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Rohit Choudhary

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Mergers and acquisitions (or combinations) refer to a situation where the ownership of two or more enterprises is joined together. A merger is said to occur when two or more companies combine to form a new company. In this, two or more companies may merge with an existing company or they may merge to form a new company. The assets and liabilities of the transferor company become the assets and liabilities of the transferee company after the merger. The purpose of a merger is usually to create a bigger entity, which accelerates growth and leads to economies of scale. However, a merger may lead to unwanted socio- economic implications that are often frowned upon.

This was proved when the European commission on competition blocked the merger of GE and Honeywell, which would have been one of the largest industrial mergers in history. This merger however, was earlier cleared by the concerned US agency – the Department of Justice. This clearly shows each country has its own rules on competition. What one perceives as a threat may not be taken the same way by the other. India, which has now opened itself to global competition, now has its own competition law.

This new law, which seems to be in line with the trend globally, replaces the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. In the pursuit of globalisation, India has responded to opening up its economy, removing controls and resorting to liberalisations. The natural corollary of this is that the Indian market must be geared to face competition from within the country and outside.

The MRTP Act, 1969 had become obsolete in certain respects in the light of international economic developments relating more particularly to competition felt to shift the focus from curbing monopolies to promoting competition so that the Indian market is equipped to compete with the markets worldwide.

The preamble of the Competition Act, 2002 states that it is a law to foster and maintain competition in the Indian market to serve consumer interest while protecting the freedom of economic action of various market participants and to prevent practices, which affect competition, and to establish a commission for these purposes (Competition Committee of India or CCI).

In India, mergers are regulated under the Companies Act, 2002 and also under the SEBI Act, 1992. With the enactment of the Competition Act in 2002, mergers have also come within the ambit of this legislation. In the Companies Act, 1956, mergers are regulated between companies inter alia to protect the interests of the secured creditors and the SEBI Act it tries to protect the interests of the investors. Apart from protecting the interests of private parties, these objectives are different and mutually exclusive. In the Competition Act, 2002, the objective is much broader. It aims at protecting the appreciable adverse effect on trade-related competition in the relevant market in India (AAEC).




The Competition Act (CA) attempts to make a shift from curbing monopolies to curbing practices that have adverse effects on competition both within and outside India. It is interesting to see that under the new regime the legislature has chosen to regulate unfair trade practices under only the Consumer Protection Act 1986 and not the Competition Act. In 2007 the Competition (Amendment) Act introduced significant changes to the competition law regime . Most noteworthy of these changes was the introduction of a mandatory notification process for persons undertaking combinations above the prescribed threshold limits. In early 2008 the Competition Commission of India also promulgated and circulated a draft of the Competition Commission (Combination) Regulations.

The regulations provide a framework for the regulation of combinations which include M&A transactions or amalgamations of enterprises. The merger provisions are not yet in force. Nonetheless, it is only a matter of time before the relevant provisions will be notified.



Before considering combinations, it is necessary to look at two important sections of the CA. On May 15 2009 the government formally notified certain provisions in the CA relating to anti-competitive agreements and abuse of dominance, covered in Sections 3 and 4 of CA respectively, which came into force on May 20 2009. Section 3 of CA governs anti-competitive agreements and prohibits: agreements involving production, supply, distribution, storage, acquisition or control of goods or provision of services, which cause or are likely to cause an ‘appreciable adverse effect on competition’ in India .

Section 4 of CA prohibits the abuse of a dominant position by an enterprise . Under the Monopolies Act, a threshold of 25% constituted a position of strength. However, this limit has been eliminated under the CA. Instead, the CA relies on the definitions of ‘relevant market ’, ‘relevant geographic market ’ and ‘relevant product market ’ as a means of determining an abuse of a dominant position.

Under Section 6, the CA prohibits enterprises from entering into agreements that cause or are likely to cause an ‘appreciable adverse effect on competition within the relevant market in India ’. Under the new regime, the Competition Commission has investigative powers in relation to combinations . Various factors are provided for determining whether a combination will or is likely to have an appreciable adverse effect on competition in India, and penalties are provided for such violations .



One of the most significant provisions of CA, Section 5, which defines ‘combination’ by providing threshold limits in terms of assets and turnover is yet to be notified. There is no clarity as to when it will be made effective. At present, any acquisition, merger or amalgamation falling within the ambit of the thresholds constitutes a combination.

Section 5 states that:

The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if-


(a) any acquisition where-

(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have,-

(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover more than fifteen hundred million US dollars; or


(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being acquired, would belong after the acquisition, jointly have or would jointly have,- (A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or (B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or turnover more than six billion US dollars; or


(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, if-

(i) the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control jointly have,- (A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or (B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover more than fifteen hundred million US dollars; or

(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the acquisition, jointly have or would jointly have,- (A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or (B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or turnover more than six billion US dollars; or


(c) any merger or amalgamation in which-

(i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case may be, have,- (A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or (B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover more than fifteen hundred million US dollars; or

(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,- (A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or

(B) in India or outside India, the assets of the value of more than two billion US dollars or turnover more than six billion US dollars.



Expectations regarding the enforcement ambitions of the Competition Commission of India(hereinafter CCI) along with risks of hefty financial penalties for firms as well as imprisonment for individuals means that it is vital for all companies that deal with India to factor antitrust law into decisions affecting their Indian businesses. Antitrust impacts on firms’ longer-term as well as day-to-day operational issues. Additionally, antitrust must be factored into the due diligence and contractual negotiation processes of mergers and acquisitions to ensure that any risks arising from antitrust compliance are addressed properly. The powers of merger review of CCI thus impacts the feasibility of certain deals. The Competition Act, 2002(hereinafter CA) introduces three enforcement areas usually found in modern competition law regimes: prohibition of anticompetitive agreements , prohibition of abuse of dominance and merger regulation . Many concepts of the new law are similar to those found in other jurisdictions, such as European Union or US competition law.

But since the market conditions are very different in India, these concepts may not be interpreted or applied in the same way . The first confession that needs to be made and accepted without any reservations is that in an interdependent world economy everything affects everything else.

Economic and industrial globalization has increased international competition and given rise to the need for an increasingly integrated and evolving legal system. A number of trends have contributed to the accelerated globalization of industry and the integration of international economies. For instance, the growing similarity in available infrastructure, distribution channels, and marketing approaches has enabled companies to introduce products and brands to a universal marketplace . However this is not to suggest that the Competition Act, 2002(hereinafter CA) should govern all the international economic conduct. There is a need to identify ways of distinguishing those international matters affecting Indian commerce sufficiently to warrant sufficient attention from our law.

It needs to be kept in mind that many ordinary difficulties of applying antitrust principles are compounded by the different mores and economic circumstances of international markets . These issues would have been at the background with a much lesser significance if the basis of jurisdiction was territorial and focused on the question as to where the relevant conduct occurred. However, with the judicially created “effects” test having come to the fore and the rise of its dominance these issues have acquired tremendous prominence.


Commission’s Extra-Territorial Powers

Section 32 of the Competition Act explicitly allows the Competition Commission to examine a combination already in effect outside India and pass orders against it provided that it has an ‘appreciable adverse effect’ on competition in India. This power is extremely wide and allows the Competition Commission to extend its jurisdiction beyond the Indian shores and declare any qualifying foreign merger or acquisition as void.

An ‘appreciable adverse effect’ on competition means anything that reduces or diminishes competition in the market. Section 32 states that

The Commission shall, notwithstanding that,- (a) an agreement referred to in section 3 has been entered into outside India; or (b) any party to such agreement is outside India; or (c) any enterprise abusing the dominant position is outside India; or (d) a combination has taken place outside India; or (e) any party to combination is outside India; or (f) any other matter or practice or action arising out of such agreement or dominant position or combination is outside India, have power to inquire into such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India


The wording of Section 32 succinctly lays down the scope of the applicability of the provision as far as the subject matter is concerned. It shall apply to:

• Anti-competitive agreements

• Abuse of dominant position

• Combinations


Combinations in the terminology of CA or cross border mergers have thus been included within the domain of the regulatory and investigative powers of the Commission. This provision needs to be read along with Section 18 of CA. Section 18 specifies in rather generic terms the duties of the Commission and the steps it can take to perform its functions under CA. It states that:

Subject to the provisions of this Act, it shall be the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India: Provided that the Commission may, for the purpose of discharging its duties or performing its functions under this Act. enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country


Appreciable Adverse Effect

The Commission has been granted wide powers under Section 32 read with Section 18 of CA. However, the caveat is that such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India.


Section 20(4) is indicative of the factors or the circumstances when ‘appreciable adverse effect on competition’ can be inferred. There are fourteen factors under this subsection and any one or all shall have to be considered by the Commission so as to ascertain the cause of AAEC in any given case:

1. actual and potential level of competition through imports in the market;

2. extent of barriers to entry into the market;

3. level of competition in the market;

4. degree of countervailing power in the market;

5. likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;

6. extent of effective competition likely to sustain in a market;

7. extent to which substitutes are available or are likely to be available in the market;

8. market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;

9. likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;

10. nature and extent of vertical integration in the market;

11. possibility of a failing business;

12. nature and extent of innovation;

13. relative advantage, by way of the contribution to the economic development by any combination having or likely to have appreciable adverse effect on competition;

14. whether the benefits of the combination outweigh the adverse impact of the combination, if any.


However, there is nothing to indicate that is the list is exhaustive. The exercise of the powers of the Commission over cross border mergers is crucially hinged on the meaning that the phrase ‘appreciable adverse effect on competition’ is given and how the jurisprudence surrounding the phrase develops.

The test thus laid down under the Act is that the Commission can investigate into a cross border merger taking place outside India if the (i) agreement or (ii ) abuse of dominant position or (iii) combination has or is likely to have an appreciable adverse affect on competition in the relevant market in India. Cross border merger regulation in India has only been partly taken care under the regulatory landscape of Securities and Exchange Board of India(SEBI). With the emergence of the new Competition Law regime in India a host of issues need to be looked into as far as cross border merger regulation is concerned and recognize the need to find a purposive solution to the possible conflicts and grey areas.



Air India and Indian (erstwhile Indian Airlines) have combined. Consequent upon that, the market share of the combined entity has increased considerably. The enhanced market share may cause, barriers to entry to other competitors; (competitors may not have market to trade), rise in passenger fares and poor quality of service.

On the contrary, it may not cause any concern at all if we look at the following factual issues:

(1) passengers have wider choice (Jet Airways, Spicejet, Kingfisher, Air Deccan, Indigo, Go Air, foreign airlines etc.);

(2) with wider choice, the combined entity may not be able to create entry barriers; and

(3) in order to maintain an optimal passenger base (for successful and viable business venture) the combined entity may have to provide competitive level price for tickets and maintain highest or at least similar levels of quality of services that its competitors would extend.


The Companies Act, 1956 and SEBI Act, 1992 (though mutually exclusive) aim to protect the interests of private individuals. Whereas, in the Competition Act, 2002, the impact of combinations directly affects the market and the players in the market including the consumers. We may, therefore, safely say that apart from the fact that all these legislations are mutually exclusive, the Companies Act, 1956 and the SEBI Act, 1992 are the sub-sets of Competition Act, 2002 in so far as legal scrutiny of mergers are concerned.



Legislative Background 

The provisions of Competition Act, 2002, s.5 relating to regulation of combinations have been sought to check concentration of economic power. The Monopolies Inquiry Commission (1964-65) divided concentration of economic power in two broad categories, namely product wise concentration and country- wise concentration. Vertical and conglomerate mergers were relevant to be considered in the context of country-wise concentration, i.e.-, to say concentration of over-all economic power. The MRTP Act, 1969 thus regulated mergers, amalgamations and takeovers by providing for their approval by the Central Government.

To turn a new leaf to the obsolete competition laws laid down in the MRTP Act, 1969, the Report of the High level Committee on Competition Policy and Law was submitted by the Raghavan Committee that was constituted for this very purpose.

The Committee suggested revival of earlier provision for seeking approval of Competition Commission relating to mergers, amalgamations, acquisitions and takeovers with certain threshold limit of asset such value of the merged entity or the group to which it belonged.

As in the case of agreements, mergers are typically classified into horizontal and vertical mergers. In addition, merger between enterprises operating in different markets are called conglomerate mergers.

Mergers are a legitimate means by which firms may grow and are generally as much part of the natural process of industrial evolution and restructuring as new entry, growth and exit. From the point of view of competition policy it is horizontal mergers that are generally the focus of attention.

As in the case of horizontal agreements, such mergers have a potential for reducing competition. In rare cases, where an enterprise in a dominant position makes a vertical merger with another firm in (vertically) adjacent market to further entrench its position of dominance, the merger may provide cause for concern. Conglomerate mergers must generally be beyond the purview of any law on mergers.

Thus, the general principle, in keeping with the overall goal, is that mergers must be challenged only if they reduce or harm competition and adversely affect welfare.

Another important issue with regard to mergers that needed to be addressed according to the Committee was regarding the requirements for prior notification. There were two possibilities. The first is that approval or disapproval of the merger may be obtained possibly within a specified time) before going ahead with the merger. This will be subject to a threshold requirement based on assets or market share. The second option is that no notification of permission is required and that the threat of action in case of a violation must generally enforce legal behaviour. Although both the US and EU laws require prior approval for mergers above certain thresholds, they also impose a timeless requirement on the relevant authority, with delays being subject to limitation. However, there is no pre-notification requirement in the existing UK law.

The Committee apprehending that a prior approval is likely to lead to delays and unjustified bureaucratic interventions did away with it in the Indian context as well. This according to them was likely to hamper the vital process of industrial evolution and restructuring and is, thus, not recommended. In any case, all mergers have to be approved by the High Court under the Companies Act, 1956 and shareholders’ interests are protected in this way.

It may also be stipulated that if no reasoned order is received within a time limit, say of 90 days, prohibiting the merger, the merger must be deemed to have been approved.

The current Competition Act, 2002, s. 5 which deals in particular with combinations-which includes mergers, is based on the above recommendations of the Raghavan Committee.


Mergers and Amalgamations

Mergers and amalgamations with the threshold limit as to the value of assets and turnover under Competition Act, 2002, s. 5, cls. (c) are covered.

Mergers or Amalgamations may be broadly classified as follows:

(1) cogeneric—within same industries, (which are of two types, horizontal merger and vertical merger); and

(2) conglomerate—between unrelated businesses.



The Companies Act, 1956, ss. 394 read with 391 provides for approval of the Tribunal (in place of High Court) for any compromise or arrangement proposed between a company and its shareholder and/or its creditors where the compromise or arrangement has been prepared for the purposes of, or in connection with, a scheme for reconstruction of any company or the amalgamation of any two or more companies or where the whole or any part of the undertaking or properties or liabilities of any company concerned in the scheme is to be transferred to another company.

The Tribunal may consider the scheme of arrangement or amalgamation after obtaining consent of shareholders and creditors of the transferor and transferee companies. This is an additional requirement for the companies concerned apart from seeking clearance from the Competition Commission. A listed company, that is, a company whose shares are listed for public dealing in any recognised stock exchange is also required lo comply with the requirements of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In terms of these Regulations, if an acquirer acquires 15 per cent or more of the shares or voting rights of any company, the acquirer will make public announcement to acquire shares in accordance with the regulations.




In the MRTP Act, 1969, ss. 23 read with 20 states that the originally required approval of the Central Government for any scheme of merger or amalgamation or any proposed takeover relating to an undertaking the value of assets of which (along with its interconnected undertakings) was not less than Rs. 100 crores or which was a dominant undertaking having the value of assets (alongwith its inter- connected undertakings) not less than Rs. one crore.

These provisions were deleted by the MRTP (Amendment) Act, 1991 and the said provisions of law have again been revived under the Competition Act, 2002, s. 5 with certain changes as to the threshold limit of the value of assets or turnover. The concept of assets/turnover ‘outside India’ is, however, new in the Competition Act, 2002. No distinction has been made under the Competition Act, 2002, between different types of mergers or amalgamations. Instead of restricting the regulatory framework to only horizontal mergers, vertical and conglomerate mergers have also been covered under the Competition Act, 2002, although they are primarily meant to curb concentration of economic power.

Under the extent provisions the power has been vested in the Competition Commission while under the MRTP Act, 1969, the power was rested with the Central Government. It is a modern piece of economic legislation. Worldwide, competition or anti-trust laws have three main contours. They are:

(1) prohibition of anti-competitive agreements;

(2) prohibition of abuse of dominance; and

(3) regulating mergers amd acquisitions.

Indian law has all these essential ingredients of anti-competitive practice provisions. Anti-competitive agreements and abuse of dominance are intended to be prohibited by orders of the Commission; whereas, combinations (mergers etc) are to be regulated by orders. This distinction in law indicates the intentions of the legislators.

Combinations ensure economic growth, more economic opportunities for businesses to compete with their overseas counterparts and consumer welfare ultimately. On the other hand, anti-competitive combinations harm markets and subvert the interests of the consumers. In amicable and consensual mergers the parties have a unanimity of interests and any Competition Authority would really have not much to do but to allow such proposals.

On examination of Annual Reports of several Competition Authorities it is seen that in almost all jurisdictions across the globe 90 per cent cases of merger notifications are allowed and in the remaining 10 per cent cases they are either modified or rejected. This clearly indicates that our law is moving in the right direction. Besides, it is a regulatory act of the Commission, there are at lease four ‘filters’ available in the law before a notification of merger may be taken up for investigation and inquiry by the Competition Commission of India. The filters are as under:

(1) establishment of ‘prima facie’ case – s. 29

(2) exceeding thresholds – s. 5

(3) establishing AAEC in relevant market – s. 20(4) (4) effect in relevant market only – ss. 19(5) to (7)


Apart from the aforesaid conditions required to be fulfilled before any matter is formally admitted for inquiry and investigation, the AAEC also needs to be happening in a relevant product/geographic market in India. If the cause of AAEC is not conclusively proved to have happened in a relevant product/geographic market then again the action against a merger notification fails. In short, the entire process is business-friendly and not that the moment a reference or information comes to the Commission it sets out to serve a notice and then proceeds to pass quasi-judicial order.

The Competition Act, 2002 has mandatory provisions under s. 49 to promote the provisions of the law through public awareness campaigns amongst stakeholders. Besides, the Act also empowers the CCI under s. 64 to frame regulations to conduct the business of the CCI in accordance with the provisions of the enactment. When one reads these two provisions of the law together, one tends to believe, keeping the international best practices in view, that the CCI may also come up with Merger Guidelines for information of general public and stakeholders. The above guidelines clearly bring out the fact that the ‘acquirer’ and not the ‘target’ is the repository of all business, commercial and legal information and, therefore, it is the only entity that would be liable to share all such information with the Commission transparently before any acquisition (formal or informal) is taken up for clearance or otherwise.

Thus, a merger notification is generally a regulatory action between an ‘acquirer’ and the Commission unlike a prohibitory action of settling disputes between two parties. Secondly, on perusal of some of the Competition Authorities’ role in handling merger notification in some selected jurisdictions, it is reiterated that over 90 per cent cases are allowed by Competition Authorities in these jurisdictions and out of remaining ten per cent (or so) some are allowed with conditions and others are rejected outright. Combinations have been brought within the purview of the Competition Act. The acquisition of enterprises by persons, the acquisition of control by enterprises, and the merger or amalgamation of enterprises is considered combinations when their asset value and turnover cross certain threshold limits. S. 5 contains provisions regarding acquisitions, acquiring of control, mergers and amalgamations.

However, the Competition Act, 2002 does not delve into the repercussions of arrangements on competition. The Companies Act, 1956, s. 390 (b) defines the term arrangement as ‘including a re-organisation 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’. This term is of wide import and includes all modes of re-o rganisation of the share capital, takeover of shares of one company by another including interference with preferential and other special rights attached to shares. Arrangements may have dire consequences on competition and must, therefore, be specifically included in the provisions regarding combinations under the Competition Act, 2002.

The Raghavan Committee (the committee that introduced the enactment) had suggested much lower limits than those mentioned above. But these limits were raised for the reason, that very few Indian companies are of international size and 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 need for mergers, amalgamations as part of the growing economic process. This change also resulted in the exclusion of more enterprises with a lower asset value and turnover from the purview of this stipulation. It must be noted that although s. 5 limits its application to companies with the prescribed asset value and turnover limit, smaller companies are kept from being anti-competitive by virtue of Competition Act, 2002, s. 4 which prevents a company from abusing its dominant position.

Moreover, another prevailing dissenting opinion seems to be that a company’s assets do not accurately reflect the company’s presence in the market and instead only the turnover test should be used to check whether a merger leads to a monopoly or not. Therefore the cap of Rs. 1,000 crores of assets on mergers between single entities and of Rs.4,000 crores in case of groups should be done away with. The Competition Act, 2002, s. 6(2) gives enterprises and persons the option to notify the CCI of the proposed combination. However, it is subject to s. 6(1), which renders the proposed combination, if it has an adverse effect on competition, void ab initio. Furthermore, pursuant to the Competition Act, 2002, s. 20(1), the CCI can inquire into any combination, suo moto or upon receiving information, within one year from when such combination takes effect. The pre-notification option granted to enterprises under s. 6(2) and the power of the CCI to inquire suo moto under s. 20 may lead to an anomalous situation, since companies that do not exercise their option under s. 6(2) are not automatically exempt from the investigations of the CCI.



Company ‘A’ merges with company ‘B’. A and B do not consider their merger anti-competitive even though they have an asset value and turnover above the prescribed threshold limit. The two companies do not notify the CCI about their merger. The companies invest a large amount on their merger within the first six months. The CCI on receipt of information from a competitor carries out an inquiry and passes a judgment within one year of the merger, that the merger has an adverse effect on competition and must not take effect. In this case, the two merged companies will incur huge losses as a result of the CCI’s order.

All these inconsistency may be removed by making pre-notification of combinations mandatory for all enterprises that have the prescribed asset value and turnover. Competition Act, 2002, s. 6 refers to ss. 29, 30 and 31, which provide the procedure for investigation into the combination by the CCI. By virtue of s. 29(1), the CCI may issue a notice to the parties to a combination that the CCI considers anti-competitive, to show cause against an investigation into the combination. Under s. 29(2), the CCI may require the parties to a combination to publish the details of the combination. Pursuant to s. 29(3), the CCI may invite any person or member of the public affected or likely to be affected by the combination, to file a written objection. This provision gives the CCI excessive discretion to decide as to which persons are eligible to be invited to file their objection against the combination. The provision must, therefore, be amended to allow anyone affected by the combination to file a written objection against the combination.

Pursuant to the Competition Act, 2002, s. 31(2), the CCI may direct that the combination will not take place, if it is of the opinion that the combination will have an appreciable adverse effect on competition. S. 20(4) sets out the factors that the CCI must consider while determining whether a combination has an adverse effect on competition.

Under s.31(3), the CCI may also propose a modification to such combinations. However, the CCI must pass an order with respect to the combination within 90 days of the publication under s. 29(2), failing which, the combination is deemed to be approved by the CCI. And even though it might be asking for too much from the ‘already struggling to keep pace jury’, the 90 day rule if reduced to 30 days, might prevent unnecessary delays.


International Transactions

Competition Act, 2002, s. 32 permits the CCI to inquire into agreements, abuse of dominant position, or combinations taking place outside India, if they have or are likely to have an appreciable adverse effect on competition in the relevant market in India. As a result of a recession in the global market, a large number of companies are merging with other companies in order to consolidate their position. Consider a situation where there is a merger between tw o enterprises abroad, such as Compaq and Hewlett Packard, which have subsidiaries in India. The CCI will have the power to inquire into the combination abroad by virtue of s. 32. Therefore, international companies having subsidiaries in India will have to adhere to the provisions of the Competition Act, 2002, ss. 3, 4 and 5 when enacted. Referring to the above instance of Hewlett Packard and Compaq, if their asset value and turnover exceed the prescribed limits, they will have to notify the CCI about their combination.

Some critics of this enactment feel that the Committee’s fear of mergers seems to stem from the fear that they would lead to monopolies that may hamper competition. But there seems to be no reason why these may not be considered by the high courts, which necessarily have to approve mergers under the Companies Act, 1956.

Hence instead of an additional set of procedures before the Competition Commission that may lead to a delay, these issues may be addressed in a holistic and cohesive manner by the high court, where the commission may play an advocacy role. However, it is easy to point to the Microsoft’s case in the US in support of the Committee’s recommendation for the creation of a regulatory authority to prevent abuse of dominance.



Microsoft neatly executed the ‘embrace, extend and extinguish’ policy, which proved lethal to its friends and foes alike. The way the computer giant altered its programming language like Java to suit the Windows environment or the encryption language used by servers or the Windows 2000 system created an empire for windows, in which everything works best only if it is a Windows product.

And though India might not have a giant like Microsoft which requires a ten member committee today, it must always be remembered that precaution is better than cure and even though as of date, the competition law is not well established in India, the competition law is indeed forward looking because it keeps a watch on the behavior and the practices of firms such that no firm may abuse the freedom given to them and in the process create an economy which will enable all to enjoy the fruits of development through vigorous competition.



International examples can be of some assistance for the purpose of serving a broad guideline or a roadmap. They cannot be definitive for other jurisdictions where the legal systems are differently positioned. The routes taken by Europe and US need not be necessarily followed by India. They can be digressed from and other alternatives more suitable to the mores and needs of socio-economic scenario of India can be followed. In fact, the legislative and administrative mechanism for cross border merger control as prevalent in US and Europe can serve little purpose while determining the competition policy for India.

Practical experience has shown that the majority of mergers notified are cleared quite quickly. The Competition Act, 2002 itself lays down stringent time lines – the Commission must take a view within 90 working days from the day it has obtained complete information failing which the merger is deemed to have been approved . Further, the Commission may initiate suo-motu enquiry into merger only within a period of one year from the day the merger has taken effect . These provisions adequately dispel any apprehension of inordinate delay or unbridled scrutiny into mergers Further global experience suggests that hardly four per cent of the all notified mergers are taken up for a detailed scrutiny by the competition authorities, of which 50 per cent are approved, and a further 25 per cent are approved with modifications.

Even the proposed merger of the two largest steel producers in the world did not attract many competition concerns. Whereas the US authorities have already cleared the proposed merger, recent news reports indicate that the controversial Mittal Steel/ Arcelor takeover bid which has been notified to the European Commission will be cleared ‘due to the largely complementary nature of the combined group’ .In other cases, where the authority comes to the conclusion that a proposed merger would lead to an appreciable adverse effect on competition, it may yet allow the merger but subject to one of several directions including divestment, requiring access to essential inputs/ facilities, dismantling exclusive distribution agreements, removing no -competition clauses, imposing price caps or other restraints on prices, refrain from conduct inhibiting entry, and so on.

The Commission needs to swing into action undertaking substantial capacity building to implement the extra territorial jurisdiction that is embodied in the Competition Act, 2002. As India integrates at a fast pace with the global economy there is a need to ensure international co-operation to tackle cross border challenges.

Combinations are economic enhancing trade practices hence they necessarily need to be encouraged by all so as to ensure ultimate benefit to the end consumers. However, there is a flip side of it too. Today’s combination may be tomorrow’s dominance and though dominance is not frowned upon under the CA but its abuse surely is. Abuse of Dominance (AoD) is mandatorily prohibited under the law. Therefore, every acquirer (not the target) has to be Competition Law Compliant even post combination and has to remain so forever if it desires to remain in healthy business practices. Except sovereign functions and functions relating to Atomic Energy, Space Research, Defence and Currency – all commercial activities of the departments of Union and States and their statutory bodies come within the ambit of the CA, which warrants the policy makers to seriously consider taking suitable steps before it is too late. Likewise, any department of a government is also a procurer of goods and services even from a non-government agency – hence it too may fall prey to an anti-competitive practice of a private supplier and the law does not preclude it to refer such matters, if any, to the CCI against such private supplier.

Therefore, private – public participation is the need of the hour if one is serious about seeing the Competition Law in its full steam. The CCI too needs to have appropriate professional manpower to understand and then implement the provisions of the law effectively. Professional and academic institutes too need to upgrade their academic curricula so as to provide the future manpower to all stakeholders and help implement the intents and purposes of this legislation for overall economic and social well being of the country.

– By Rohit Choudhary

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2 Comments on "Effect of Compitition Law on Mergers and Acquisition"

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avesta kurda
avesta kurda
3 years 2 months ago

please I want some source about merge company in India act 1956 , monopoly Indian act 2002,and cases about it, because I am master student in company act, and no one help me, please can you help me??????? thanks

Amit Singh
4 years 11 months ago

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