Competition Act 2002

MRTP ACT, 1969

• The MRTP Act, 1969, aims at preventing
economic power concentration in order to avoid
damage.
• The act also provides for probation of
monopolistic, unfair and restrictive trade
practices.
• Came into force from 1 June 1970 and has been
amended in 1991.
 Monopolistic Trade Practice
 Such practice indicates misuse of one’s power to
abuse the market in terms of production and sales of
goods and services.

 Firms involved in monopolistic trade practice tries to

eliminate competition from the market, take advantage of
their monopoly and charge unreasonably high prices.

 They also deteriorate the product quality, limit technical

development, prevent competition and adopt unfair trade
practices.
• Unfair Trade Practice -
 False representation and misleading advertisement of
goods and services.
 Falsely representing second-hand goods as new.
 Misleading representation regarding usefulness, need,
quality, standard, style etc of goods and services.
 Giving false guarantee or warranty on goods and
services without adequate tests.

• Restrictive Trade Practice

The traders, in order to maximize their profits and to
gain power in the market, often indulge in activities that
tend to block the flow of capital into production
 MRTP COMISSION
• The Central Government has established a commission to be known as the
Monopolies and Restrictive Trade Practices Commission.

• This commission shall consist of a Chairman and minimum 2 and maximum 8 other
members, all to be appointed by the Central Government.

• The procedure for filing a complaint is as follows:

 Complaint is filed either by the individual consumer or through a registered

consumer organization.
 The Director General of the MRTP commission would carry on the investigation for
finding facts of the case.
 If the prima facie case is not made, the complaint is dismissed. If the compliant is
true, an order is passed to its effect.
 The commission restricts and restrains the concerned party from carrying on such
practices by granting temporary injunction.
 Then the final order is passed. The complainant may be compensated for his loss.
 Need of Indian Competition Act
• Globalization process, - which called for level playing field and investor-
friendly environment.

• Why from MRTP Act to Competition Act-

• To shift the focus from curbing monopolies to encouraging companies to

invest and grow, thereby promoting competition while preventing any
abuse of market power.

• In an open market economy, some enterprises may undermine the market

by resorting to anti-competitive practices for short-term gains. In line
with the international trend and to cope up with the changing realities
India, consequently, enacted the Competition Act, 2002 
 3 STAGE TRANSITION
• The Act provides for three-staged transition, spanning the first three years from
the date of notification of the Act, wherein the Competition Commission of
India would replace the MRTP Commission.

 First year
• At the onset of first year, MRTP Commission will cease to exist and CCI would
assume the role of an advisory body.
• The pending cases in the MRTP Commission relating to unfair trade practices
would be transferred to the concerned consumer courts under the Consumer
Protection Act, 1986.
• The pending cases relating to monopolistic and restrictive trade practices have to
be taken up for adjudication by CCI.
 Second year
• During the second year, CCI would scrutinize the anti-competitive practices.
 Third year
• During the third year, CCI would begin regulating the mergers and acquisitions
that will have adverse impact on competition.
 OBJECTIVE
• to prevent practices having adverse effect on competition,
• to promote and sustain competition in markets, to protect the
interests of consumers
• to ensure freedom of trade carried on by other participants in
markets, in India, and for matters connected therewith or
incidental thereto.
• The advantages of perfect competition are three-fold-

 allocative efficiency, which ensures the effective allocation of

resources,
 productive efficiency, which ensures that costs of production are
kept at a minimum and
 dynamic efficiency, which promotes innovative practices."
 OBJECTS TO BE ACHIEVED
• I. To check anti-competitive practices

• II. To prohibit abuse of dominance

• III. Regulation of combinations.

• IV. To provide for the establishment of

CCI, a quasi-judicial body.
 1.Anti Competitive Agreements
• The departure is reflected in section 3 of the Act,
which states that 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.
• The species of agreement 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 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. Abuse of Dominant Position
• Section 4 of the Act enjoins, "no enterprise shall abuse its dominant position".

• Dominant position :
• It is the position of strength enjoyed by an enterprise in the relevant market, which
enables it to operate independently of competitive forces prevailing market, or
affect its competitors or consumers or the relevant market in its favor.

• When is one doing “abuse of dominant position”

 Directly or indirectly imposing discriminatory conditions in the purchase or sale of

goods or service, or setting prices in the purchase or sale (including predatory
pricing) of goods or services.

 Limiting or restricting the production of goods or provision of services or market

therefore; or limiting technical or scientific development relating to goods or
services to the prejudice of customers;
 Indulging in practice or practices resulting in the denial of
market access

 Making conclusion of contracts subject to acceptance by

other parties of supplementary obligations, which has no
connection with the subject of such contract;

 Utilization of the dominant position in one relevant

market to enter into, or protect, another relevant market.
 3. Combination
• 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 an appreciable adverse impact on competition
within the relevant market in India, can be scrutinized by the Commission.

• Threshold limits that would invite the scrutiny are specified below:

 For acquisition:
• Combined assets of the firm more than Rs 3,000 crore.
• The limits are more than Rs 4,000 crore or 12,000 crore and US $ 2 billion and 6
billion in case acquirer is a group in India or outside India respectively.

 For mergers:
• Assets of the merged/amalgamated entity more than Rs 1,000 crore or turnover
more than Rs 3,000 crore .
• These limits are more than Rs 4,000 crore or Rs 12,000 crore and US $ 2 billions
and 6 billions in case merged/amalgamated entity belongs to a group in India or
outside India respectively.
 Acquisition
• Acquisition --- Indian co ---- Asset 3000 cr

• Acquisition --- Outside India co ---- Asset us $ 500

million

• Acquisition---Indian co- --- Deal limit 4000 cr

---US $ 2 billion

• Acquisition --- Outside Indian co ---- Deal limit 12000 cr

---US$ 6 Billion
 Merger
• Merger --- Indian co ---- Asset >1000 cr
---- Turnover >3000 cr

• Merger---Outside India co
» ---- Asset US $ 500 million
» ---- Turnover > US $ 1500 million

• Merger--- Indian co ---- Deal limit 4000 cr

---US $ 2 billion

• Merger --- Outside Indian co --- Deal limit 12000 cr

--- US $ 6 billion
4. Competition Commission of India

• CCI, entrusted with eliminating prohibited

practices, 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 ten,
other members.
 Acts taking place outside India

CCI has the power to enquire into unfair agreements or abuse of

dominant position or combinations taking place outside India but
having adverse effect on competition in India, provided that any of
the below mentioned 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.
Thank you !!