1.

The Competition Act, 2002 (as amended), [the Act], is based on contemporary
competition law thinking and aims to foster competition while protecting Indian
markets from anti-competitive behavior. Anti-competitive agreements, misuse of
dominant position, and combinations (mergers and acquisitions) are all outlawed by
the Act, which is intended to protect Indian competition. The provisions of the Act
governing mergers and acquisitions become effective on June 1, 2011.1

A combination is defined as the acquisition of control, shares, voting rights, or assets

by a person over an enterprise if that person has direct or indirect control over another
enterprise engaged in competing businesses, as well as mergers and amalgamations
between or among firms that exceed the Act's thresholds. The Act specifies thresholds
for total assets and revenue in India and abroad. The phrases "combination" and
"merger" are used interchangeably in this guide. It is unlawful to enter into a
combination that has or will have a significant negative impact on competition in the
relevant market in India, and such a combination is void. India's economy is one of the
fastest-growing in the world. The growth process is fuelled by both organic (mergers
and acquisitions) and inorganic (organic growth) expansion of enterprises. Examining
all mergers and acquisitions is neither practical nor prudent. It is reasonable to believe
that in the case of small size combinations, the likelihood of a substantial detrimental
influence on competition in Indian markets is reduced. The Act sets sufficiently high
asset/turnover thresholds for the Commission to be notified.

The Act also empowers the government to amend the threshold limits every two years
via notification, in consultation with the Commission, based on changes in the
Wholesale Price Index (WPI) or fluctuations in rupee or foreign currency exchange
rates. According to notification S.O. 480 (E) dated 4th March 2011, the government
has increased the value of assets and turnover mentioned in section 5 by 50%. 2

The current asset/turnover thresholds for the merging parties are listed below:

 Individual

Either the companies' entire assets in India are worth more than (INR) 1,500
crores, or their combined turnover in India is worth more than (INR) 4,500
crores. If one or both of the companies have assets or turnover outside of India,
their total assets must be worth at least US$ 750 million, with (INR) 750 crores
in India, or their turnover must be worth at least US$ 2250 million, with (INR)
2,250 crores in India.
1
CCI, 'Provisions Relating To Combinations',
< https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf> accessed 15 MAY
2020.
2
ibid, [5].
 Group

The group to which the enterprise whose control, shares, assets, or voting rights
are being acquired, or the group to which the business continuing after the
merger or amalgamation would belong, would have either assets worth more
than (INR) 6000 crores in India or turnover worth more than (INR) 18000
crores in India after the acquisition. When a company has a presence in both
India and abroad, it must have assets of at least US$ US$ 3 billion, including
INR 750 crores in India, and a turnover of at least US$ 9 billion, including INR
2250 crores in India. The Act establishes a definition for the term "group." A
"Group" is formed when one of the firms has at least 26% voting rights,
appoints at least 50% of the directors, or controls the management or affairs of
the other. It is necessary to give notice. Under S.O. 481 (E) dated March 4,
2011, the government has exempted "Groups" with fewer than fifty percent
voting rights in other firms from the terms of section 5 of the Act for a period
of five years.3

When determining turnover, the value of goods or services sold must be taken
into account. By removing any depreciation from the book value of assets as
reported in the enterprise's audited books of account in the financial year
immediately before the financial year in which the proposed merger occurs, the
book value of assets is determined. As explained in explanation (c) to section 5
of the Act, the worth of assets includes marketability, asset value, and
Intellectual Property Rights.

Combinations that do not necessitate a standard notice

Certain combinations specified in Schedule I are exempt from submitting a notice

with the Commission since they are unlikely to have a significant adverse effect on
competition in India, according to the Combination Regulations.4

Combination Notice

As part of the Act's evaluation procedure for combinations, pre-combination

communication to the Commission is needed. Following the board of directors'
approval of a merger or amalgamation, or the execution of any agreement or other
document in connection with the acquisition, any person or enterprise proposing to
enter into a combination must notify the Commission in the required form, stating the
specifics of the proposed combination, within 30 days of the proposal's approval. The

3
ibid, [6].
4
ibid, [7].
Commission has the authority to begin an investigation if a notifiable combination is
not revealed within a year of its adoption. For failing to notify the Commission of a
merger, the Commission has the ability to impose a penalty of up to 1% of the
combined company's total turnover or assets, whichever is larger. Any combination
for which the Commission has received notice will not take effect for at least 210 days
after the date of notification, or until the Commission issues an order, whichever
comes first. If the Commission does not issue an order within the 210-day period, the
combination will be declared approved.

Procedure for notifying the CCI of such a transaction

If a merger or amalgamation occurs, a notification under Section 6(2)(a) of the Act

must be filed with CCI within 30 days of the board of directors of the firms involved
issuing a board resolution sanctioning the merger or amalgamation. A notice under
Section 6(2)(b) of the Act must be filed with CCI within 30 days of the execution of
any agreement or other document for acquisition. A combination that meets the Act's
jurisdictional requirements is required to file a notification under Section 6(2). Failure
to comply with Section 43A of the Act could result in a penalty of up to 1% of the
combined company's total turnover or assets, whichever is greater. Because the types
of combinations mentioned in Schedule I are unlikely to have an appreciable adverse
effect on competition (“AAEC”) in India, no notification under section 6(2) of the Act
is necessary in most situations, according to Regulation 4 of the Combination
Regulations. The original, one (1) copy, and an electronic copy of a combination
notification must all be filed with the CCI's registration.

The notice must be complete in every aspect (and in the correct format), as well as
include filing fees. A public version of the notice, as well as an electronic version,
must be submitted if the parties assert confidentiality over some information contained
in the notice. The notice must also be accompanied with summary(ies) of the
combination, as well as separate electronic copies, as required by Regulations 13(1A)
and 13(1B) of the Combination Regulations. The Combination Regulations'
Introductory Notes to Forms, Notes to Form I, and Regulations 5, 9, 10, 11, 12, 13,
and 30 provide specific instructions on how to file a notice. In the case of acquisitions,
the acquirer is required to file the notification. Under the Combination Regulations,
articles 9(1), 9(2), and 9(3), all parties involved in a merger or amalgamation must file
the notice jointly. CCI will direct the parties to file an Establish II notice if they have
submitted a Form I notice and CCI requires information in Form II to form a prima
facie conclusion on whether the merger would cause or has caused an AAEC in the
relevant market. If the acquirer is a public financial institution, a foreign institutional
investor, a bank, or a venture capital fund, the acquirer may file a notice in Form III
with the CCI, as provided in Schedule II to the Combination Regulations, within 7
days of completing the acquisition, pursuant to any covenant of a loan agreement or
investment agreement. CCI must approve an order or issue a directive on a
combination within 210 days of the date of the notice given to CCI under Section 6(2)
of the Act, in line with Section 31 of the Act. This era is covered by the clock stops in
Sections 31(11) and 31(12) of the Act. According to the schedule, the CCI will
examine combinations in both Phase I and Phase II. 5

2.

A number of statutes call for a study into the realm of 'control.' Just a few examples
include the Companies Act of 2013, the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations of 2011 ['Takeover Code'], the Competition Act of 2002
['Act'], and the Foreign Direct Investment Policy ['FDI Policy']. Acquisition or change
in control triggers certain procedures under the aforementioned legislation, which
might range from offering present shareholders an open offer to alerting the regulator
of the merger/acquisition, depending on the statute in question.6

The fundamental aspects of India's merger control system are governed under the
Competition Act of 2002. (specifically, Sections 5, 6, 20, 29 and 31). Most of the
procedural aspects are addressed in the Competition Commission of India (Procedure
with Regard to the Transaction of Business Relating to Combinations) Regulations,
2011 (the "Combination Regulations"). The term "control" is defined in Explanation
(a) of Section 5 of the Competition Act as "the control of the affairs or management of
another firm or group by one or more firms, jointly or individually." Under the CCI's
decisional practice, "ability to exert decisive influence over the management or
affairs" of a target corporation constituted "control." Having such a tight hold on a
corporation "implies control over the company's strategic commercial operations,"
according to the CCI. The power to veto or induce a deadlock in some "essential
commercial operations" has been ruled to be sufficient to constitute negative control.

As a result, the CCI considers control to include the ability to veto any or all of the
following items:

• Business plans;
5
CCI, 'Combination and Jurisdictional Thresholds',
<http://www.cci.gov.in/sites/default/files/whats_newdocument/FAQ%27s_Combinations.pdf>.
6
Ayush Vijayvargiy, 'Deconstructing “Control” Under Competition Act, 2002: Need For Re-Look?'
(2017) 2(1) Indian Competition Law Review.
• Yearly operating plans (including yearly budget plans);

• The start of a new line of business;

• The end of an existing line of business;

• The appointment of key managerial employees and their compensation; and

• Changes to charter papers.

Through amendments to the Combination Regulations, the CCI has clarified what
constitutes a "financial investment." As a result, this has effectively become the new
control threshold.7 Competition rules in India are designed to integrate the social and
economic philosophy outlined in the Constitution's Directive Principles of State
Policy. The obligation to design a policy that prohibits wealth concentration in the
hands of a few at the expense of the general welfare may be found not only in the
Constitution, but also in the Anti-Competitive Practices Act. One of the principal
types of anti-competitive behavior prohibited by the Act is combinations that result in
an appreciable adverse effect on competition ('AAEC') within the relevant market in
India. In order to build a stronger antitrust enforcement framework, the Commission
has recommended measures for combination control.8 Because the combination
control requirements are still in their early stages, these laws are continually changing,
including exemptions from filing, costs, and the manner of notice to be employed. The
Amended Regulations were spurred by a growth in the number of business initiatives,
with mergers, acquisitions, and corporate restructuring becoming the economy's
driving force.9

It's crucial to understand how the concept of "control" under securities legislation
(such as the Takeover Code) differs from the concept of "control" under antitrust law.
The scope of application of the two pieces of legislation differs. As a result, we'll limit
our definition of "control" to the legal system in India. The Act defines control in
rather confusing language in Explanation (a) to section 5, as it applies to combination
control provisions: control includes controlling the affairs or management. Control
can be exercised individually or collectively by businesses and organizations. On the
other hand, the Act contains no additional definitions of what constitutes effective
control over another group. Fewer exclusions and more filings with the Commission
will come from a broad definition of control, the bulk of which may not involve the
acquiring party assuming de facto control as a result of the purchase. As a result,
7
P. Ram Kumar, 'India: Merger Control Comparative Guide', Talwar Thakore & Associates
<https://www.mondaq.com/india/anti-trustcompetition-law/843858/merger-control-comparative-
guide> accesssed.
8
Tanaya Sanyal & Sohini Chatterjee, 'Combination Control: Strengthening the Regulatory Framework
of Competition Law in India?' (2012) 5 (425) NUJS L. Rev P- 428.
9
ibid, [429].
transactions with a small impact on the competitive structure of the market will be
notified. If control is defined broadly, however, only purchases involving a transfer of
control will necessitate notice, so satisfying the basic basis for combination control. 10

The Commission's reasoning on the idea of control can be divided into two categories
in the order considering the proposed scheme. The two key pillars are the principle of
rapid control and ultimate authority. On the initial issue, it was decided that the
subscription would provide the acquiring corporation the right to convert the
debentures into equity shares throughout the period of the agreement, giving the
acquiring corporation entire capital control over the target companies. This translates
to having "decisive influence" over the target enterprises' management and affairs,
which satisfies the Act's "control" criteria. Due to its control over the activities of the
target enterprises, it will also have indirect authority over the Network 18 group's
management.11

The aforementioned techniques have been implemented in a number of nations to

track anti-competitive practices over time. In Germany, for example, the purpose of
competition policy is to ensure competitive markets and prohibit all agreements
between parties that limit competition. In addition to protecting competition, the
German cartel statute considers non-competition objectives, such as efficiency. In
Germany, merger analysis is done from the standpoint of societal welfare. In order to
analyze merger-related efficiency, German merger control uses a two-tiered method.
The Federal Cartel Office evaluates how mergers affect competition in the initial
stage. In the second step, the Federal Minister of Economics considers whether a
merger can be approved notwithstanding the negative effects on competition because
of overall economic gains or a compelling public interest. In order to provide an
exception, the minister must officially overrule the Cartel Office. As a result,
ministerial clearance comes with a lot of restrictions.

The European Union's ('EU') competition policy strives to promote consumer interests
while simultaneously safeguarding fair competition in the single market. Competition
policy is frequently considered as a strategy for advancing economic integration in
Europe. In a merger study, both criteria must be addressed, although competitive goals
take precedence over integrating purposes. As a result, the European merger control
system employs a hybrid approach that combines elements of consumer and social
welfare rules. EU merger regulations use a one-level method to consider efficiency
aspects while analyzing the competitive implications of a proposed combination. 12 To
establish whether the proposed transaction produces or enhances a dominant position,

10
ibid, [444].
11
ibid, [445].
12
Shivam Bhardwaj & Samyak Sibasish, 'Treatment of A Non-Compete Clause In M&A: Finally Clarifying The
Indian Position?' (2014) NUJS LAW REVIEW.
the European Commission ('EC') must evaluate whether it will promote dynamic
efficiency through the development of technical and economic developments. The
efficiency criterion, on the other hand, can only be used if it is highly consistent with
competition and customer interests. According to the language of the Regulations, an
efficiency defence can only be used if there is no conflict between efficiency and
market power.

The efficacy defence in the United States ('US') is examined, and it is discovered that
American merger practice differs from that of Germany and Europe, not only in terms
of the legal framework, but also in terms of the antitrust policy goals that are
envisioned. Despite the fact that Congress has enacted a number of ambiguous laws, it
has made the preservation of American consumer interests a top priority. As a result,
enforcement agencies and courts apply the consumer welfare method in merger
analysis. The Merger Guidelines lay forth how the Justice Department and the Federal
Trade Commission should assess merger efficiency. In the 1997 Guidelines, the term
"cognisable" is used to define all of the efficiencies that the agencies will consider
during merger review. The term "cognisable" is used in the 1997 Guidelines to
describe all of the efficiencies that the agencies will evaluate during merger analysis.
The agencies will not reject a combination if the cost savings from increased
efficiency are sufficient to keep global prices from rising. The authorities will not
object to the merger if the benefits of efficiency are sufficient to prevent price hikes
for consumers in the global economy.13

13
ibid, [270].