A Need for a Close Scrutiny in Combinations Involving a Maverick Firm

Akash Thomas Jose


Antitrust regulators across the world have recognised the role of a Maverick firm in enhancing competition, which proves beneficial to serving the objective of antitrust regulations, i.e., increasing consumer welfare. Maverick firms thus satisfy the said objective by playing a ‘disruptive role’ in the market, as they have a greater economic incentive to deviate from the terms of coordination that may be followed by most of the rivals in the business. The economic incentive maybe by virtue of the unusual ability of the firm to generate increased sales than the sales it would have achieved in general parlance by adhering to the terms conditions or the norms set by the other market players.

Position in Foreign Jurisdictions

The US Horizontal Merger Guidelines of 2010 (Guideline 2.1.5.) has defined “Maverick” as a firm with the ability to play a disruptive role and also provided traits for recognition of Maverick firms. These traits include- (i) the potential to disrupt the market condition with contemporary technology or business models, (ii) ability to lead the market in undertaking price-cutting measures along with the concurrent ability to expand the production capability with the existing capacity and (iii) resist cooperation by adhering to the norms of the other market players. The EU Merger Guidelines do not provide a comprehensive method of identifying a Maverick firm, however, in its merger analysis, they have construed ‘disruptive behaviour’ as practices adopted by firms such as- adopting different strategic prices or the lack of incentive to follow the price increase by the competitors. The Australian Merger Guidelines (Regulation 7.56.) have outlined that a merger involving a Maverick Firm has the ability, and in practice incentivises the residual firms to indulge in coordinated conduct. The same guidelines have subsequently provided for methods to identify Maverick Firms taking into consideration its pricing behaviour, past and expected innovation, among others. 

Though not comprehensive in nature, the antitrust regulators across the globe have provided guidelines that may enable them to identify Maverick Firms and have denied permissions of mergers with a Maverick Firm in the past. For instance, the proposed merger between MCI Worldcom and Sprint in the US was rejected as one of the main concerns was Sprint’s  reputation of being a ‘pricing maverick.’ Hence, it can be said that antitrust regulators have identified that a merger or any form of combination ‘involving’ or ‘between’ Mavericks may create conditions that lead to an increase in market power for the new firm and the possibility of collusion among remaining firms.

Position in India and Analysis of the Takeover of Mindtree by L&T

In India, there are a large number of combinations (Section 5) that warrant the approval of the Competition Commission of India (“CCI”). However, the criteria for assessment have not included the consideration of Maverick Firms nor is there any codification to that effect. It can be safely stated that, in India, no combination has been rejected on the premise of it being a combination with a Maverick firm.   

The recent hostile takeover of Mindtree by Larsen & Toubro (“L&T”) can be closely scrutinised to deduce if there was a case of a takeover of a Maverick firm, i.e., Mindtree. There have been many examples globally wherein young, nascent yet brewing firms were taken over by more successful firms on the pretext of expansion of R&D activities and the activities of the firms. As these firms are involved in a technology-oriented business, the combination analysis must have been through the lens of gauging the effects in a Schumpeterian market, i.e., a highly dynamic market where there exists frequent innovation. A plain analysis of evaluating combinations by only referring to the threshold criteria and at best the possibility of anti-competitive effects without taking into consideration a decrease in competition due to the takeover of a Maverick is a futile exercise in realising the competition objectives. 

The takeover of Mindtree has helped consolidate the market share of L&T in the mid-tier IT firms. Mindtree could have potentially been labelled as a Maverick as they had been disrupting a few of the coordinated market practices. One such disruption could be seen through the pricing mechanism Mindtree adopted, where they followed a policy of ‘hybrid pricing’ for its offshore business focusing on cost-saving measures that could potentially threaten the likes of big established players in the market.

Though Mindtree retains its identity at present, the rumours of a proposed merger can add to the competition concerns. A young innovative firm like Mindtree in the recent past has had a significant impact in the IT sector where their clientele was not only contained within India, but also extended to the US, Germany, among other countries. The recent growth strategy had promised a significant future for Mindtree, where the firm was growing faster than the industry standards and additionally possessed a peculiar ‘One Shore’ business model which allowed it to balance quality, save costs, and cater to different sectors. Such facts raise a pertinent question – if Mindtree was, in fact, a Maverick in the IT sector and the takeover by one of the biggest conglomerates in India, L&T, has destroyed the possible disruptive role it was playing in the market, thereby deteriorating the competition. Hence, it is imperative that the CCI should lay specific emphasis on the need to evaluate the combination on a case to case basis giving due consideration to the specificities of these innovative markets.


The merger and acquisition analysis involving Maverick firms has been viewed with great caution across the globe by Antitrust regulators. However, in India, especially since the CCI has not introduced or considered introducing guidelines to identify Maverick Firms, the likelihood of negative effects as to the variety, quality, and innovation along with the harmful impact of tacit collusion and coordinated behaviour takes a back seat in combination control analysis. Thus, the competition policy needs to investigate and evaluate mergers and other combinations, using threshold criteria and other analytical procedures that accomplish the specificities of these innovative markets. If such evaluations in terms of identifying a Maverick firm are not conducted, there is the possibility of failing the objectives of the Competition Act, and hence this warrants the necessity of formulating appropriate guidelines.  

The author is a student at the School of Law, Christ (Deemed to be University).

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