Meaning of Combination and its regulation under Competition Act

Meaning of Combination and its regulation under Competition Act?

Meaning of Combination

Section 5 of the Competition Act explains combination as:

‘Acquisition of one or more Enterprises by one or more persons or Merger or amalgamation of Enterprises Shall be a combination of Such Enterprises and Persons or Enterprises.

Thus, Combination within the Competition Law is the merger between two or more enterprises or firms or the business sector acquisitions (such as companies or firms) by other business enterprises. The Government controls combinations or mergers and acquisitions within the country to promote competition and thereby seeing to that small scale establishments are not overshadowed and swallowed by more reputed industries. This is because the merger of big shot companies not only reduce competition but also make it difficult and almost impossible for smaller firms to grow or profit from their business. The accumulation of wealth in certain sectors of business and the consumer concerns can lead to major economic and social discrepancies within the nation.

Regulation of Combinations under the Competition Law

A merger or a combination can be held valid under the purview of the Competition Act 2002 and its regulation policies only if the newly acquired or merged enterprise passes the threshold pertaining to the assets and the turnover mentioned in the Act. If not confined to the criteria then the attractancy of the new enterprise will be nil as far as the provisions of the Competition Act are concerned. Sections 5 and 6 of the Competition Act covers the definition and regulation of combinations.

The Procedural Aspects

Step 1: To Notify

Once the threshold is met the next step is to non optionally notify the Competition Commission of India (CCI) on the merger or combination as prescribed in section 6 (2) of the Competition Act. This is for the purposes of determining whether a combination would have the effect of or is likely to have an appreciable adverse effect on competition in the relevant market while regarding factors like the actual and potential level of competition through imports in the market; extent of barriers to entry into the market; level of combination in the market; degree of countervailing power in the market etc.

The CCI has been amended on the 8th of January 2016 bringing in key changes closing in to complete ease of doing business in India and also in the regulation of combinations through the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulation, 2016. Any new enterprise to be considered by the CCI will have to abide by the section 6(2) of the Competition Act read with Regulation 5 and Regulation 8 of the Combination Regulation (2016).

Step 2: Inspection of the Notice:

The CCI is to scrutinise the notice for defects or incompleteness on the premises of Regulation 14 of the CCI Amendment Regulation, 2016. After the process the parties to the merger are asked to remove the defects if any.

Step 3: Prima Facie Opinion

The Commission has to form a prima facie opinion under sub-section I of section 29 of the Act within thirty days of the receipt of said notice. The procedure related to forming a prima facie view is contained in Regulation 19. As per sub regulation 2 of Regulation 19, the Commission may, if considered necessary, require the parties to the combination to file additional information.

Further the parties are asked to publish the details of the combination as per section 29 (2) which creates an open invitation to the public to come forth with objections within fifteen working days from the publishing under section 29(3), which are to be pacified by the CCI accordingly. The CCI may call upon the parties for additional information pertaining to the merger under section 29(4) read with section 29(5).

Step 4: Proceeding to the Final Order:

After receiving the additional information the Commission decides as to whether or not the merger or combination will have unfavourable effects on the current competition market as per under section 31. If the commission has concluded after careful scrutiny that the combination at hand will not have harmful effects on the competition market then the Commission shall approve of the transaction under section 31(1) of the Act. On the other hand if the Commission has concluded negative on the transaction due to its adverse effect on the market, it shall hold the transaction null under Section 31(2) of the Act. In a third scenario the Commission can provide the parties with modifications to be made in the transaction to rinse out the provisions likely to be inharmonious to the competition market (Section 31(3)].

Conclusion

The regulation of combinations in a broad sense has two expressions. The first one being the procedural format to be followed by the parties and the CCI, starting off from the point of notifying the Commission proceeding to the dispensation of the final order. The transactions presented to the Commission through notification maybe countenanced, countenanced with modification or held null in accordance with the concerned provisions of the Act. At the centre of any resolution made by the Commission is the, COMPETITION APPRAISAL, markedly pertaining to vertical and horizontal combinations. Further in the challenge of steading the competition market what helps is the careful and erudite assessment of the unilateral and coordinated effects both quantitatively and qualitatively owing to specific cases. A number of factors come and go while assessing combinations but the overall guiding notion is a barter between the anti-competitive effects and the pro-competitive effects.

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