Regulation of Combinations Under Sections 5 and 6 of the Competition Act, 2002: Mergers, Thresholds and CCI Approval

What Is a Combination Under the Competition Act, 2002?

Section 5 of the Competition Act, 2002 defines a combination to include mergers, amalgamations and acquisitions of shares, voting rights, control or assets that cross specified financial thresholds based on assets or turnover, measured both in India and worldwide. Section 6 prohibits any person or enterprise from entering into a combination that causes or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India, and declares such combinations void.

Thresholds and Mandatory Notification Requirements

Combinations that cross the asset or turnover thresholds prescribed under Section 5, as periodically revised by the Ministry of Corporate Affairs, must be notified to the CCI before they take effect, subject to certain exemptions such as the de minimis or small target exemption for acquisitions of enterprises with limited Indian assets or turnover. Parties must generally observe a standstill period and cannot complete the transaction until the CCI approves it or the statutory review period lapses. The Competition (Amendment) Act, 2023 also introduced a deal value threshold, requiring notification of transactions above a specified value that have substantial business operations in India, aimed at capturing high value digital and technology acquisitions that might otherwise fall outside traditional asset or turnover tests.

The CCI's Role in Merger Review: Assessing Appreciable Adverse Effect on Competition (AAEC)

Once a combination is notified, the CCI examines whether it is likely to cause an AAEC in the relevant market, using the factors listed under Section 20(4), including market share of the combined entity, level of competition remaining, barriers to entry, countervailing buyer power, and the extent to which the combination would result in the removal of an effective competitor. Most combinations are cleared in the first phase within thirty working days if no serious competition concerns arise. Where the CCI forms a prima facie opinion that a combination raises or is likely to raise an AAEC, it moves to a detailed Phase II investigation involving a wider inquiry and public comments.

Cross-Border Mergers: Jurisdiction and Enforcement

The Competition Act, 2002 applies to combinations that have an effect on competition within India even if the merging parties or the transaction itself takes place outside India, reflecting the effects doctrine that most modern competition regimes, including the EU and US, also follow. This means global mergers between multinational corporations often require separate CCI clearance in India alongside approvals from the European Commission, the US Federal Trade Commission or Department of Justice, and other regulators, making coordinated multi jurisdictional merger control a growing area of practice for Indian competition lawyers.

Procedure, Remedies and Penalties

If the CCI finds that a notified combination is likely to cause an AAEC, it can direct modifications, such as divestiture of certain assets or business lines, rather than an outright prohibition, reflecting a general preference for structural remedies that preserve the underlying transaction where possible. Failure to notify a notifiable combination, or completing a combination before CCI approval, known as gun jumping, attracts significant monetary penalties under the Act, and the combination itself can be declared void. The CCI also has the power to unwind or modify a combination that was implemented without proper notification.

Landmark Cases on Combination Regulation

• Competition Commission of India v. Steel Authority of India Ltd., (2010) 10 SCC 744, foundational for understanding the CCI's investigative and adjudicatory powers that also apply in combination review.

• Uber India Systems Pvt. Ltd. v. CCI, Appeal No. 31 of 2021 (NCLAT), touching on market definition principles relevant to assessing dominance and combination effects in platform markets.

• XYZ v. Indian Railways Catering and Tourism Corporation (IRCTC), Case No. 30 of 2021 (CCI), illustrating how the CCI applies market definition and effects analysis, principles that also inform combination assessment.

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Frequently Asked Questions

What is a combination under the Competition Act, 2002?

A combination, defined under Section 5, includes mergers, amalgamations, and acquisitions of shares, voting rights, control or assets that cross the prescribed asset or turnover thresholds, or, after the 2023 amendment, the deal value threshold for transactions with substantial business operations in India.

Do all mergers need CCI approval?

No. Only combinations that cross the specified financial thresholds under Section 5 need mandatory notification and approval, subject to exemptions such as the small target or de minimis exemption for acquisitions involving enterprises with limited Indian assets or turnover.

What is the deal value threshold introduced by the Competition (Amendment) Act, 2023?

It requires notification of combinations above a specified transaction value where the target has substantial business operations in India, designed to capture high value acquisitions, particularly in the digital and technology sectors, that might otherwise escape traditional asset or turnover based thresholds.

What happens if parties complete a combination without CCI approval?

This is known as gun jumping and can attract significant monetary penalties. The CCI also has the power to treat the combination as void and can direct the parties to unwind or modify the transaction.

How does the CCI assess whether a combination causes an appreciable adverse effect on competition?

Under Section 20(4), the CCI examines factors such as the market share of the combined entity, the level of remaining competition, entry barriers, countervailing buyer power and the risk of removing an effective competitor from the relevant market.

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