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Module V - Regulation of Combinations:

Combinations: Merger, Acquisition, Amalgamation and Takeover - Horizontal, Vertical and
Conglomerate Mergers - Combinations covered under the Competition Act, 2002 – Regulations
– Penalties - Regulation of Combinations under EU, UK and US Laws - Controls over mergers
amalgamation and take-overs – Securities and Exchange Board of India, Reserve Bank of India,
National Company Law Tribunal (NCLT) and Competition Commission - Enforcement
Mechanisms under the Competion Act, 2002 - Competition Advocacy

COMBINATION [pdf]
Understanding Combination in Competition Law in India

The regulation of combination in competition law plays a pivotal role in ensuring fair business
practices and safeguarding consumer interests in India. Under the Competition Act, 2002,
combinations involving mergers, acquisitions, or amalgamations are closely monitored. This
article delves into the concept of combinations in competition law, the regulatory framework,
key provisions, and insights for businesses looking to navigate the complexities of this area.

What is a combination in competition law?

A combination, as per Section 5 of the Competition Act, 2002, refers to the acquisition of control,
shares, or assets of one or more enterprises by one or more persons or the merger/amalgamation
of enterprises. These combinations are subject to regulatory scrutiny to ensure that they do not
lead to anti-competitive outcomes in the market.

1. Types of Combinations Regulated by the Act

The Competition Act regulates three primary types of combinations:

1.​ Horizontal Combinations: These occur when businesses at the same production level
merge or acquire each other, usually involving similar goods or services.

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2.​ Vertical Combinations: This happens when companies at different production stages
within the same industry consolidate. It can create efficiencies but also lead to potential
monopolistic behaviors.
3.​ Conglomerate Combinations: This involves the merger or acquisition of companies
operating in unrelated business sectors. While these do not typically reduce competition,
they are still scrutinised to ensure no anti-competitive effects arise.
●​ Why Regulate Combinations?

Combinations have the potential to significantly alter market dynamics. Unchecked mergers and
acquisitions can:

1.​ Stifle Competition: A dominant market player resulting from a combination can suppress
competition, leading to higher prices.
2.​ Reduce Consumer Choices: If competitors are eliminated through mergers, consumers
may face fewer options.

Therefore, the Competition Commission of India (CCI) is responsible for regulating these
combinations, assessing whether they are likely to cause an appreciable adverse effect on
competition (AAEC) in the relevant market.

2. Key Provisions for Combination Regulation

The Competition Act, 2002 outlines a robust regulatory framework, with several provisions that
guide the regulation of combinations:

●​ Threshold Limits: The Act stipulates that combinations exceeding specific asset or
turnover limits must notify the CCI. As of now, the thresholds are:
1.​ Combined assets in India: INR 2,000 crore or more
2.​ Combined turnover in India: INR 6,000 crore or more

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●​ Anti-competitive Assessment: The CCI evaluates if the proposed combination will harm
competition. If there is a significant risk of market dominance or reduced competition,
the CCI may impose conditions or even reject the combination.
●​ Approval Process: The CCI has three possible courses of action:
1.​ Approve the combination without conditions
2.​ Approve the combination with conditions to mitigate any anti-competitive effects
3.​ Reject the combination if it is found to substantially reduce competition

Landmark Judgment on Combinations

A significant case illustrating the regulation of combinations is the CCI vs. Bengal Chemicals &
Pharmaceuticals Ltd. (2016). In this case, the CCI disapproved a merger after determining that it
would result in an AAEC in the market for quinine and its salts. This judgment highlights the
crucial role the CCI plays in maintaining a competitive market by scrutinising potential mergers
that could negatively affect competition.

Insights on Combinations and Competition Law

The regulation of combinations in competition law serves several important functions:

1.​ Promoting Fair Competition: The Act ensures that mergers and acquisitions do not
eliminate competition, which could otherwise lead to monopolistic behavior. It aims to
create a level playing field for businesses, benefiting the overall economy.
2.​ Encouraging Innovation: By preventing anti-competitive mergers, the Act fosters an
environment where businesses are incentivised to innovate and offer better products and
services to consumers.
3.​ Protecting Consumer Welfare: The ultimate goal of regulating combinations is to ensure
that consumers continue to benefit from competitive prices, better choices, and improved
quality. If unchecked, mergers could lead to inflated prices and reduced variety.

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The Road Ahead for Combination Regulations

As India’s economy grows, the importance of regulating combinations will continue to rise. The
CCI remains vigilant, ensuring that market structures do not tilt unfairly in favor of a few
dominant players. The regulatory framework is evolving, with updated guidelines and decisions
reflecting changes in business practices and competition concerns.

In light of this, businesses considering mergers or acquisitions must remain informed about the
latest developments in competition law to ensure compliance and avoid legal challenges.

Conclusion

The regulation of combinations under the Competition Act, 2002 is critical for preserving a fair
and competitive business environment in India. By adhering to the regulatory framework,
businesses can ensure that their mergers and acquisitions do not harm competition. Seeking
expert legal advice and conducting thorough market impact assessments are key steps in
navigating the complexities of competition law.

MERGERS & ACQUISITIONS UNDER THE COMPETITION ACT, 2002

INTRODUCTION

In the pursuit of globalisation, India has responded by opening up its economy, removing
controls and resorting to liberalisation. The natural corollary of this is that the Indian market
should be geared to face competition from within the country and outside. The Monopolies and
Restrictive Trade Practices Act, 1969 has become obsolete in certain respects in the light of
international economic developments relating more particularly to competition laws and there is
a need to shift our focus from curbing monopolies to promoting competition.

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Pursuant to the above philosophy the Government of India passed the Competition Act, 2002.
The Competition Act (hereinafter referred to as “Act”) seeks to ensure fair competition in India
by prohibiting trade practices which cause appreciable adverse effect on competition in markets
within India and, for this purpose, provides for the establishment of a quasi-judicial body to be
called the Competition Commission of India (hereinafter referred to as “CCI”) which shall also
undertake competition advocacy for creating awareness and imparting training on competition
issues.

One of the main components of the Act is the regulation of mergers and acquisitions. This
project seeks to critically analyze the provisions of the Act relating to the regulation of mergers
and acquisitions.

THE COMPETITION ACT, 2002

The Competition Act 2002 ("Act") has been introduced into Parliament in August and represents
the latest piece in the country's economic reform jigsaw. The Act will replace the current
Monopolies and Restrictive Trade Practices Act 1969 (hereinafter referred to as "MRTP Act").
Whilst the MRTP Act was designed to govern restrictive trade practices in the context of a closed
and centrally planned economy, the new Act draws upon concepts of competition law found in
more liberalized economies such as the US and EU. Of particular relevance to multinational
companies ("MNCs") operating in India is that the proposed new regulatory body, the
Competition Commission of India ("CCI"), will be empowered to scrutinise all mergers,
acquisitions and joint venture activity in India where the asset value of the parties involved is
more than Rs.1,000 crore within India or $500 million globally, or turnover is greater than
Rs.3,000 crore within India or $1,500 million globally.

The Act has four main components:

- Prohibition of Anti-Competitive Agreements;

- Prevention of Abuse of Dominance;

- Regulation of Mergers and Acquisitions;

- Establishment of the 10 members CCI.

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Prohibition of Anti-Competitive

Agreements (Section 3)

- Prohibits and voids any agreement which causes or is likely to cause an appreciable
adverse effect on competition in India.

- Contains presumption against agreements which indirectly or directly determine prices;

control production, supply, markets, technical development, investment or provision of services;
share markets or sources of production either by geographical allocation or types of goods or
services or market shares; or which either directly or indirectly result in bid rigging or collusive
bidding.

Prevention of Abuse of Dominance

(Section 4)

- Prohibits abuse of dominant position.

- An abuse of dominant position may consist of:

o Directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale

of goods or services, or setting prices in the purchase or sale (including predatory pricing) of
goods or services;

o Limiting or restricting the production of goods or provision of services or market therefore;

or limiting technical or scientific development relating to goods or services to the prejudice of
consumers;

o Indulging in practice or practices resulting in the denial of market access;

o Making conclusion of contracts subject to acceptance by other parties of supplementary

obligations which have no connection with the subject of such contracts;

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o Utilisation of a dominant position in one market to enter into, or protect, another market.

Regulation of Mergers and Acquisitions

(Section 5)

- Prohibits and voids any "combination" which causes or is likely to cause an appreciable
adverse effect on competition within the relevant market in India.

- The following thresholds apply for determining whether a merger or acquisition becomes a
"combination" subject to scrutiny:

o Enterprises with operations in India:

Rs.1,000 crore asset value or Rs.3,000 crore turnover;

o Enterprises with global operations:

$500 million asset value or $1,500 million turnover;

o Groups of companies with operations in India:

Rs.4,000 crore or Rs.12,000 crore turnover;

o Groups of companies with global operations:

$2 billion asset value or $6 billion turnover.

- An M&A deal which does not meet these thresholds but which may, however, result in an
adverse effect within the relevant market may still be voidable pursuant to section 3.

- Parties to a transaction have an option to seek an advance clearance from the CCI.
However, there is no mandatory requirement to obtain an advance ruling.

- The section contains an exemption for share subscriptions, financing facilities and
acquisitions by public financial institutions, banks and venture capital funds. However, these

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entities will be required to submit to the CCI details of such acquisitions along with information
on details of controls, circumstances for exercise of such control and consequences of default
arising out of any financing facility.

Competition Commission of India

(Section 7)

- Provides for establishment of a 10 member CCI with investigative and judicial powers.
The CCI will replace the current MRTP Commission.

- CCI authorised to inquire into whether a "combination" under section 5 has caused or is
likely to cause an appreciable adverse effect on competition in India. Any such inquiry must be
initiated within one year of the combination taking effect.

- CCI may also inquire into any action which is alleged to be in contravention of section 3
or section 4 on receipt of a complaint.

- CCI empowered to pass a range of orders including: directing an enterprise to discontinue

any agreement or practice (e.g. demerging); the imposition of fines from 3-10 percent of turnover
for the last three years; the modification of agreements; and an award of compensation to an
affected party.

PROHIBITION OF ABUSE OF DOMINANT POSITION

The Competition Act 2002 permits an enterprise to enjoy its dominant position, i.e., its position
of strength in a relevant market within and outside India, which enables it to operate
independently of competitive forces prevailing in the relevant market or affect its competitors,
consumers or relevant markets in its favor. Section 4 of the Act, however, prohibits any
enterprise from abusing its dominant position. An enterprise is said to abuse its dominant
position if it:

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o directly or indirectly, imposes unfair conditions or pricing stipulations, (including

predatory price) in the purchase or sale of goods or services;

o limits or restricts the production of goods or services or their market, or the technical or
scientific development relating to such goods or services;

o denies market access to others;

o enters into contracts subject to conditions which have no connection with the subject matter
of the contract; or

o uses its dominant position to enter into or to protect another relevant market.

Under Section 19 of the Act, the CCI may inquire into any alleged abuse of dominance by an
enterprise, either on its own motion or on receipt of a complaint or reference. Section 19 (4) lists
out the factors which must be considered by the CCI while inquiring whether an enterprise
enjoys a dominant position or not. Some of the factors stated therein include:

o market share of the enterprise;

o size and resources of the enterprise;

o size and importance of the competitors;

o economic power of the enterprise including commercial advantages over competitors;

o vertical integration of the enterprises or sale or service network of such enterprises;

o dependence of consumers on enterprise.

As in the case of anti-competitive agreements, the CCI can direct the enterprise or person to stop
abusing its dominant position, award compensation to the affected parties and impose a fine in an
amount not exceeding ten percent of the average turnover of the three preceding financial years,

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on the party abusing its dominant position. The CCI may also recommend to the Central
Government that the enterprise enjoying a dominant position be divided to ensure that it does not
abuse its dominant position. Based on this recommendation, the Central Government may pass
an order in writing, directing division of the enterprise enjoying a dominant position. The order
may also provide for the transfer of property, allotment of shares, payment of compensation, the
amendment of the memorandum and articles of association of the enterprise, etc.

At this point it is worth mentioning that the Act does not prohibit or restrict enterprises from
coming into dominance. There is no control whatsoever to prevent enterprises from coming into
or acquiring position of dominance. All that the Act prohibits is the abuse of that dominant
position. The Act therefore targets the abuse of dominance and not dominance per se. This is
indeed a welcome step, a step towards a truly global and liberal economy.

REGULATION OF COMBINATIONS

According to the relevant provisions of the Act, only those mergers & acquisitions are liable to
be regulated that qualify under the definition of combinations under Section 5. Size is currently
the only criteria for stipulating the post-merger review of mergers & acquisitions. Other arguably
more valid criteria such as the market size of a particular industry or the market share of an
industry player are not included. There exist no provisions for the regulation of those mergers &
acquisitions that do not fall within the meaning of combination and yet have the potential to
affect competition adversely. There may arise a situation where any merger may not come under
the definition of combination, yet may give rise to serious competition concern in a market.
Therefore, most enterprises with a lower asset value and turnover would be excluded from this
stipulation. Let us suppose a situation where there are only two competitors for a product and
they decide to merge. However, their asset values as well as turnover are such that their merger
would fall outside the definition of combination as given in the Act. Hence, despite causing clear
appreciable adverse effect on competition, the merger would go unregulated.

Infact the Associated Chambers of Commerce in India has carried out an analysis of the
implications of the Act and its findings report that practically every investment in India by a
global major will cross the thresholds stipulated in Section 5. The Competition Commission of
India (CCI) will be able to investigate the deal irrespective of the position the investment or joint

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venture will occupy in the marketplace. Conversely a smaller enterprise which may have a
dominant position in the same marketplace will not necessarily meet the criteria and may avoid
investigation.

The threshold values indicated serve only as a trigger for the investigative process and do not
render the merger bad by themselves. The CCI would carry out a more detailed investigation
before any action is taken against the particular merger. However, in view of the dynamics of the
Indian economy and the unstable currency rates the threshold values serve little purpose. It is
therefore suggested that a suitable compromise would lie in listing several criteria like asset
valuation and net turnover, market share, etc, the satisfaction of even one of which could trigger
an investigation.

The very purpose of Section 5 & 6 of the Act is to restrict combinations which cause or are
likely to cause an appreciable adverse effect on competition. It is indeed hard to understand how
the above can be achieved without considering market share of the merging and the merged
entities.

Section 5 of the Competition Act 2002 contains provisions regarding acquisitions, acquiring of
control, mergers and amalgamations. However, the Act does not delve into the repercussions of
arrangements on competition. Section 390 (b) of the Companies Act, 1956 defines the term
arrangement as “including a re-organization 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
reorganization of the share capital, takeover of shares of one company by another including
interference with preferential and other special rights attached to shares.[1] Arrangements can
have dire consequences on competition and must, therefore, be specifically included in the
provisions regarding combinations under the Act.

Section 6(2) of the Act gives enterprises and persons the option to notify the CCI of the
proposed combination. Although Section 6(2) of the Act gives persons and enterprises the option
to notify the CCI about the proposed combination, it is subject to Section 6(1) which renders the
proposed combination, if it has an adverse effect on competition, void ab initio. Thus, a
combination falling afoul of the provisions of Section 5 is void in the first instance.

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Furthermore, pursuant to Section 20(1) of the Act, 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 Section 6(2) and the power of the
CCI to inquire suo moto under Section 20 may lead to an anomalous situation, since companies
that do not exercise their option under Section 6(2) are not automatically exempt from the
investigations of the CCI. The said anomaly can be better explained with the help of the
following factual situation:

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 should not take effect. In this case, the two merged
companies will incur huge losses as a result of the CCI’s order.

This inconsistency can be removed by making pre-notification of combinations mandatory for

all enterprises that have the prescribed asset value and turnover. In other words rather than have
an optional notification requirement, it must be mandated that all combinations crossing the
threshold limits must seek the CCI’s clearance. The CCI can then give its judgment within
ninety working days from the publication of the details of the combination, as prescribed under
Section 31(11).

This ofcourse may seem against the government’s policy of ‘free market’, ‘minimum
restrictions’ and ‘minimum intervention’. But, in the light of the anomaly pointed out it is the
most practical solution. But this solution has its problems as well. The Confederation of Indian
Industries (CII) has pointed out that together with the provisions of the Competition Act
regarding notifications of mergers the Companies Act already required the mandatory nod of the
High Courts to complete mergers. This multiplicity of procedures ofcourse acts as a hindrance
and deterrent factor to business activities. With regard to this problem it is suggested that a
system could be worked out whereby the CCI could be enabled to place its views before the
High Court, and thereby cut down on procedures.

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Pursuant to Section 29(3) of the Act, 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 Section gives
the CCI excessive discretion to decide on which persons are eligible to be invited to file their
objection against the combination. This section must, therefore, be amended to allow anyone
affected by the combination to file a written objection against the combination.

Apart from suo moto action initiated by the CCI, action may also be initiated at the request of
any person affected or likely to be affected by the said combination. A problem may arise in this
situation that frivolous complaints maybe filed to harass the companies concerned. As a
necessary balance of the two interests it is suggested that on an objection by a person affected or
likely to be affected by the said combination the CCI should conduct an internal inquiry and if
the objection is found to be reasonable only then should action be initiated against the
combination.

A welcome addition in the Act is the power of the CCI to suggest modifications in the merger
u/s. 31(3) which would otherwise be bad in law. This is a step in the direction of the European
Community Law and a very powerful provision which could serve as an engine of growth.

CONCLUSION

The new Competition Act has indeed sought to promote a merger-friendly line of thinking. It
would be difficult to deny that the Act has made significant advances towards this line of
thinking. However, this intention is not clearly conveyed through the Act.

A few anomalies and low-points under the Act have been mentioned in the previous section. The
points stated therein and the suggestions that follow are not very large in scope but their
significance lies in their power to clarify the intention of the legislature. The said suggestions are
not against the spirit of the Act, but to enhance the same and make the final outcome more
meaningful and perhaps more effective.

Amalgamation

In competition law, amalgamation refers to the combination of two or more companies into a
single new legal entity, unlike mergers or acquisitions where existing companies survive. Under

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the Competition Act of India, such combinations, including mergers and acquisitions, are
regulated to prevent anti-competitive practices and ensure fair competition in the market.

Key aspects of amalgamation in competition law:

​ Definition:​
Amalgamation involves the creation of a new company by combining two or more existing
ones, with the old companies ceasing to exist as separate entities.
​ Regulation:​
The Competition Act, 2002, in India, regulates combinations (including mergers and
amalgamations) to prevent them from causing an appreciable adverse effect on competition
in the relevant market.
​ Notification:​
If a combination (merger, amalgamation, or acquisition) meets certain financial thresholds
(e.g., asset value or turnover), it may require a notice to be filed with the Competition
Commission of India (CCI).
​ Thresholds:​
The thresholds for requiring a notification are based on the financial strength of the merging
or acquiring entities, considering assets and turnover.
​ Review and Approval:​
The CCI reviews combinations to determine if they are likely to cause an appreciable
adverse effect on competition. If so, the CCI can modify or prohibit the transaction.
​ Exemptions:​
Certain types of combinations may be exempt from the need to file a notice, such as those
involving small companies or those between a holding company and its wholly owned
subsidiary, subject to certain conditions.
​ Purpose:​
The regulation of combinations aims to promote fair competition, prevent monopolies, and
protect consumer interests.

Distinction from Mergers and Acquisitions:

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​ Mergers:​
A merger involves the acquisition of one company by another, with the acquiring company
retaining its legal identity and the acquired company potentially dissolving or being
absorbed.
​ Acquisitions:​
An acquisition is similar to a merger, but the acquired company's assets and liabilities may
be transferred to the acquiring company, and the acquired company may or may not be
dissolved.
​ Amalgamation:​
In contrast, amalgamation creates a completely new company, with the assets and liabilities
of the original companies being transferred to the new entity.

In essence, competition law aims to ensure that mergers, acquisitions, and amalgamations do not
lead to undue concentration of market power, which can stifle competition and harm consumers.

What is a Merger?

A merger refers to an agreement in which two companies join together to form one company. In
other words, a merger is the combination of two companies into a single legal entity. In this
article, we will look at different types of mergers that companies can undergo.

Types of Mergers

There are five basic categories or types of mergers:

1.​ Horizontal merger: A merger between companies that are in direct competition with
each other in terms of product lines and markets
2.​ Vertical merger: A merger between companies that are along the same supply chain
(e.g., a retail company in the auto parts industry merges with a company that supplies raw
materials for auto parts.)
3.​ Market-extension merger: A merger between companies in different markets that sell
similar products or services

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4.​ Product-extension merger: A merger between companies in the same markets that sell
different but related products or services
5.​ Conglomerate merger: A merger between companies in unrelated business activities
(e.g., a clothing company buys a software company)

Learn about modeling different types of mergers in CFI’s M&A Financial Modeling Course.

Horizontal Mergers

A horizontal merger is a merger between companies that directly compete with each other.
Horizontal mergers are done to increase market power (market share), further utilize economies
of scale, and exploit merger synergies.

A famous example of a horizontal merger was that between HP (Hewlett-Packard) and Compaq
in 2011. The successful merger between these two companies created a global technology leader
valued at over US$87 billion.

Vertical Mergers

A vertical merger is a merger between companies that operate along the same supply chain. A
vertical merger is the combination of companies along the production and distribution process of
a business. The rationale behind a vertical merger includes higher quality control, better flow of
information along the supply chain, and merger synergies.

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A notable vertical merger happened between America Online and Time Warner in 2000. The
merger was considered a vertical merger due to each company’s different operations in the
supply chain – Time Warner supplied information through CNN and Time Magazine while AOL
distributed information through the internet.

Market-Extension Mergers

A market-extension merger is a merger between companies that sell the same products or
services but that operate in different markets. The goal of a market-extension merger is to gain
access to a larger market and thus a bigger client/customer base.

For example, RBC Centura’s merger with Eagle Bancshares Inc. in 2002 was a market-extension
merger that helped RBC with its growing operations in the North American market. Eagle
Bancshares owned Tucker Federal Bank, one of the biggest banks in Atlanta, with over 250
workers and $1.1 billion in assets.

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Learn about modeling different types of mergers in CFI’s M&A Financial Modeling Course.

Product-Extension Mergers

A product-extension merger is a merger between companies that sell related products or services
and that operate in the same market. By employing a product-extension merger, the merged
company is able to group their products together and gain access to more consumers. It is
important to note that the products and services of both companies are not the same, but they are
related. The key is that they utilize similar distribution channels and common, or related,
production processions or supply chains.

For example, the merger between Mobilink Telecom Inc. and Broadcom is a product-extension
merger. The two companies both operate in the electronics industry and the resulting merger
allowed the companies to combine technologies. The merger enabled the combination of
Mobilink’s 2G and 2.5G technologies with Broadcom’s 802.11, Bluetooth, and DSP products.
Therefore, the two companies are able to sell products that complement each other.

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Learn about modeling different types of mergers in CFI’s M&A Financial Modeling Course.

Conglomerate Mergers

A conglomerate merger is a merger between companies that are totally unrelated. There are two
types of a conglomerate merger: pure and mixed.

●​ A pure conglomerate merger involves companies that are totally unrelated and that
operate in distinct markets.
●​ A mixed conglomerate merger involves companies that are looking to expand product
lines or target markets.

The biggest risk in a conglomerate merger is the immediate shift in business operations resulting
from the merger, as the two companies operate in completely different markets and offer
unrelated products/services.

For example, the merger between Walt Disney Company and the American Broadcasting
Company (ABC) was a conglomerate merger. Walt Disney Company is an entertainment
company, while American Broadcasting company is a US commercial broadcast television
network (media and news company).

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Combinations under the Competition Act, 2002

In the corporate environment, mergers and acquisitions are critical for growth,
efficiency improvement, and market expansion. These company mergers,
however, are subject to tight regulatory frameworks to maintain fair competition
and prevent market power concentration.

The Competition Act, 2002 in India governs these activities, requiring

compliance to protect consumer interests, prevent anti-competitive behaviour,
and foster a competitive corporate environment.

In layman’s terms, market rivalry refers to competition between competitors’

comparable things or potential benefits to achieve income, benefit, and a piece of
the pie. Such a severe market structure does not generally flourish, but the
government should foster, ensure, and regulate it through an opposition strategy.

Such an approach must include not only accessible resources for improving
rivalry in the local and public business sectors but also centres around opposing
infrastructure restrictions.

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India has opened its economy to achieve globalisation, removed restraints, and
resorted to liberalisation. The natural implication is that the Indian market should
be prepared to compete within and outside the country.

Mergers might be horizontal, vertical, or conglomerate in nature. Companies at

the same level of the supply chain are involved in horizontal mergers. It is,
therefore, a merging of parties that compete at the same production and/or
distribution level of goods/services, i.e., in the same relevant market.

Vertical mergers include enterprises at various levels of the supply chain. They
are mergers of enterprises that operate at separate but complementary stages of
the same end product’s manufacturing and/or distribution chain. Typically, in
such mergers, one business creates an input used by another.

Conglomerate mergers are mergers that are neither vertical nor horizontal and
involve firms from essentially entirely diverse industries. Conglomerate mergers
can be classed based on the products’ connection into complementary,
neighbouring, or unrelated products. Though they are typically innocuous to
competition, they are viewed with mistrust owing to the “deep chest” idea, which
indicates mergers that would significantly contribute to a company’s existing
significant turnover, strengthening its market position.

The Monopolies and Restrictive Trade Practices Act, 1969 has become
outmoded in some ways due to worldwide economic trends, notably those
relating to competition laws, and there is a need to shift our attention from
preventing monopolies to fostering competition.

The Government of India passed the Competition Act, 2002 following the
ideology above. The Competition Act (hereinafter referred to as “Act”) seeks to
ensure fair competition in India by prohibiting trade practices that have a
significant adverse effect on competition in Indian markets and, to that end,
provides for the establishment of a quasi-judicial body to be known as the

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Competition Commission of India (hereinafter referred to as “CCI”), which shall

also undertake competition advocacy for creating awareness and imparting
competition training.

The Act’s principal component is the regulation of mergers and acquisitions.

This article aims to examine the Act’s provisions governing mergers and
acquisitions critically.

Combinations under Competition Act, 2002

The Competition Act, 2002 used the term ‘Combinations,’ which encompasses
mergers, acquisitions of shares and assets, and taking control of a business. The
fundamental justification for a combination or merger is that the combined
entity’s value is projected to be larger than the sum of the independent values of
the merging commodities.

Limiting or eliminating competition is feasible by choosing the proper manner

and amount of acquisition. The goal of any competition regulation is to
guarantee that individuals or businesses gaining autonomy via mergers and
acquisitions do not undermine the competitive system.

It is critical to limit monopolisation to encourage competition. However, the

Competition Act, 2002 aims to move the focus from monopolies to practises that
harm competition both within and outside India.

Mergers/combinations are a structural issue impacting competition, as opposed

to anti-competitive agreements and abuse of dominant position, which are
fundamentally behavioural concerns.

Furthermore, anti-competitive agreements and abuse of dominant position

operate post-facto or while the problem is still in effect; mergers, on the other

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hand, must be disclosed before the merger. This is done to avoid the damage that
is expected.

Following liberalisation measures compelling businesses to reorganise their

enterprises to survive and compete in the new environment, it was deemed
necessary to make provisions for merger control to avoid anti-competitive effects
and provide for an appropriate competition policy for the country.

The openness of the economy to foreign investment and the loss of government
control over investment choices have altered the operating environment for
firms, preeminent multinational corporations operating in India.

Mergers have an anti-competitive effect because they raise the probability of

collusion among a smaller number of players or create excessive market
dominance or even monopoly. Other reasons include:

●​ One of these implications is that it can potentially remove or reduce the advantages of
successful competition, such as better consumer welfare, higher levels of efficiency,
and more innovation.
●​ Second, dealing with a merger is more accessible than dealing with post-facto market
power or collusion.
●​ Third, ordering a de-merger may be extremely expensive both socially and
economically.
●​ Fourth, without merger review, collusive firms might avoid penalties by simply
merging, thereby contradicting the objective of the legislation.
●​ Fifth, mergers alter the industry structure and continue longer than collusion.

The Act defines ‘Combinations’ under Section 5,1 which covers mergers,
amalgamations, and acquisitions. However, only certain mergers,
amalgamations, and acquisitions that meet the act’s threshold limit would qualify
as a “combination.”

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Section 5 jurisdictional thresholds entail a two-step analysis: the target’s global

turnover or assets; and the aggregate global and Indian turnover or assets for
either the parties or the post-completion group (i.e. the acquirer group
comprising the target).

A ‘group’ is defined as two or more enterprises that, directly or indirectly, have:

●​ the ability to exercise 26% or more of the voting rights in the other enterprise; or
●​ the power to appoint more than half of the members of the other enterprise’s board of
directors; or
●​ the ability to control the affairs of the other enterprise.

Control, as used in the definition of group, refers to the control of one or more
enterprises, either jointly or separately, over another enterprise; or one or more
groups, together or singularly, over another group or company.

The asset and turnover threshold limitations are to be changed every two years
based on the Wholesale Price Index or variations in the exchange rate of the
rupee or foreign currencies.

If the jurisdictional thresholds are reached, Section 5 of the Competition Act

provides for three types of transactions that must be reported to and cleared by
the CCI before completion:

●​ Section 5(a): any transaction involving acquiring control, shares, voting rights, or
assets.
●​ Section 5(b): a person gaining control of an enterprise when that person already has
direct or indirect control of another enterprise engaged in the production, distribution,
or trading of similar or identical or substitutable goods or the provision of an equal or
identical or substitutable service.
●​ Section 5(c): a merger or amalgamation.

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It is worth noting that India has one of the highest threshold limits globally
compared to other countries.

This is done to stimulate mergers, which also benefit the economy. According to
worldwide experience, 85% of mergers are allowed without a full investigation
and 10% after an inquiry. Around 5% of mergers are allowed or granted
provisional approval.

Section 6 of the Act requires any ‘enterprise’ or ‘person’ engaging in such a

combination to notify the commission of the intended combination. The Act was
amended in 2007 to make such notice mandatory.

The maximum approval term for a combination was extended from 150 to 210
days by the 2007 amendment. The merger is presumed allowed if the
Competition Commission does not issue an order within 210 days.

According to Section 20 of the Act, the Commission shall have the jurisdiction
and authority to investigate combinations to determine if such combination has
an ‘appreciable detrimental effect’ on competition inside India.

The provision provides the Commission legislative authority to investigate any

combinations, either on its initiative or in response to an application received by
the Commission. However, the commission will not be allowed to launch such an
investigation once one year has gone since the combination went into force.

Section 20(4)7 specifies the considerations to be considered in evaluating

whether the combination will have a considerable detrimental effect on
competition or is likely to have such an effect:

●​ the actual and potential level of competition in the market from imports, the extent of
market entry barriers, and the level of combination in the market.

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●​ the degree of countervailing power in the market; the likelihood that the combination
would result in the parties to the combination being able to significantly and
sustainably increase prices or profit margins.
●​ the extent to which effective competition is likely to be sustained in a market
●​ the extent to which substitutes are available or are likely to be available in the market
●​ the market share in the relevant market of the persons or enterprises in a combination,
individually, and as a combination
●​ the likelihood that the combination will result in the removal of a vigorous and
effective competitor or competitors in the market
●​ the nature and extent of vertical integration in the mark the possibility of a failing
business; the nature and extent of innovation
●​ relative advantage in terms of economic development contribution by any
combination having or likely to have an appreciable adverse effect on competition
●​ whether the benefits of the combination outweigh the negative impact of the
combination, if any.

These are the fundamental standards for determining whether a specific

combination is forbidden or permitted under the Act.

Aside from the elements above that must be met before any matter is legally
admitted for inquiry and investigation, the AAEC must also occur in India’s
relevant product/geographic market. If the cause of AAEC cannot be proven to
have happened in relevant product/geographic markets, the action against a
merger notice fails again.

Relevant markets have two dimensions: product markets and geographic

markets. The relevant product market is described in terms of product
substitutability. On the demand side, the relevant product market contains all
substitutes the customer would move to if the product’s price under inquiry rose.

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On the supply side, this would encompass any manufacturers who could
transition to manufacturing such alternative commodities using their existing
facilities. It may be defined as the smallest group of interchangeable items in the
face of a modest but significant non-transitory price increase (SSNIP).

For example, whether aerated and fruit drinks are in the same product market
may be questioned. However, a low-cost Maruti 800 may compete in a different
product market than a high-end BMW.

The Act defines a relevant geographic market as “the area in which the
conditions of competition for the supply of goods or provision of services or
demand of goods or services are distinctly homogeneous and distinguishable
from the conditions prevailing in neighbouring areas.” As a result, it
encompasses the area where supply and demand circumstances are
homogeneous.

In cement, a relatively heavy but low-value commodity, the question of whether

the relevant market is the entire country or a small area or region may emerge.
Interstate limitations can have an impact on the relevant regional market.

In its adjudicatory efforts, the Commission must consider whether a

combination’s benefits outweigh the negative impact on competition. The Act’s
investigation procedure gives the merging firms ample chance to defend the
merger and consider any amendments the Commission offers.

It also allows opposing parties to make their case before the Commission. In
summary, the procedure is business-friendly, rather than the Commission issuing
a notice and passing a quasi-judicial ruling when a reference or information is
received.

Critical Analysis

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One of the most contentious components of the 2002 Competition Act is the
regulation of combinations. Some of the points highlighted are discussed below.

●​ The Indian business sector requires consolidation to produce appropriately sized

enterprises and players capable of competing effectively in the home and international
markets. In other words, mergers will not be discouraged unless they are
anti-competitive and, more specifically, harmful to consumer interests. This must be
understood in the perspective of Indian firms competing in India and the international
market. Therefore, to have a foothold in the global market, Indian companies must
first have a stronghold in the Indian market.
●​ The asset and turnover threshold restrictions are high enough that most mergers will
fall outside the scope of combination regulation. Furthermore, Indian corporations
have lower threshold restrictions than international companies. For example, an
Indian company with a turnover of Rs. 3000 crore cannot acquire another company
without prior notification and approval from CCI. In contrast, a foreign company with
a turnover of more than $ 1.5 billion (or Rs. 4500 crore) outside India may acquire an
Indian company with a turnover of less than Rs. 1500 crore.
●​ The “Domestic Nexus” requirements proposed by the 2007 amendment harm Indian
companies’ interests.
●​ Beyond the threshold restrictions, the parties have only a voluntary (rather than
obligatory) premerger notice requirement.
●​ The term “combinations” does not contain the phrase “joint ventures.” Some business
chambers were concerned that including ‘joint ventures’ would depress
industrialization in the nation since the road of ‘joint ventures’ was a pragmatic and
popular one followed by its constituents.
●​ The idea of ‘group’ is contained in the combination regulation regulations.
●​ There was a request to exclude it because a conceivable and likely bureaucratic
approach may link unrelated endeavours. Many mergers may be derailed due to an
activity being seen as belonging to some group.

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●​ Even intra-group acquisitions by promoters of publicly traded companies, as well as

internal reorganisations within a business group, need statutory notification, even if
they do not affect competition.
●​ Notifying such papers is likely to jeopardise the secrecy of commercial arrangements
before they are concluded and may be detrimental to efficiency.
●​ The previous time frame for the CCI to act was 150 days, which has been raised to
210 days by the 2007 Amendment, which is too long for commercially significant
deals with high stakes.

Conclusion

The goal of mergers and acquisitions is to promote economic growth and

enhance trade practices that can assist and benefit customers in various ways.
Adding the MRTP Act to the Competition Act substantially influenced society
and resulted in several changes.

The Competition Act made mergers and acquisitions mandatory for the
commission around 2007. In this statute, the Competition Commission is given
extensive authority. It primarily focuses on decreasing the negative consequences
damaging to customers.

To summarise, managing the amalgamation and merger process while complying

with the Competition Act of 2002 necessitates precise preparation, thorough
evaluations, and adherence to legal standards.

Ensuring compliance not only speeds up the clearance process, but also helps to
a competitive and fair business climate that benefits customers and the market as
a whole.

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Regulation of Combinations (Section 5 & 6)

Combination refers to merger or amalgamation amongst enterprises, or acquisition of control,

shares, voting rights or assets of an enterprise by another person, provided (i) the financial
threshold specified in the Section 5 of the Act are satisfied; and (ii) merger, amalgamation and
acquisition are not covered under any of exemption notification. Any person or enterprise, which
proposes to enter into a combination, is required to give notice to the Commission under Section
6(2) of the Act any time prior to consummation of the same. However, categories of
combinations mentioned in schedule l of Combination Regulation are ordinarily not likely to
cause an appreciable adverse effect on competition in India, therefore notice under sub-section
(2) of section 6 of the Act need not normally be filed, in respect thereof. If a combination causes
or is likely to cause an appreciable adverse effect on competition within the relevant market in
India, it can be modified/prohibited by the Commission.

Penalties in Combination Cases Under the Competition Act, 2002

Under the Indian merger control regime, a ‘combination’ (i.e., an acquisition, merger or
amalgamation (collectively, ‘Combination’), must be notified to and approved by the Indian
competition law authority, Competition Commission of India (‘CCI’), if it breaches the prescribed
asset and turnover thresholds and does not qualify for any statutory exemptions. The requirement to
notify CCI is mandatory and such Combinations are subject to a standstill or suspensory obligation,
until approved by CCI. There are some cases where CCI has reprimanded parties for violating
provisions under the Competition Act, 2002 (‘CA02’) relating to Combination. This article analyses
CCI’s decisional practice in such cases.

Types of Penalties that CCI can Impose in Combination Cases

CA02 prescribes various types of penalties in Combination cases on individuals and companies such
as: (i) gun-jumping and/or failure to notify: consummation of a notifiable transaction before CCI’s
approval or failure to notify a notifiable transaction may attract a penalty of up to 1% of the
worldwide turnover or value of assets of the parties to the proposed Combination, whichever is
higher; (ii) material omission by enterprises/individuals: where the parties/individuals make material

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false statements (knowing it to be false) or omit to disclose material facts in the notification, penalties
between ₹ 50 lakhs (approx. USD 0.06 million) to ₹ 1 crore (approx. USD 0.135 million) can be
imposed; and (iii) non-compliance: failure to pay penalties prescribed at (i) above, may result in
additional penalties and/or imprisonment of up to three years.

CCI’s Decisional Practice

On a review of CCI’s decisional practice in Combination cases, the following trend emerges:

As of last week, CCI had passed 51 orders in Combination cases and found a contravention in all but
one case. Out of the 50 orders where CCI found a contravention, it imposed penalties in 39 cases. In
the remaining 11 cases, CCI: (i) did not impose a penalty in 10 cases as it was the first year of
implementation of the enforcement provisions relating to Combinations; and (ii) decided not to
impose a penalty under CA02 in one case, after hearing the explanation provided by the parties.

i. Quantum: The lowest penalty imposed by CCI till date is ₹ 1 lakh (approx. USD 1,357), imposed
in four cases and the highest is ₹ 5 crores (approx. USD 0.67 million), imposed in two cases.

ii. Gun Jumping: In five cases, CCI imposed penalties for gun jumping on parties who made
pre-payment of consideration or advanced a loan, which had the effect of consummating a part of the
Combination before CCI’s approval. The penalties in these cases vary from ₹ 5 lakhs (approx. USD
6,788) to ₹ 10 lakhs (approx. USD 13,575) Pertinently, CCI did not take into account the amount of
pre-payment or loan advanced by the parties as an aggravating/mitigating factor while imposing a
penalty, which varied from ₹ 7 crores (approx. USD 0.23 million) to ₹ 2502 crores (approx. USD
339.66 million) in these cases.

iii. Change in Law: There have also been few instances where CCI imposed penalties for ‘technical’
contraventions. For instance:

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• ​Removal of the requirement to notify within 30 days of the trigger event: CCI imposed penalties in
four instances ranging from ₹ 5 lakhs (approx. USD 6,788) to ₹ 5 crores (approx. USD 0.67 million )
for not notifying a notifiable Combination within 30 days of the trigger event, as earlier required
under CA02. The requirement to notify within a period of 30 days was later made inapplicable on
June 29, 2017 for a period of five years.

• ​Acquisition of a business division under the De Minimis Exemption: CCI imposed penalties in six
cases ranging from ₹ 2 lakhs (approx. USD 2,715) to ₹ 1 crore (approx. USD 0.135 million) for
failing to notify transactions where the value of assets and turnover attributable to the relevant
asset(s) or business being acquired was below the de minimis thresholds. In these cases, CCI was of
the view that for the assessment of de minimis thresholds, the value of the entire assets and turnover
of the target enterprise (and not just the relevant assets or business being acquired) were to be
considered. On March 29, 2017, a Government of India notification clarified that where a portion of
an enterprise or division or business is being acquired, only the relevant assets and turnover
attributable to that portion of enterprise or division or business is to be considered when considering
the De Minimis Exemption.

• ​Sector- specific exemptions: CCI passed two orders against various Rural Regional Banks (‘RRB’)
imposing nominal penalties of ₹ 1 lakh (approx. USD 1,357) in each order. On August 10, 2017, the
Government of India through a notification exempted RRB from the application of the relevant
provisions of CA02.

iv. Material Omission by Enterprises/Individuals: CCI has passed only one order for material
omissions by enterprises/individuals, where after hearing the explanation provided by the parties
decided not to impose any penalty.

v.​Appeals: Based on publicly available information, there are a total of seven cases where CCI
imposed penalties and the parties appealed this decision. Out of these, so far two cases have been
appealed to the Supreme Court of India (‘SC’), which upheld CCI’s orders. Only in one case, the
appellate court has set aside the findings and the penalty imposed by CCI in Combination cases.

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Conclusion

CCI has the power to impose severe penalties for breach of provisions relating to Combinations.
However, the trends suggest that CCI has rightly shown great self-restraint in exercising their powers
in Combination cases and has only imposed nominal penalties after giving due consideration to
mitigating factors.

controls over merger amalgamation and takeover in competition law

In Indian competition law, the Competition Commission of India (CCI) controls mergers,
amalgamations, and takeovers through the Competition Act, 2002, and its regulations. The CCI aims
to prevent acquisitions, mergers, and amalgamations that could lead to anti-competitive practices.
This is done by reviewing and assessing transactions where the value or turnover of the parties
exceeds certain thresholds, and by ensuring that these transactions do not create an "appreciable
adverse effect on competition" (AAEC).

Here's a more detailed breakdown:

Mandatory Notification:

If a merger, amalgamation, or acquisition meets the prescribed thresholds (based on turnover or assets
of the parties involved), a pre-notification must be filed with the CCI.

Thresholds:

These thresholds are defined in Section 5 of the Competition Act and are based on the value of assets
or turnover of the parties involved.

Competition Commission of India (CCI) Review:

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The CCI reviews these transactions to assess whether they are likely to create an AAEC in the
relevant market.

Approval:

If the CCI determines that the transaction is unlikely to create an AAEC, it approves the merger,
amalgamation, or acquisition.

Conditional Approvals:

The CCI may impose conditions on approvals to mitigate potential anti-competitive effects, such as
divestiture of certain assets or business operations.

Non-Approval:

If the CCI finds that a transaction is likely to cause an AAEC, it can prohibit the transaction or
impose penalties.

Appeals:

Decisions of the CCI can be appealed to the National Company Law Appellate Tribunal (NCLAT)
and, ultimately, the Supreme Court of India.

Gun-jumping:

"Gun-jumping" refers to the practice of completing a transaction before receiving CCI approval,
which is prohibited.

Exemptions:

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Certain types of transactions may be exempt from notification requirements under the regulations or
notifications issued by the government.

CCI vs. SEBI: Overlapping Jurisdiction of CCI and a Sectoral Regulator

The Competition Commission of India (‘CCI’) monitors markets of all nature to identify any
anti-competitive practice by persons or enterprises leading to appreciable adverse effect on
competition. This means that the CCI’s powers also traverse sectors governed by special laws
and regulated by specialized ‘sectoral regulators’, invariably leading to an apparent jurisdictional
conflict. Confronted with this issue, the CCI has attempted to resolve the overlap of jurisdiction
with the Securities and Exchange Board of India (‘SEBI’) in In Re: Brickwork Ratings India Pvt.
Ltd. and CRISIL Ltd. and Others (decided 29 December 2020).

Factual Background

The National Highways Authority of India had invited tenders from credit rating agencies
(‘CRAs’) to rate its bond issuances, pursuant to which CRISIL Ltd., India Ratings and Research
Pvt. Ltd., CARE Ratings Ltd. and ICRA Ltd. (collectively the ‘Opposite Parties’) submitted their
price quotes. The Informant averred that the Opposite Parties cartelised and quoted identical
rates in the bid and, hence, indulged in anti-competitive practices in contravention of section 3 of
the Competition Act, 2002.

Since CRAs are regulated by SEBI, the CCI invited comments from SEBI regarding the
Information. SEBI objected to the jurisdiction of the CCI but did provide any information, in
case the CCI were to initiate any action against the Opposite Parties. Consequently, the CCI
proceeded with the Information.

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Analysis

As SEBI is the authority regulating CRAs, the apparent conflict of jurisdiction between the CCI
and SEBI emerges. This apparent conflict between the CCI and a sectoral regulator has to be
reconciled in view of the unique role each of these bodies play, as also the interplay between and
competition law and securities law.

In Telefonaktiebolaget LM Ericsson v. CCI, the Delhi High Court had ruled that the Competition
Act is in addition to, and not in derogation of, any other Act. Since the case involved the abuse of
patent rights, any competitive agreement which imposes unreasonable conditions was held to be
in contravention of section 3 of the Competition Act. This judgement leads to the understanding
that securities laws governing CRAs cannot be construed to be in conflict with Competition Act,
as the latter is in addition to, and not repugnant with, the former.

The 2018 Supreme Court judgement in CCI v. Bharti Airtel was decisive in resolving the
jurisdictional conflicts between sectoral regulator TRAI and the CCI, and in outlining the
distinctions between the two. The Court had explained that the ‘CCI is not a sector based body
but has the jurisdiction across which transcends sectoral boundaries, thereby covering all the
industries.’

The Court propounded a two-step process to address concerns of jurisdictional conflict, wherein
the jurisdictional fact has to be first determined by the sectoral regulator, i.e. TRAI, in this
matter, in order for the CCI to proceed to examine the anti-competitive nature of an agreement.
As a sectoral regulator, TRAI is better equipped to decide on jurisdictional aspects of
telecom-related matters. However, this does not signify that the CCI’s jurisdiction is barred. Only
after TRAI has returned its findings on the jurisdictional aspects and the proceedings under the
TRAI Act have concluded can the CCI exercise its jurisdiction.

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On the nature of the remedy provided under both the Acts, the Court explained that even if TRAI
adjudges that the impugned activity is anti-competitive, thereby causing appreciable adverse on
competition, its powers would be limited to the action that can be taken under the TRAI Act
alone. It is the CCI which is the expert body in studying the nuances of competition in market.
The CCI provides more structural remedies, which promote the entry of new players, and hence
competition in the market. Thus, in Bharti Airtel, the Supreme Court did not altogether exclude
the jurisdiction of the CCI in the presence of a statutory sectoral regulator, but only deferred it to
a later stage.

In Monsanto Holdings Pvt. Ltd. v. CCI, Delhi High Court reiterated the decision of Ericsson that
the CCI has jurisdiction when patent rights are abused. Hence, it is the exercise of the rights or
the conduct which is to be examined by CCI and not the subject matter of those rights which is
the domain of the expert body. However, the Court held that the Bharti Airtel judgement is not
applicable in the present matter concerning patent rights and Controller of Patents, as the role of
Controller is ‘materially different’ from that of a regulator, i.e. TRAI.

SEBI’s primary role, as the preamble to the SEBI Act, 1992 states, is to regulate the securities
markets. Hence, it acts as the regulator of the securities market, unlike the Controller of Patents.
CRAs rate the issue of securities to enable prospective investors in deciphering the level of risks
and creditworthiness of the securities. CRAs are governed under the SEBI (Credit Rating
Agencies) Regulations, 1999 (‘CRA Regulations’) and are regulated by SEBI. The CRA
Regulations have laid down a Code of Conduct in their Third Schedule which mandate that a
CRA ‘shall observe high standards of integrity, dignity and fairness in the conduct of its
business’ and it ‘shall not indulge in any unfair competition’. SEBI is the authority to inspect,
investigate and initiate proceedings against a CRA in case of contravention of the CRA
Regulations.

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In the present case, the Opposite Parties had allegedly formed a cartel for bid rigging, hence
falling afoul the Competition Act. The Opposite Parties contended that the CCI lacks the
jurisdiction to proceed against them, as SEBI is the regulator of CRAs and exercises the requisite
jurisdiction under the CRA Regulations to initiate an action against them. Rejecting this
contention, the CCI relied upon the Bharti Airtel judgement to rule that the mere presence of a
sectoral regulator, viz. SEBI, does not extinguish the jurisdiction of the CCI. Although the
subject matter of CRAs falls within the domain expertise of SEBI, examining any conduct of a
CRA alleged to be anti-competitive is within the jurisdictional ambit of the CCI.

The Supreme Court, in Bharti Airtel, has harmoniously interpreted the objectives of Competition
Act and TRAI Act. The Court has reconciled the distinct functions of the CCI and TRAI to make
way for both the statutory bodies and avoid any apparent conflict of powers. Resultantly, the
CCI’s jurisdiction had not been altogether barred, but only pushed to a later stage until the
conclusion of proceedings by the domain-specific regulator.

Pursuant to this two-step process approach, the CCI had invited comments from SEBI, to which
the latter stated that the allegations levelled against the Opposite Parties attract the provisions of
the CRA Regulations. Besides, SEBI is the right authority to entertain any complaint against
CRAs and that the CCI may not entertain the same. It is to be noted that SEBI did not state in its
comments on whether it has initiated any enquiry against the Opposite Parties for allegedly
flouting the Code of Conduct under the CRA Regulations. Hence, SEBI did not adequately deal
with the jurisdictional facts and technical issues, nor did it furnish any information on any
proceeding against the Opposite Parties. In the light of these circumstances, the CCI exercised its
jurisdiction and proceeded to decide the matter on merits.

The CCI has clearly followed the Bharti Airtel dictum in the present case and allowed SEBI to
exercise its jurisdiction and contemplate actions under relevant laws. However, SEBI merely
objected to the jurisdiction of the CCI and, as evident from the comments, did not initiate further

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actions under the CRA Regulations. The CCI has strived to apply the two-step process in the
presence of a sectoral regulator. After the examination, the CCI concluded that there were no
materials to show any abuse of dominance and the conduct of the Opposite Parties did not pose
any threat to competition in market.

Concluding Remarks

While Ericsson and Monsanto have dealt with powers of Controller of Patents vis-à-vis the CCI,
Bharti Airtel examined the seemingly conflicting jurisdiction between the CCI and TRAI. The
presence of a specialised statutory body has always given rise to uncertainties regarding the
jurisdiction of a body like the CCI which is not limited to a specific sector. Section 62 of the
Competition Act lays down that provisions of this Act are in addition to, and not in derogation
of, any other law. This reflects the legislative intent that there should be no repugnancy between
the CCI and a statutory body or a sectoral regulator. This case further clarifies the grey areas
where the CCI’s jurisdiction can appear to be in conflict with the securities market regulator. The
CCI is within its powers to exercise jurisdiction over CRAs and any other securities market
related body to the extent of their anti-competitive conduct in market. Thus, the CCI has
attempted to avoid any foreseeable conflict with SEBI by giving it the leeway to proceed under
the CRA Regulations, while probing the alleged anti-competitive conduct by the CRAs.

[pdf]

SEBI (security and exchange board of India):

It is a vital part of regulatory bodies in India. The growing IPO market in the country is how
SEBI became the regulatory body of the Indian capital market. The SEBI holds the responsibility
to maintain the balance in the stock exchange market of India. SEBI incorporated the charge
under the SEBI ACT1992.

Functions of SEBI:

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There are many exciting and informative functions of SEBI. According to it, the body regulates
the stock market of India.

Protective functions:

SEBI regulates the stock market and its trading with all the adjacent aspects in the Indian bank’s
regulatory body. These functions include investment protection with interest and the prevention
of insider trading techniques. The protective functions of SEBI have the charge to spread
awareness against any deception among the investment traders.

Development functions:

The SEBI develops the platform of the Indian stock market by promoting the growth aspects of
investment securities methodologies. Presently, the department empowers investors’ knowledge
to attract foreign investment for economic growth. The SEBI also runs various training programs
for investment development and motivates innovation and research.

Powers:

These powers relate to the responsibility for how SEBI became the regulatory body of the Indian
capital market to prevent scams and provide the enormous rise in economic growth.

●​ SEBI can access all the transaction information from the exchange markets.
●​ It has the power to reform the laws relative to the functioning of the stock exchange.
●​ Intermediaries regulation
●​ SEBI can analyse the case for any malpractice and fraud report.

RBI (reserve bank of India)

The central bank of India established the RBI bank in 1935. The RBI regulates all the monetary
functions and policies which act effectively in the Indian market. The RBI has a governor under
which all the officers regulate the financial market and monetary funding.

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Functions:

Below are the functions of the RBI according to the regulations and power. The governor of RBI
signs the currency notes of India. The function of RBI regulates the Indian monetary structure.

Functions:

●​ RBI bank issues the license to all the active banks in India. It has the bank policy
according to which each bank body should function and follow the regulation.
●​ Citizens have their financial accounts in banks. RBI holds the power to manage and
check the financial account of the bank. RBI regulates the statement, fund transactions,
and all the other details.
●​ RBI balances the accurate amount of currency supply and regulates it.

CCI (completion commission of India):

The competition commission of India became part of regulatory bodies in India and came into
function in the year 2009. This regulatory body manages the competition act 2002 with its
implementation and enforcement of the competition act.

Functions:

Below are the functions of CCI as an Indian bank regulatory body.

●​ The CCI promotes sustainable competition in the market.

●​ This regulatory body can eliminate market-affecting practices for declining values.

[pdf] regulators

What is National Company Law Tribunal?

The National Company Law Tribunal (NCLT) is a specialized quasi-judicial body in India.
Under the Companies Act 2013, it was established to handle matters related to corporate disputes
and insolvency proceedings. NCLT has jurisdiction over cases involving companies, limited

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liability partnerships, and other entities specified under the Companies Act. It has benches
located in various cities across India to facilitate accessibility. NCLT is responsible for resolving
disputes related to company law, mergers, amalgamations, and company winding up. It plays a
crucial role in promoting efficient and timely resolution of corporate disputes and insolvency
matters in the country.

Characteristics of NCLAT

○​ Under Sections 202 and 211 of the IBC, the NCLAT also serves as the Appellate Tribunal
for judgments issued by the Insolvency and Bankruptcy Board of India.
○​ The NCLAT is also the Appellate Tribunal to hear and dispose of appeals against any
directive issued, judgment, or order passed by the Competition Commission of India
(CCI).
○​ The Ministry of Corporate Affairs established eleven Benches in the first phase, one
Principal Bench in New Delhi, and 10 Benches in New Delhi, Ahmadabad, Allahabad,
Bengaluru, Chandigarh, Chennai, Gauhati, Hyderabad, Kolkata, and Mumbai.
○​ At various locations, NCLT benches were led by the President, 16 Judicial Members, and
9 Technical Members. More members have joined, and benches have been established in
Cuttack, Jaipur, Kochi, Amravati, and Indore.

NCLAT Recent Developments

○​ The NCLAT decided 2016 that Cyrus Pallonji Mistry’s removal as Executive Chairman
of Tata Sons was illegal.
○​ The Tribunal has overturned a July 2017 judgment of the Mumbai bench of the National
Company Law Tribunal (NCLT) that supported Mistry’s dismissal.
○​ The NCLAT also ruled that the Registrar of Companies’ change of ‘Tata Sons Limited’
from ‘Public Company’ to ‘Private Company’ was unlawful.
○​ It stated that the decision to go private was ‘prejudicial’ and ‘oppressive’ to the minority
shareholders.
○​ The NCLAT ruling will empower minority shareholders, and Independent Directors will
be forced to take their concerns more seriously.

Objectives of NCLT

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○​ Initiated before the Company Law Board under the previous act (the Companies Act
1956)
○​ Pending before the Board for Industrial and Financial Reconstruction (BIFR), including
those pending under the Sick Industrial Companies (Special Provisions) Act, 1985
○​ Pending before the Appellate Authority for Industrial and Financial Reconstruction
○​ Pertaining to claims of oppression and mismanagement of a company, winding up of
companies and all other powers prescribed under the Companies Act.

National Company Law Tribunal (NCLT), 2013

○​ The National Company Law Tribunal (NCLT) is a quasi-judicial organization established

to oversee businesses formed under the Companies Act of 2013.
○​ It has jurisdiction over various procedures under the Companies Act, including
arbitration, agreements, compromise, reconstruction, and company winding up.
○​ NCLT is the successor entity to the Company Law Board and was established based on
the recommendations of the Justice Erandi Committee for insolvency and company
winding up.
○​ Additionally, NCLT serves as the Adjudicating Authority for insolvency proceedings
under the Insolvency and Bankruptcy Code, 2016.
○​ Civil courts do not have jurisdiction over matters handled by NCLT.
○​ Once NCLT grants an insolvency petition under the IBC, 2016, the case cannot be
dismissed even if the parties agree to settle, except under the authority of the Supreme
Court citing Art. 142.
○​ NCLT can summon a General Meeting if a company fails to hold an Annual General
Meeting or Extraordinary General Meeting as required by the Companies Act.
○​ It also has the authority to change a corporation's fiscal year established in India.
What is Competition Commission of India?

The Competition Commission of India CCI is a statutory body established under the Competition
Act 2002. It is responsible for promoting fair competition in the Indian market. It prevents
practices that may adversely affect competition. The CCI is an independent regulatory authority
that enforces the competition laws. It ensures that there is no abuse of dominance,
anti-competitive agreements, or combinations that could lead to monopolies or restrict

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competition. Its primary objective is to foster a competitive business environment and protect the
interests of consumers and small businesses. The CCI has the authority to:

○​ investigate and take action against anti-competitive practices,

○​ impose penalties, and
○​ issue orders to ensure a level playing field in the Indian market.

Also, check the article on Consumer Price Index for UPSC Exam.

Formation of Competition Commission of India

The Vajpayee government established the CCI under the provisions of the Competition Act 2002.
The Competition Amendment Act 2007 was enacted to amend the Competition Act 2002. This
amendment led to the establishment of the CCI and the Competition Appellate Tribunal. The
central government established the Competition Appellate Tribunal. It hears and disposes
appeals against any direction issued or order passed by the CCI. This body was, however, later
replaced by the National Company Law Appellate Tribunal in 2017.

About the Competition Act 2002

The Competition Act 2002 was enacted to promote and sustain competition in the Indian market.
The objectives of the Competition Act 2002 include the following:

○​ It aims to prevent anti-competitive practices, promote and sustain competition, protect the
interests of consumers, and ensure freedom of trade.
○​ The Act prohibits anti-competitive agreements and abuse of dominant position. It
regulates combinations (mergers and acquisitions) that may have an adverse effect on
competition.
○​ It is based on the principles of the modern competition law regimes prevalent in
developed economies like the United States and the European Union.

Read the article on the Credit Rating Agencies In India!

Objectives of the Competition Commission of India

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The Competition Commission of India Act is the competition regulator in India. Though
established in 2003, it became fully functional only by 2009. The major objectives of the
Competition Commission of India are as follows:

○​ Foster and sustain an environment where businesses can compete on a level playing field,
enhancing overall market dynamics.
○​ Safeguard the interests and rights of consumers by ensuring they have access to fair
prices and high-quality products/services, free from exploitative practices.
○​ Identify and curb anti-competitive agreements such as cartels and monitor to prevent
activities that abuse market dominance.
○​ Scrutinize and regulate mergers and acquisitions to ensure they do not adversely affect
market competition, preventing the creation of monopolies.
○​ Eliminate barriers for new businesses to enter the market, promoting diversity and
innovation within the industry.
○​ Encourage the efficient use of resources within markets to drive productivity and
innovation, ultimately benefiting the economy.

Read more about the Types Of Banks In India.

Composition of CCI

The Competition Commission of India CCI is the statutory body established under the
Competition Act 2002 to enforce the Act.

○​ The CCI is composed of a Chairperson and six other Members appointed by the Central
Government.
○​ The Chairperson and Members of the CCI are selected from persons of ability, integrity,
and standing who have special knowledge or experience in matters related to:
○​ competition,
○​ economics,
○​ business,
○​ commerce,
○​ law,
○​ finance,

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○​ accounting, or
○​ management.
○​ The Chairperson and Members hold office for a term of five years and are not eligible for
re-appointment.

Also, Read about the Minimum Support Price for UPSC Exam here.
Powers and Functions of Competition Commission of India

The CCI has the power to inquire into and investigate any anti-competitive agreements, abuse of
dominant position, and mergers and acquisitions. It can impose penalties on enterprises for
engaging in anti-competitive practices. It can also order the modification or dissolution of
anti-competitive agreements or mergers. The CCI has the power to summon and examine any
person, require the production of documents, and conduct searches and seizures. It can also make
recommendations to the Central Government on issues related to competition policy and law.

The primary function of the CCI is to eliminate practices having an adverse effect on
competition, promote and sustain competition, protect the interests of consumers, and ensure
freedom of trade. The CCI investigates complaints of anti-competitive practices, such as
price-fixing, bid-rigging, and abuse of dominant position. It also reviews and approves mergers
and acquisitions above a certain threshold to ensure they do not harm competition.

The CCI can also conduct suo moto inquiries and investigations into any anti-competitive
practices. It can issue cease and desist orders, impose penalties, and make recommendations to
the government on competition policy and law.

Check out the article on Insolvency and Bankruptcy Code here!

Achievements of the Competition Commission of India CCI

Competition Commission of India (CCI), since its establishment, has set forth significant
accomplishments in the promotion of fair market competition and protection of consumer
interest. Some major accomplishments exemplifying its presence are:

○​ Conducted significant investigations and imposed penalties on various cartels in sectors

like cement, pharmaceuticals, and automotive parts, promoting fair competition.

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○​ Cleared over 650 merger and acquisition cases, ensuring they didn't stifle competition,
and intervened in several high-profile cases to prevent monopolistic dominance.
○​ Resolved many consumer complaints, protecting consumers against unfair trade practices
and ensuring that markets remain consumer-friendly.
○​ Conducted over 300 advocacy programs, promoting competition culture among
businesses, policymakers, and the general public.
○​ They engaged directly with foreign antitrust bodies and took part in international
conferences strengthening enforcement mechanisms and conforming to international best
practices.
○​ According to a detailed sector grouping on e-commerce, telecommunications, and
pharmaceuticals, in-depth studies were conducted to gain an understanding of industry
dynamics and identify anti-competitive practices.
○​ Implemented IT initiatives like online filing for cases and improved transparency and
efficiency within the organization.
○​ Imposed substantial financial penalties on major corporations for anti-competitive
practices, fostering a deterrence effect in the market.

Also, read about the Banks Board Bureau here for the UPSC Exam!
Challenges Faced by the Competition Commission of India

The CCI or Competition Commission of India handles various issues to promote fair competition
and protect consumers' interests in India.

○​ One of the challenges is that businesses and consumers may not fully understand the
competition laws or their respective rights. Hence, complaints against anticompetitive
practices are seldom raised.
○​ Establishing evidence of anti-competitive behavior can be challenging, especially in
cases where collusion or abuse of dominance is concealed.
○​ Legal processes can be time-consuming. It led to delayed resolutions and enforcement
actions.
○​ The CCI may need more resource constraints, limiting its ability to handle many cases
effectively.

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○​ With the globalization of markets, the CCI may need help dealing with competition
issues that span international borders.
○​ Striking a balance between promoting competition and fostering economic development
can be challenging, especially in sectors with potential trade-offs between the two.
○​ The CCI may need help obtaining necessary information from businesses, hindering the
investigation process.
○​ The rise of e-commerce and digital markets introduces new complexities in regulating
competition and addressing issues like data privacy and platform dominance.
○​ The current penalty provisions in the Competition Act may not act as sufficient deterrents
for some companies engaged in anti-competitive practices.
○​ In case there occurs any instance within which the judiciary intervenes or challenge the
decision of CCI, there would be a negative impact on the desired strength of enforcement
therein.

For the CCI, addressing these challenges requires continuing efforts, stakeholder collaboration,
awareness campaigns, and amendments in the competition laws to keep pace with the evolving
market dynamics.

Way Forward

○​ The CCI should continue to strengthen its enforcement capabilities and take timely
actions to address anti-competitive practices.
○​ It should also focus on advocacy and awareness-building to promote a
competition-friendly environment.
○​ The CCI should work closely with other regulatory agencies to address cross-sectoral
competition issues.
○​ The government should provide adequate resources and support to the CCI to enable it to
effectively fulfill its mandate.
○​ There is a need to continuously review and update the Competition Act to ensure that it
remains relevant and effective in addressing emerging competition challenges.

[pdf] cci

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Advocacy[pdf]
To enable CCI to reach out to its every stakeholder in an effective manner, Section 49 of the Act
mandates for the Advocacy of various facets of Competition Law and role & functions of CCI.
This is imperative as competition law is a relatively newer legislation requiring creation of
awareness among stakeholders- Industry, Academia, Central & State Governments, Public Sector
Undertakings (PSUs), Trade Associations etc.- before they fall on wrong side of competition law.

In this pursuit, a dedicated Division of CCI under the nomenclature of Advocacy Division
undertakes a wide array of activities viz. seminars, conferences, workshops, interactive sessions,
moot court competitions, internships, road shows, competitions assessments of legislations, essay
competitions, publications of comprehensive advocacy material on various aspects of
competition law etc.

As the field of Competition Law is in constant flux, Advocacy Division adopts innovative
approaches so that changes occurring in the market due to various factors- digitalisation,
innovative disruptions etc.- are adequately addressed to the needs of the target stakeholders.

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