Competition Act 2002

As a consequence of LPG Indian

economy opened up and the
controls were removed.
The older law MRTP Act, 1969
has become obsolete. It curbed
monopolies, restrictive and
unfair trade practices, whereas
The Competition Act 2002
wanted to promote competition.

 Competition laws are also known

as Anti-Trust laws. The laws make
certain practices to be illegal
which hurt both business and
consumers.
Other countries use the term
Competition Law

 This Act extends to the whole of

India except J & K. It comprises
of 66 sections.

Objectives of the Act

Encourage competition
Prevent abuse of dominant
position
Protect the consumer
Ensure a level playing field to
participate in the Indian
economy

The provisions under which the Act is

related to comes under four categories-

Anti-competitive agreements
(Section 3)
Abuse of Dominance
(section 4)
Regulation of combinations
(section 5 & 6)
Competition advocacy (section 49)

Competition Commission of
India
In accordance with the provisions
of the Competition Amendment
Act, the Commission was duly
constituted in March 2009.
The Commission has a
Chairperson and six members.

1. Anti-competitive agreements
(section-3)
Firms enter into which may restrict
competition. Agreements may be
written or oral understanding which
may or may not be enforceable by
legal proceedings.
There are two types of
agreements - horizontal and
vertical agreements between firms.

 Horizontal agreement is among

competitors and vertical
agreements are those relating to
an actual or potential
relationship of purchasing or
selling to each other
Manufacturer 1

 A harmful type of horizontal

agreement is a cartel.
Vertical agreements are harmful
if they are between firms in a
position of dominance

 Agreements between two or

more enterprises that are at the
same stage of production chain
and in the same market are
horizontal agreements.
For the law to be applicable the
products produced by the two
enterprises must be substitutes

 The Act presumes four type of

agreements(horizontal) between
enterprises, involved in similar
manufacturing or trading of
goods or provision of services
have an adverse affect on
competition -

 Agreement regarding prices fixing

purchase or sale price
Agreements regarding quantities
limiting or controlling production,
supply, markets, technical
development, investment or provision
of services.
Agreements regarding bids (collusive
bidding or rig bidding) tenders
submitted as a joint activity or
agreement

 Agreements regarding market

sharing agreements for sharing
of market or sources of
production or type of goods or
services by way of geographical
area of market or number of
customers in the market

 Such horizontal agreements,

which include membership of
cartels, lead to unreasonable
restrictions of competition

Vertical agreement
Vertical agreement do not come
under so much of coverage of
law as the horizontal
agreements.
Wherever vertical agreement has
the character of distorting or
preventing competition then it is
not spared from law.

Vertical agreement

 Any agreement amongst

enterprises or persons at
different stages or levels of the
production chain in different
markets in respect of production
, supply, distribution, storage,
sale or price of, or trade in goods
or provision of services, including
-

Tie-in agreement
Exclusive supply agreement
Exclusive distribution agreement
Refusal to deal
Resale price maintenance
shall be anti-competitive if such
agreement causes or is likely to
cause an appreciable adverse
effect on competition in India.

The Act lists the following factors to

determine whether
an agreement or a practice
has an
adverse effect on competition Creation of barriers to new entrants
in the market
Driving existing competitors out of
the market(predatory pricing is one
such example- pricing below the cost
to eliminate competitors)

 Preventing accrual of benefits to

consumers
Prevents improvements in
production or distribution of
goods or provision of services
Prevents promotion of technical,
scientific, and economic
development by its production of
goods or services

2. Provisions on abuse of dominance

As per Section 4 of Indian

Competition Act, enterprises or
groups are
prohibited from abusing their
dominant position.

The Act defines dominant position as

a position of strength, enjoyed by an
enterprise, in the relevant market in
India, which enables it to;
Operate independently of the
competitive forces prevailing in the
relevant market
Affect its competitors or consumers
or the relevant market in its favour.
Dominance per se is not bad.
However, its abuse has been
considered bad.

 Act provides that there shall be

an abuse of dominant position if
an enterprise or group ;
i) Directly or indirectly , imposes
unfair or discriminatory
Condition in purchase or sale of
goods or services; or
Price in purchase or sale
(including predatory price) of
goods or services

ii) limits or restricts ;

Production of goods or provision
of services or market; or
Technical or scientific
development relating to goods or
services to the prejudice of
customers; or

iii) indulges in practice or

practices resulting in denial of
market access in any manner; or
iv) Makes conclusion of contracts
subject to acceptance by other
parties of supplementary
obligations which, by their nature
or according to commercial
usage, have no connection with
the subject of such contracts; or

v) Uses its dominant position in

one relevant market to enter
into, or protect, other relevant
market.

3. Regulation of
Combinations(section 5 & 6)
Section 5 of the Act defines
Combination
Section 6 of the Act is concerned
with regulation of Combinations

Section 5
Combinations include
mergers,
amalgamations and
acquisition of control, shares,
voting rights or assets.

 Combinations are classified into

horizontal, vertical and
conglomerate combinations. If a
proposed combination causes or
is likely to cause appreciable
adverse effect on competition, it
cannot be permitted to take
effect.

 Horizontal combinations are

those that are between rivals and
are most likely to cause
appreciable adverse effect on
competition.
Vertical combinations are those
that are between enterprises that
are at different stages of the
production chain and are less
likely to cause appreciable
adverse effect on competition.

 Conglomerate combinations are

those that are between
enterprises not in the same line
of business or in the same
relevant market and are least
likely to cause appreciable
adverse effect on competition.

 The concern mostly arises in the

case of horizontal mergers
between competitors operating
in the same market, i.e. dealing
with same goods in the same
area

 However all Amalgamations and

Mergers are not covered in the
definition of Section 5 under the
Competition Act, 2002, only
those Acquisitions and Mergers
which cross the Specified Assets
and Turnover Criteria are covered
under Competition Act, 2002.

 The law prescribes threshold

limits, in terms of value of assets
or turnover, which are indeed
very high in comparison to limits
provided in the laws of other
countries.

 The scrutiny of a combination

under the Act is usually expected
to take place beforeit comes into
effect with an idea of preventing
a possible anti-competitive
behaviour which may adversely
affect the consumers.
Combinations likely to have an
anti-competitive effect can be
permitted after such effects are
removed by modifications.

 The Combination Regulations

were amended twice on 23rd
February 2012 and 4th April
2013, with a view to relax filing
requirements in respect of
transactions not likely to raise
competition concerns, provide
certainty, reduce compliance
requirements and make filings
simpler.

4. ADVOCACY FUNCTIONS
The major tasks for the Commission
under advocacy functions were to:
Spread awareness about Competition
Act and the CCI among various
stakeholders.
Reach out to all the stakeholders
including the consumers, the Government
departments, industry organizations etc.
through various Seminars, Workshops and
Symposiums to make them aware of the
need and beneficial role of competition.

 Sensitize the stake-holders about

nuances of competition law, to

facilitate competition audit of their
respective laws on different
subjects.
Take confidence building measures
among business enterprises and
other stakeholders associated with
competition.
Take up the issues of National
Competition Policy

Benefits of Competition
The benefits of competition
enhances allocative, productive
and dynamic efficiency, and
thereby benefit the consumers,
businesses and the government.

Consumers