Rule of Reason Approach—Critical analysis on the AAEC in respect of P & G Gillette Merger.
--- By Bhanu Shree Jain
In inquiring into a Merger and Acquisition the Competition Commission has to see whether a Merger and Acquisition has caused or likely to cause an “appreciable adverse effect on competition” (AAEC) and there is a
‘rule of reason’ approach to the inquiry. The paper explores Section 5, 6, 20, 29, 30 & 31 of the Competition Act, 2002 which govern the same and the act provides a large number of factors which the Commission must take in to account in the inquiry. Most importantly, these include the market share of the enterprises, barriers to entry, level of concentration in the market, likelihood of increase in prices of profits margins, removal of an important competitor, and so on. If the Commission finds, which going by historical experiences could be in a small proposition of the cases, that the merger is likely to have AAEC, the commission may refuse approval or may approve it with certain modifications. In case of P&G Gillette merger, the authorities stipulated that certain part of the business must be divested. The process of inquiry set out in the act provides full opportune to the merging enterprises to defend the merger and also to consider any modifications proposed by the Commission. It also provides an open opportunity to opposing parties to present their position to the Commission.
Section 5 sets up the threshold limit in India as well as at Global level, thus providing a safeguard from internal as well as external Mergers and Acquisitions which will likely affect the Competition and prices in Indian market. Parties are not required to mandatorily notify their transaction to the commission. However the enterprise has to consider either to go for pre- notification of the combination or post notification after one year of