**This report was modified on 4/21/2016. Please see the public docket for this accident for more information.** The pilots of the two balloons involved in a midair collision reported that they both began the takeoff ascent as part of a competition. The Balloon Works balloon pilot, who was lower than the Balony balloon during the ascent, reported that his envelope collided vertically with the basket of the Balony balloon, about 2,000 feet above the ground. The Balony balloon pilot reported that he saw the Balloon Works balloon below him and started to use both of the available burners, but was unable to climb fast enough. A witness to the accident reported that the Balony balloon pilot did not use the balloon's burners until after the collision. After the midair collision, the Balloon Works balloon began to descend about 700 feet per minute and impacted the ground. The pilot of the Balony Balloon reported that he landed without further incident. Both of the pilots reported there were no pre-impact mechanical failures or malfunctions with their balloons or burners that would have precluded normal operation. A postaccident inspection of the Balony balloon revealed no damage to the balloon or the burner. A postaccident inspection of the Balloon Works balloon revealed substantial damage to the envelope. According to FAA-H-8083-11A, Balloon Flying Handbook, "There is an unwritten rule in ballooning (not regulatory) that the balloon below has the right of way (due to lack of visibility above). Although the balloon below has the right of way, the higher balloon needs time to climb out of the way, if necessary. Pilots must maintain awareness of other balloons operating near them, particularly in crowded or rally situations." According to FAA-H-8083-11A, Balloon Flying Handbook, "All pilots must be alert to the potential for midair collision and near midair collisions. The general operating and flight rules in 14 CFR Part 91 set forth the concept of "See and Avoid." This concept requires that vigilance shall be maintained at all times, by each person operating an aircraft. Pilots should also keep in mind their responsibility for continuously maintaining a vigilant lookout regardless of the type of balloon being flown and the purpose of the flight." According to the Code of Federal Regulations, Part 91.113(b), "When weather conditions permit, regardless of whether an operation is conducted under instrument flight rules or visual flight rules, vigilance shall be maintained by each person operating an aircraft so as to see and avoid other aircraft. When a rule of this section gives another aircraft the right-of-way, the pilot shall give way to that aircraft and may not pass over, under, or ahead of it unless well clear."