DISCLAIMER

This booklet is published as part of the Competi-

tion Advocacy and Awareness programme of the
Competition Commission of India (the Commis-
sion). Its contents should, in no way, be treated
as official views of the Commission. Readers are
advised to carefully study the Competition Act,
2002 (“Act”), as amended, and the Competition
Commission of India (Procedure in regard to the
transaction of business relating to combinations)
Regulation, 2011 (“Combination Regulations”),
seek legal advice, wherever necessary.
 COMBINATIONS
INTRODUCTION

The Competition Act, 2002 (as amended), [the Act], follows the
philosophy of modern competition laws and aims at fostering competition
and protecting Indian markets against anti-competitive practices. The Act
prohibits anti-competitive agreements, abuse of dominant position and
regulates combinations (mergers and acquisitions) with a view to ensure
that there is no adverse effect on competition in India. The provisions of
the Act relating to regulation of combinations have been enforced with
effect from 1st June, 2011.1

WHAT IS COMBINATION?

Broadly, combination under the Act means acquisition of control,

shares, voting rights or assets, acquisition of control by a person over
an enterprise where such person has direct or indirect control over
another enterprise engaged in competing businesses, and mergers and
amalgamations between or amongst enterprises when the combining
parties exceed the thresholds set in the Act. The thresholds are specified
in the Act in terms of assets or turnover in India and outside India.

Entering into a combination which causes or is likely to cause an

appreciable adverse effect on competition within the relevant market in
India is prohibited and such combination shall be void.

THRESHOLDS FOR COMBINATIONS UNDER THE ACT

India is one of the fastest growing economies in the world. The growth
process is driven both by organic and inorganic (through the mergers
and acquisition route) growth of enterprises. It is neither feasible nor
advisable to review all the mergers and acquisitions. It is natural to
presume that in the case of small size combinations there is less
likelihood of appreciable adverse effect on competition in markets in

See, Central Government notification S.O. 479(E) dated 4th March, 2011.
1

2 COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS

India. The Act provides for sufficiently high thresholds in terms of
assets/turnover, for mandatory notification to the Commission.

The current thresholds for the combined assets/turnover of the

combining parties are as follows:

Individual: Either the combined assets of the enterpris-

es are more than 1,500 crores in India or the combined
turnover of the enterprise is more than 4,500 crores in
India. In case either or both of the enterprises have assets/
turnover outside India also, then the combined assets of the
enterprises are more than US$ 750 millions, including at least
750 crores in India, or turnover is more than US$ 2250 mil-
lions, including at least 2,250 crores in India.

Group: The group to which the enterprise whose control,

shares, assets or voting rights are being acquired would belong
after the acquisition or the group to which the enterprise re-
maining the merger or amalgamation would belong has either
assets of more than 6000 crores in India or turnover more
than 18000 crores in India. Where the group has presence in
India as well as outside India then the group has assets more
than US$ 3 billion including at least 750 crores in India or turn-
over more than US$ 9 billion including at least 2250 crores in
India.

The term Group has been explained in the Act. Two enterprises
belong to a “Group” if one is in position to exercises at least 26
per cent voting rights or appoint at least 50 per cent of
the directors or controls the management or affairs in the
other2 . Vide notification S.O. 481 (E) dated 4th March, 2011, the
government has exempted “Group” exercising less than fifty per
cent of voting rights in other enterprise from the provisions of
section 5 of the Act for a period of five years.

Explanation (b) to section 5 of the Act.

2

COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS 3

 In exercise of the powers conferred by clause (a) of section 54 of
the Competition Act, 2002 (12 of 2003), the Central Government,
in public interest, hereby exempts an enterprise, whose control,
shares, voting rights or assets are being acquired has either as-
sets of the value of not more than 250 crores in India or turn-
over of not more than 750 crores in India from the provisions of
section 5 of the said Act for a period of five years.

The above thresholds are presented in the form of a table below:

APPLICABLE TO ASSETS TURNOVER

In India Individual 1,500 cr. 4,500 cr.
Group 6,000 cr. 18,000 cr.
ASSETS TURNOVER
Minimum Minimum Indian
Indian Component out of
In India and Total Total
Component Total
outside
Individual parties $750 m 750 cr. $2,250 m 2,250 cr
Group $3 bn. 750 cr. 9 bn. 2,250 cr.

1 Crore = 10 million

The turnover shall be determined by taking into account the

values of sales of goods or services. The value of assets shall be
determined by taking the book value of the assets as shown in the
audited books of account of the enterprise, in the financial year
immediately preceding the financial year in which the date of proposed
combination falls, as reduced by any depreciation. The value of assets
shall include the brand value, value of goodwill, or Intellectual Property
Rights etc. referred to in explanation (c) to section 5 of the Act.

4 COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS

COMBINATION NOTICE
The review process for combination under the Act involves
mandatory pre-combination notification to the Commission. Any
person or enterprise proposing to enter into a combination shall give
notice to the Commission in the specified form disclosing the details of the
proposed combination within 30 days of the approval of the propos-
al relating to merger or amalgamation by the board of directors or of
the execution of any agreement or other document in relation to the
acquisition, as the case may be. In case, a notifiable combination is not
notified, the Commission has the power to inquire into it within one year
of the taking into effect of the combination.
The Commission also has the power to impose a fine which may
extend to one per cent of the total turnover or the assets of the
combination, whichever is higher, for failure to give notice to the
Commission of the combination.
ACQUISITION OR FINANCING FACILITY BY PFIs, VCFs Etc.
In case of share subscription or financing facility or any acquisition,
inter alia, by a public financial institution, foreign institutional inves-
tor, bank or venture capital fund, pursuant to any covenant of a loan
agreement or investment agreement, details of such acquisition are
required to be filed with the Commission within seven days from the date
of acquisition.

TIME LIMIT FOR GIVING NOTICE TO THE COMMISSION

Any person or enterprise proposing to enter into a combination
shall notify the Commission in the specified form disclosing the details
of the proposed combination within 30 days of the approval of such
proposal by the board of directors or of the execution of any agreement
or other document.
The proposed combination cannot take effect for a period of 210 days
from the date it notifies the Commission or till the Commission passes
an order, whichever is earlier. If the Commission does not pass an order
during the said period of 210 days the combination shall be deemed

COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS 5

to have been approved. The draft regulations propose to dispose of
notifications within 30 days in respect of Combination, which, in the opin-
ion of the Commission, has little or no potential for appreciable adverse
effect on competition in Indian markets.

PROCEDURE FOR INVESTIGATION OF COMBINATIONS

As per the Combination Regulations, the Commission shall form
its prima facie opinion as to whether the combination is likely to cause
or has caused appreciable adverse effect on competition within the
relevant market in India within 30 days from the receipt of the notice. If the
Commission is prima facie of the opinion that a combination has caused
or is likely to cause adverse effect on competition in Indian markets, it
shall issue a notice to show cause to the parties as to why investigation
in respect of such combination should not be conducted. On receipt
of the response, if Commission is of the prima facie opinion that the
combination has or is likely to have appreciable adverse effect on
competition, the Commission shall deal with the notice as per the
provisions of the Act.

INQUIRY INTO COMBINATIONS

Combination evaluation involves the following process:
(a) Identification of the relevant market, consisting of relevant product
market and relevant geographic market
(b) Consideration whether the Combination has appreciable adverse effect
on competition in the relevant market in India
(c) Approval, rejection, or approval with modification of the Combina-
tion
Identification of the relevant market
The Act envisages appreciable adverse effect on competition in
the relevant market in India as the touchstone. The concept of relevant
market is clearly defined in the Act. It consists of the relevant product
(including goods and services) market and the relevant geographic
market.

6 COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS

 The relevant market means “the market that may be determined
by the Commission with reference to the relevant product market or the
relevant geographic market or with reference to both the markets”. The
Act lays down the factors3 , any one or all of which shall be taken into
account by the Commission while defining the relevant product/geo-
graphic market as the case may be.
Relevant product market is defined in terms of substitutability of
products. It means “a market comprising all those products or services
which are regarded as interchangeable or substitutable by the consumer,
by reason of characteristics of the products or services, their prices and
intended use.”
Relevant geographic market is defined in the Act in terms of “the
area in which the conditions of competition for supply of goods or
provision of services or demand of goods or services are distinctly
homogenous and can be distinguished from the conditions prevailing in
the neighbouring areas”.
EVALUATION OF ‘APPRECIABLE ADVERSE EFFECT ON COMPETITION’
The Act envisages appreciable adverse effect on competition in the
relevant market in India as the criterion for regulation of combinations.
In order to evaluate appreciable adverse effect on competition, the Act
empowers the Commission to evaluate the effect of Combination on the
basis of factors mentioned in sub section (4) of section 20. These factors
are indicated in the table below:

COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS 7

 Factors to be considered by the Commission while evaluating
appreciable adverse effect of Combinations on competition in the
relevant market

(sub-section (4) of section 20 of the Act)

(a) actual and potential level of competition through imports in the
market;
(b) extent of barriers to entry into the market;
(c) level of concentration in the market ;
(d) degree of countervailing power in the market;
(e) likelihood that the combination would result in the parties to the
combination being able to significantly and sustainably increase
prices or profit margins;
(f) extent of effective competition likely to sustain in a market;
(g) extent to which substitutes are available or are likely to be avail able
in the market;
(h) market share, in the relevant market, of the persons or enterprise in
a combination, individually and as a combination;
(i) likelihood that the combination would result in the removal of a
vigorous and effective competitor or competitors in the market;
(j) nature and extent of vertical integration in the market;
(k) possibility of a failing business;
(l) nature and extent of innovation;
(m) relative advantage, by way of the contribution to the economic
development, by any combination having or likely to have
appreciable adverse effect on competition;
(n) whether the benefits of the combination outweigh the adverse
impact of the combination, if any.

8 COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS

REMEDIES UNDER THE ACT
Most of the Possible/anticipated anti-competitive effects of Combi-
nation can be remedied without holding back the Combination itself.
Combination analysis consists of assessment of the likely anti-com-
petitive effect of the merger under analysis and how such effect could be
minimized or eliminated. Prohibition is considered only when remedies
are either not available or not feasible.
Remedies can be either structural or behavioural. Although
behavioural remedy is preferable, its implementation and monitoring is
difficult. On the other hand, structural remedy would entail requiring the
combining enterprises to make structural adjustment which could be in
the form of sale of assets, divestment of a division or a unit or creation or
strengthening of competitors through, for example, licensing of an Intel-
lectual Property Right (IPR).
APPEALS
The Central Government has notified a Competition Appellate
Tribunal (COMPAT) to hear and dispose of appeals against any direction
issued or decision made or order passed by the Commission under specified
sections of the Act, such as orders relating to notification of combination,
inquiry by the Commission and penalties.
An appeal has to be filed within 60 days of receipt of the order /
direction / decision of the Commission.

COMPETITION ACT 2002 : PROVISIONS RELATING TO COMBINATIONS 9

 COMPETITION COMMISSION OF INDIA
Sh. Ashok Chawla
Chairperson,
E-mail: [email protected]
Tel No. 91-11-23704647
Fax No. 23704649
Sh. H.C. Gupta Sh. R. Prasad Dr. Geeta Gouri
Member, Member, Member,
E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]
Tel No. 91-11-23704630 Tel No. 91-11-23704633 Tel No. 91-11-23704634
Fax No. 23704631 Fax No. 23704632 Fax No. 23704635
Sh. Anurag Goel Sh. M.L. Tayal Sh. S.N Dhingra
Member, Member, Member,
E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]
Tel No. 91-11-23704641 Tel. No. : 91-11-23704643 Tel. No. : 91-11-23704638
Fax No. 23704642 Fax No. : 91-11-23704644 Fax No. : 91-11-23704639
Sh. A. K. Chauhan Sh. S.L. Bunker
Director-General, Secretary,
Email: [email protected] E-mail: [email protected]
Tel. No. : 91-11-26172895, 26701671 Tel. No. : 91-11-23704651
Fax No. : 91-11-26107428 Fax No. : 23704652
Dr. Seema Gaur Sh. R.N. Sahay Sh. Praveen Kumar Purwar
Adviser (Eco) Adviser (Eco) Adviser (FA),
E-mail: [email protected] E-mail: [email protected] Email: [email protected]
Tel. No: 91-11-23704645 Tel. No. 91-11-23704653 Tel. No, : 91-11-23752380

Sh G R Wadhwa Sh. Sanjay Bahadur Sh. P.K. Singh

Adviser (FA), Adviser (Eco), Adviser (Law)
Email: [email protected] E-mail: [email protected] E-mail: [email protected]
Tel. No. 91-11-23752382 Tel No. 91-11-23704681 Tel No. 91-11-23704682

REGULATIONS NOTIFIED BY COMPETITION COMMISSION OF INDIA

The Competition Commission of India (Procedure for Engagement of Experts and

Professionals) Regulations, 2009; ( No. 1 of 2009)
The Competition Commission of India (General) Regulations, 2009 ;
( No. 2 of 2009)
The Competition Commission of India (Meeting for Transaction of Business)
Regulations, 2009; ( No. 3 of 2009)
The Competition Commission of India (Lesser Penalty) Regulations, 2009;
(No. 4 of 2009)
The Competition Commission of India (Determination of Cost of Production)
Regulations, 2009; ( No. 5 of 2009)
The Competition Commission of India (General) Amendment Regulations, 2009;
(No. 6 of 2009)
The Competition Commission of India (Manner of Recovery of Monitory Penalty)
Regulations, 2011
Competition Commission of. India (Procedure in regard to the Transaction of business
relating to combination) Regulation 2011
Above regulations are available on the website of the Commission : www.cci.gov.in