Question

What does it mean that “competition and combination are correctives of each other?”（describe the different types of competition and combination） Explain why these correctives can or cannot work without some sort of government regulation?

Answer 1

Two firms combining or coordinating is seen as a conspiracy by reps of big firms. Cooperation between firms was necessary to ease dangerous competition that threatened the profitability of large-scale industries.

As per companies act, combination refers to amalgamation or merger of two or more entities. These include,

1) Horizontal merger - merger of entities operating at the same level of production process

2) Vertical merger - merger of entities involved in different phases of the production process

3) Conglomerate - merger of entities operating in business fields that are totally unrelated.

Regulation of Combination

1) Procedural part

Legislation that govern both parties as stipulated by CCI. For eg ensuring that the merged entity conforms to threshold related to assets and turnover.

2) The second part involves competition appraisal and ensuring anti competitive effects do not come into picture.

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