Blindsided: Preparedness of Indian Competition Authority to Battle the Complications of Conglomerate Mergers

The potential antitrust complications of conglomerate mergers are a metaphorical ticking time bomb. These combinations pose a threat to the prevalence of healthy competition in a market primarily due to lacunae in the antitrust policy, which is fortified by the apathy of the enforcement authorities towards the adverse effects that may be caused. Through this post, the author attempts to draw attention to the same.

The first part addresses the concept of a conglomerate merger, followed by the identification of anticompetitive effects of such combinations in other jurisdictions [II]. Pursuant to this, we look at the anticompetitive effects [III] that such combinations could have on a market and finally look at the preparedness of the enforcement authorities [IV] to surmount the said complications.


Conglomerate mergers classify as neither vertical nor horizontal. The rationale of combination in these instances is not in substitutability of products but in the supplementation of one another. A requisite for such a merger is sufficient diversification amongst the undertakings.i

The SVS Raghavan Committee found that the odds of a conglomerate merger resulting in an antitrust complication are rather slim. This may also be a reason why the competition authorities have turned a rather ignorant eye to conglomerate mergers.ii

All the same, we cannot overlook the fact that while conglomerate mergers do not pose an imminent and direct threat to the prevalent competition in a particular market, they may have an aggravating or mitigating impact on the existing horizontal or vertical effects.


The potential threat of conglomerate mergers was first recognised by the United States in 1950 when they made an amendment to Section 7 of the Clayton Act.iii The US has ever since followed a rather restrictive practice in merger control, including conglomerate mergers, declaring them anti-competitive if they have the potential to lead to a substantial lessening of competition.

Competition Law authorities in the European Union have made radical changes in their dealing with conglomerate mergers by specifying the standard of proof and review that is applicable to merger control generically and with specificity to conglomerate mergers.iv

There has been sufficient recognition of the potential hazards of uncontrolled conglomerate mergers in the European Union and this has been addressed in cases such as Tetra Laval v Sidel v and General Electrical v In Tetra Laval, the Commission did not allow the acquisition of Sidel due to its concerns surrounding a conglomerate merger, despite their prima facie competitively neutral nature. When brought before the ECJ, it established the power of Community Courts to exercise judicial review while carrying out merger control. Further, the Court instituted that the Commission has to take into account the state of competition in the market in question and lay emphasis on the possible chains of cause and effect.

Given that the anticompetitive effects of a conglomerate merger will not be felt with immediacy, the quality of evidence employed by the Commission in this assessment has to be of higher quality than what is administered otherwise.

III. Potential anticompetitive effects by conglomerate mergers

The merger’s capacity to harm potential competition can be analysed in a twofold manner, former being harm to perceived potential competition and the latter as actual potential competition. This harm can be estimated by taking into account factors such as market concentration and entry position of the undertaking amongst others.vii

A conglomerate merger can adversely affect competition by way of reciprocity dealings. Both undertakings to the merger could entice their consumers and suppliers to indulge in further transactions with the other undertaking part taking in the merger respectively. Such a practice of tying could result in market foreclosure in a manner akin to what is witnessed in a vertical merger.vii

There is also the prospect of strong brands that belong to the merging undertakings will also be recipient to spill over benefit to their weaker enterprises. They may also find themselves in a position to exploit the residual substitution amongst weak substitutes and hinder the flourishing of potential competition.ix

The Raghavan Committee identified threats that conglomerate mergers implicitly posed to the existence of healthy competition in any relevant market, namely, they lead to the creation of deep pockets; they lower costs below the marginal costs in the market in question for the merged entity; lead to a rise in entry barriers; and lead to the elimination of potential competition.x

IV. Preparedness to face antitrust complications stemming from conglomerate mergers

India’s merger regulation regime administered by the CCI has only been in force since 2011, and it is at a relatively nascent stage. While there are provisions in the Indian Competition Act and the Combination Regulations that prescribe thresholds to classify the merger into various categoriesxi, there is little literature that dictates the course of action in case of an interposed combination such as a conglomerate merger.

An instance of a conglomerate merger that India encountered recently is that of Larsen & Toubro and its subsidiary L&T Shipbuilding. Although this amalgamation did not necessitate approval from the CCI, competitors in the market did attempt to taint the combination with claims that the amalgamation stemmed from negative propaganda, despite financial stability being displayed by both undertakings.xii

When this proposed combination was brought before the NCLT, it did not even identify the classification of the amalgamation as a conglomerate merger, and carried out a far from holistic analysis of the ramifications of this combination on the market. Although the onus to defend the nation’s economy from antitrust complications primarily falls on the CCI, other enforcement authorities in the country must also be cognizant to the nature of the combination that is being approved by them, to be able to effectively discern the threats to the market that stem therefrom. Even the Competition Law Review Committee of 2019xiii made no comment on statutory reform or amendment to address the complications of a merger of this sort.

The author believes that sooner rather than later the convoluted nature of a conglomerate merger will expose the Indian enforcement authorities to an antitrust complication they may not find themselves equipped to deal with. This calls for an express recognition of this classification of combination in the provisions of the Act and the rules ancillary to it.

The author is a former CIRC intern. The views expressed are personal.

i Goldberg, Lawrence G., The Effect of Conglomerate Mergers on Competition, (1973) The Journal of Law & Economics, 137–158, <> accessed 26 Sept. 2020.


iii  Kennecott Copper Corp. V. FTC, 467 F.2d 67, 74(10th Cir. 1972); U.S. v. Black & Decker Mfg. Co., 430 F.Supp. 729, 734.

iv Conglomerate effects of merger- Note by BIAC, Directorate for Financial and Enterprise Affairs Competition Committee, OECD <>

v Judgments of the Court of First Instance in Case T-5/02 and Case T-80/02 <>

vi <>

vii Conglomerate mergers in merger control, Discussion paper for the meeting of the Working Group on Competition Law on 21 September 2006, Bundeskartellamt <>

viii Roundtable on Conglomerate Effects of Mergers- Background Note by the Secretariat, Directorate for Financial and Enterprise Affairs Competition Committee, OECD <>

ix Jules Backamn, Conglomerate Mergers and Competition, St John’s Law Review (Spring 1970, Special Edition) <>


xi <>


xiii Report Summary, Report of the Competition Law Review Committee, PRS Legislative Research <>