Competition Commission of India

Competition Commission of India is a body of the Government of India responsible for

enforcing The Competition Act, 2002throughout India and to prevent activities that have an
adverse effect on competition in India. It was established on 14 October 2003. It became fully
functional in May 2009.

Objectives
Preamble to the Competition Act
An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.[5]
To achieve its objectives, the Competition Commission of India endeavours to do the following:

Make the markets work for the benefit and welfare of consumers.
Ensure fair and healthy competition in economic activities in the country for faster and
inclusive growth and development of economy.
Implement competition policies with an aim to effectuate the most efficient utilization of
economic resources.
Develop and nurture effective relations and interactions with sectoral regulators to ensure
smooth alignment of sectoral regulatory laws in tandem with the competition law.
Effectively carry out competition advocacy and spread the information on benefits of
competition among all stakeholders to establish and nurture competition culture in Indian
economy.

POSITION ON MERGRES AND ACQUISITIONS

Before considering combinations, it is necessary to look at two important sections of the
Competition Act. On May 15 2009 the government formally notified certain provisions in the
Act relating to anti-competitive agreements and abuse of dominance, covered in Sections 3 and 4
of Competition Act respectively, which came into force on May 20 2009. Section 3 of CA
governs anti-competitive agreements and prohibits: agreements involving production, supply,
distribution, storage, acquisition or control of goods or provision of services, which cause or are
likely to cause an appreciable adverse effect on competition in India .
Section 4 of CA prohibits the abuse of a dominant position by an enterprise . Under the
Monopolies Act, a threshold of 25% constituted a position of strength. However, this limit has
been eliminated under the CA. Instead, the CA relies on the definitions of relevant market ,
relevant geographic market and relevant product market as a means of determining an abuse
of a dominant position.
Under Section 6, the CA prohibits enterprises from entering into agreements that cause or are
likely to cause an appreciable adverse effect on competition within the relevant market in India
. Under the new regime, the Competition Commission has investigative powers in relation to
combinations. Various factors are provided for determining whether a combination will or is
likely to have an appreciable adverse effect on competition in India, and penalties are provided
for such violations .

CRITERIA UNDER SECTION

One of the most significant provisions of CA, Section 5, which defines combination by
providing threshold limits in terms of assets and turnover is yet to be notified. There is no clarity
as to when it will be made effective. At present, any acquisition, merger or amalgamation falling
within the ambit of the thresholds constitutes a combination.

Accounting Standard 14: Accounting for Amalgamations

Accounting Standard 14: Accounting for Amalgamations
Amalgamation in nature of merger be accounted for under Pooling of Interest Method and in
nature of purchase be accounted for under Purchase Method.
Under the Pooling of the Interest Method, assets, liabilities and reserves of the transferor
company be recorded at existing carrying amount and in the same form as it was appearing in the
books of the transferor.
In case of conflicting accounting policies, a uniform policy be adopted on amalgamation. Effect
on financial statement of such change in policy be reported as per AS5.
Difference between the amount recorded as share capital issued and the amount of capital of the
transferor company should be adjusted in reserves.
Under Purchase Method, all assets and liabilities of the transferor company be recorded at
existing carrying amount or consideration be allocated to individual identifiable assets and
liabilities on basis of fair values at date of amalgamation. The reserves of the transferor company
shall lose its identity. The excess or shortfall of consideration over value of net assets be
recognised as goodwill or capital reserve.
Any non-cash item included in the consideration on amalgamation should be accounted at fair
value.
In case the scheme of amalgamation sanctioned under the statute prescribes a treatment to be
given to the transferor company reserves on amalgamation, same should be followed. However a
description of accounting treatment given to reserves and the reasons for following a treatment
different from that prescribed in the AS is to be given. Also deviations between the two
accounting treatments given to the reserves and the financial effect, if any, arising due to such
deviation is to be disclosed. (Limited Revision to AS 14 w.e.f 1-4-2004)
Disclosures to include effective date of amalgamation for accounting, the method of accounting
followed, particulars of the scheme sanctioned.
In case of amalgamation under the Pooling of Interest Method the treatment given to the
difference between the consideration and the value of the net identified assets acquired is to be
disclosed. In case of amalgamation under the Purchase Method the consideration and the
treatment given to the difference compared to the value of the net identifiable assets acquired
including period of amortization of goodwill arising on amalgamation is to be disclosed.

Disclosure
For all amalgamations, the following disclosures should be madein the first financial statements
following the amalgamation:
(a) names and general nature of business of the amalgamatingcompanies;
(b) effective date of amalgamation for accounting purposes;
(c) the method of accounting used to reflect the amalgamation; and
(d) particulars of the scheme sanctioned under a statute.

For amalgamations accounted for under the pooling of interests method, the following additional
disclosures should be made in the first financial statements following the amalgamation:
(a) description and number of shares issued, together with the percentage of each companys
equity shares exchanged to effect the amalgamation;
(b) the amount of any difference between the consideration and the value of net identifiable
assets acquired, and the treatment thereof.
45. For amalgamations accounted for under the purchase method, the following additional
disclosures should be made in the first financial statements following the amalgamation:
(a) consideration for the amalgamation and a description of the consideration paid or
contingently payable; and
(b) the amount of any difference between the consideration and the value of net identifiable
assets acquired, and the treatment thereof including the period of amortisation of any goodwill
arising on amalgamation.
Amalgamation after the Balance Sheet Date
When an amalgamation is effected after the balance sheet date but before the issuance of the
financial statements of either party to the amalgamation, disclosure should be made in
accordance with AS 4,
Contingencies and Events Occurring After the Balance Sheet Date, but the amalgamation
should not be incorporated in the financial statements. In certain circumstances, the
amalgamation may also provide additional information affecting the financial statements