlling ownership rests within the corporate group

Treatment of Joint Ventures: A Lacuna

A point of contention that remains of considerable significance, but has not been clearly addressed in
the Indian competition law regulating combinations is the manner of treatment accorded to joint
ventures. The position under the 2002 Act can best be summarized by saying that the only reference
that has been made to JVs has been under Section 3 of the Act and that too has taken place in a
roundabout manner. Nor does the Act define JVs in any place, leading to further confusion regarding
whether provisions such as Section 5 will at all apply to JVs in the first place. According to some, JVs
should be treated just like any other combination to which Section 5 would apply, like the usual fifty-
fifty equity/corporate JV271, for instance, and as such, they should all be subjected to the notification
mandate as per Section 6(2) of the 2002 Act.272 The problem is whether a JV would trigger the
threshold criteria mentioned in Section 5 so as to fall within such mandate to begin with, particularly
if the JV has been planned for purposes other than asset transfer to or from the entities concerned.273
Given the ‘de minimisexemptions’ prescribed by the aforesaid Exemption Notification, using which
certain enterprises can be excluded from the notification requirement, this issue assumes further
significance. Given the definition of ‘enterprise’ as provided under Section 2(h) of the 2002 Act and
Regulation 2(e) of the 2011 Regulations, one may further argue that the definition does not extend to
cover a business that is being newly formed and is not already existing at the time of the acquisition –
therefore, JVs may be excluded from within its purview in its entirety, given that they are not engaged
in any existing activity at the time of the proposed transaction.274 However, while nascent JVs may
well be rewarded with the benefit of such exemption, one must not forget the further complications
involved in the 2002 Act, wherein efficiency enhancing JVs, despite having been decided to be engaged
in anticompetitive activities, can be allowed as per the proviso to Section 3(3) of the Act. However,
the degree of enhancement of efficiency that would enable a JV to avail of such exemption remains
unspecified. In the absence of a prescribed monetary threshold, this ambiguity, coupled with the
exclusion of nascent JVs as stated earlier, can have undesirable results such as the entire gamut of JVs
operating under the radar of competition law authorities. One of the solutions may be to subject the
JVs to the U.S. Rule of Reason275 to gauge if they are having AAEC on the relevant market as well as to
figure out whether the mutual cooperation between the participating enterprises is of non-
competitive and complementary nature.276
Insofar as the treatment of JVs under other prominent competition regimes are concerned, the U.S.
applies Sections 1 (to establishment and functioning of JVs) and 2 (to JVs used to create monopoly
power) of the Sherman Act to the problem, besides having Section 7 of the Clayton Act (to JVs leading

Each party to the JV contributes 50% equity and gets 50% control over shares and residuary cash flow in
return, depending upon the negotiation. See Robert Hauswald, Ownership and Control in Joint Ventures: Theory
and Evidence, available at
ation/2a07ce9f75fa751877e5ef28d12d1b66.pdf (Last visited August 8, 2013).
See T. RAMAPPPA, COMPETITION LAW IN INDIA 224 (Oxford University Press, 2009).
See Desai et al., Joint Ventures under India’s Competition Act, available at e707c168152b/
Presentation/PublicationAttachment/ba4dc164-90d4-41f5-8d0f-dbfd68d0aeb8/10438.pdf (Last visited August
8, 2013).
The Doctrine of Rule of Reason was derived by the U.S. apex court to interpret the Sherman Act in Standard
Oil Company case [221 U.S. 1 (1911)]; it states that only those contracts and combinations that would result in
unreasonable restraint of trade would be prosecuted under competition law, instead of all exercise of monopoly
power of any kind.
See D.P.MITTAL, COMPETITION LAW AND PRACTICE 187 (Taxmann Allied Services Pvt. Ltd., 2009).
to substantial lessening of competition) to deal with even nascent JVs277, which form yet a non-
clarified problem in the Indian scenario. Apart from these, the HSRA is also applicable to notification
of JVs and the HSRA Rules also provide that in case of any acquisition creating JVs as a non-corporate
enterprise, only the acquiring enterprise to have got 50% or more stake in the JV will fall under the
reporting mandate and in case there is no such sole majority, then the JV will be exempted from
HSRA’s application. Moreover, the FTC Act may also be used to control the creation and functioning
of JVs vide Section 5. Insofar as the 2010 Horizontal Merger Guidelines are concerned, Section 1.1 of
the Guidelines allow a JV analysis provided the participating enterprises are rival firms in the same
relevant market, the transaction seeks to put an end to all competition between those rivals, the
cooperation does not expire within a specified and acceptable duration and has an impact on market
efficiency. In case the JV has an anticompetitive effect and does not lead to significant efficiency
enhancement, it will be considered void per se, but in case efficiency shows an increase, then the Rule
of Reason can be applied.278
EC’s response to JVs depends on the nature of the JV under consideration. A full-function JV triggering
the prescribed threshold limits will be reviewed under the ECMR, irrespective of its efficiency
enhancement; the review will comprise inter alia the structural mechanisms effecting control over the
JV. In case a JV is not fully functioning, it can nonetheless be governed by Article 101 of the TFEU,
provided the JV can potentially affect trade or competition within the EC Member States.279 While
Article 101(3) of the TFEU does provide for exemptions, they are applicable not specifically to JVs, but
to certain specific categories of commercial agreements and even then, the exemption requires
cogent conditional prerequisites to be satisfied.280
Therefore, one can opine that both the U.S. as well as the EC positions on JVs appear to be
considerably more developed and stable as compared to their Indian counterpart. One can, however,
argue that the Indian stance on JVs allows for an inherent leniency towards such corporate structures,
given their role in increasing efficiency in production and distribution, costs, quality, services etc. that
in turn gets at least partially translated into greater consumer welfare.

Ambiguity and lack in definitions

Last but not the least, another principal area of ambiguity that exists within the 2002 Act is the non-
usage of the term “working” before the time limit specified in certain provisions such as Sections 6(2),
6(5) and 29(5). The interpretation of legislative intention in this particular matter is yet to be resolved
to the satisfaction of all concerned, with the judiciary having been silent on this matter so far. Another
similar persisting problem with the 2011 Regulations is their usage of terms which are yet to be
defined precisely for the ease of the affected parties. Mention may be in this context of the
exemptions provided to certain combinations form the notification requirement under Regulation 4
and Schedule I of the Regulations281, which uses terms such as “solely as an investment or in the

See United States v. Penn-Olin Chemical Corporation, 378 US 158 (1964).
Supra note 303.

Supra note 383.
The following transactions are not under ordinary circumstances likely to have any AAEC in the relevant
market and hence are exempted from the notification requirement:
“1) Acquisition up to 24.99% of the shares or voting rights of the target enterprise, solely as an investment or in
the ordinary course of business provided no other controlling rights are acquired.
2) Acquisition of the shares or voting rights where the acquirer prior to acquisition has at least 50% of the shares
or voting rights in the target enterprise except when it leads from joint to sole control.
3) Intra-group acquisition within the same group; also, a merger or amalgamation involving a holding company
and its subsidiary wholly owned by enterprises belonging to the same group and/ or involving subsidiaries wholly
owned by enterprises belonging to the same group.
ordinary course of business”, “in the ordinary course of business”, “substantial business operations”
etc., none of which has been properly defined either in the 2002 Act, or the 2011 Regulations and as
such, are open to different interpretations and hence bound to foster confusion and ambiguity for
some time to come at the very least.

Conclusion and Suggestions

A perusal of the details of the analysis contained in the aforementioned parts of this paper regarding
the Indian competition law’s approach towards merger control through the 2002 Act and the 2011
Regulations (and amendments thereto) is likely to reveal certain important facts, viz. the emergence
of only a very recent rising trend in the CCI’s level of activism with regard to adjudicating merger
decisions on the basis of substance and merit and the fact that the CCI has managed to achieve only
partially what it had envisaged to perform as a responsible regulator, with the amendments to the
2011 Regulations still exhibiting certain glaring omissions in terms of, say, the lack of presence of
certain combinations taking place as a part of inter-group transactions from within the ambit of the
notification mandate.
Because of the constraints suffered by the CCI owing to the delay in the 2011 Regulations to come to
effect after having been framed much earlier, the legislative provisions applicable to merger control
have scarcely been tested under the interpretive perspective of the judiciary and hence their ability
to live up to the expectations of them still remains to be proven, as is their capacity to fill in the
regulative laches left behind by the parent 2002 statute. The researcher believes the precise role that
is to be played by the Regulations is yet to be properly determined, to the extent that it is not certain
whether they exist merely to play second fiddle to the 2002 Act by remaining limited only to address
procedural matters of merger control and review and not venture into the substantive part at all. Also,
if the Regulations are meant to address substantive omissions present in the 2002 Act, then there may
also arise debates regarding a subordinate legislation exceeding the mandates of the parent statute,
as one can clearly gather from the issue of the revised time period (of 180 days) prescribed for the CCI
to complete merger reviews that was above and beyond the prescriptions of the 2002 Act.
One can therefore appreciate the restrictions within which the Regulations may have to operate while
seeking to provide solutions to problems relating to merger governance, although the researcher
would like to opine that they can still be used to provide clarity to the ambiguities present in the 2002
Act, or supplement the Act by providing for the essentials that the Act is silent about, instead of
contradicting the already existing provisions under the Act. Furthermore, including new provisions
within the 2011 Regulations will involve lesser effort as compared to amending the parent statute
itself, given that the CCI has been sufficiently authorized by the 2002 Act to take all necessary steps to
render the combination governance under competition law flexible and efficient. Some of the areas
within the Combination Regulations that require clarification or improving amendments have already
been discussed in the previous section of this paper, while further light is shaded on the rest of them

4) Deals taking place entirely outside India with insignificant local nexus and effects on markets in India.
5) Acquisition of stock in trade, raw material, stores, spares or current assets in the ordinary course of business.
6) Acquisition of shares or voting right pursuant to a bonus issue, stock split or consolidation or buy back of shares
or right issue provided no control is acquired.
7) Amended or renewed tender offer where a notice has been filed prior to such amendment or renewal offer.
8) Acquisitions of assets that are not directly related to the business activity of the party acquiring the assets or
made solely as an investment or in the ordinary course of the business, not leading to the control of the seller,
except where the assets being acquired represent substantial business operations in a particular location or for
a particular product or services of the seller .
9) Acquisition of shares or voting rights by a person acting as a securities underwriter or a registered stock broker
in the ordinary course of the business and in the process of underwriting or stock broking.”See 2011 Regulations,
Regulation 4 and Schedule I.
as follows and suggestions made as to how to initiate this organic process of regulatory self-
improvement of the Indian competition law regime for merger control.
While market definition has been one of the key focus areas of merger control provisions across global
competition regimes, the developments in this regard have been stinted at best under the 2002 Act
and the Combination Regulations. In this context, if one takes a look at the different orders given by
the CCI regarding combinations even following the notification of the Combination Regulations, no
precise standard can be ascertained that would make the task of deciding whether a combination can
be approved, despite there having been attempts to gauge the nature of the product market by
looking into the goods/services produced by the combining entities282, to determine whether the
combination under consideration is a horizontal one or a vertical one283, how concentrated or
fragmented the market under consideration is284, whether the goods/services being sold in the market
have substitutes for them285, the share of the market that each player is in possession of286, the
geographical reach of the market287 and several other factors.
The absence of any precise definition of the concept of submarket is another drawback of both the
2002 Act as well as the Combination Regulations. As has been seen in earlier parts of this paper, the
notion of submarket is in vogue in both the U.S. and EC antitrust laws, whereas in India, the CCI has
been struggling to come to terms with this concept during merger analysis288.
One of the most important operations in merger analysis is the mode in which empirical evidence is
collected to determine the identity of and the prevailing conditions within the market. As has been
seen in earlier parts of this paper, one of the most developed systems in this regard is exhibited by
the EC competition law, wherein factors such as differential pricing, trading arrangements, supplier
and purchaser uniqueness and geographical positions, choices of consumers, costs for delivery etc.
are relied upon for collection of said evidence, while in the U.S. consumer surveys play a key role to
achieve this objective. However, the Indian scenario does not prescribe any specific evidentiary
mechanism till date; nor does the CCI orders provide clarity as to the mechanism used to determine
the facets of the relevant market –which is why the researcher believes that the time is now ripe for
the Combination Regulations to provide recommendations relating to this issue, perhaps akin to the
EC Notice on Market Definition289, or the related provisions of the U.S. 2010 MG.
The lack of a proper definition of AAEC, which is the lynchpin of the substantial test used for merger
regulation under the Indian competition law, is another problem needing expedited resolution.
Although Section 21(4) of the 2002 Act does provide a delineation of factors that facilitate discernment
of AAEC, the list is clearly not exhaustive in nature and as a result, the ultimate decision has been left
to CCI’s discretion, which in turn is a potential ground for ambiguity, especially in matters relating to
cross-border mergers. On the one hand, the CCI has been empowered under the 2002 Act to look into
combinations outside India, provided they have an AAEC within the relevant market in India, but at
the same time, exemptions have been provided to combinations having a mere insignificant nexus to
the Indian market, with the scope or degree of such nexus having never been clearly laid down290.
When compared with the EC “community dimension” and “compatibility with the common market”
requirements and specific monetary thresholds including the more recent “significant impediment to
effective competition” test that signifies a convergence of the EC and U.S. position in this matter, the

See e.g., Nippon Steel Corp./Sumimoto Metal Industries C-2011/10/07, Tata Chemicals Ltd./Wyoming Pvt. Ltd.
C-2011/12/12, Walt Disney/UTV Software C-2011/08/02 etc.Supra note 300.
See RIL/RIIL C-2011/07/01, Tata Chemicals Ltd./Wyoming Pvt. Ltd. C-2011/12/12 etc.Supra note 300.
See Walt Disney/UTV Software,supra notes 300 and 389.
See BBTCL/NHK Automobiles C-2011/10/05.Supra note 300.
See AN India/AN Chemicals/AN Coatings C-2011/12/11.Supra note 300.
Supra note 392.
[1997] O.J. C-372/5.
See Combination Regulations, Regulation 4, together with Schedule I, Clause 10.
Indian position seems to be lacking in clarity and specificity and needs to adhere to global context
while interpreting AAEC for the purpose of combination analysis.
The issues surrounding the treatment of JVs under Indian competition law and the corresponding
positions under the U.S. and EC regimes have already been referred to once in this paper. While it has
been stated the legislative intention might have been to allow discretionary powers to the CCI to
choose which JVs to regulate by way of according the definitional ambit considerable flexibility, an
instance of the resulting confusion surrounding this subject can be cited of the JV named Media Pro
Enterprises, wherein the CCI had to begin its investigative proceedings under Sections 3 and 4 of the
2002 Act, because of its lack of certainty whether the combination provisions under Sections 5 and 6
of the Act would at all be applicable to such JVs291. The crux of the current debate seems to be hinging
on the question whether the JV has been newly formed or whether it existed before, the latter being
the only possible way the JV could be termed as an “enterprise” engaged in specified activities that
would render it subject to the combination control provisions of the 2002 Act and Combination
Regulations. EC competition authorities, on the other hand, have solved this predicament by pegging
all the “fully functioning” JVs triggering the threshold requirement to be subject to the notification
mandate. Hopeful signs have been spotted in India lately in this regard, with the Ministry of Corporate
Affairs mooting the chance of issuing a notification to clearly bring JVs within the regulatory mandate
of CCI292.
As the Combination Regulations provide (vide Regulation 4, together with Schedule I, Clause 8), inter-
group combinations (acquisition of control/shares/assets/voting rights of one group member by
another member) are exempted from the notification requirement unless evidence can be produced
of such combinations having an AAEC in the relevant Indian market. Given the propensity of Indian
companies to being members of one corporate group or another, this factor assumes considerable
importance and needs a proper legal definition of what “group” consists of.While as per the 2002 Act,
two or more enterprises capable of exercising control over at least 26% voting rights in the other
enterprise would form a “group” as the term has been subsequently envisaged under the Combination
Regulations, the Exemption Notification issued by the Ministry of Corporate Affairs also cover
transactions within a “group” that has control over less than 50% voting rights in another corporate
entity, while even those combinations involving acquiring of shares/voting rights with the acquirer
already in possession of more than 50% of said shares/rights also fall within the exempted ambit. At
the same time, if the control that was being shared jointly by more than one entity gets converted
into sole control exercised by a single entity, then the exemptions would cease to apply. Such a
convoluted situation has done little to dispel the ambiguity surrounding governance of intra-group
combinations under the Indian competition law, as has already been exhibited in matters like the
ALSTOM restructuring wherein CCI had proceeded to examine the transaction notwithstanding the
exemption that could be accorded to said transaction as availing a pre-merger CCI clearance as per
Schedule I, Clause 8 and Regulation 4 of the Combination Regulations293. The researcher believes that
the Indian competition law would fare better to solve this predicament by shifting its focus as per
global practice to economic efficiency and obstacles for market entry as standard combination
defenses on a case-specific basis, rather than making separate provisions and blanket exemptions for
intra-group combinations.
Lack of inter-regulator cooperation has been proven to be yet another crippling problem of the
combination control provisions in India. While CCI remain the nodal agency to address this matter, it

See (Last visited
August 8, 2013).Supra note 300.

See (Last
visited August 8, 2013).
is by no means the sole interested regulator in this aspect294, with other governmental agencies like
the Telecom Regulatory Authority of India295, the Insurance Regulatory and Development Authority296
and most importantly, the Securities and Exchange Board of India297. Jurisdictional overlapping of
these regulators has time and again given rise to contradictions and ambiguity that has left the merger
control scenario in India in a considerable lurch. In most of the other regimes that have been discussed
in course of this paper, solutions to secure inter-regulatory cooperation have already been found and
effectively applied to reconcile the conflicting agencies.
Instance can be cited of the U.S. scenario wherein more than one authority (USDOJ and FTC) jointly
exercise regulatory supervision over mergers in concurrence with each other, with industry-specific
regulators being subjected to a common federal stature that paves the way for development of
uniform and harmonizing standards as precedent.298 It cannot be entirely denied that the Indian
legislative authorities do acknowledge the existence of this problem and have even made some
piecemeal attempts to address the same, such as inclusion of a non-obstante clause in Section 174 of
the Electricity Act that establishes the authority of the regulator under said Act to be superior to the
CCI when it comes to combinations within the industry. Still, instead of such a cut-and-dried hierarchy,
perhaps cooperative concurrence in terms of exercise of regulatory jurisdiction, exercised through
creation of a single-window framework or a coordination mechanism, can be the better solution to be
transplanted with the competition laws. Given the complete lack of guidance on this matter of
regulatory supervision in the CCI decisions so far, such as IVRCL/IVRCL AH, Siemens VAI/Morgan
Construction Company/Siemens Limitedand TataChemicals Ltd./Wyoming Pvt. Ltd. etc., the time is
now ripe for the CCI or the Indian Parliament to settle this issue once and for all. Even in the decisions
wherein regulatory hierarchy has been acknowledged, such as the Walt Disney case (wherein TRAI
was given stronger jurisdictional claims over CCI), no specific guideline has been laid down delineating
the nature of relationship between the different regulators having jurisdiction that would have
otherwise allowed their respective skills to be utilized to render the entire combination control more
As grave a problem as regulatory overlapping and lack of cooperation is the statutory conflicts that
merger control under Indian competition law has to face vis-à-vis other legislative provisions relating
to governance of similar transactions, such as Section 394 of the Companies Act, for instance, which
authorizes the corresponding High Court to approve or reject a proposed scheme of amalgamation,
or even modify the same, something which the CCI is also empowered to do as per Section 31(3) of
the 2002 Act. If a jurisdictional tussle ensues between these two authorities, the merging entities are
going to face considerable hardship in effecting their transaction in an expedited and efficient manner.
The dilemma gets further compounded by the lack of clarity in the merger control process envisaged
by Section 394, with there being no specific test to determine the fate of an amalgamation. This
problem has become more apparent in matters such as Bank of Baroda case299. Similar conflicts may

See generally Rahul Singh, The teeter-totter of regulation and competition: balancing the Indian Competition
Commissionwith SectoralRegulators, 8 W.U. Global Studies Law Review71 (2009).
It has recommendatory powers regarding “measuresto facilitate competition and promote efficiency in the
operation of telecommunications services”, as per Preamble, The TRAI Act, 1997. See also Guideline No. 20-
100/2007-AS-I issued by the Ministry of Communications and Information.Supra note 300.
Vide the Preamble of the Insurance Regulatory and Development Authority Act, 1999, IRDA can regulate and
promote the developmental evolution of the insurance sector. Similar authority has also been granted to the
concerned regulator under the Electricity Act, 2003, and the Petroleum and Natural Gas Regulatory Board Act,
2006.Supra note 383.
SEBI has the mandate to secure the interests of the investors and to regulate substantial acquisition of shares
of listed companies. See SEBI Act, Section 11(2), together with the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997.Supra note 300.
See O'Connor, Federalist Lessons for International Antitrust Convergence, 70 Antitrust Bulletin413, 419-420
See Bank of Baroda v. Mahindra Euine Steel Co. Ltd. [1976] 46 Comp. Cases 227, wherein the two authorities
had differed in their decisions whether to allow to prohibit the merger.Supra note 300.
also arise from discrepancies with the time periods allowed to the CCI (210 days) as opposed to that
within which High Court has been known to provide a judgment regarding a combination (3-4 months).
Furthermore, while CCI is given at least 30 days to deliver a prima facie opinion regarding an
acquisition, the SEBI Takeover Code requires the acquirer of shares to make good all payments due to
the sellers of those shares within 15 days from making the acquisition offer in the first place, which
essentially means that until CCI comes up with said opinion, the acquirer will be compelled to provide
compensation to the existing shareowners for the extra time. In relation to transactions involving
hostile takeovers, this time period of 30 days granted to the CCI to come to a prima facie decision
about the transaction may further give rise to difficulties such as tendency of the target entity to
consolidate its shareholding pattern by way of intra-group restructuring that as it is remains mostly
exempted from the purview of the notification mandate.
Mention may also be made of the mandate of Clause 13.4.1 of the SEBI (Disclosure and Protection)
Guidelines, 2000, requiring completion of preferential share allotment within 15 days of passage of
resolution under Section 81 of the Companies Act, which is not possible before the CCI decides about
the transaction for which it can take as many as 210 days. The phase-wise approach of competition
regimes like EC, for example, has done wonders to resolve such predicaments, something that Indian
legislators should definitely seek to emulate.
The CCI has not been entirely idle since the Combination Regulations have into effect –an internal
committee had been established in November 2011 to identify the potential laches within the 2002
Act and the Regulations, such as the provisions addressing the degree of investigating authority
granted to the CCI, or rather the Director General of Investigation, potential benefits of supplementing
such authority with the power to search and seize etc.300 The recommendations of that committee
has partially sought to have been implemented through the Draft National Competition Policy of 2011
as well as possibilities of amendments to the 2002 Act so as to provide the CCI with a wider range of
examination power, including oversight over cartels formed by the market consumers and trade
unions. Apart from this, CCI has also been known to have considered the possibility of starting
suomotu investigation in sectors prone to display anticompetitive tendencies, such as the financial,
banking and mobile phone sectors.301 Need for proper definition of fundamental concepts such as
“turnover” so as to facilitate review operations such as determination of threshold triggers in a sector-
sensitive manner has also been highlighted by said Committee. One of the potential problems in the
asset/turnover calculation that CCI engages in, as can be foreseen by the researcher, is for instance,
the practice of calculating the entire asset value of the vendor in course of a slump sale, instead of
confining it to the value of the business sold –this practice on the CCI’s part may, given its lack of
formal acknowledgment in the Combination Regulations, prove to be a potential source of future
conflict between CCI and corporate shareholders.
With regard to relaxation of norms about acquisition of shares/voting rights of an enterprise, the
present exemptions stand up to 25% of the share capital of an enterprise (for investment purpose or
in ordinary business course) as per the 2012 Amendments to the Combination Regulations, in
concurrence with the SEBI Takeover Code, with talks going on about a further relaxation of norms.
However, even this position is far from ideal, with a considerable number of combinations occurring
in an intra-group system, where majority ownership and not complete ownership is the usual practice,
which makes the exemption inadequate302 given the unlikelihood of such intra-group combinations at
all posing any threat to market competition to begin with.
At present, the combination control provisions under the Indian competition law provide for sanctions
of monetary (fines and compensations) and confining nature. However, given the white-collar

competitionact/882062/0 (Last visited August 8, 2013). Supra note 300.
See visited
August 8, 2013). See also, id.
group-ma-rules-once-again/articleshow/121 (Last visited August 8, 2013).See also, id.
category of offences that competition law seeks to address for the most part, imposition of static
monetary penalty can cause problems like lack of regular indexing of such penalties to counter
inflationary trends that may lead to dilution of stringency of the penalty, the lack of suitability of
imprisonment as a penalty for white collar criminals etc. Perhaps a few more viable alternatives can
be sought to be introduced as sanctions, of the likes of the Posnerian indexing of monetary penalties
to account for inflation and customize them in proportion to the income of the offender303, or the
naming-and-shaming mechanism proposed by Dan Kahan.304An increase in clarity about the legislative
and policy makers’ intention behind affixing the sanctions, which can be obtained by way of statutory
explanations, may also be of aid to minimize judicial arbitrariness in imposition of said sanctions.
There is little doubt about the growing importance of mergers in the present Indian commercial and
trade scenario and hence the role played by the competition legislations in seeking a fine balance
between the growth of business by way of efficiency-enhancing combinations and mitigation of the
potential adverse impact of the same on the market competition, while at the same time relying upon
the skills emerging out of inter-regulatory collaboration and economic theories and approaches,
assumes a high significance. The obstacles in the way of framing an efficient regulatory merger regime
have time and again been referred to in course of the historical antecedents of competition law in
India and given that the Combination Regulations, together with the 2002 Act, seek to provide long-
term solutions to such obstacles, the researcher recommends that they need to be interpreted and
subjected to suitable amendments so as to better suited to achieve said objective, including a
continuation of legal transplantations from its foreign counterparts, if need be.
The Indian competition laws owe their origin and developments largely to the U.S. and EC regimes, as
is evident from the adoption of the 5-step merger review procedure, the usage of the Hypothetical
Monopolist Test, the HHI computation for market concentration determination, prevalence of
different notification mandates for financial institutions, extra-territorial application in terms of the
Effects Doctrine, filing different forms for notification depending upon the benign nature and
complexity of the mergers, stop-the-clock provisions that shifts the burden on the merging entities for
delay on their part in providing relevant information etc. At the same time, there are many more
practices that are in vogue in those regimes that can be modified and transplanted in the Indian
competition law scene for efficacy-enhancing results. Where EC and US are concerned, such practices
would include mergers needing to satisfy Community Dimension requirements or the three-pronged
Commerce-Size of Party-Size of Transaction Test to be examined, the substantive SIEC Test, much-
needed clarity on existing concepts like control, relevant product and geographical markets,
introduction of new concepts like rapid entrants and captive use provisions, on definitive turnover
thresholds applicable to different forms of combinations, phased manner of investigation, separate
guidelines for horizontal and non-horizontal mergers, formalized prescription of inter-regulatory
cooperation, greater utilization of the Efficiency Defense and the Failing Firm Defense and the likes of
such. Insofar as the South African regime is concerned, the features that are worthy of consideration
and possible emulation include classification of mergers depending upon their size and impact and
application of differing review standards and procedures to them, the provision of public
administrative hearing in case of complex situations, the practice of the merging entities submitting a
specific Competitiveness Report, the requirement of reporting all the official discussions and planning
taking place between the employees of the merging entities relating to the merger, encouragement
of third-party intervention and detailed discovery processes, etc. When it comes to Japan, the only
other Asian regime discussed in this paper, the singular characteristics that CCI can learn from range
from statutory recognition of involvement of ministries like the Ministry of Economy, Trade and
Industry apart from JFTC in merger regulation depending on the sector concerned wherein the merger
is taking place, to the innovative replacement of total assets by domestic sales for threshold

See generallyRichard A. Posner, Optimal Sentences for White-collar Criminals, 17 American Criminal Law
Review409 (1979).See also, id.
See D. Kahan, New Voices in Criminal Theory: Punishment Incommensurability Punishment, 1 Buffalo Criminal
Law Review 691, 701 (1998).See also, id.
calculation, inclusion of corporate splits within the ambit of merger regulation and extensive use of
the informal pre-notification consultation process etc.
Providing clarity to the definitional ambit of the 2002 Act and the Combination Regulations, especially
terms such as “relevant market”, “enterprise”, “appreciable adverse effect”, “binding document” etc.
will also streamline the entire combination review procedure. Reliance on econometric and statistical
methods and providing statutory guidelines to exercises such as merger simulation and exact
procedure of merger review is something else that the Indian competition law can hugely benefit
To conclude, what the 2002 Act had started, by way of revolutionizing the Indian competition law
approach to mergers by adherence to global standards, including cross-border mergers and vertical
mergers within its ambit as compared to the erstwhile MRTP Act, shifting the regulatory burden from
the central government to an independent body like the CCI –the Combination Regulations are merely
continuing, and hopefully taking to the next logical level. A few steps have been taken in the right
direction by the CCI, in terms of, say, encouraging stakeholder comments and suggestions on the new
Regulations and trying to make some positive changes, such as using its official website to promote
an informal voluntary system of pre-notification consultation. Legal transplantation, provided it occurs
with proper modification while paying respect to the context, can be one of the possible solutions to
the recent problems faced by the Indian regime, given its relative young nature compared to the more
established ones like U.S. and EC. For millennia, legal systems across the globe have evolved through
such transplantation. While from a pragmatic perspective, the process may indeed be simpler and
efficiency enhancing in terms of its borrowing legal structures from others, rather than reinventing
the wheel all over again, one must keep in mind to steer clear of the ethnocentricity or naiveté
associated with bare transplantation in assuming that foreign law could simply be grafted onto the
dissimilar institutions and social conditions of another country without molding it into shape to suit
the prevailing conditions. The researcher believes that the Combination Regulations, working in
consonance with the 2002 Act, ought to be given more time before they could be judged on their
success in achieving the goals of facilitating market competition, efficiency and consumer welfare, a
task they are sure to succeed in with the passage of time, provided of course, they are given the due
cooperation from the policy makers and enforcers in the country in terms of effective implementation
of their provisions, commercially viable implementation and sufficient allocation of resources towards
ensuring their success.