MEANING, DEFINITION & EXPLANATION
Under the Competition Act 2002 (“Act“), a combination refers to the acquisition of control, shares, voting rights, or assets, merger, or amalgamation between or amongst enterprises when such transactions cross the asset and turnover thresholds specified in the Act. The Act regulates combinations to prevent practices that may have an appreciable adverse effect on competition (“AAEC”) within the relevant market in India.
TYPES OF COMBINATIONS
The Act covers three types of combinations:
- Acquisition of control, shares, voting rights, or assets of an enterprise by a person.
- Acquisition of control over an enterprise where the acquirer already has direct or indirect control over another enterprise engaged in identical business.
- Merger or amalgamation between or amongst enterprises.
Acquisitions can be of:
- Shares
- Voting rights
- Assets
- Control over management or assets
THRESHOLDS AND NOTIFICATIONS
Section 5 of the Act specifies asset and turnover thresholds for notifying combinations to the Competition Commission of India (“CCI”). The current thresholds are:
- Parties to the combination have:
- > INR 2000 crore assets in India or
- > INR 6000 crore turnover in India or
- > USD 1 billion assets with > INR 1000 crore in India or
- > USD 3 billion turnover with > INR 3000 crore in India
- Group to which the target will belong post-combination has:
- > INR 8000 crore assets in India or
- > INR 24000 crore turnover in India or
- > USD 4 billion assets with > INR 1000 crore in India or
- > USD 12 billion turnover with > INR 3000 crore in India
Notification to CCI is mandatory for combinations crossing these thresholds, and they cannot be consummated until CCI approval. The thresholds apply to assets/turnover in India and worldwide, including India.
TARGET-BASED EXEMPTION
Acquisitions where the target enterprise’s assets in India are < INR 350 crore or turnover in India is < INR 1000 crore are exempt from mandatory notification.
DE MINIMIS EXEMPTION
Transactions where the acquirer’s:
- Control is < 25% of shares/voting rights of the target and/or
- Acquisition is < INR 350 crore of assets or < INR 1000 crore turnover in India
are exempt from mandatory notification as they are unlikely to cause AAEC.
NOTIFICATION PROCESS
Combinations must be notified to CCI within 30 days of:
- Approval of the merger/amalgamation proposal by the board of directors, or
- Execution of an agreement/document for acquisition of control, shares, voting rights, or assets
The notification must be in Form I or Form II as specified, along with a fee. Notified combinations cannot be consummated until 210 days have passed from notification or CCI has passed an order approving it, whichever is earlier.
ASSESSMENT CRITERIA
CCI assesses whether the combination is likely to cause an AAEC in the relevant market in India based on factors like:
- Actual and potential level of competition through imports
- Extent of barriers to entry
- Level of combination in the market
- Degree of countervailing power
- Likelihood of removal of vigorous and effective competitors
- Extent of effective competition likely to sustain
- Extent to which substitutes are available or likely to be available
- Market share of the combining parties
- Likelihood of price increase or profit margins
- Nature and extent of vertical integration and possibility of a failing business
- Nature and extent of innovation
- Relative advantage by way of contribution to economic development
- Whether benefits outweigh adverse impact of the combination
GREEN CHANNEL APPROVALS
Under the Green Channel route, notified combinations where the parties have no:
- Horizontal overlaps (i.e., are not engaged in similar business), or
- Vertical relationships (i.e., are not engaged at different stages of the supply chain)
are deemed approved upon filing and acknowledgment of a Form I. This enables fast approval for transactions with no anticipated AAEC issues. Parties must provide a declaration confirming no overlaps based on all plausible alternative market definitions.
INVESTIGATION PROCEDURES
After the combination is notified, CCI has 30 working days for a prima facie opinion on whether the combination is likely to cause an AAEC in India.
If CCI believes it may cause AAEC, it issues a show cause notice to the parties to respond with reasons why an investigation should not be conducted. After considering the response, if CCI still believes the combination may cause AAEC, it initiates a Phase II investigation and directs parties to file a detailed Form II.
The Phase II investigation involves:
- Detailed examination of the proposed combination
- Seeking additional information from parties
- Inviting comments from the public or third parties
- Consulting other regulatory agencies, if needed
CCI must complete the assessment within 210 days of receipt of notification; else, the combination is deemed approved.
ORDERS AND REMEDIES
After investigation, CCI can:
- Approve the combination if it does not cause AAEC.
- Approve the combination with structural or behavioral modifications to remedy anticipated AAEC concerns.
- Prohibit consummation of the combination if it has AAEC, which cannot be remedied through modifications.
If modifications are proposed, parties have 30 days to accept or submit amendments. CCI may agree with the amendment and approve the combination or grant a further 30 days to accept its proposed modifications, failing which the combination will be treated as void.
SIGNIFICANT PRECEDENTS AND CASE STUDIES
- HOLCIM/LAFARGE MERGER:
In 2015, CCI approved the merger of the Indian subsidiaries of Holcim and Lafarge, two of the world’s largest cement companies, subject to divestiture remedies. The combination involved multiple interconnected transactions with a cumulative deal value over $40 billion.
Given the significant combined market share of the parties post-merger across various regions in India, CCI conducted a detailed Phase II investigation. To address the anticipated AAEC (Appreciable Adverse Effect on Competition) concerns, CCI ordered the divestment of Lafarge’s 2 cement plants in Jharkhand and Chhattisgarh with a total capacity of 5 million tonnes per annum to eliminate the competition overlap in the relevant geographic markets.
This was one of the early cases demonstrating:
- CCI’s approach in assessing complex global transactions,
- Identifying narrow geographic markets based on the location of cement plants, and
- Applying structural remedies even at the cost of re-opening already consummated deals.
- ZEE/SONY MERGER:
In 2021, the proposed merger between Zee Entertainment Enterprises Limited (ZEEL) and Bangla Entertainment Private Limited (BEPL), a subsidiary of Sony Pictures Networks India, was the first transaction to be notified to CCI under the Green Channel route.
The parties certified that there were no horizontal, vertical, or complementary overlaps between the businesses of the combining parties. Based on this certification, the transaction was deemed automatically approved upon notification and acknowledgment, enabling expedited consummation.
This showcased the benefit of the Green Channel in enabling fast-track approval for transactions with no perceived adverse impact on competition.
- PVR/INOX MERGER:
In 2022, CCI approved the merger of PVR and INOX Leisure, two of India’s largest multiplex chains, after a detailed Phase II investigation lasting five months. Based on third-party representations, CCI identified certain anti-competitive practices in the film exhibition industry such as:
- Control over theatrical windows,
- Exclusivity restrictions on movie releases, and
- Virtual print fee arrangements.
To mitigate anticipated AAEC concerns, various modifications were incorporated in the merger such as: - Reduction in exclusivity period from current 8-12 weeks to 6 weeks,
- Ban on exclusive dealing arrangements with any film distributor, and
- Prohibition on discriminatory virtual print fees based on location.
This demonstrated CCI’s willingness to go beyond traditional market share-based analysis and address wider industry practices while clearing mergers to ensure continued competitiveness of the sector.
- BPCL DIVESTMENT:
In 2019, in light of the proposed strategic disinvestment of the Government of India’s shareholding in Bharat Petroleum Corporation Limited (BPCL), CCI, in its policy advocacy role, highlighted the need to ensure fair competition and access to infrastructure post-privatization.
Given BPCL’s ownership of critical fuel and LPG infrastructure, CCI emphasized the need for appropriate safeguards such as:
- Ensuring open access to BPCL’s infrastructure on fair and non-discriminatory terms,
- Restrictions on acquisition of BPCL shares by entities with competing businesses,
- Monitoring of the divestment process by CCI, and
- Enabling an optimal combination of ensuring maximum valuation and promoting competition.
This reflected CCI’s proactive efforts to facilitate the entry of private players while maintaining market competition even in sectors undergoing privatization.
CONCLUSION
The combination provisions enable CCI to assess the competitive impact of large M&A transactions and business consolidations. Mandatory notification with specified thresholds (modified periodically) plus a suspensory regime allows CCI to scrutinize combination activity and maintain fair markets and a competitive business environment in India.
A fortiori, the regulation of combinations aims to assess the impact of large M&As and business consolidations on market competition in India and uses a mandatory suspensory notification regime for transactions above specified thresholds. This enables the Competition Commission to scrutinize transactions, suggest remedies to mitigate AAEC concerns, and maintain a fair and competitive business environment. The Green Channel also allows fast-track auto-approval for transactions with no competition overlaps.
