Regulating Market Combinations Under the Competition Act, 2002: Ensuring Fair Play

Every time two large companies decide to merge or one acquires another in India, a critical question arises: will this deal harm competition in the market? The Competition Act, 2002 answers that question through Sections 5 and 6 – the provisions that regulate what are legally termed combinations. These two sections form the backbone of India’s merger control regime, ensuring that corporate consolidation does not come at the cost of fair competition, consumer welfare, or market diversity.

What is a “combination” under the Competition Act? 🔗

The term “combination” under Section 5 of the Competition Act, 2002 is broader than it might first appear. It does not just mean a merger. It covers three distinct forms of corporate transactions: an acquisition (where one enterprise gains control over shares, assets, or voting rights of another), a merger (where two or more enterprises combine into a single entity), and an amalgamation (where two enterprises come together to form an entirely new entity, or one absorbs the other). Joint venture arrangements that result in the creation of a new enterprise can also constitute a combination depending on how they are structured.

Not every acquisition or merger, however, falls within the regulatory scope of Section 5. The law applies only when the transaction crosses prescribed financial thresholds – based on the assets and turnover of the parties involved. This threshold-based trigger is what distinguishes a notifiable combination from an ordinary business transaction.

The threshold framework under Section 5 🔗

Section 5 sets out two tests for determining whether a combination requires notification to the Competition Commission of India (CCI) – the enterprise-level test and the group-level test. Both tests measure financial size using assets and turnover, either within India alone or on a combined India and global basis.

For the enterprise-level test, a transaction is notifiable if the parties to the acquisition – taken together – either have assets worth more than ₹1,000 crore or a turnover exceeding ₹3,000 crore within India. Alternatively, on a global basis, the threshold is assets exceeding USD 500 million (including at least ₹500 crore in India) or a turnover above USD 1.5 billion (including at least ₹1,500 crore in India). The group-level test applies similar logic but measures the financial size of the entire group to which the acquiring enterprise belongs, with higher thresholds to account for the broader scale of corporate groups.

An important relief mechanism exists in the form of the de minimis exemption. As notified by the Ministry of Corporate Affairs, a transaction is exempt from CCI review if the target enterprise has assets in India worth less than ₹350 crore or a turnover below ₹1,000 crore. This small-target exemption ensures that minor deals – which pose little competitive risk – are not burdened with regulatory procedures designed for large-scale market-altering transactions.

Beyond financial thresholds, Section 5 has also been updated to account for high-value digital economy transactions. A deal value threshold (DVT) has been introduced so that acquisitions of technology startups with significant user bases but low revenue – which previously escaped review – can still be assessed by the CCI if the deal value exceeds ₹2,000 crore and the target has substantial business operations in India.

Section 6: the obligation to notify and the prohibition on AAEC 🔗

While Section 5 defines what counts as a combination, Section 6 governs its effect and enforceability. The central rule under Section 6(1) is direct: any combination that causes or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India is void. This is the fundamental legal standard that the CCI applies when evaluating every notified transaction.

Section 6(2) casts a mandatory obligation on parties proposing to enter into a combination: they must give prior notice to the CCI before the transaction is consummated. No combination can come into effect until 150 days have passed from the date notice was given to the CCI, or until the CCI has passed an order under Section 31 – whichever is earlier. The 150-day outer limit was reduced from the earlier 210 days by the Competition (Amendment) Act, 2023, reflecting a push toward faster regulatory clearances.

The filing responsibility is clearly allocated. In cases of acquisition or hostile takeover, it is the acquirer’s responsibility to file the notice. For mergers and amalgamations, a joint notice is filed by all merging parties. In the case of a joint venture, the notice must be filed collectively by all parties forming it.

Critically, gun-jumping – the act of consummating a combination before CCI clearance – is treated as a serious violation. The Indian merger control regime is mandatory and suspensory in nature, meaning parties cannot implement the transaction, even in part, before receiving approval. Violations can attract significant penalties under Section 43A of the Act.

Factors the CCI considers in evaluating AAEC 🔗

The CCI does not evaluate combinations in a vacuum. Section 20(4) of the Competition Act provides a detailed list of factors that the Commission must consider when assessing whether a combination would have an appreciable adverse effect on competition. These include:

The market share of the combined entity post-transaction is one of the most significant indicators. A post-combination share that is particularly high – typically above 40% – raises immediate concern. The CCI also examines barriers to entry: if the market is already difficult to enter, a combination that consolidates existing players further entrenches those barriers. Countervailing buyer power, the degree of concentration in the relevant market, the likelihood of collusion between remaining players, and the nature and extent of innovation likely to follow the combination are all evaluated. The CCI has also used economic tools like the Herfindahl-Hirschman Index (HHI) to measure market concentration in certain cases.

Importantly, the assessment is not purely about harm. The CCI also considers potential efficiencies – whether the combination is likely to reduce costs, improve quality, or enhance innovation in ways that benefit consumers. If the efficiencies are substantial and cannot be achieved through less restrictive means, they may outweigh competition concerns.

The investigation procedure: Phase I and Phase II 🔗

Once a notice is filed, the CCI follows a structured two-phase inquiry process.

Phase I: prima facie review 🔗

In Phase I, the CCI is required to form a prima facie opinion on whether the proposed combination causes or is likely to cause AAEC within 30 calendar days of receiving the notice (revised from working days under the 2023 Amendment). If the CCI concludes at this stage that there is no competitive concern, it issues a formal approval order and the parties can proceed. The vast majority of combinations filed before the CCI are cleared at this stage itself.

Parties can file using Form I for simpler, low-risk transactions or Form II for combinations with significant market overlaps or competitive concerns. The CCI may also direct parties to switch from Form I to Form II if it believes a more detailed examination is warranted. A recently introduced Green Channel Route allows automatic approval for certain categories of combinations with no horizontal, vertical, or complementary overlaps, streamlining the process further.

Phase II: detailed investigation 🔗

If the CCI’s prima facie assessment raises competition concerns, it issues a notice to the parties under Section 29, asking them to show cause why a detailed investigation should not be conducted. The CCI may then direct its investigative arm – the Director General (DG) – to conduct a formal inquiry and submit a report. The parties are also required to publicly disclose details of the proposed combination by publishing it in national dailies and on their websites, ensuring transparency and inviting third-party comments.

During Phase II, the CCI examines the relevant product and geographic markets with precision, assesses the degree of competitive overlap, and evaluates economic evidence submitted by the parties and third parties.

Possible outcomes: approval, modification, or rejection 🔗

Under Section 31, after completing its inquiry, the CCI has three options:

Unconditional approval is granted when the CCI concludes that the combination does not cause AAEC. The parties may then complete the transaction. Conditional approval with modifications is issued when the CCI finds competitive concerns but believes they can be addressed through remedies. These remedies can be structural – such as requiring divestiture of certain assets or businesses – or behavioural, such as mandating non-discriminatory access to certain inputs or platforms. Parties may also voluntarily offer modifications during Phase I or Phase II to address the CCI’s concerns and secure faster approval. Real-world examples include the Sun Pharmaceutical-Ranbaxy merger (2014), which received CCI clearance subject to specific divestitures in the pharmaceutical sector, and the Holcim-Lafarge combination in the cement sector, approved with structural modifications.

Finally, the CCI can block the combination by declaring it void under Section 6(1) if it determines that the transaction would cause AAEC and no remedy can adequately address the harm. To date, the CCI has never outright blocked a combination – it has always found that modifications could resolve the identified concerns – though this remains a live possibility for future transactions.

Exemptions and special categories 🔗

Not all transactions that technically meet the threshold under Section 5 need to be notified. Schedule I of the Combination Regulations lists categories of transactions that are ordinarily not notifiable because they are unlikely to have any AAEC. These include intra-group acquisitions (where one enterprise acquires another within the same corporate group with no change in control), acquisitions pursuant to bonus issues or stock splits, and acquisitions by securities underwriters in the ordinary course of business.

The Central Government has also granted sector-specific exemptions, such as for the amalgamation of Regional Rural Banks and the reconstitution of nationalised banks, recognising that public policy considerations sometimes outweigh standard competition concerns in certain regulated sectors.

The Competition (Amendment) Act, 2023 and recent developments 🔗

The Competition (Amendment) Act, 2023 introduced meaningful changes to the combination framework. The review timeline was reduced from 210 days to 150 days, and the prima facie opinion period was changed from working days to calendar days, making the process faster and more predictable for businesses. The deal value threshold was introduced to address gaps in the existing asset-turnover-based model, particularly for digital markets. The 2023 amendments also proposed greater accountability in the process, including tighter timelines and clearer procedural rules.

The interplay between the Competition Act and the Insolvency and Bankruptcy Code, 2016 was also recently clarified by the Supreme Court. In Independent Sugar Corporation Ltd. v. Girish Sriram Juneja (2025), the Court held that CCI approval for combinations arising during corporate insolvency resolution processes must be obtained before the Committee of Creditors approves the resolution plan – reinforcing that competition law compliance is a mandatory precondition, not an afterthought, even in insolvency proceedings.

The regulation of combinations under Sections 5 and 6 of the Competition Act, 2002 reflects a carefully calibrated balance: supporting legitimate business restructuring and economic growth while preventing transactions that would unfairly concentrate market power. The CCI’s role as merger regulator is not simply to approve or reject deals, but to ensure that India’s markets remain contestable, consumer-friendly, and open to competition – whether a deal originates in Mumbai or Silicon Valley.

What do you think? Given that India has never outright blocked a combination and has always relied on modifications instead, do you think conditional approvals are sufficient to protect competition – or does the absence of a full block weaken the deterrent effect of the law? And with the rise of data-driven tech companies, do existing asset and turnover thresholds adequately capture the true competitive significance of large digital acquisitions in India?

References

1. https://www.cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf
2. https://www.cci.gov.in/combination/combination/filing-of-combination-notice/introduction
3. https://thelegalschool.in/blog/section-5-competition-act
4. https://disputeresolution.cyrilamarchandblogs.com/2025/03/cci-nod-mandatory-before-committee-of-creditors-approval-under-the-code-says-supreme-court/
5. https://azbpartners.com/bank/india-the-merger-control-review-edition-10/
6. https://www.azbpartners.com/bank/india-the-merger-control-review-edition-10/
7. https://xbma.org/indian-update-phase-ii-combination-investigations-by-the-cci/
8. https://taxguru.in/corporate-law/section-5-6-indian-competition-act-2002-combination-regulations.html