From List to Test: Structuring Efficiencies Defence in Indian Combination Control

[Architshri is a student at Hidayatullah National Law University.]

The European Commission's recent Draft Merger Guidelines (April 2026) elevate efficiencies into a structured "theory of benefit”, assessed against a defined structure. The contrast sharpens the central problem this piece identifies: India retains efficiencies in its regulations, but lacks a reliable enforcement mechanism. As Indian regime is relatively bent towards the EU framework, this piece uses the US framework to illustrate the gap more sharply.

Section 20(4) of the Competition Act 2002 (Act) directs the Competition Commission of India (CCI) to have due regard to a list of factors while assessing whether a combination causes an appreciable adverse effect on competition (AAEC). This list contains negative factors, which might weigh against the combination, as well as positive factors, which may defend it. Among the latter, the efficiency factor (EF) is the focus of this article. Put simply, it stands for a cognizable cost-saving or gain in output, quality, or innovation produced by the combination itself that may legitimately offset anticipated competitive harm, subject to certain essential conditions. Two clauses particularly constitute the EF regime: the contribution to economic development under clause (m), and the net-benefit inquiry under clause (n).

Yet, the Act supplies a list and not a proper methodology. The operational phrase in Section 20(4) is: “all or any of the following factors,” which is disjunctive in nature, as it permits the CCI to determine the AAEC based on any subset within the list it chooses; thus, providing it with no obligation to consider EF claims. The statute is also silent on how rigorously any efficiency claim must be tested before it earns weight.

This piece argues that the EF regime in Indian merger control is invoked in the language of synergies and scale, but never subjected to a structured evidentiary threshold. It is a gap, which becomes apparent when Section 20(4) is read against some other jurisprudences, like the 2023 US Merger Guidelines (collectively referred to as a single document, MG). Although the MG does not possess statutory binding force, it reflects the working methodology adopted by the relevant agencies, and its gating structure offers a productive model for Indian merger control. 

The Gated Architecture of the 2023 US Merger Guidelines

Although under the US regime, every case is not strictly required to undergo an EF analysis, it is treated with a proper methodology whenever a party claims it during investigations. Section 3.3 of the MG cites Philadelphia National Bank to the effect that “possible economies cannot be used as a defence to illegality”. EFs are accordingly treated not as a balancing counterweight to harm, but as an evidenced rebuttal of whether competition is, in fact, threatened. A claim that fails the gated screening receives no weight whatsoever, and this gating quality is what distinguishes a test from a list. As per MG, the burden of proof lies on the parties undergoing combinations to satisfy four criteria, as follows.

Merger/ combination specificity

It denotes that the claimed benefit must be one that could not be achieved, if there were no combination in the first place. This rules out gains like those obtained via organic growth, mergers with parties other than those in the current case, partial combinations, and contractual collaborations.

Verifiability

Verifiability requires the gains to be determined via a reliable methodology. The parties need to utilise the data disclosed in public and notification forms, and apply a method that passes the reasonable evidentiary threshold. This also ensures that the gain would be able to materialise in future.

Competition reduction

The gain provided by the EF must be within the relevant market of the combination. Out-of-market gains are not cognizable. The MG states that efficiencies that "merely benefit the merging firms… are not cognizable". Hence, a benefit captured by the merged firm as higher profit, rather than passed on to consumers, is not a competitive benefit at all; it is merely the financial upside of market power. Consumer pass- on is a comparable criterion often used in the EU regime.

Anti-competitive origin

This further enhances the gating architecture. It implies that efficiency generated by the very reduction in output or quality that the merger threatens cannot be counted. This prevents a circularity which often hides in plain sight. A merger that lessens competition will often appear to generate benefits through ways like overhead or fixed-cost reductions, but these are the financial signature of the harm itself, not an offset to it. Counting them would allow the anticompetitive effect to justify the transaction that produces it.

The criteria described above are “conjunctive” in nature. It is so because the MG employs the word “each” in Section 3.3, so the agencies are required to consider all the criteria together. Also, the word “cognizable” signifies that the EF claimed shall satisfy all the criteria, so it may be able to counter the harm. They are not prescribed in a fixed sequence, but the disqualifying force is identical whether applied in series or simultaneously.

The Indian Gap: Efficiencies as Narrative, Not Defence

The recent trend reveals that the CCI has not developed a clear EF regime yet. This article discusses some combination orders below to illustrate this.

Holcim/Lafarge (C-2014/07/190)

In this case, Holicim and Lafarge contended that the proposed merger would enable pooling of skills and resources, generate synergistic operational practices, expand consumer choice, exert downward pressure on distribution costs, etc. The CCI rejected these claims comprehensively (paragraph 15.19). It found that: first, the asserted EFs were not merger-specific; less anticompetitive means of achieving the same benefits existed. Second, the submissions were insufficiently quantified and unverifiable, lacking the evidentiary rigour necessary for independent assessment. Third, there was no evidence that any efficiency gains would pass on to consumers in the form of lower prices.

PVR/DLF Utilities (C-2015/07/288)

In this case, the acquirer, PVR Ltd., claimed “operational and organisational efficiencies” through pooled resources and rationalised administrative overheads. However, CCI rejected these in the manner as follows (paragraphs 60, 73). The EFs were held to be not combination-specific; no evidence demonstrated lasting consumer pass-on; and CCI further found that the asserted gains “would not offset the identified AAEC concerns to any significant extent”. 

A notable point in this case is that the Commission came closest to an explicit balancing, among other cases. However, it stopped short of a structured assessment and merely presented it as an assertion.

Viacom18 / Star India (C-2024/05/115)

This case depicts a peculiar scenario of silence by CCI on the EF claim raised by the parties. On one hand, the press release recorded that the parties submitted that “the proposed transaction is being undertaken to bring about synergistic benefits and operational efficiencies for the parties.” Thus, the parties, in their filing under Regulation 13(1A), claimed synergistic benefits and operational efficiencies, including a world-class digital platform, a competitive advertising marketplace, etc. The final order, however, contains no engagement with these EF claims. Approval rested entirely on AAEC analysis across relevant market segments, voluntary commitments of channel divestments and sports broadcasting behavioural restrictions.

Analysis: Selective Engagement and Strategic Silence

The defect across these orders is not poor weighing of efficiencies but their treatment on an apparently discretionary basis. Two shortcomings become apparent. First, as in Holcim and PVR, CCI applies three of the four MG criteria: merger-specificity, verifiability, and consumer pass- on, but not as a pre-stated standard, but as reasoning embedded within each of the orders. So, there is no governing norm that CCI would conduct an independent EF test if the claim is raised by the parties. Secondly, neither order engaged with the fourth criterion: anticompetitive origin. This trend seems to extrapolate itself to the rest of the orders as well. 

Thus, the conjunctive force of the US criteria is replicated only selectively. Now, this gap has the potential to aggravate itself to complete silence, as happened in the Viacom18 case. A regime with a gated EF test would oblige the Commission to either accept the claim with reasons or reject it based on fixed criteria; its freedom to pass over the claim altogether confirms that no such obligation currently exists.

The deeper consequence of this silence is discouragement. Without clear guidelines, a properly developed EF defence would seldom be given. So, parties currently seem to treat it as a formality at the notification stage without bearing any real evidentiary burden, perpetuating a cycle of inadequate submissions and superficial treatment of them during investigations.

Towards a Structured Efficiencies Discipline: A Calibrated Transplant

Two interventions could address this gap. First, an amendment to the combinations notification forms available under the Combination Regulations should require parties to support EF claims with reliable, independently verifiable evidence rather than internal projections alone, formalising the party-side obligation. Second, the CCI should release a formal framework like that of MG, imposing a corresponding Commission-side obligation to engage. Regulatory authority for both exists under Section 64 of the Act.

One calibration is necessary. The MG’s gated structure restricts cognizable EFs to the relevant market of harm. Importing this without modification would render Section 20(4)(m) effectively redundant, as that provision expressly covers developmental benefits that may arise outside the relevant market. The appropriate course is to treat in-market EFs as presumptively cognizable while requiring out-of-market claims to meet a higher evidentiary standard.

Conclusion

Section 20(4) is structurally adequate as a platform for rigorous EF analysis. The combination orders examined demonstrate that CCI already applies the conceptual substance of merger-specificity and verifiability, but with ambiguity. The gap is one of structure and obligation, not of substance. The Indian regime has EFs in its statutory catalogue, but with no proper methodology. 

Also, the comparison with MG has been offered as illustrative rather than prescriptive. The CCI’s analytical vocabulary already contains the building blocks of such a test. A formal framework would not introduce a foreign discipline into Indian merger control but enhance and stabilise the discipline that Indian merger control, at its best, already practices.