UNIT 4

a) Combinations: Merger, Acquisition,

b) Amalgamation and Takeover- Horizontal, Vertical and Conglomerate Mergers Combinations
Covered under the Competition Act. 2002
c) Regulations, Penalties
d) Threshold Limits

What is Combination

The Acquisition of one or more enterprise by way of merger or amalgamation or control over enterprise is
regarded as combination.

A Combination is an acquisition of one or more enterprises by one or more persons, merger or

amalgamation of enterprises, if it meets the prescribed monetary thresholds and involves:

 Any acquisition of control, shares, voting rights or assets of any enterprise

 Any acquisition of control by a person over an enterprise, where such person already has
direct/indirect control over another enterprise in a similar business
 Any merger or amalgamation of enterprises

Combinations above the defined monetary thresholds require filing and prior approval of the CCI before
they can be made effective. CCI has powers to investigate combinations and modify/reject them.

Separate provisions exist in case of acquisitions pursuant to loan/ investment agreements of public
financial institutions, FII, banks or VC funds.

The CCI must be notified within 30 days of the ‘trigger event’ of such combinations.

Trigger Event

 Board approval of the enterprises in case of a proposed merger/ amalgamation; or

 Execution of any agreement or ‘other document’ in case of a proposed acquisition

Exemption of Notification to CCI

Under the Combination Regulations, Decision taken for the Amalgamation, Mergers, Acquisition prior to
June 1, 2011 have been exempted from notifying to CCI.

Regulation of Combination (Section 6)

(1) Prohibition of Anti-Competitive Combinations

 No person or enterprise is allowed to enter into a combination that causes or is likely to cause an
Appreciable Adverse Effect on Competition (AAEC) within the relevant market in India.
 If such a combination occurs, it shall be considered void.
(2) Mandatory Notification Requirement

 Before implementing a combination, the parties must notify the Competition Commission of
India (CCI).
 Notice must be given:
o After approval by the Board of Directors in case of mergers/amalgamations, OR
o After execution of an agreement/document in case of acquisitions or acquiring control.

(2A) Standstill Obligation

 Once the notice is given, the combination cannot be implemented until:

o Either 150 days have passed, or
o The CCI gives its decision under Section 31 (approval/modification/blocking),
o Whichever is earlier.

(3) Procedure

 The CCI will process the notice as per Sections 29, 29A, 30, and 31 to determine whether the
combination is likely to have an AAEC.

(4) Green Channel Route (Simplified Process)

 Certain combinations meeting pre-defined criteria can use a fast-track route by submitting a
simplified notice in the prescribed form and fee.
 If this is done, a separate notice under (2) is not required.

(5) Deemed Approval for Green Channel

 Once such a simplified notice (under 6(4)) is filed and acknowledged:

o The combination is deemed approved by the CCI.
o No further approval is necessary.

(6) Revocation of Deemed Approval

 If within the statutory period (under Section 20), the CCI finds that:
o The Green Channel criteria were not met, or
o Material facts were incorrect/incomplete,
o The deemed approval is void ab initio, and
o The CCI can pass orders (after hearing the parties).

(7) Exemptions

 Certain categories of combinations, once specified by regulations, need not comply with
subsections (2), (2A), and (4).
(8) Transition Provisions

 Existing rules and regulations before the 2023 Amendment will continue to operate until new
ones are notified.
 Actions already taken (e.g., orders passed, combinations approved) under the earlier framework
remain valid and enforceable.

(9) Exclusions from this Section

 The section does not apply to:

o Share subscription or financing facilities or
o Acquisitions by public financial institutions, foreign portfolio investors, banks, or
Category I AIFs under loan/investment agreements.

Section 6A: Open Offers and Stock Exchange Acquisitions

 Open offers or acquisitions made via stock exchanges through multiple sellers can proceed,
despite the 150-day standstill rule, if:
1. Notice is filed with CCI in time and as per regulations.
2. The acquirer does not exercise any rights (ownership/voting/dividends/etc.) over the
securities until the CCI approves the acquisition.

Procedure to be followed for the combination

Any person or enterprise proposes to enter into combination shall give notice to competition commission
in prescribed form within 30 days to:

 Approval of the Board of Directors of proposal relating to merger or amalgamation

 Execution of any agreement relating to acquisition or acquiring control

No combination shall come into effect until 210 days from the day on which notice has been given to
commission or order has been passed.

Procedure for Investigation into Combination by CCI

Step 1

The CCI will issue a notice to the parties to the combination to reply within 30 days of such combination
for not declaring it as Void.

The CCI will direct the Director General to submit a report on combination. On receipt of such report, if
the CCI is satisfied that the combination has an Adverse effect on competition, it can pass the following
order:

Step 2 (Section 31)

 It can direct the combination shall not be in effect

 If the Adverse effect can be rectified by suitable modification, the CCI will order such
modification should be performed by the parties.
 (In this case the parties shall submit the modified combination within 30 Working days. If the
CCI agrees with the modification, It can accept the Combination)

Step 3

If the CCI is not satisfied by the modification effected by the parties, it can grant 30 Days further to the
party to accept that modification proposed by the commission.

Step 4

If the party still fails to accept the modification, the commission can declare the combination as void as
well as it can impose such penalties mentioned in the Act (1% of Turnover).

Types of Mergers and Combinations under the Competition Act, 2002

Mergers and combinations are generally categorized into three types based on the nature of the combining
businesses. These categories are essential from a competition law perspective, as they help determine
the potential impact on market dynamics and whether a combination may lead to an appreciable adverse
effect on competition (AAEC) under the Competition Act, 2002.

A. Horizontal Mergers

A horizontal merger takes place between companies operating in the same industry and at the same
stage of production or distribution, often as direct competitors. The key objectives of horizontal
mergers include:

 Enhancing market share

 Achieving economies of scale
 Reducing operational redundancy

Regulatory Implications:

Such mergers are closely scrutinized by the Competition Commission of India (CCI) because they can
significantly reduce competition, increase market concentration, and may potentially lead to
monopolistic practices like price-fixing or output restriction.

Non Horizontal Covers Vertical and Conglomerate

B. Vertical Mergers

Vertical mergers involve companies operating at different stages of the supply chain—for example, a
manufacturer merging with a supplier or distributor. The aim is typically to:

 Improve efficiency
 Reduce transaction costs
 Streamline supply chains

Regulatory Implications:
While vertical mergers can improve integration and reduce production costs, they may also lead to
market foreclosure if access to key inputs or distribution channels is restricted for competitors.

C. Conglomerate Mergers

Conglomerate mergers are mergers between companies that operate in unrelated business activities.
These may occur for diversification, risk mitigation, or cross-industry expansion.

Regulatory Implications:

Generally considered less harmful to competition, conglomerate mergers may still be reviewed if they
lead to portfolio effects, i.e., leveraging dominance in one market to unfairly benefit in another.

Penalties for Non-Compliance

Failure to Notify (Gun-Jumping): If parties fail to notify the CCI about a notifiable combination or
proceed with the transaction before receiving approval, they may face penalties under Section 43A of the
Competition Act. The CCI can impose a penalty up to 1% of the total turnover or assets of the
combination, whichever is higher

False Statements or Omission: Providing false information or omitting material particulars in the
notification can lead to penalties ranging from ₹50 lakhs to ₹1 crore, as per Section 44 of the Act.

Consequences of Prohibited Combinations: If a combination is consummated without approval and is

later found to have an AAEC, the CCI can declare the combination void and may order its dissolution or
restructuring to restore competition.