The Mergers, amalgamations and acquisitions in India are regulated by the
Competition Commission of India (CCI). CCI is the statutory authority
responsible for reviewing combinations and assessing whether or not they cause
or are likely to cause an appreciable adverse effect on competition within the
relevant market(s) in India.
It does its work according to the rules and regulations set under the
Competition Act, 2002. The Competition Act is the principal legislation that
regulates combinations (acquisitions, mergers, amalgamations and de-mergers) in
India. CCI approval is required for combinations where the parties involved
exceed the assets/turnover thresholds set out in section 5 of the Competition
Act. This section along with section 6 of the Competition Act, deal with the
regulation of combinations, have been in force since 1 June 2011.
The CCI has to follow a set of procedures which have been laid down. These
procedures are set in:
# The Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations 2011 (as last
amended on 7 January 2016) (Combination Regulations).
# The Competition Commission of India (General) Regulations 2009 (General
However, most times it is not enough to just follow these procedures before
approval of a merger or amalgamation. The CCI has to keep in mind certain rules
and regulations, and different criteria have to be considered before a merger
can be approved. These are so as to not hamper the competition in the market.
In this paper we will attempt to understand the criteria.
This paper will concern itself with two research questions.
The questions are:
1) What is the concept of Competition Regulation?
2) What are the criteria considered by the CCI before approval of a
Nature of the Research Paper:
This paper will be a doctrinal paper, i.e. the information gathered is from
journals and articles and other already published sources. The sources that have
been used will be given due credit in this paper.
Objective of the Research Paper:
The objective of the research paper is to understand what the criteria
considered by the CCI are, and why they are needed to be considered before
approval of any merger/amalgamation/acquisition. These objectives have been
chosen because of the gradual increase in mergers and rapid spread of intense
competition in businesses in India.
Concept of Competition Regulation:
The Competition Act, 2002 was enacted by the Parliament of India to replace The
Monopolies and Restrictive Trade Practices Act, 1969. This Legislation was the
basis on which the CCI was established. The main aim of the CCI under this act
is to stop unwanted monopolies from emerging in the Indian economy.
It is a tool to implement and enforce competition policy and to prevent and
punish anti-competitive business practices by firms. It is also often used to
stop unnecessary Government influence in the Indian Economy. Competition laws is
equally applicable on written as well as oral agreement, arrangements between
the enterprises or persons.
This act was made to ensure that enterprises, persons or associations of
enterprises, any other such organization specified in the act or by the CCI,
shall not enter into agreements in respect of any part of economic activity
including but not limited to production, supply, distribution, storage,
acquisition or control of goods or provision of services, which may cause, or
are likely to cause an“appreciable adverse impact”on competition in India.
“Appreciable adverse impact”in this case means a large number of implications
like restricting any or all other companies or entities in the same field from
carrying out any economic activity, to establishing a monopoly in the industry.
Any such agreement made would consequently be considered void and stopped from
operation with immediate effect.
The act was also made to restrict abuse of dominant positionby any
enterprise, which is in a position to impose directly or indirectly unfair or
discriminatory conditions in purchase or sale of goods or services, or restricts
production or technical development, or create any form of hindrance in entry of
new operators to the prejudice of consumers.
The provisions relating to abuse of dominant position requires determination of
dominance of the concerned in the relevant market.
The act was also designed to regulate the operation and activities of
combinations (which means acquisition, mergers or amalgamations). Combination
that exceeds the threshold limits specified in the act in terms of assets or
turnover, any of which factors causes or is likely to cause any adverse impact
on competition of the relevant market in India, can be scrutinized by the
Commission, and ultimately stop (if no other option exists) such combination
from coming into existence.
The main concept of regulating the competition in the Indian economy came from
wanting to give not only the companies in the industries a fair chance in their
relevant markets but also from wanting to give the consumers an equally fair
chance at getting quality products at reasonable price ranges.
Criteria Considered by CCI:
The CCI will consider a few criteria before sanctioning or approving a
combination. These criteria are:
# What will be the actual level of imports in the market after the combination
# The total market share of the new entity formed through the combination the
concentration of market share in the entity.
# Whether other competitors will make any unilateral effort to remain in the
competition after the combination takes place, or will all efforts stop.
# Whether the resulting entity from the combination will create barriers to
entry in the relevant market. Or even if they will stop other competitors
# In case of horizontal mergers, whether there is any overlap in the markets
and other factors.
# The degree of countervailing in the market after the combination.
# Whether or not there is a chance of alternative suppliers and if there are
substitute products existing in the market.
# The likelihood under which it is possible for the combination of getting a
substantially large profit after combination.
# If the mere existence of the combination will curb other competition.
# Possibility of a failing business.
# The nature and extent of innovation coming into the market after the
# Whether or not the benefits of the combination outweigh the adverse effects
These are just some of the factors which have to be very carefully considered by
the CCI before approving any combination. This is because it falls on to the CCI
to ensure that no one exploits or tries to control the economy to suit their
# Vodafone - Idea Merger-After the advent of the telecommunication service of
Reliance Jio, many telecom companies have been forced to slash their prices and
to bring about new offers.
Along with this is comes the merger of telecom giants Vodafone and Idea.
Individually both these companies had dominant position in the market. Thus, the
question that arises is why this combination was allowed by the Competition
Commission of India. The answer to this lies within the analysis of the
industry. After looking at the position of the industry after Jio, it could be
seen that Jio was also in a position to abuse dominant position in the market.
The merger was allowed to ensure that competition continues.
# Tata Steel - Bhushan Steel Takeover-Tata is already a giant in the steel
industry and has near monopoly in most sectors of the steel market. Bhushan
steel was the leading company in the field of auto-grade steel.
Though having stable operations, it was a non-performing asset. It was up for
takeover. Tata Steel won the bid and then this has become known as Tata Steel
BSL. This takeover has allowed Tata Steel to gain dominant position in the one
steel field where it was not a leader. This opens avenue for a near monopoly in
the steel market. Yet, the CCI allowed this takeover, because not only did it
allow the economy to continue, but increased revenue in the market.
The criteria which the enterprises have to fulfil have been laid down after
careful consideration. These are the requirements, which only when have been
complied with can a combination be made.
These criteria are there to ensure that the free economy and trade of India are
not hampered by any enterprises enjoying maximum sway over the economy or in
their relevant market coming together.
It is only after a combination passes the scrutiny of the CCI, and only if the
CCI is reasonably satisfied that the competition of the economy will not be
affected in any way, will they approve a combination.
This actually ensures that the CCI has a huge say in which companies can be
merged, and only after their assent that any combination can be formed. However,
the main reason of such harsh criteria is to ensure that the economy and trade
can grow instead of being hampered due to a very powerful combination growing
unchecked in the market.
Online article- Merger control in India: overview-byShweta Shroff ChopraandToshit
Shandilya,Shardul Amarchand Mangaldas & Co
The Competition Act, 2002
Section 4 (explanation) of Competition Act, 2002
Section 4 of Competition Act, 2002
Criteria from Section 20(4) of Competition Act, 2002