Competition Act 2002

Contents
• Objective
• Background of Competition Law in India
• What is Competition Act?
• Competition Commission of India
• Abuse of Dominant Position
• Duties, Powers , Functions and Penalties
• Distinction between MRTP and Competition act
• Case Study
• Conclusion
 Background
• Background of Competition Laws:

1) Back to Ancient India- Cartelization finds

mention in Arthashastra, Kautilya.
2) In modern period, Monopolies and Restrictive
Trade Practices Act was enacted in 1969 to;
a) Prevent the concentration of economic power.
b) Provide for the control of monopolies
c) Prohibit monopolistic and restrictive trade
practices.
 THE COMPETITION ACT,2002

1) Acting on the report of the Committee, the

Government of India passed the
Competition Act in the year 2002; to which
the president accorded assent in 2003.

• It was subsequently amended by the

Competition (Amendment) Act,2007.
 COMPETITION ACT
2) The broad objectives of the Competition Act, as
laid down in its preamble are:

• "to prevent practices having adverse effect

on competition, to promote and sustain
competition in markets, to protect the
interest of the consumers and to ensure
freedom of trade carried on by other
participants in markets in India"
 Contd..
• Competition Act, 2002 notified in Gazette in
January, 2003. Preamble's stated objectives is
to establish the commission which has the duty
to:

1) Eliminate practices having adverse effect on

competition
2) Promote and sustain competition
3) Protect consumers interests
4) Ensure freedom of trade carried on by other
participants in markets, in India.
 COMPETITION ACT, 2002
1) It prohibits Anti-Competitive Agreements
(Sec 3)
2) It regulates Acquisitions, Mergers and
Combinations (Sec 5 & 6)
3) It prohibits Abuse of Dominant Position
(Sec 4)
4) It mandates Competition Advocacy (Sec
49)
 Salient Features Of New Competition
Policy
1) The Industries (Development and Regulation) Act, 1951 may
no longer be necessary except for location (avoidance of
urban-centric location), for environmental protection and for
monuments and national heritage protection considerations,
etc.

2) The Industrial Disputes Act, 1947 and the connected statutes

need to be amended to provide for an easy exit to the non-
viable, ill-managed and inefficient units subject to their legal
obligations in respect of their liabilities.

3) The Board for Industrial Finance & Restructuring (BIFR)

formulated under the provisions of Sick Industrial Companies
(Special Provisions) Act, 1985 should be abolished.
 Contd..
3) World Trade Organizations (WTO)

• There should be necessary provision and teeth to examine

and adjudicate upon anti-competition practices that may
accompany or follow developments arising out of the
implementation of WTO Agreements.
• Particularly, agreements relating to foreign investment,
intellectual property rights, subsidies, countervailing
duties, anti-dumping measures, sanitary and psytosanitary
measures, technical barriers to trade and Government
procurement need to be reckoned in the Competition
Policy/Law with a view to dealing with anti-competition
practices. The competition law should be made extra
territorial.
 Contd..
4) MRTP Act

• The MRTP Act extends to the whole of India except the state
of Jammu and Kashmir. This law was enacted:

• Brief on The MRTP Act, 1969

• Post independence, many new and big firms have entered the
Indian market. They had little competition and they were
trying to monopolize the market. The Government of India
understood the intentions of such firms. In order to safeguard
the rights of consumers, Government of India passed the
MRTP bill. The bill was passed and the Monopolies and
Restrictive Trade Practices Act, 1969, came into existence.
Through this law, the MRTP commission has the power to stop
all businesses that create barrier for the scope of competition
in Indian economy.
Competition Act-What practices are
stopped by it??
• Under this act following are restricted practice and these
practices are stopped by this act.

1. Price fixing:-

• If two or more supplier fixes the same price for supply the
goods then it will be restricted practice.

2. Bid ragging:-

• If two or more supplier exchange sensitive information of

bid, then it will also be restricted practice and against
competition.
 Contd..
3. Re-sale price fixation:-

• If a producer sells the goods to the distributors on the

condition that he will not sell any other price which is not
fixed by producer.

4. Exclusive dealing:-

• This is also restricted practice. If a distributor purchases the

goods on the condition that supplier will not supply the
goods any other distributor.

• Above all activities promote monopoly so under

competition act these are void and action of competition
commission will not entertain by civil court.
 Anti Competition Agreement
• Prohibition of Anti competition Agreement:
• Section 3 provides that no enterprise or
person shall enter into any agreement in
respect of production, supply, distribution,
storage acquisition or control of goods or
provision of services, which causes or is
likely to cause an appreciable adverse
effect on competition within India.
 Competition Commission Of
India
a) In accordance with the provisions of the
Competition Amendment Act, the
Commission was duly constituted in March
2009.

b) The Commission has a Chairperson and

six members.
 Composition of Commission
1) The Chairperson and other Members of
the Commission shall be appointed by the
Central Government.

2) Selection Committee includes Chief

Justice of India or his nominee, Secretary
in the Ministry of Corporate Affairs
 DOMINANCE
• What is Dominance?

-Position of strength enjoyed by an enterprise in the relevant market

which enables it to:
1) Operate independently of competitive forces prevailing in relevant
market.
2) Affect its competitors or consumers or the relevant market in its
favor.

• It involves two distinct parts:

1) Determining whether firm has dominant position

2) Examining whether conduct of the dominant firm falls within the
definition of abuse.
 FACTORS TO BE CONSIDERED IN
DETERMINING DOMINANCE
1) Market share of enterprise
2) Size and resources of enterprise
3) Size and importance of competitors
4) Commercial advantage of enterprise over competitors.
5) Vertical Integration
6) Dependence of consumers
7) Dominant position as a result of a statue
8) Entry Barriers
9) Social obligations and costs
10) Market structure and size of market.
11) Countervailing Buying Power
12) Contribution to economic structure.
 Elements of Dominance
• It is the ability to prevent effective
competition and ability to behave
independently of two sets of market
actors, namely:

• a) Competitors

• b) Consumers
Provisions on Abuse of Dominance

a) As per Section 4 of Indian Competition Act, enterprises or

groups are prohibited from abusing their dominant position.
b) The Act defines dominant position as a position of strength,
enjoyed by an enterprise, in the relevant market in India,
which enables it to.
c) Operate independently of the competitive forces prevailing
in the relevant market.
d) Affect its competitors or consumers or the relevant market
in its favor.
e) Act provides that there shall be an abuse of dominant
position if an enterprise or group.
 Abuse of Dominance
i) Directly or indirectly, imposes unfair or
discriminatory
1) Condition in purchase or sale of goods or
services
2) Price in purchase or sale of goods or services
ii) Limits or restricts
1) Production of goods or provision of services or
market
2) Technical or scientific development relating to
gods or services to the prejudice of customers.
 Distinction between MRTP and
Competition ACT
• Competition Act MRTP

• Competition concepts expressly defined Competition concepts not

expressly defined

• Provision of regulation of combination No regulations of

combinations

• Power to impose penalty factor No power to impose penalty

• Statutory authority can seek CCI's opinion No provision for statutory

authorities to seek
opinion
 Distinction between MRTP and
Competition ACT
• Competition MRTP
• Government department within its ambit Government department
outside its ambit

• Based on the post reforms scenario Based on pre reforms

scenario

• Based on structure as a factor Based on size as a factor

• Combinations regulated beyond No combinations regulation

• a threshold limit.

• Relatively more autonomy for the Very little administrative and

competition commission
financial autonomy
 Distinction between MRTP and
Competition ACT
• Competition MRTP
• Competition Commission
selected by Search committee. Competition Commission
appointed by
the Government

• Penalties for offences No penalties for offences

• Proactive & flexible Reactive & Rigid

• Unfair trade practices omitted Unfair trade practices covered

• Frowns upon abuse of dominance Frowns upon

dominance
 BENEFITS OF COMPETITION
• The benefits of Competition work through the
economy by enhancing allocative, productive
and dynamic efficiency and thereby benefit the
consumers, businesses and the government.
a) Consumers:

i) Wider choice of goods, services and suppliers

ii) Better quality and improved value for money.
 BENEFITS….
• b) Businesses:

i) Level playing field

ii) Redressal against anti competitive practices
iii) Competitively priced inputs
iv) Greater productivity and ability to compete in global
markets.

• c) Governments (Central and State)

i) Optimal realization from sale of assets

ii) Savings of public money in procurement
iii) Enhanced availability of resources for social sector.
 Advantages of Competition

1) Lower prices for consumers

2) A greater discipline on producers/suppliers to keep their

costs down

3) Improvements in technology – with positive effects on

production methods and costs

4) A greater variety of products (giving more choice)

5) A faster pace of invention and innovation

 Advantages of Competition

• 6) Improvements to the quality of service for consumers

• 7) Better information for consumers allowing people to make more

informed choices

• 8) Competition between different firms leads to increased efficiency, as

firms do whatever is necessary—including laying off workers—to lower
their costs;

• 9) Most people work harder (the threat of losing one’s job is a great
motivator);

• 10) Foreign investment is attracted as word gets out about the new
opportunities for earning profit

The overall impact of increased competition should be an

improvement in economic welfare.