“Combination”

Under the meaning of the Competition Act, 2002

a combination refers to the direct or indirect acquisition of the shares,

voting rights or assets or the control over management or control over

assets of one or more enterprises by one or more persons, or, a merger or

amalgamation between enterprises, when the combining enterprises jointly

exceed certain thresholds set under Section 5 of the Act.

 Types of Combinations
• Horizontal Combination

• Non-Horizontal Combination
o Vertical Combination
o Conglomerate Combination
 Horizontal Combination
• Horizontal Combinations refer to combinations where the combining

enterprises are competitors having an identical level of production

process and produce substitute goods.

• These are friendly combinations between enterprises dealing with

the production of substitute goods.

• Such combinations are beneficial for the combined enterprise as it

reduces the competition in the market.

• However, horizontal combinations often lead to monopolistic

tendencies in the market.

 Vertical combination
• Vertical Combinations refer to combinations where the combining

enterprises are engaged in different levels of the manufacture and

production process and such enterprises unite into an interacting

whole.

• When an enterprise or person has already direct or indirect control

over another enterprise engaged in production, distribution or trading

of a similar or identical or substitutable goods.

• Such combinations improve the efficiency and effectiveness of the

production process, increase the combination’s competitiveness in the

market 
 Conglomerate combination

• Conglomerate Combinations refers to the combination of enterprises that

are engaged in business markets that are completely unrelated to one

another.

• Such combinations take place when two enterprises providing different

products in varying sectors of business are integrated together.  

 Financial thresholds for combination

In case of
Acquisition

Resultant
Group
Enterprise

In India International India International

Asset Turnover Assets >

T/O >$3billion Assets T/O
> 2000Cr >6000Cr $1billion
(with 3000Cr >$4billion >$12billion
(with 1000Cr in India) (with 1000Cr in (with 3000Cr
in India) India) in India

Assets > T/O >

8000Cr 24000Cr
 In case of
Acquisition (by
person having
some control
over enterprise

Resultant
Group
Enterprise

In India International India International

Asset Turnover Assets >

T/O >$3billion T/O
> 2000Cr >6000Cr $1billion Assets >$12billion
(with 3000Cr in >$4billion (with
(with 1000Cr India) (with 3000Cr
in India) 1000Cr in India) in India

Assets > T/O >

8000Cr 24000Cr
 In case of
Merger/
Amalgamation

Resultant
Group
Enterprise

In India International India International

Asset Turnover Assets >

T/O >$3billion T/O
> 2000Cr >6000Cr $1billion Assets >$12billion
(with 3000Cr in >$4billion (with
(with 1000Cr India) (with 3000Cr
in India) 1000Cr in India) in India

Assets > T/O >

8000Cr 24000Cr
 Regulation of Combinations

• Once any acquisition, amalgamation or any merger has been

categorized as a combination, it has to follow the regulations

provided in Section 6 of the Competition Act, 2002.

• Section 6(1) prohibits the formation of combinations that are likely

to have an appreciable adverse effect on competition in the relevant

market in India and further declares that such combinations should

be deemed void.
Now subject to the prohibition laid down in Section 6(1) of the Competition Act, if
any person or enterprise wishes to form a combination, formation of a combination is
possible with the approval of the Competition Commission India. 
The following procedure is required to be followed before the Competition
Commission of India passes an order of approval or rejection with respect to the
proposed combination:

1. Submission of Notice to CCI

2. Disposal of Notice by CCI

3. Passing of order by CCI

 Submission of Notice to CCI
• As per Section 6(2) of the Competition Act, any person or enterprise who
proposes to enter into a combination has to mandatorily provide a notice
to the Commission
• The notice has to be given to the Commission within thirty days of
receiving approval from the board of directors of any enterprise seeking
to enter into a merger or amalgamation,
• or within thirty days of execution of any agreement or other document for
the acquisition of any enterprise or for acquiring the control of any
enterprise.
•  However, no combination can come into effect unless 210 days have
passed from the date on which the Commission had received notice from
the enterprise
 Disposal of Notice by CCI

• Upon receiving the notice under Section 6(2), the Commission will
examine the notice and form a prima facie opinion on whether the
proposed combination is likely to cause an appreciable adverse effect on
competition in the relevant market.

• It will investigate the combination under the investigation procedures

provided in Section 29 of the Competition Act.
 Passing of order by CCI

• After investigation has taken place, if the Commission is of the

opinion that any combination does not, or is not likely to have an
appreciable adverse effect on competition, it shall by order approve
the combination in respect of which notice was given.

• On the other hand, after investigation, if the Commission is of the

opinion that the combination is likely to have an appreciable
adverse effect on competition in the relevant market, the
Commission will direct that the combination shall not come into
effect and such combination will be deemed void. 
• However, if the Commission is of the opinion that the combination has, or
is likely to have, an appreciable adverse effect on competition but such
adverse effect could be removed by making certain modifications to the
proposed combination, it might propose appropriate modifications to the
combination and to the parties to such combination. 

• The parties to the combination who accept such modifications as proposed

by the Commission, have to make such modification within the time
specified by the Commission.

• If the parties to the combination, who have accepted the modification fail
to carry out the modification within the specified time, such combination
shall be deemed.
• In case the parties to the combination refuse to accept the modifications
proposed by the Commission such parties can, submit amendments to the
modifications proposed by the Commission
 Conclusion
In a rapidly growing economy such as India, enterprises show both organic and

inorganic growth (mergers, amalgamations, acquisitions). It is impossible to keep a

check on all such mergers and acquisitions but it can be assumed that small scale

mergers and acquisitions do not have such a significant impact in the market. 

 However, large scale combinations could lead to an appreciable adverse effect on

competition in the market and thus need to be regulated. Under the Indian

Competition Law, combinations that are likely to cause such adverse appreciable

effect on competition in the relevant market are prohibited