Corporate and Economic Laws · The Competition Act, 2002

Regulation of Combinations under the Competition Act, 2002

Updated 11 October 2026 · Fact-checked

A combination is an acquisition, acquiring of control, or merger or amalgamation that crosses the asset, turnover or deal-value limits in Section 5. The Competition Commission of India inquires whether it causes or is likely to cause an appreciable adverse effect on competition in India. You solve questions by testing the type of deal, then the limits, then the Section 20(4) factors.

Understand Regulation of Combinations (Mergers and Acquisitions)

Competition law does not only punish bad conduct. It also watches deals that can change market structure. When two firms merge or one buys another, competition may fall. So the Act regulates combinations.

Section 5 says an acquisition, a merger or an amalgamation is a combination only if it crosses the monetary limits given in the section. Small deals are left alone. The limits are tested on assets or turnover, and, since the 2023 amendment (effective 10-9-2024), also on the value of the transaction. The de minimis exemption in Section 5(e) applies to the asset and turnover routes in clauses (a), (b) and (c). It does not override the deal-value route in clause (d).

There are three kinds of deals in Section 5: (a) an acquisition of control, shares, voting rights or assets; (b) acquiring of control by a person who already controls a competing enterprise (one dealing in similar, identical or substitutable goods or services); and (c) a merger or amalgamation. Clause (d) adds a deal-value test.

The Commission looks at whether the combination has caused or is likely to cause an appreciable adverse effect on competition (AAEC) in India. Section 20(4) lists the factors it must consider, such as barriers to entry, market concentration, market share, removal of a vigorous competitor, vertical integration, a failing business, innovation, and whether the benefits outweigh the harm.

The Commission can act in two ways. It inquires on receipt of a notice under Section 6(2). It can also inquire on its own knowledge or information, but not after one year from the date the combination took effect. Notice filing is covered in Section 6, which is not in the supplied text, so learn it from your study material.

Key rules to remember

Section 5(a)(i)(A): parties test, India only: Acquirer + target together: assets in India > ₹1,000 crore OR turnover in India > ₹3,000 crore; Parties are the acquirer and the enterprise whose control, shares, voting rights or assets are acquired. 'More than' means equal to the limit does not qualify.
Section 5(a)(i)(B): parties test, India and abroad: Aggregate assets > US$ 500 million, including at least ₹500 crore in India OR turnover > US$ 1,500 million, including at least ₹1,500 crore in India; Assets and turnover limits are alternatives. The Indian minimum must be met within the same limb.
Section 5(a)(ii)(A): group test, India only: Group after acquisition: assets in India > ₹4,000 crore OR turnover in India > ₹12,000 crore; Group is that to which the acquired enterprise would belong after the acquisition.
Section 5(a)(ii)(B): group test, India and abroad: Group: aggregate assets > US$ 2 billion, including at least ₹500 crore in India OR turnover > US$ 6 billion, including at least ₹1,500 crore in India; Clauses (b) and (c) use the same figures. In (c) the test is on the merged or created enterprise, and its group.
Section 5(d): deal value test: Value of transaction > ₹2,000 crore; The enterprise acquired, controlled, merged or amalgamated must have substantial business operations in India, as specified by regulations. The Section 5(e) de minimis exemption does not override this clause.
Section 5(e): de minimis: Assets or turnover of the target in India not more than the prescribed value → not a combination; Applies notwithstanding clauses (a), (b) and (c) only, not the deal-value test in clause (d). The prescribed value is set by the Central Government, so do not quote a figure without your material.
Control: Control = ability to exercise material influence, in any manner, over management, affairs or strategic commercial decisions; Explanation to Section 5.
Group: Group = enterprises where one can exercise 26% (or higher prescribed) voting rights, or appoint more than 50% of directors, or control management or affairs of the other; Any one of the three conditions is enough.
Value of assets: Book value as in audited accounts of the preceding financial year, less depreciation; includes brand value, goodwill, copyright, patent and similar rights; Where only a division is acquired, use that portion's assets, turnover or deal value.
Section 20(1) time limit: Own-motion inquiry barred after 1 year from the date the combination took effect; Section 20(2): on receipt of a notice under Section 6(2), the Commission shall inquire whether the combination has caused or is likely to cause AAEC in India.

How to solve Regulation of Combinations (Mergers and Acquisitions) questions

Use the same order for any question on combinations. It keeps you from missing a test and gives the examiner clear headings to mark.

1Identify the type of deal: acquisition (5(a)), acquiring control by a person already controlling a competitor (5(b)), or merger or amalgamation (5(c)).
2Identify the entities to be tested: parties, merged entity, or group after the deal. Check whether a group exists using the 26% voting, 50% board or management control test.
3Compute assets and turnover. Use audited book values for assets, less depreciation, and for turnover exclude intra-group sales, indirect taxes, trade discounts and customer amounts from outside India when testing India turnover.
4Apply the limits one by one: India-only, then India and abroad, then group limits. Remember 'more than', and that assets and turnover are alternatives.
5Check Section 5(d) deal value of more than ₹2,000 crore and the substantial business operations condition. Then check the Section 5(e) de minimis exemption.
6If it is a combination, state that notice to the Commission is needed, and that the Commission inquires into AAEC under Section 20(2).
7Apply Section 20(4) factors to the facts given and conclude whether the combination is likely to cause AAEC, weighing benefits.
8State the final answer clearly, with the section reference for each step.

Quickest way: Three-gate check

When to use it: For MCQs and short case scenarios where you must decide quickly whether a deal is a combination.

Gate 1: Is it an acquisition, control, merger or amalgamation? If it is only a minor transaction with no control, shares or assets acquired, stop.
Gate 2: Does any one limit get crossed? Parties: ₹1,000 crore assets or ₹3,000 crore turnover in India. Group: ₹4,000 crore assets or ₹12,000 crore turnover in India. Or deal value above ₹2,000 crore. Check the foreign-inclusive limits only if figures include foreign operations.
Gate 3: Is the target's India assets or turnover at or below the prescribed de minimis value? If yes, it is not a combination.
If all gates are passed, it is a combination. Then name the Section 20(4) factors the facts point to.

Common mistakes in Regulation of Combinations (Mergers and Acquisitions)

Treating a figure equal to the limit as crossing it.
Students read '₹1,000 crore' and forget the words 'more than'.
Fix: Every limit in Section 5 is 'more than'. Exactly ₹1,000 crore assets does not meet the test.
Requiring both assets and turnover to cross the limit.
Students assume the two tests are cumulative.
Fix: They are alternatives joined by 'or'. Either assets or turnover crossing the limit is enough.
Ignoring the minimum Indian component in the foreign-inclusive tests.
Students see US$ figures and add global numbers only.
Fix: For the India-and-abroad limbs, at least ₹500 crore of assets or ₹1,500 crore of turnover must be in India, depending on the limb used.
Forgetting the Section 5(d) deal value test and the de minimis exemption in 5(e).
Older notes cover only assets and turnover.
Fix: Check deal value above ₹2,000 crore with substantial business operations in India. Then check the Section 5(e) target-size exemption, which overrides clauses (a) to (c) only. It does not apply to the deal-value test in clause (d).
Using the whole enterprise's figures when only a division is bought.
Students take the seller's total balance sheet.
Fix: Under the Explanation, use the assets, turnover or deal value of the portion acquired or attributable to it.
Saying the Commission can inquire into any combination at any time.
Students overlook the proviso to Section 20(1).
Fix: Own-motion inquiry cannot begin after one year from the date the combination took effect.

Worked examples

Example 1

Alpha Ltd acquires 100% shares of Beta Ltd, a competitor. Together, their assets in India are ₹900 crore and turnover in India is ₹3,200 crore. Alpha's group would have assets in India of ₹2,500 crore and turnover in India of ₹8,000 crore after the acquisition. Deal value is ₹1,800 crore. Beta's India assets and turnover are above the prescribed de minimis value. Is this a combination?

Show the solution

Type of deal: acquisition of shares, so Section 5(a) applies.
Parties test, India only: assets ₹900 crore do not exceed ₹1,000 crore, but turnover ₹3,200 crore exceeds ₹3,000 crore. Since assets and turnover are alternatives, the test is met.
Group test is not needed, because the parties test is enough under clause (a), which uses 'or' between the limbs. (Group: ₹2,500 crore is below ₹4,000 crore and ₹8,000 crore is below ₹12,000 crore, so it would not be met on its own.)
Deal value ₹1,800 crore is not more than ₹2,000 crore, so Section 5(d) does not apply, but it is not needed.
De minimis: Beta's India assets and turnover are above the prescribed value, so Section 5(e) does not exempt the deal.
Conclusion: it is a combination. Notice to the Commission is required, and the Commission will inquire under Section 20(2).

Answer: Yes. Turnover in India of ₹3,200 crore exceeds ₹3,000 crore, which satisfies Section 5(a)(i)(A). The deal is a combination and the Commission will inquire into appreciable adverse effect on competition.

Example 2

The Commission is asked to assess a merger of two firms making cement in the same region. The merged firm would have 70% of the relevant market. New entry is hard because of heavy capital and licensing needs. One firm is not failing. Which Section 20(4) factors apply, and what is the likely view?

Show the solution

The Commission must have due regard to the Section 20(4) factors in deciding AAEC in the relevant market.
Market share of the combination in the relevant market (clause (h)): 70% is very high.
Level of concentration (clause (c)): the market becomes more concentrated after the merger.
Barriers to entry (clause (b)): heavy capital and licensing needs mean few new entrants, so countervailing competition is limited.
Removal of a vigorous and effective competitor (clause (i)): one of two close rivals disappears.
Likelihood of significant and sustainable price increase (clause (e)): high market share and high entry barriers make this likely.
Failing business (clause (k)): not available, as neither firm is failing.
Benefits (clauses (m) and (n)): the Commission would also weigh any efficiency or economic development benefits. None are given here, so they do not offset the harm.

Answer: The merger is likely to cause appreciable adverse effect on competition, because market share, concentration, entry barriers, removal of a competitor and price-rise likelihood all point to harm, while the failing business defence and benefits do not apply on these facts.

Exam tips

Learn the limits in a grid: parties India (₹1,000 crore / ₹3,000 crore), group India (₹4,000 crore / ₹12,000 crore), and the deal value ₹2,000 crore. Most MCQs test one of these numbers.
In numerical MCQs, check 'more than' carefully. A figure equal to the limit fails the test.
In case-study answers, quote the section and the factor, such as Section 20(4)(h) for market share, and apply it to the facts rather than listing all 14 factors.
Remember the 2023 amendment changes: deal value test, definition of control as material influence, and the 'group' definition. These are likely to be tested because they are recent.
Do not quote a figure for the de minimis exemption or the notice timelines unless your study material states it. Say 'as prescribed'.

Practice questions from The Competition Act, 2002

Regulation of Combinations (Mergers and Acquisitions) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Regulation of Combinations (Mergers and Acquisitions): frequently asked questions

What is a combination under the Competition Act, 2002?

It is an acquisition, acquiring of control, or merger or amalgamation that crosses the asset, turnover or deal value limits in Section 5. Deals below those limits are not combinations and need no review.

What are the asset and turnover thresholds in Section 5?

For parties to an acquisition or the merged entity, the India limits are assets above ₹1,000 crore or turnover above ₹3,000 crore. For the group, they are assets above ₹4,000 crore or turnover above ₹12,000 crore. Foreign-inclusive limits in US dollars also exist, with a minimum Indian component.

What is the deal value threshold?

Section 5(d) covers a transaction whose value exceeds ₹2,000 crore. The target must have substantial business operations in India, as specified by regulations. Deal value includes every valuable consideration, direct, indirect or deferred.

On what basis does the Commission judge a combination?

It asks whether the combination has caused or is likely to cause appreciable adverse effect on competition in India. It uses the Section 20(4) factors, such as entry barriers, concentration, market share, removal of a competitor, failing business, innovation and whether benefits outweigh harm.

Can the Commission inquire into a combination on its own?

Yes, under Section 20(1), on its own knowledge or information. It cannot start such an inquiry after one year from the date the combination took effect.