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Impact of Mergers on Market Competition in Indian Manufacturing: An Assessment

Beena Saraswathy

ISID Working Paper :188
The Competition Commission of India (hereinafter the “Commission”) tookover the functions of the MRTP Commission from 2009 onward, which marked a paradigm shift in the competition regulation in India. The latter had been dealing with competition issues in India for more than three decades. In general, the approval of combina tions has been distrusted in the academic literature, mainly due to its potential to create or strengthen the market power of firms, which in turn has an adverse impact on consumer welfare. In this study, our attempt is to examine the role of mergers in changing the level of market competition across various industries since it reduces the actual number of firms in the industry, which in turn is likely to allow the merged entity to strengthen and derive
benefits from increased market power. We have adopted various indicators such as disappearance rate and survival probability to examine the effect of mergers. In the Indian context, it is the first attempt to empirically examine the impact of mergers on competition across sectors using a long period database.Our study found that in most of the merger intensive sectors, the disappearance rate was significant to influence market competition. However, in the case of surviving firms, the increase in market shares is not sustained in the long run as expected, which was mainly due to the absence of synergy creation during the post-merger period.
Courtesy: ISID
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