Consentia on Multidisciplinary Research



Merger can be termed as a marriage between two or more business enterprises for achieving better results. Usually a merger is seen as an amalgamation of two or more business enterprises for better and efficient functioning.  With the increase in global competition the market has become dynamic in nature and the industries cannot survive in the market only by being efficient in their approach. Now the industries to survive in this global market have to carry out large scale of operations along being efficient. This becomes one of the important reasons for merger to take place so that the companies can attain economies of scale by merging up. India has always faced stiff competition from China even in India’s domestic territory as China has always performed better with large scale of operations. Therefore Merger are generally seen for different business and commercial reasons, few of those could be, to achieve economies of scale and scope, to expand business capacity, to be operative in different markets, to produce at lowest  marginal cost and various others.

Merger is a very common practise in India and mergers are not prohibited till they do not harm the spirit of healthy market. A merger would come under the scanner of Competition Commission of India if such merger would have or an appreciable effect on the market. The scanner of CCI will also be attracted in such mergers where there is a possibility that there can be an appreciable adverse effect on the competition due to such merger.  Under Indian Competition Act 2002 there is no definition of AAEC but there are clear statutory provisions under the act which states that in which conditions it is possible to say that there has been an Appreciable Adverse Effect on The Competition. Merger control is based on the preventive theory and generally operates ex ante, i.e. to prevent a transaction adversely affecting competition, before it is put into practice. Also, practically, cost of de-merging entities after the merger transaction is very heavy and not an easy operation for competition and other regulatory authorities. International trade and commercial activities have been increasing in recent past, as singular nation states do not possess all requirements for efficient and cheap production of commercial products.

This has resulted in increase in cross-border merger transactions between nations, and has become almost imperative for nation states to have merger laws which are in concord with the international trade community. This paper would also primarily deal with different types of mergers and will elaborate on effects and consequences of these merger transactions. Competition Laws in various other jurisdictions such as EU & US would also be compared with the Indian competition laws to evaluate the method of regulating mergers and their evaluation on effectiveness while comparing it with Indian Competition law.



A true (or full) merger involves two separate undertakings merging entirely into a new entity[1]. However, under competition  law, the term ‘merger’ is used in a wider sense to mean and include amalgamation, acquisition of shares, voting rights, assets or acquisition of control over enterprise[2].   In an extensive ambit, the term merger is a transaction that brings change in control of different business entities enabling one business entity to effectively control a significant part of assets or decision making process of another[3].   An effective control through any form of acquisition mentioned above, amounts to merger as per the ECMR guidelines if there is a ‘possibility of exercising decisive influence’ by the acquiring firm over the acquired[4].   In  various  decision,  the European Commission  has determined that the question, whether a particular transaction results in a merger (or concentration as used in the ECMR) is to be determined  by analyzing, if the market in future will function  less competitively than it did prior to merger[5]. Similarly, the Indian Competition Act uses the terminology ‘causes or likely to cause appreciable adverse effects on competition’ to determine the veracity of a transaction[6]. Mergers are classified on the basis of the position of merging parties in the economic chain prior to the merger. The most common type of merger is horizontal merger. Horizontal merger occurs when actual or potential competitors of the same product and market and at same level of production or distribution merge.[7] For example a transaction between two entities ‘A’ and ‘B’ producing the same product ‘x’, to form new entity for better production the product ‘x’ is horizontal merger. The other type of mergers i.e. the non-horizontal mergers include vertical mergers and conglomerate mergers. Vertical merger occurs when two entities which operate at different but complimentary levels of production chain. Under Indian Competition law horizontal mergers are per se illegal which also defined in statutory provisions under sec 3(3) of Competition Act 2002.

Conglomerate mergers are mergers between entities which are not linked or connected in any form. These entities are neither competitor in market nor are vertically connected for manufacturing of particular product.[8]    Conglomerate mergers in economic sense can be classified further as

 (A) Pure conglomerate, where merging entities are not connected in any manner;

(B) Product extension merger, where the product of the acquiring entity is complementary to that of acquired entity

 (C) Market extension merger, where the merging entities seek to enter into a new market.


Horizontal mergers are considered as most blemish to competition than the other type of mergers. These mergers have effect on market concentration and use of market power as they lead to, a) reduction in number of market players, and b) increase the market share of the merged entity.[9] The European Commission’s Horizontal Merger Guidelines also mention two similar conditions where horizontal merger affect healthy competition in the market.[10]

These conditions are creation or strengthening of dominant position of one firm having high market share post-merger.[11]  The second being reduction in competition restrains which existed pre-merger.[12] In the EC’s Horizontal merger guidelines, and Office of Fair Trading (‘OFT’) guidance[13]  and United Kingdom’s Competition  Commission (‘CC’) Guidelines,[14] anti-competitive effects arising post-merger, but due to non-coordinated action by market players are known as non-coordinated or unilateral effects. The most common non-coordinated effect of a merger arises when post-merger, the market players are reduced in number and their market power increases, due to which they are vastly empowered to increase profit margins or able to reduce output, quality or variety. For example, if there are three market players viz. ‘A’, ‘B’ and ‘C’ and merger occurs between two of them to form ‘AB’, the number of competitors in the market is reduced and market share of the players increase post-merger. Now, if ‘AB’ increases profit margin, and customers start preferring ‘C’; ‘C’ may also increase its profit  margin due to its position in the market post- merger.  The legislations including the U.S. Horizontal Merger Guidelines, which are relevant to determine whether coordination effects have occurred due to merger are: a) market transparency must make it possible for the coordinating firms to monitor whether the terms of coordination are followed, b) existence of credible deterrents for the firm to maintain the coordinated policy, and c) no retort from competitors or consumers that would imperil the coordinated policy. Apart from these factors, other aspects such as past coordination or coordination in similar markets may be considered.[15]



It is generally acknowledged that non-horizontal mergers do not cause harm to competition in the market. The European Commission has issued Non-Horizontal merger guidelines in the year 2007, which also recognize that non-horizontal mergers are less likely to significantly impede competition.[16] This is the reason why Indian competition Act does not apply the rule of per se illegal in non-horizontal mergers. The UK’s OFT guidelines also mention the progressive effects to non-horizontal mergers.[17] However, these guidelines also state that there can be circumstances where non-horizontal mergers cause anti- competitive effects. Examining vertical mergers, two possible anti-competitive effects that could arise are: a) non-coordinated effects likely to cause foreclosure of other market players,[18] and b) coordinated effects carried out by the merger entity.[19] Conglomerate mergers also have minimal anti-competitive effects, however, three concerns arising out of these kinds of these mergers have been detailed by the OFT guidance.[20]

Firstly, conglomerate mergers may lead to market domination over various portfolio of products in market. Secondly, such merger may lead to anti-competitive practices such as predation,[21] and thirdly it may lead to coordinated behaviour in the market.[22]

Threshold Limit – A comparative study between India, EU & USA

Threshold limits are important aspect of all competition policies, as these limits determine which transaction is to be notified to or which needs to be reviewed by the competition authorities. The ICN Recommended Practices on Merger Notification Procedures, state that threshold limits should be clear, understandable & determined on objectively quantifiable criterion and information.[23]  The laying down of threshold limit also eases the pressure of competition authority of inspecting all mergers, as done in mandatory notifying systems and allows the authorities to focus only on most likely mergers to affect transactions.[24] That threshold limits are used in order to provide a straightforward mechanism in determining the jurisdiction of competition authorities over a transaction and should not be considered as means of substantive assessment over the transaction.[25]

Different jurisdictions have set out different threshold limits in the terms of assets, sale, turnover etc of The three test involved in finding out the threshold limit is in terms of asset. In spite of there being difference in criterions, the ICN practices suggest that sufficient assets or sales of the undertakings involved in the transactions should be within the territorial limits of the country where authority   is exercising jurisdiction.[26]    This is also known as the local nexus provision. In United States the HSR act states that if the undertakings involved in the transaction i.e. either the acquiring or the acquired party are engaged in US commerce or any activity affecting US commerce, then the authorities have power to inspect. The second is the ‘size of transaction test’ which states to look into the voting securities or assets that will be held by acquiring party through the proposed transaction. The third and important method of determining jurisdictional threshold is the ‘size of parties’ test. This test looks at size of the parties involved in the transaction and is satisfied if one party has worldwide sales or assets of US$10 million or more and the other has worldwide sales or assets of US$100 million or more.

In contrast to the US law, the EU law only looks at turnover as an important aspect for determining jurisdictional threshold.  The ECMR for large-scale transactions  provides that authorities  will have jurisdiction if the aggregate worldwide turnover of the parties exceeds €5 billion and the Community wide turnover of each of at least two parities, exceeds €250 million unless each of the parties achieves more than two-third of its aggregate Community wide turnover in one and the same member state.[27]

Similarly, for small scale transactions the ECMR will intervene if the aggregate worldwide turnover of the parties exceeds €2.5 billion and the Community wide turnover of each of at least two parities exceeds €100 million and in each of at least three member states, the aggregate turnover of all the parties exceeds €100 million and in these three member states, the turnover of each of at least two parties exceeds €25 million unless each of the parties achieves more than two-third of its aggregate Community wide turnover in one and the same member state.[28]  The term turnover is understood as amount derived from the sale of products or provision of services in the preceding financial year. Similar to the EU law, is the law in UK. However, the jurisdictional tests laid in Enterprise Act of 2002 are much simpler. UK law also mainly follows the turnover test, where a relevant merger situation is created and authorities can inspect, if the value of turnover of the enterprise being acquired exceeds £70 million.[29] The turnover is determined by aggregating the total value of the turnover in UK of the enterprises which are ceasing to be distinct and deducting: the turnover in UK of any enterprise, which continues to be carried on under the same ownership or control or if enterprise continues to be carried on under the same ownership and control, the turnover in UK which of all turnovers concerned, is the turnover of the highest value. The Act also provides for ‘share of supply’ test, whereby it states that authorities  will intervene  if the merger creates or enhances 25 % (one- quarter of the goods or services) share of supply or purchases in UK or in substantial part of it.[30]

       The Indian Competition law while dealing with mergers considers both assets and turnover while considering jurisdictional thresholds. The Commission can intervene if individually or together the acquirer and acquired party have: a) combined assets in India of INR1500 crores or combined turnover in India of INR4500 crores; or b) combined worldwide assets of US$750 million, including combined assets in India of INR750 crores; or c) combined worldwide turnover of US$2.25 billion, including combined turnover in India of INR2250 crores.[31] The Commission also intervenes if the combined company group to which the acquired party will belong post-acquisition has: a) assets in India of INR6000 crores or turnover in India of INR18,000 crores; or b)worldwide assets of US$3 billion, including assets in India of INR750 crores; or c)worldwide turnover of US$9 billion including turnover in INR 2250 cr.

Effect of Amendments on Mergers


Competition Laws of India underwent two amendments in the year of 2007 & 2012 which had a significant impact on the procedural aspects of Mergers. By 2007 amendment notification of all combinations i.e. Mergers, Acquisitions & Amalgamations to the commission was made compulsory. This was not a pre requirement under the earlier competition laws. The 2012 amendment has brought relief to some of the mergers by raising the combination limit. After the new amendment for a turnover to be calculated under combinations will exclude taxes which has made it mandatory to the commission to exclude taxes even in certain number of cases where it had to be included in the part of turnover. This has a direct impact on section 5 on combinations which includes mergers as the actual amount has increased thus widening up combination limit and also now there would be less number of filings because of increased limit.



The Indian Competition law has majorly been adopted from competition laws of EU & USA. When merger control is taken into consideration the factor of threshold limit becomes very important which has been adopted from EU & USA practices. These provisions help the Competition authorities to work towards its duties of preventing adverse effects on competition, protecting interest of consumers and ensuring freedom of trade. However, there are certain factors which need to be deliberated upon and need further skilled escalation. Importantly, amongst these is a need for lucid and cogent guidelines or strategy principles on types of mergers and there effects. Like the EU or US guidelines of horizontal and non-horizontal mergers, which also prescribe for coordinated and non-coordinated effects caused by mergers, the Indian law should also try to provide for similar.

An essential facet with regard to merger regulations is with respect to setting of threshold limits. Though the Indian  law, being  progressive  in  nature mentions both  individual  and group while describing thresholds,  needs to mull over the fact that setting monetary thresholds  needs timely restructuring,  as the economic and commercial factors keep shifting  very  rapidly  in  developing countries like India.


  1. Competition Law Today, Vinod Dhall (ed.) Oxford University Press, 1st edition, 2007.
  2. T Ramappa, Competition Law in India: Policy, Issues and Developments, Oxford University Press, 1st , 2006
  3. David M. Barton and Roger Sherman, The Price and Profit Effects of Horizontal Merger: A Case Study, The Journal of Industrial Economics, 33, No. 2 (Dec., 1984), pp.

165-177, available at

  1. P. Mittal, Competition Law & Practice, Taxman’s Publication, 2nd ed., 2008
  2. Jonna Goyder, eal., ECs Competition Law, Oxford University Press, 5th ed., 2009
  3. Maher M. Dabbeh, EC & UK Competition Law, Cambridge University Press, 5th e, 2004.
  4. Neeraj Tiwari, Merger Under The Regime of Competition Law: A Comparative Study of Indian Legal  Framework  With EC and  UK, Bond Law Review, 23, Iss. 1, Article 7, available at

[1] Wish, Competition Law, Oxford University Press, 6th ed., 2009, 798

[2] See  Competition Law Today, Vinod Dhall (ed.) Oxford University Press, 1st edition, 2007, 15

[3] Dhall, Id on 93

[4] Whish,  Supra note 19 at 799

[5] See Case M 890 Blokker/Toys ‘R’ Us, decision of 26th June, 1997, OJ [1998] L 316/1

[6] India, The Competition Act, 2002, sec 6

[7] Neeraj Tiwari, Merger Under The Regime of Competition Law: A Comparative Study  of Indian  Legal Framework With EC and UK, Bond Law Review, Vol. 23, Iss. 1, Article 7, available at  (last visited on October 30th, 2011); See also Pieter   T. Elgers and John J. Clark, Merger Types and Shareholder Returns: Additional Evidence, Financial Management, Vol. 9, No. 2 (Summer, 1980), pp. 66-72, available at (last visited on October 10th, 2013)

[8] See Tiwari, Supra note 25

[9] David M. Barton and Roger Sherman, The Price and Profit Effects of Horizontal Merger: A Case Study,  The Journal of Industrial  Economics,  Vol. 33, No. 2 (Dec., 1984), pp. 165-177, available at (last visited on October 11th, 2013)

[10] John J. Parisi,  A  Simple  Guide   to  the  EC  Merger  Regulation,   January   2010,  available  (last visited on October  10th, 2013)

[11] Id

[12] Id

[13] Office of Fair Trading,  Mergers: Substantive Assessment Guidance(‘OFT guidance’), May 2003, ¶ 4.7 -4.10 available   at      (last   visited   on October 15th, 2013)

[14] UK, Merger references:  Competition Commission Guidelines(‘UKCC guidelines’),  June 2003, ¶ 3.28-3.31  available at (last visited on October

15th, 2013)

[15] EC, Horizontal Merger Guidelines 2004

[16] EC, Non-Horizontal Merger Guidelines, 2007, ¶ 12, 20 available at  (last  visited  on October 16th, 2013)

[17] OFT guidance ¶ 5.3, 5.4

[18] EC Non-Horizontal Merger Guidelines, 2007, ¶ 18; OFT guidance

[19] EC Non-Horizontal Merger Guidelines, 2007, ¶ 19; OFT guidance

[20] OFT guidance ¶ 6.1

[21] OFT guidance ¶ 6.2,6.3

[22]OFT guidance ¶ 6.4, 6.5

[23] International Competition Network, Recommended Practices for Merger Notification Procedures,   pg 3-4 available at (last visited on October 30th,


[24] Golderberg, Supra note 30 at 96

[25] Whish,  Supra note 19 at 828

[26] Recommended Practices, Supra note 57 at pg 1

[27]  EC   Merger    Regulations, 2004,   art  46(2),   available  at visited on October 15th, 2013)

[28] Id at art 46(3)

[29] UK, Enterprise Act, 2002, sec 23(1)

[30] Id at sec 23(3) and 23(4)

[31] India, Competition Act, 2002, sec 5(b)


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