Authored By: Juhi (LL.B), Law Centre 2, Faculty of Law, Delhi University, India, Research Writer at Law Audience®,
Edited By: Mr. Varun Kumar, Advocate, Himachal, Punjab & Haryana and Founder at Law Audience
INTRODUCTION
In the era of liberalisation, privatization and globalization, contemporary market economies have featured by Mergers, acquisitions, and amalgamations. Though Corporate restructuring mechanisms of such a kind promote efficiency and innovation also economies of scale but they also carries significant dangers to competitive market structures as it concentrates economic power in the hands of a few .The Competition Act, 2002 was enacted to address these concerns by preventing practices that have an appreciable adverse effect on competition, while simultaneously promoting consumer welfare and economic development.
One of the most crucial features of the Act is its framework for the regulation of combinations. There exists a clear cut distinction between the earlier Monopolies and Restrictive Trade Practices Act and the Competition Act. Unlike the earlier Monopolies and Restrictive Trade Practices Act, 1969, which focused primarily on size and control, the Competition Act adopts an effects-based approach, examining whether a combination is likely to harm competition in the relevant market. This paper examines the legal framework governing combinations under the Competition Act, 2002, the procedural and substantive aspects of merger control, key judicial and decisional developments, and the essential elements that guide competition assessment in India.
COMBINATIONS: MEANING AND SCOPE:
The concept of a “combination” is defined under Section 5 of the Competition Act, 2002. It comprises of major three categories of transactions which includes:
(a)acquisition of control, shares, voting rights, or assets of an enterprise;
(b) acquisition of control by a person over an enterprise where such person already has control over another enterprise engaged in identical or similar business; and
(c) merger or amalgamation between or among enterprises.[1]
The Act prescribes asset-based and turnover-based thresholds, at the domestic as well as at the global levels. It is to determine whether a transaction qualifies as a combination. Only transactions crossing these thresholds are subject to scrutiny by the Competition Commission of India (CCI). This threshold-based approach ensures that regulatory oversight is confined to transactions with the potential to materially affect market competition, thereby avoiding unnecessary intervention in smaller transactions.
OBJECTIVE BEHIND REGULATING COMBINATIONS
The regulation of combinations under the Competition Act primarily focuses at preventing transactions that either cause or are likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India. Section 6(1) of the Act expressly prohibits such combinations, while Sections 6(2) and 6(2A) prescribe the mandatory notification and suspensory regime.[2]
The rationale behind this framework lies in the recognition that combinations can both enhance and restrict competition. On one hand, they may result in efficiency gains, technological advancement, and improved consumer outcomes. On the other, they may lead to market foreclosure, elimination of potential competitors, and abuse of dominance. The Act therefore adopts a balanced approach, permitting combinations that are competitively benign or beneficial, while restricting those that harm market competition.
ROLE AND POWERS OF THE COMPETITION COMMISSION OF INDIA
The Competition Commission of India is the statutory authority entrusted with the enforcement of competition law in India. Under Section 18 of the Act, the CCI is mandated 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.[3] In relation to combinations, the CCI has wide-ranging powers to inquire into notified transactions, call for information, conduct investigations, and assess their impact on competition. Under Section 31, the Commission may approve a combination, approve it subject to modifications, or prohibit it altogether if it is found to cause AAEC. The power to impose modifications shows the Commission’s preference for behavioural or structural remedies over outright prohibition, thereby preserving pro-competitive aspects of transactions wherever possible.
NOTIFICATION AND PROCEDURAL FRAMEWORK
The Competition Act establishes a compulsory pre-merger notification regime for combinations that cross the prescribed thresholds. Parties to a combination are required to notify the CCI prior to giving effect to the transaction. The detailed procedure for such notification is laid down in the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.[4]
Upon receipt of a notification, the CCI undertakes a two-stage review process. In Phase I, the Commission conducts a prima facie assessment to determine whether the combination is likely to cause AAEC. If no such concern is found, the transaction is approved. If the Commission forms a prima facie opinion that the combination may cause AAEC, it initiates a Phase II investigation, which involves a detailed analysis of market conditions, competitive constraints, and stakeholder responses.
The Act also provides for a deemed approval mechanism, whereby a combination is deemed to be approved if the CCI does not pass an order within the statutory time limit. This provision ensures procedural certainty and aligns Indian merger control with international best practices.
SUBSTANTIVE TEST: APPRECIABLE ADVERSE EFFECTS ON COMPETITION
The substantive test applied by the CCI in assessing combinations is whether the transaction causes or is likely to cause an appreciable adverse effect on competition in India. Section 20(4) of the Act enumerates a non-exhaustive list of factors that the Commission must consider in this assessment. These include market share, degree of concentration, barriers to entry, countervailing buyer power, likelihood of foreclosure, and the extent of innovation.[5] A crucial step in this analysis is the determination of the relevant market, comprising the relevant product market and the relevant geographic market. The CCI examines demand-side substitutability, supply-side constraints, and consumer preferences to delineate the relevant market. Once the market is defined, the Commission assesses the competitive landscape both before and after the combination. Importantly, the Act also requires consideration of efficiency-related factors, such as accrual of benefits to consumers, improvements in production or distribution, and promotion of technical and economic development. This reflects an effects-based and welfare-oriented approach rather than a rigid focus on market structure alone.
KEY CASE LAWS SUPPORTING REGULATION OF COMBINATIONS
Indian jurisprudence on combinations has evolved significantly through decisions of the CCI and appellate bodies. In Competition Commission of India v. Thomas Cook (India) Ltd., the Supreme Court recognised the importance of assessing the competitive impact of mergers beyond mere market shares, emphasizing the need for an effects-based analysis.[6]
In CCI v. UltraTech Cement Ltd., the Commission examined a series of acquisitions and held that even minority acquisitions could amount to combinations if they confer strategic control or influence, thereby affecting competition.[7]This decision underscored the broad interpretation of “control” under the Act.
In Sun Pharmaceutical Industries Ltd. V. Competition Commission of India, the Bombay High Court upheld the CCI’s power to impose structural remedies to address competition concerns arising from a merger in the pharmaceutical sector.[8]The case highlighted the Commission’s remedial discretion and its role in preserving market competition.
In the same manner, in Schneider Electric India Pvt. Ltd. V. Competition Commission of India, the appellate authority emphasised the importance of timely and accurate notification, holding that failure to notify a notifiable combination attracts penalties irrespective of intent.[9]This case reinforced the mandatory nature of the notification regime.
EXEMPTIONS AND SAFE HARBORS
The Competition Act and the Combination Regulations provide for certain exemptions to reduce regulatory burden and promote ease of doing business. Transactions falling below the de minimis thresholds are exempt from notification requirements. In addition, certain intra-group restructurings and acquisitions made solely as an investment, without the intention of acquiring control, are granted limited exemptions.[10] The Central Government has also exercised its power to exempt specific classes of transactions from the application of Sections 5 and 6, recognizing the need for flexibility in a dynamic economic environment.
CONCLUSION
The regulation of combinations under the Competition Act, 2002 constitutes a vital component of India’s competition law regime. Through adoption of an effects-based approach centered on the concept of appreciable adverse effect on competition, the Act strikes a careful balance between facilitating economic growth and preventing market distortions. The Competition Commission of India has played a pivotal role in shaping merger control jurisprudence through reasoned decisions, remedial interventions, and procedural discipline. As Indian markets continue to expand and integrate with global economies, particularly in digital and technology-driven sectors, the regulation of combinations ensures even greater significance. Continuous refinement of legal standards, economic analysis, and enforcement mechanisms will be essential to ensure that the combination control framework remains effective, predictable, and aligned with the broader objectives of competition policy and consumer welfare.
[1] Competition Act, No. 12 of 2003, § 5 (India).
[2] Id. § 6.
[3] Id. § 18.
[4] Competition Comm’n of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011.
[5] Competition Act, No. 12 of 2003, § 20(4) (India).
[6] Competition Comm’n of India v. Thomas Cook (India) Ltd., (2018) 14 S.C.C. 549 (India).
[7] Competition Comm’n of India v. UltraTech Cement Ltd., C-2013/05/122, SCC OnLine CCI ¶¶ 310–320 (June 19, 2018).
[8] Sun Pharm. Indus. Ltd. V. Competition Comm’n of India, 2016 SCC OnLine Bom 412.
[9] Schneider Elec. India (P) Ltd. V. Competition Comm’n of India, 2019 SCC OnLine NCLAT 385.
[10] Ministry of Corporate Affairs, Notification S.O. 988€ (Mar. 29, 2017) (India) (De Minimis Exemption).
