COMPETITION LAW

MODULE-1
The Competition Act, 2002

An Act to give, keeping in view of the economic development of the country, for the establishment of a
Commission to prevent practices having adverse effect on competition, to promote and sustain
competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on
by other participants in markets, in India, and for matters connected therewith or incidental thereto.

Citation Act No. 12 of 2003

Enacted by Parliament of India

Date assented to 13 January 2003

Date commenced 31 March 2003

Introduced by Arun Jaitley

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian competition law.
It replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969. Under this legislation,
the Competition Commission of India was established to prevent the activities that have an adverse
effect on competition in India. This act extends to whole of India except the State of Jammu and Kashmir.

It is a tool to implement and enforce competition policy and to prevent and punish anti-competitive
business practices by firms and unnecessary Government interference in the market. Competition laws is
equally applicable on written as well as oral agreement, arrangements between the enterprises or
persons.

The Competition Act, 2002 was amended by the Competition (Amendment) Act, 2007 and again by the
Competition (Amendment) Act, 2009.

The Act establishes a Commission which is duty bound to protect the interests of the free and fair
competition (including the process of competition), and as a consequence, protect the interests of
consumers. Broadly, the Commission's duty is:-

• To prohibit the agreements or practices that have or are likely to have an appreciable adverse
effect on competition in a market in India, (horizontal and vertical agreements / conduct);

• To prohibit the abuse of dominance in a market;

• To prohibit acquisitions, mergers, amalgamations etc. between enterprises which have or are
likely to have an appreciable adverse effect on competition in market(s) in India.
In addition to this, the Competition Act envisages its enforcement with the aid of mutual international
support and enforcement network across the world,

History

The Government of India in April 1964 appointed the Monopolies Inquiry Commission under the
Chairmanship of Justice K. C Das Gupta, a judge of the Supreme Court, to inquire into the extent and
effect of concentration of economic power in private hands and prevalence of monopolistic and
restrictive trade practices in important sectors of economic activity other than agriculture.

To regulate advertising, in 1984, Parliament inserted a chapter on unfair trade practices in the
Monopolies and Restrictive Trade Practices Act, 1969.

The Monopolies and Restrictive Trade Practices Commission was constituted in the year 1970.

The Monopolies and Restrictive Trade Practices Act, 1969 had its genesis in the Directive Principles of
State Policy embodied in the Constitution of India. It received the assent of the President of India on 27
December, 1969. The Monopolies and Restrictive Trade Practices Act was intended to curb the rise of
concentration of wealth in a few hands and of monopolistic practices. It was repealed on September
2009. The Act has been succeeded by The Competition Act, 2002.

Competition law global development

Competition law is a law that promotes or seeks to maintain market competition by regulating anti-
competitive conduct by companies.Competition law is implemented through public and private
enforcement. Competition law is known as "antitrust law" in the United States for historical reasons, and
as "anti-monopoly law" in China and Russia. In previous years it has been known as trade practices law in
the United Kingdom and Australia. In the European Union, it is referred to as both antitrust and
competition law.

The history of competition law reaches back to the Roman Empire. The business practices of market
traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions.
Since the 20th century, competition law has become global. The two largest and most influential systems
of competition regulation are United States antitrust law and European Union competition law. National
and regional competition authorities across the world have formed international support and
enforcement networks.

Modern competition law has historically evolved on a country level to promote and maintain fair
competition in markets principally within the territorial boundaries of nation-states. National
competition law usually does not cover activity beyond territorial borders unless it has significant effects
at nation-state level. Countries may allow for extraterritorial jurisdiction in competition cases based on
so-called effects doctrine.The protection of international competition is governed by international
competition agreements. In 1945, during the negotiations preceding the adoption of the General
Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were
proposed within the Charter for an International Trade Organisation. These obligations were not
included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral
Negotiations, the World Trade Organization (WTO) was created. The Agreement Establishing the WTO
included a range of limited provisions on various cross-border competition issues on a sector specific
basis.

Definitions

• Acquisition: Acquisition means, directly or indirectly, acquiring or agreeing to acquire shares,

voting rights or assets of any enterprise or control over management or assets of any enterprise.[10]

• Cartel: Cartel includes an association of producers, sellers, distributors, traders or service

providers who, by agreement among themselves, limit control or attempt to control the production,
distribution, sale or price of goods or provision of services.

• Dominant position: It means a position of strength, enjoyed by an enterprise, in the relevant

market which enables it to operate independently of competitive forces prevailing in the market or affect
its competitors or consumers in its favour.

• Predatory pricing: Predatory pricing means the sale of goods or provision of services, at a price
which is below the cost of production of the goods or provision of services, with a view to reduce
competition or eliminate the competitors.

• Rule of reason: It is the analysis of any activity under the challenge on the basis of business
justification, competitive intent, market impact, impact on competition and on consumer. It is the logic
behind the conclusion for any order.

“consumer” means any person who— (i) buys any goods for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred payment and includes any
user of such goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised, or under any system of deferred payment when such use is made with
the approval of such person, whether such purchase of goods is for resale or for any commercial purpose
or for personal use; (ii) hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other than the person who hires or avails of the services for consideration
paid or promised, or partly paid and partly promised, or under any system of deferred payment, when
such services are availed of with the approval of the first-mentioned person whether such hiring or
availing of services is for any commercial purpose or for personal use;
Salient Features

1.Anti Agreements

Enterprises, persons or associations of enterprises or persons, including cartels, shall not enter into
agreements in respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services, which cause or are likely to cause an "appreciable adverse impact" on competition
in India. Such agreements would consequently be considered void. Agreements which would be
considered to have an appreciable adverse impact would be those agreements which-

• Directly or indirectly determine sale or purchase prices,

• Limit or control production, supply, markets, technical development, investment or provision of

services,

• Share the market or source of production or provision of services by allocation of inter alia
geographical area of market, nature of goods or number of customers or any other similar way,

• Directly or indirectly result in bid rigging or collusive bidding.

2.Types of agreement

A 'horizontal agreement' is an agreement for co-operation between two or more competing businesses
operating at the same level in the market. A vertical agreement is an agreement between firms at
different levels of the supply chain. For instance, a manufacturer of consumer electronics might have a
vertical agreement with a retailer according to which the latter would promote their products in return
for lower prices.

3.Abuse of dominant position

There shall be an abuse of dominant position if an enterprise imposes directly or indirectly unfair or
discriminatory conditions in purchase or sale of goods or services or restricts production or technical
development or create hindrance in entry of new operators to the prejudice of consumers. The
provisions relating to abuse of dominant position require determination of dominance in the relevant
market. Dominant position enables an enterprise to operate independently or effect competitors by
action

4.Combinations

The Act is designed to regulate the operation and activities of combinations, a term, which contemplates
acquisition, mergers or amalgamations. Combination that exceeds the threshold limits specified in the
Act in terms of assets or turnover, which causes or is likely to cause adverse impact on competition
within the relevant market in India, can be scrutinized by the Commission.

Competition Commission of India

Competition Commission of India is a body corporate and independent entity possessing a common seal
with the power to enter into contracts and to sue in its name. It is to consist of a chairperson, who is to
be assisted by a minimum of two, and a maximum of six, other members. It is the duty of the
Commission to eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
The Commission is also required to give opinion on competition issues on a reference received from a
statutory authority established under any law and to undertake competition advocacy, create public
awareness and impart training on competition issues.

Commission has the power to inquire into unfair agreements or abuse of dominant position or
combinations taking place outside India but having adverse effect on competition in India, if any of the
circumstances exists:

• An agreement has been executed outside India

• Any contracting party resides outside India

• Any enterprise abusing dominant position is outside India

• A combination has been established outside India

• A party to a combination is located abroad.

• Any other matter or practice or action arising out of such agreement or dominant position or
combination is outside India.

To deal with cross border issues, Commission is empowered to enter into any Memorandum of
Understanding or arrangement with any foreign agency of any foreign country with the prior approval of
Central Government.

Review of orders of Commission

Any person aggrieved by an order of the Commission can apply to the Commission for review of its order
within thirty days from the date of the order. Commission may entertain a review application after the
expiry of thirty days, if it is satisfied that the applicant was prevented by sufficient cause from preferring
the application in time. No order shall be modified or set aside without giving an opportunity of being
heard to the person in whose favour the order is given and the Director General where he was a party to
the proceedings.

Appeal
Any person aggrieved by any decision or order of the Commission may file an appeal to the Supreme
Court within sixty days from the date of communication of the decision or order of the Commission. No
appeal shall lie against any decision or order of the Commission made with the consent of the parties.

Penalty

If any person fails to comply with the orders or directions of the Commission shall be punishable with
fine which may extend to 1 lakh for each day during which such non compliance occurs, subject to a
maximum of 10 crore.

If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under
this section, he shall be punishable with imprisonment for a term which will extend to three years, or
with fine which may extend to 25 crores or with both.

Section 44 provides that if any person, being a party to a combination makes a statement which is false
in any material particular or knowing it to be false or omits to state any material particular knowing it to
be material, such person shall be liable to a penalty which shall not be less than 50 lakhs but which may
extend to 1 crore.