UNIT-2

COMBINATIONS

Vishesh Dahiya
Assistant Professor-Law
 INTRODUCTION
Under the meaning of the Competition Act, 2002 a
combination refers to any of the following 3:
1. direct or indirect acquisition of the shares, voting rights
or assets or the control over one or more enterprises by
one or more persons
2. merger
3. amalgamation between enterprises,
when the combining enterprises jointly exceed certain
thresholds set under Section 5 of the Act.
Thus a merger or amalgamation or an acquisition would
be categorized as a combination under the Competition
Act 2002 where such merger/amalgamation or
acquisition exceeds the financial thresholds contained in
Section 5 of the Competition Act, 2002 and such
combinations would be subject to regulations provided
in Section 6 of the Act. The financial thresholds
contained in Section 5 are in terms of the joint value of
assets or the turnover of the combining enterprises.
 NEED TO REGULATE COMBINATIONS
The Government of India regulates combinations to ensure that
there exists healthy competition in the market. Any combination
that causes an appreciable adverse effect in the relevant market are
deemed to be void under the Competition Act, 2002.
If such mergers/amalgamations or acquisitions are not kept under
check, the large scale enterprises would often take over the small
enterprises and prevent competition in the market. Further if such
practices are left unchecked, it shall result in the concentration of
wealth in specific sectors of the economy which shall hamper the
economic vision of the country in line with the economic policies of
the Government of India.
 TYPES OF COMBINATIONS
Combinations can be categorized into three types – Horizontal
Combinations, Vertical Combinations and Conglomerate Combinations.

• Horizontal Combinations- Horizontal Combinations refer to

combinations where the combining enterprises are competitors
having an identical level of production process and produce
substitute goods. Such combinations are beneficial for the combined
enterprise as it reduces the competition in the market, improve the
market share of the product manufactured and result in performance
growth and business gains. However, horizontal combinations often
lead to monopolistic tendencies in the market.
• Vertical Combinations – Vertical Combinations refer to
combinations where the combining enterprises are
engaged in different levels of the manufacture and
production process and such enterprises unite into an
interacting whole. Such combinations improve the
efficiency and effectiveness of the production process,
increase the combination’s competitiveness in the market
and also result in reduction in cost of production of the
product as there is restructuring of the production and
supply chain of the product.
• Conglomerate Combinations – Conglomerate Combinations
refers to the combination of enterprises that are engaged in
business markets that are completely unrelated to one
another. Such combinations take place when two enterprises
providing different products in varying sectors of business
are integrated together. Conglomerate combinations occur
when enterprises seek to gain a stronger position in varying
markets and improve their profit margins, which is unlikely
to happen if they do not combine. Conglomerate merges can
lead to ascend in market share and synergy.
 SECTION-5
This provision sets out when a ‘combination’ would result.
Section-5 provides that:
• Acquisition of 1 or more enterprises by 1 or more persons, or;
• Merger, or;
• Amalgamation of enterprises shall be combination of such
enterprises and persons or enterprises.
If after such acquisition or merger or amalgamation, the joint
assets or turnover increases following limits, it will be called a
combination.
 Thresholds under Section-5
Type of Asset & Turnover in India Asset & Turnover outside India
Combination Single Group Single Group
Acquirer Acquirer Acquirer Acquirer

Acquisition by Joint assets over Group Assets Joint Assets over Group assets
Acquirer dealing in US$500 million or $2 Billion or
different G/S Rs.1000 Cr or over Rs.4000Cr Turnover of Turnover of
[Section-5(a)(i & ii)] Turnover of Turnover of $1500 million $ 6 Billion
Rs.3000 Cr. Rs 12000 Cr
Acquisition by Joint Assets Group Assets Joint Assets over Group assets
Acquirer dealing in Rs.1000 Cr or over Rs.4000Cr US$500 million or $2 Billion or
similar G/S Turnover of Turnover of Turnover of Turnover of
[Section-5(b)(I &ii)] Rs.3000 Cr Rs.12000 Cr $1500 million $ 6 Billion

Merger & Combined Assets Combined assets Combined Assets Combined Assets
Amalgamation Rs.1000 Cr or Rs.4000 Cr or US$500 million or $2 Billion or
[Section-5(c)(i & ii)] Turnover of Turnover of Turnover of Turnover of
Rs.3000 Cr Rs.12000 Cr $1500 million $ 6 Billion
This criteria will trigger a filing in India which will relate to
either the turnover or assets of:
1. Acquirer and the Target (individual parties thereof)
2. The Group to which the merged entity will belong after
acquisition.
If any Combination is more than the above asset or turnover
limit, then such combination will be scrutinized by CCI and will
be allowed only with prior approval of CCI. If CCI is satisfied that
such combination would cause AAEC in India, it shall be void.
 ‘Group’ under Section-5
It has been defined under Section-5(b) in following manner:
‘Group’ means 2 or more enterprises which directly or
indirectly are in a position to-
1. Exercise 26% or more of the voting rights in the other
enterprise.
2. Appoint more than 50% of Directors in the other
enterprise.
3. Control the management and affairs of the other
enterprise.
 ‘Control’ under Section-5
Section-5 (a) defines the term ‘Control’ in following way:

Control includes controlling the affairs or management

by-
1. One or more enterprises, either jointly/singly, over
another enterprise or group;
2. One or more Groups, either jointly/singly, over
another group or enterprise.
In the Act, ‘Control’ includes both the control of affairs
and management of another enterprise/group by one or
more enterprises or groups.
Control can either be ‘Sole Control’ where an
undertaking acquires a majority of voting rights of a
company. In many cases an acquisition which doesn’t
include a majority of voting rights does not normally
confer control even if it involves the acquisition of a
majority of share capital.
Control may also exist as a ‘Joint Control’ where 2 or
more undertakings or persons have the possibility of
exercising decisive influence over another undertaking.
Decisive Influence means power to block actions which
determine strategic commercial behaviour of an
undertaking.
 Regulation of Combinations
(Section-6)
Section 6 stipulates that a person/enterprise should not
enter into any combination which causes or is likely to
cause AAEC on competition in relevant market in India.
The combination in itself is not prohibited under Section-
6. But, it will be held void only if it adversely affects
competition.
 Time Limit for notifying CCI about Combination

Section-6.2 makes it mandatory for persons/enterprises

proposing to enter into a combination to give notice to
CCI of such intention and provide details of the
combination within 30 days of:
a. Approval of Proposal relating to
merger/amalgamation by Board of Directors.
b. Execution of any agreement or other document for
Acquisition.
After receipt of notice, CCI shall deal with such notice in
accordance with provisions contained in Sections-29,30,
and 31.
CCI may then approve the combination or direct that
combination shall not take effect or propose
modification.
Section-20(1) also provides that CCI has the power to
investigate the combination only up to 1 year after such
combination has taken effect.
 Procedure for Investigation into Combination
(Setion-29)
When monetary threshold in Section-5 have been
crossed by Combination and parties have filed
mandatory notice before CCI under Section-6, then CCI
acts as per the procedure set out in Section-29 and CCI
(Procedure in regard to the transaction of Business
relating to Combinations) Regulations 2011.
The step by step procedure for investigation of
Combination by CCI under aforementioned provision an
Regulation is following:
1. When CCI is of prima facie opinion combination is
likely to cause or has caused AAEC within relevant
market, CCI shall issue a show cause notice to the
parties to the combination to respond within 30 days
of receipt of such notice as to why investigation
should not be conducted.
After receiving response of parties, CCI may call for a
report from DG.
2. Thereafter, CCI shall within 7 working days from receipt of
response by parties or report from DG, whichever is later, direct
the parties to publish the details of their combination.
This publication is to be made within 10 working days of such
direction. This is done to bring the combination to the knowledge
of public and persons likely to be affected by combination.

3. CCI may invite any person or member of the public affected or

likely to be affected to file his written objections. This shall be done
within 15 working days from the date of publication of details.
4. CCI may call for addition info from parties to
combination. This shall be done within 15 working days
after expiry of aforesaid period of 15 days.
5. After receiving of information CCI shall proceed to deal
with the case within a period of 45 working days after
expiry of aforementioned period of 15 days.
 INQUIRY INTO COMBINATIONS
1. Identification of the relevant market i.e, relevant product market and
relevant geographical market.
2. Consideration whether the Combination has AAEC.
3. Approval, rejection or approval with modification of the
Combination.
• CCI can clear the combination.
• CCI can clear the combination with modifications if CCI is of the
opinion that adverse effect on competition by such combination can
be eliminated by suitable modification.
• Prohibit Combination if CCI’s review reveals AAEC that cannot be
remedied by modification.
 ORDERS PASSED BY CCI ON CERTAIN
COMBINATIONS (Section-31)
Section-31(1): If CCI opines that combination does not or
is not likely to have AAEC, it shall approve such
combination including combinations in respect of which
a notice has been given under Section-6(2).
Section-31(2): If CCI opines that combination has or is
likely to have AAEC, it passes an order that combination
shall not take place.
Section-31(3): CCI can impose modification to the
combination to eliminate adverse effect.
Section-31(4): Such modification has to implemented by parties
within period specified by CCI.

Section-31(5): If the parties fail to carry out the modification

within specifies period, such combination shall be deemed to
have AAEC and commission shall deal it accordingly.

After imposing modifications to combinations, CCI can also

appoint agencies to oversee the implementation of such
modifications.
 APPEALS
Appeal from any order passed by CCI against a
combination in any of the preceding sections lies to
NCLAT within 60 days of receipt of order.