What do you mean by combination? Explain the legal provision of combination with the help of decided cases under competition Law in India.

Combination under Competition Law in India

Introduction:
The term "combination" in competition law refers to mergers, acquisitions, or amalgamations that may significantly affect competition in the market. Under the Competition Act, 2002, combinations are regulated to ensure they do not adversely impact competition or lead to the creation of a monopoly or dominant position.

Legal Provision of Combination:

Section 5 of the Competition Act, 2002:

It defines combinations based on the assets and turnover of the entities involved. A transaction qualifies as a combination if it crosses certain thresholds, including:

  1. Acquisitions of control, shares, voting rights, or assets.
  2. Mergers or amalgamations that result in the creation of a new entity or the absorption of one entity into another.

Threshold limits are periodically revised by the government. Transactions below these thresholds are not treated as combinations under the Act.

Section 6 of the Competition Act, 2002:

It prohibits combinations that have or are likely to have an appreciable adverse effect on competition (AAEC) in the relevant market. Such combinations require prior approval from the Competition Commission of India (CCI).

Exemptions:
Certain combinations may be exempted if their market impact is negligible, or they fall below the prescribed thresholds.

Factors for Assessing AAEC (Section 20(4)):

The CCI considers the following while evaluating combinations:

  1. Level of competition in the relevant market.
  2. Market share of the combined entity.
  3. Barriers to entry for new players.
  4. Countervailing buyer power.
  5. Extent of innovation and technical development.

Important Cases Under Competition Law:

  1. Jet Airways and Etihad Airways (2013):

    • Jet Airways planned to sell a 24% stake to Etihad Airways.
    • The CCI examined the impact of the transaction on competition in the aviation market.
    • It was cleared after conditions were imposed to ensure that competition was not distorted.

  2. CCI v. Thomas Cook (India) Ltd. and Sterling Holiday Resorts (2015):

    • Thomas Cook’s acquisition of Sterling was scrutinized for AAEC.
    • The CCI allowed the transaction after detailed analysis, emphasizing that overlapping business segments would not harm competition.

  3. Sun Pharma and Ranbaxy Laboratories (2014):

    • The merger raised concerns about the pharmaceutical market due to overlapping product portfolios.
    • The CCI approved the merger subject to the divestment of certain products to prevent market concentration.

  4. Flipkart-Walmart Deal (2018):

    • Walmart acquired a majority stake in Flipkart.
    • The CCI examined the impact on online retail and supply chain markets.
    • The deal was approved, highlighting that the market was dynamic and evolving.

Conclusion:

Combination regulations aim to strike a balance between promoting economic efficiency and preventing anti-competitive practices. The CCI ensures that combinations do not harm consumer welfare or stifle competition. Cases like Sun Pharma-Ranbaxy and Jet-Etihad demonstrate the practical application of these laws, reinforcing their significance in maintaining a healthy competitive landscape in India.

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