PROJECT REPORT

BUSINESS LAWS-II

ENFORCEMENT
MECHANISM UNDER
COMPETITION ACT, 2002

SUBMITTED TO: SUBMITTED BY:

Dr. Deepak Thakur Shubham Bhatia

Faculty, UILS B.A.LL.B. (Hons.) Sem-8th

Panjab University, Chandigarh Roll No: 95/16

Section-B
 ACKNOWLEDGEMENT
I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.
I am highly indebted to Dr. Deepak Thakur for his guidance and constant supervision as well
as providing information regarding the project and also for his support in completing this
project.
I would like to express my gratitude towards my parents and friends for their kind co-operation
and encouragement which helped me in completion of this project.

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 INDEX

S.NO TOPIC PAGE NO.

1. INTRODUCTION 4

2. COMPETITION COMMISSION OF INDIA 5-11

 ESTABLISHMENT
 COMPOSITION
 TERM OF OFFICE, RESIGNATION
AND REMOVAL
 APPOINTMENT OF DIRECTOR
GENERAL AND OTHER OFFICIALS
 POWERS AND FUNCTIONS OF THE
COMMISSION

3. PENALITIES UNDER THE COMPETITION 12-13

ACT, 2002

4. COMPETITION APPELLATE TRIBUNAL 14

5. CASE LAWS 15-16

6. CONCLUSION 17

7. REFERENCES 18

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 TABLE OF CASES

S.NO TOPIC CITATION PAGE NO.

1. Google Inc. v. Competition Commission AIR 1987 SC 15

of India 386

2. Competition Commission of India v. CIVIL 15

Steel Authority of India Ltd APPEAL NO.
7779 OF 2010

3. Brahm Dutt vs. Union of India AIR 2005 SC 15

730

4. D.K.Yadav vs J.M.A .Industries Ltd AIR 1997 SC 16

1125

5. Union of India v. Competition AIR 2012 Del 16

Commission of India 64

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 INTRODUCTION

In the recent times, the Indian economy has seen reform and restructuring initiatives in diverse
facets and dimensions since mid-1980s. In the context of the globalization, the emergence of
multinational corporations, interdependence of economies, and role of private enterprise in
economic development, the global financial crisis is emerging as a watershed in the “regulatory
and reform” thinking. India took up economic reforms in earnest in the early 1990s and in the
second phase of the reforms, it enacted a new competition law to replace the Monopolies and
Restrictive Trade Practices (MRTP) Act of 1969, which had become obsolete in certain aspects.

The Competition Act of 2002 came on the statute book. It is in the economic terms a more
sophisticated law and covers the three standard limbs of Competition law ---- namely anti-
competitive agreements, abuse of dominance and merger regulation. The new competition law
i.e. Competition Act 2002, after taking into consideration the recommendations of the
Raghavan Committee and deliberations of the standing Committee on finance, provided for the
establishment of Competition Commission of India (CCI).

The Commission is the sole Competition enforcement agency. It has also been assigned to take
a proactive stand to promote Competition. The Competition (Amendment) Act, 2007 provided
for the establishment of Appellate Tribunal for adjudicating claim for the Compensation and
for hearing appeal against the direction of decision made or order passed by the Commission.

The Enforcement mechanism under the Competition Act, 2002 can be divided into three parts:

 COMPETITION COMMISSION OF INDIA

 PENALTIES UNDER THE COMPETITION ACT, 2002

 COMPETITION APPELLATE TRIBUNAL

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 THE COMPETITION COMMISSION OF INDIA

ESTABLISHMENT

Section 7 of the Act deals with establishment of “Competition Commission of India”. It

provides that with effect from such date as the Central Government may, by notification,
appoint there shall be established a Commission called the ‘Competition Commission of India”.
The Competition Act 2002 provides for the establishment of CCI to prevent those malpractices
that adversely affect competition. Additionally, it was enacted to promote and sustain
competition in markets as well as to protect the interests of consumers. The Competition
Commission is the sole authority to receive complaints against the infringement of Competition
Law from individuals, business firms, and entities, Central or State Governments. Thus, it was
enacted to ensure free and fair trade amongst participants in Indian markets and such other
matters connected therewith. It provides for both substantive and procedural provisions of Law.
The Competition Commission of India shall have the following two basic functions;

a. Administration and enforcement of Competition Law and Competition Policy to foster

economic efficiency and consumer welfare.

b. Involvement proactively in Governmental policy formulation to ensure that markets remain

fair, free, open flexible and adaptable.

The Commission is a body corporate having perpetual succession and common seal with power
to acquire hold and dispose of property both movable and immovable and to contract and shall
sue and be sued. Its head office shall be at such places as the Central Government may decide
from time to time. Thus Competition Commission has come in the place of MRTP
Commission; MRTP Act was established and constituted under section 5 of the MRTP Act
1969. Further the Competition Commission of India may be compared with SEBI, IRDA and
TRAI as a regulating agency. Under sub-section 2 of section 7, CCI has been established as a
body corporate. A body corporate is a person in the eye of law, it is not a natural person but a
legal or an artificial person may be created or established by forming ,for example ‘company”
under the Companies Act , 1956 or it may be created or established by an Act of legislation in
which case it is known as statutory company. CCI is a statutory corporation having its existence
under an Act of parliament namely the Competition Act 2002.

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 COMPOSITION OF THE COMMISSION

Section 8 provides that the Competition Commission shall consist of a Chairperson and not
less than two and not more than six other members to be appointed by the Central Government.
Section 9 provides that the Chairperson and the members are appointed by the Central
Government from the panel of names recommended by the selection committee consisting of;

 The Chief Justice of India or his nominee (chairperson of the committee);

 Secretaries in the Ministries of Corporate Affairs and Law and Justice;

 Two experts of repute having special knowledge of and professional experience in

international trade, economics, business, commerce, law, finance, accountancy, management,
industry, public affair or competition matters including competition law and policy in
international trade, economics, business, commerce, law, finance, industry.

TERM OF OFFICE, RESIGNATION AND REMOVAL

According to Section 10, The Chairperson and every other member shall hold office as such
for a term of five years from the date on which he enters upon his office and shall be eligible
for reappointment. The maximum age of chairperson and other members is 65 years. The Act
provides that the salaries of the staff and other expenses shall be met by the Competition Fund.

The Central Government is empowered to remove the chairperson and any member of the
commission on certain specific grounds and the procedure as specified in the Act.

Section 11 and section 53K deals with the removal of Chairman or any member of the
Commission. He can be removed if he

a) Is ,or at any time has been, adjudged insolvent; or

b) Has engaged at any time, during his term of office, in any paid employment; or

c) Has been convicted of an offence which, in the opinion of the Central Government, involves
moral turpitude; or

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d) Has acquired such financial or other interest as is likely to affect prejudicially his functions
as a member; or

e) Has so abused his position as to render his continuance in office prejudicial to the public
interest; or

f) Has become physically or mentally incapable of acting as member.

The ‘Persons’ appointed shall be whole time Members. Section 12 of the Act prohibits
Chairperson and the members to accept employment in or connect with the management or
administration of any enterprise which has been party to the proceedings before the
Commission, within two years of demitting the office.

According to Section 14, The Chairperson and the members of the commission have been
given protection of the service in as much as their salary, allowance and other terms and
conditions of the service will not be varied to their disadvantage after their appointment. The
Chairperson and the other staff of the Commission are deemed to be public servants within the
meaning of section 21 of the Indian Penal Code. No suit or proceedings shall lie against Central
government, Commission or the officers/ staff of the commission for anything done in good
faith or intended to be done under this Act or the rules or regulations framed there under. The
Chairperson has general power of superintendence, direction and control over the
administrative matters of the Commission. The Competition Commission will also have suo
moto powers for initiating action against any perceived infringement. The Commission shall
be assisted by a Director General (DG) appointed by the central government.

APPOINTMENT OF DIRECTOR GENERAL AND OTHER OFFICIALS

According to Section 16, the Central Government appoints the Director General (DG) for
assisting CCI in conducting enquiry into contravention of any of the provisions of the Act or
to perform other functions as provided by or under the Act. The Additional, Joint, Deputy and
Assistant Director General or such other advisers, consultant and officers so appointed shall
exercise his powers and discharge his functions, subject to the general control, supervision and
direction of the Director General under the provision of Section 17 of the Act.

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The Director General and Additional ,Joint, Deputy and Assistant Directors General or such
other advisers , consultant and officers, shall be appointed from amongst persons of integrity
and outstanding ability and who have experience in investigation and knowledge of
accountancy , management , business , public administration , international trade , law or
economies and such other qualification s as may be prescribed..

According to Section 41, The Director General shall, when directed by the Commission assist
the Commission in investigation into any contravention of the provisions of the Act.

POWERS AND FUNCTIONS OF THE COMMISSION

Section 18 of the Act states that the Commission has duty to eliminate the practices having
adverse effect on competition, to promote and sustain competition in the market, to protect the
consumer interests and to ensure freedom of trade carried on by other participants in the market
in India. For the purpose of discharging its duties or performing its functions, the Commission
may enter into any memorandum or arrangement with the prior approval of the Central
Government, with any agency of any foreign country.

1. Inquiry into Anti-competitive Agreements by the Competition Commission of

India:

According to Section 26, The CCI upon receipt of reference or its own knowledge or
information received under Section 19 with regard to anti-competitive agreement has to
come to a prima facie opinion that a case exits and once it comes to such conclusion, it
shall direct the Director General (DG) to make an investigation. If the CCI does not find a
prima facie case, it will close the case, pass an appropriate Order and forward the Orders
to the concerned persons. The Director General is required to submit a report on his finding
to the CCI within the time as may be specified by the Order of the Commission.

Orders that CCI can pass:

According to Section 27, after CCI comes to the conclusion that there is an anti-competitive
agreement, which has caused or is likely to cause appreciable adverse effect on competition
within India, it may pass all or any of the following orders:

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 Direct the parties to the said agreements to discontinue the said agreement and not to
re-enter such agreements;
 Impose penalty which shall not be more that 10 percent of the average turnover of the
last three preceding financial years upon each of the parties to the said agreements;
 If the anti-competitive agreement has been entered by a cartel , the CCI may impose
upon each member of the cartel a penalty of up to three percent of its profit for each
year of continuance of such agreement or ten per cent of its turn over for each year of
continuance of such agreement, whichever is higher;
 Direct modification of the agreements294;
 Direct compliance of its orders /directions including payment of costs295;
 The CCI can also pass orders /directions and impose penalties upon a group or its
members if, during investigations, it finds that:
a) The enterprise which has contravened the provision s of the Act is a part of a Group
and
b) Other members of the group are also responsible for or contributed to such
contravention.

Further, the CCI has jurisdiction and is empowered to pass ex-parte interim Orders
temporarily restraining a party from carrying out an act until conclusion of an investigation
or until further orders.

2. Inquiry into Abuse of Dominance by the Competition Commission of India:

The Commission must arrive at a prima facie opinion that a case of abuse of dominance
exists. Once it comes to such conclusion, it shall direct the Director General DG to
investigate into the matter. If the Commission does not find a prima facie case, it will close
the case, pass an appropriate order and forward the orders to the concerned persons. DG is
required to submit a report on his findings to the Commission within the time as may be
specified by the order of the Commission.

Orders that CCI can pass:

After the competition of the investigation ,if Commission comes to the conclusion that there
is an anti-competitive agreement, which has caused or is likely to cause appreciable adverse
effect on competition within India , it may pass all or any of the following Orders;

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 a) Direct the parties to continue the abuse of dominance;
b) Direct compliance of its orders /directions including payment of costs;
c) Direct for the division of an enterprise abusing the dominant position to ensure that
it does not abuse its dominance; (Section 28)
d) Pass such other order or issue such other direction as the Commission deems fit.

The Order directing the division of an enterprise may provide for all or any of the following
matters;

i. The transfer or vesting of property ,rights ,liabilities or obligations;

ii. The adjustment of contracts either by discharge or reduction of any liability or
obligation or otherwise;
iii. The creation, allotment, surrender or cancellation of any shares, stocks or securities;
iv. The formation or winding up of an enterprise or the amendment of memorandum
of association or article of association or any other instruments regulating the
business of any enterprise;
v. The extent to which, and the circumstances in which, provision of the Order
affecting an enterprise may be altered by the enterprise and the registration there.

According to Section 32 when any enterprise abusing the dominant position is outside
India, the Commission is empowered to inquire into such abuse of dominance and pass
such orders as it may deem fir in accordance with the provision of the Act.

According to Section 33, the Commission is vested with the power to pass ex-parte interim
Order temporarily restraining a party from carrying out any act until conclusion of an
investigation or until further Orders.

3. Investigation of Combination by the Competition Commission of India:

As per Section 29 of the act, on coming to a prima facie opinion that the combination is
likely to cause or has caused appreciable adverse effect on competition within the relevant
market, the commission shall issue a show cause notice to parties to the combination calling
upon them to show within 30 days of receipt as to why investigation of such combination
should not be conducted. After the receipt of the response from the parties, the commission
may call for a report from the DG within the time as may be specified.

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Orders that CCI can pass:

According to Section 31 The commission is empowered to pass the following orders after
the due process:

a) Approve the combination where no appreciable adverse effect on competition in the

relevant market in India;
b) Direct that combination shall not take effect where the Commission is opinion that
there is or is likely to have appreciable adverse effect on competition;
c) Propose modification in the combination where the commission is of the
appreciable adverse effect cause or likely to be caused by the combination can be
eliminated by the modification.

Two scenario s have been envisaged in the Act in case of the modification proposal:

a) The parties may accept and carry out the modification within the specified time. If
they fail to carry out the modification to the combination with in the specified time,
such combination shall be deemed to have appreciable adverse effect on
competition;
b) The parties to the combination may within 30 days of the modification proposal
submit an amendment to the modification proposal , whereupon :
 If the Commission agrees with the amendment to the modification proposal ,shall
approve the combination;
 If it does not agree with the amendment, the Commission will give further 30 days
to the parties to accept the modification. If they fail to accept the modification, the
combination shall be deemed to have adverse effect on competition and shall not be
given effect.

Once the Commission has passed an order a combination to be void, the acquisition,
acquiring of the control or merger or amalgamation shall be dealt by the authorities as if
such acquisition, acquiring control or merger or amalgamation had not taken place. It is
worth to refer here that the Commission is vested with the power to pass ex parte interim
order temporarily restraining a party from carrying out an act or until the conclusion of the
investigation.

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 PENALITIES UNDER THE COMPETITION ACT, 2002

In cases where the compliance of Competition Act is breached, the Commission have various
reforms to levy a penalty of such an entity.

PENALITY FOR CONTRAVENTION OF ORDERS OF CCI (SECTION 42)

In case the person or entity fails to comply with the orders and/or directions set up under the
Competition Act 2002, he is liable to be punished with a monetary fine which could extend up
to one lakh rupees for each day of non-compliance. However, this penalty cannot be more than
ten crore rupees at single instance. This is especially applicable towards sections 27, 28, 31,
32, 33, 42A and 43A of the Competition Act 2002.

In case the person breaches the orders and directions of the Competition Act 2002 under sub
section (2) of Section 42, then he shall be punished with an imprisonment for a term which
may extend up to three years and /or with a monetary penalty of twenty-five crores as the Chief
Metropolitan Magistrate of Delhi may deems fit.

However, a person or entity under this Act is empowered to make an application to Appellate
Tribunal about recovery of compensation for any loss or damage that have been done due to
such a non-compliance by another person or entity. And the Commission then can either
approve, sanction or exempt the non-compliant company in this relation and order them to
fulfil the losses.

PENALTY FOR FAILURE TO COMPLY WITH THE DIRECTIONS OF

COMMISSION AND DIRECTOR GENERAL (SECTION 43)

In any case if a person or entity fails to comply with the direction given by the Commission
under the sub-section 2) and 4) of Section 36 or the directions given by the Director General
while exercising the powers referred to in sub section 2) of Section 41, and that too without
any reasonable cause, then such a person will be punishable and shall have to fulfil a fine which
could extend up to the sum of one lakh rupees for each day of non-compliance. However, this
sum of penalty could not exceed one crore rupees.

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 PENALTY FOR NON-FURNISHING OF INFORMATION ON COMBINATIONS
(SECTION 43A)

In case any person or entity fails to give notice to the Commission under sub-section (2) of
section 6, then such a Commission shall be imposed by a penalty which may extend up to one
percent of the total turnover of the assets of such a combination.

PENALTY FOR MAKING FALSE STATEMENT OR OMISSION TO FURNISH

THE MATERIAL INFORMATION (SECTION 44)

In case a person or a party makes statement which is false in any material or they know that
they are furnishing a false material and/or omits to submit the material towards compliance of
the Competition Act 2002, then such a person is liable to a penalty of not less than fifty lakh
rupees and it may extend maximum to one crore rupees as may be determined by the
Commission.

PENALTY FOR THE OFFENCES IN RELATION TO FURNISHING THE

INFORMATION (SECTION 45)

In case a person who is required to furnish an information under the Competition Act 2002 in
form of any or documents or any other kind and makes a statement which he knows is falls
and/or omits some of the material information, or willfully alter them or try to suppress or
destroy any such document then such a person is liable to be punished with a monetary fine
which may extend up to one crore rupees.

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 COMPETITION APPELLATE TRIBUNAL (COMPAT)

The Amendment made to the Act in 2007, casts an obligation upon the under Section 53A
Central Government to establish Competition Appellate Tribunal (COMPAT), which shall be
a three member quasi –judicial body to

 Hear and dispose of appeals against any direction issued or decision made or the
Order passed by the Commission;
 Adjudicate on any claim for compensation that may arise from the findings of the
Commission or the Orders of the Appellate Tribunal in an appeal against any
finding of the Commission or under section 42A or sub-section (2) of section 53Q
of this Act, and pass Orders for the recovery of compensation under section 53N of
the Act.

The Competition Appellate Tribunal will be guided by principle of natural justice and it can
regulate its own procedure. COMPAT can dismiss a petition for default or decide it ex parte
and such order of dismissal or ex parte order can be set aside. The proceedings before
COMPAT are deemed to be judicial proceedings.

If Appellate Tribunal cannot execute its order, it will be sent to Court within whose local
jurisdiction the registered office of the company or place of residence of the person is situated.
Order of the COMPAT will be executed as a degree of court. COMPAT can directly send the
order to a civil court for execution. The order will be executed by that Court as if it is a decree
of that Court. The appeal can be filed with COMPAT by Central Government, State
Government or enterprises or any person who is aggrieved by decision, direction or order of
CCI.

According to Section 53 B appeal should be filed within 60 days in prescribed form. Delay in
filing the appeal can be condoned by COMPAT if sufficient cause is shown. The COMPAT
will endeavor to dispose of the appeal within six months from receipt of appeal. Thus, the time
limit of six months is not mandatory. In the event that the orders of Competition Appellate
Tribunal are contravened without any reasonable ground punishment of imprisonment up to
three years and penalty up to Rs. One crore can be imposed by Chief Metropolitan Magistrate,
Delhi. Appeal against the order of COMPAT can be made to Supreme Court which should be
filed within 60 days, but Supreme Court can condone the delay.

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 CASE LAWS

1. Google Inc. v. Competition Commission of India1

The Delhi High Court held that the CCI has the power to recall its orders of investigation under
Section 26(1) of the Act, though it is not an inherent power or expressly provided in the Act.

2. Competition Commission of India v. Steel Authority of India Ltd.2

The Supreme Court of India, reversing the decision of the Competition Appellate Tribunal has
declared that no opportunity of hearing was required to be given by the Competition
Commission of India to any person before beginning to investigate a case or complaint. The
Appellate Tribunal had declared that the principles of natural justice were inviolable and thus
hearing opportunity was mandatory whereas the Commission of the opinion that if such
opportunity was given the very basis of investigation would be eroded away, and thus appealed
against the order of the Tribunal to the Supreme Court. The Bench formulated for itself the
issues required to be answered in terms of the powers of the Competition Commission and the
procedure to be followed.

3. Brahm Dutt vs. Union of India3

The constitutional validity of the Competition Commission was mainly challenged on the
ground that Competition Commission envisaged by the Act was more of a judicial body having
adjudicatory powers on questions of importance and legalistic in nature and in the background
of the doctrine of separation of powers recognized by the Indian Constitution, the right to
appoint the judicial members of the commission should rest with the Chief Justice of India or
his nominee and further the Chairman of the Commission had necessarily to be a retired Chief
Justice or the Judge of the Supreme court or of the High Court, to be nominated by the Chief
Justice of India or by a Committee preside over by the Chief Justice of India.

The Apex court refrained from giving a judgment as there were the affidavits filed by the union
of India stating that there has been proposed some amendments to the effect so as to enable the
Chairman and the members to be selected by a Committee presided over by the Chief Justice

1
AIR 1987 SC 386
2
CIVIL APPEAL NO. 7779 OF 2010
3
AIR 2005 SC 730

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of India or his nominee. Hence the court stated that one should look at the amendments as and
when notified and then address the issue of constitutionality.

4. D.K.Yadav vs J.M.A .Industries Ltd4

It was held that the Act has been enacted to carry out the objectives of the Article 38 and 39 of
the Constitution of India. Further, the Act prescribes that the commission in discharge of its
functions shall be guided by the principles of natural justice292 and the concerned parties can
appear before the commission in person or shall though authorized Chartered Accountants,
Company Secretaries, Costs Accountants or Legal Practitioners.

a hope that the ministry would set up an independent nodal agency for overseeing the work of
tribunals.

5. Union of India v. Competition Commission of India 5

It was held that proceedings before the CCI are not barred by existence of an arbitration clause
in the agreement between the parties. CCI is not a court. The scope and nature of proceedings
before the Commission and Arbitration Tribunal are entirely different.

4
AIR 1997 SC 1125
5
AIR 2012 Del 64

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 CONCLUSION

Competition is the engine of free enterprise. Competition laws have been described as Magna
Carta of free enterprises. Competition is important for the preservation of economic freedom
and our free enterprise system. The need for competition law arises because market can suffer
from failures and distortions, and various players can resort to anti- competitive activities such
as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer
welfare.

Thus, there is a need for competition law to provide a regulative force which establishes
effective control over economic activities. During the era in which the economies are moving
from close economies to open economies, an effective competition commission is essential to
ensure the continued viability of domestic industries, carefully balanced with attaining the
benefits of foreign investment increased competition.

The Competition Commission of India is established by Central Government to implement the

Competition Law. The Commission is Competition law enforcing agency. It has also been
assigned to take a proactive stand to promote competition. Thus Competition Commission has
two basic functions, a)administration and enforcement of competition law and competition
policy to foster economic efficiency and consumer welfare; b) involvement proactively in
Governmental policy formulation to ensure that markets remain fair, open , flexible and
adaptable.

Furthermore Competition Appellate Tribunal is also empowered to adjudicate the claim for
compensation and for hearing appeal against the direction of decision made or order passed by
the Commission. In some countries, the advocacy role is supported by a statutory provision in
the law, as in India, while in some other countries; it is undertaken as an administered measure.
The Commission has been undertaking work relating to competition advocacy and institution
building. Thus, the Commission can function as stated above easy only if the Government
provide the required infrastructure. The bottom –line is, though the Competition Commission
of India (CCI) has partially become functional with effect from May 2009 but several questions
remain unanswered in spite of the fact that the Act has had a thorough Scrutiny of the Apex
Court and substantial amendment made thereafter by the Parliament before it could become
functional.

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 REFERENCES
BIBLIOGRAPHY

 A.K. Jain, Competition Law (Ascent Publication, 2018).

 Avtar Singh, Business Laws (Eastern Book Company, 2019).

 R.K. Bangia, Competition Act, 2002 (Allahabad Law Agency, 2010).

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