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

As per section 5 of Competition Act 2002, Combination refers to the amalgamation or merger of one or more entities/ individuals. Types of combinations include:

1. Horizontal Combinations:

merger of entities operating at the same level of production process, which facilitates enhancement of business perofrmance, shareholders' value etc.

2. Vertical Combination:

merger of entities involved in different phases of the production process, this helps in increasing the competitiveness, better process control etc.

3. Conglomerate

merger of entities operating in business fields that are totally unrelated. This is generally undertaken because the entities will achieve a stronger stand in the market than when they were operating individually

Regulation of Combinations:

Regulation covers two aspects in this case:

1. Procedural part: legislations to be adhered to by both parties as stipulated by CCI, for eg: ensuring that the merged entity conforms to the thershold pertaining to assets and turnover limits stated in the Act. This also includes following the process to notify CCI till the obtaining of final order.

2. The othe part involves competition appraisal and ensuring that the anti competitive effects do not come into picture which might go against the very spirit of the Act (to ensure fair competitive practices).

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