CRITERIA FOR COMBINATIONS

[Mr. M. GOVINDARAJAN]

Section 6 of the Competition Act, 2002 (‘Act’ for short) provides for regulation of combinations.  Section 6(4) of the Act provides that if a combination fulfils such criteria as may be prescribed and is not otherwise exempted under this Act from the requirement to give notice to the Commission, then notice for such combination may be given to the Commission in such form and on payment of such fee as may be specified by regulations, disclosing the details of the proposed combination and thereupon a separate notice shall not be required to be given for such combination.

Section 6(5) of the Act provides that upon filing of a notice under sub-section (4) and acknowledgement thereof by the Commission, the proposed combination shall be deemed to have been approved by the Commission under section 31(1) and no other approval shall be required under sub-section (2) or sub-section (2A).

Section 6(6) of the Act provides that if the Commission finds that the combination notified under sub-section (4) does not fulfil the requirements specified under that sub-section or the information or declarations provided are materially incorrect or incomplete, the approval under sub-section (5) shall be void ab initio and the Commission may pass such order as it may deem fit.   No such order shall be passed unless the parties to the combination have been given an opportunity of being heard.

For this purpose, the Central Government made ‘The Competition (Criteria of Combination) Rules, 2024 vide Notification No. GSR 548 (E), dated 09.09.2024.  The provisions of these Rules came into effect from 10.09.2024.

Rule 3(1) provides that the parties to a combination, their respective group entities and their affiliates who fulfils the following criteria, may give notice for such combination under that sub-section, namely: -

• they do not produce or provide similar or identical or substitutable product or service;
• they are not engaged in any activity relating to production, supply, distribution, storage, sale and service or trade in product or provision of service,–

• which are at different stage or level of production; or
• which are complementary to each other;

Rule 3(2) defines the expression ‘the parties to the combination and their respective group entities’ as-

•  the ultimate controlling person of the acquirer and other entities forming part of the same group;
• the enterprise being acquired and its downstream entities forming part of its group;
• enterprises being merged or amalgamated, their controlling persons, and entities forming part of their group.

An enterprise is considered to be an affiliate of another enterprise if that another enterprise has–

• 10%. or more of the shareholding or voting rights of the enterprise; or
• right or ability to have a representation on the board of directors of the enterprise either as a director or as an observer; or

right or ability to access commercially sensitive information of the enterprise.