The Effect of Competition Law on Mergers

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Be it Vodafone’s purchase of Hutchison Essar or Aditya Birla’s takeover of Novellis, NTT Tata Docomo or Reliance MTN, mergers in India and by Indian companies have increased and become more significant than ever before.

The significance of mergers has led to greater legal control over them. One of the most significant developments in this respect has been effect of Competition law on mergers.

Technically, Merger is the amalgamation of two or more business or companies for increasing ambit of provision of services and efficient functioning. Mergers are usually done to widen the scale and scope of the business and produce at lesser price.

On 1st June 2011, India entered into the club of countries having full operational competition law. After speculations, controversies, doubts, oppositions and persuasions, finally amalgamations, combinations and acquisitions were added to the Competition law. Even though the competition law was enacted in January 2003, it took almost 8 years for the government to include amalgamations in the completion law.

This was largely due to the fact that the merger law received immense opposition. Right from the speculation that the CCI would be sitting over merger clearances delaying business transactions to claims that CCI does not have the capacity and capability to review complex mergers, it being a new competition agency. However, the motive behind all these speculations was to restrain merger law to enter the competition law and hamper businesses. History shows, be it Canada or US or the EU, competition law enforcement has never been welcomes by big business enterprise as it has the potential to hamper profit and ability to form cartels. Nevertheless, in 2011, mergers were included in the comp...

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...st companies used the first form. The first form for merger filing was almost discretionary. It only required that the basic information of the transaction be filed and to ensure that it did not fall into any of the categories given in the schedule and the regulations. However, unlike speculations this system proved to be quite effective as competition assessment could be gauged from the fact that nearly all merger filings were voluntary including details of the transaction as well as the reason why it would not have an adverse effect on competition. The AAEC or adverse effect on competition is a substantive test for evaluation of mergers in India.

Now this scheme of discretion has proved to be effective because this has reduced opposition and accusations that introducing would burden the businesses or postpone enforcement of merger control on different grounds.

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