Competition Act 2002

Competition Commission of India

1. Scope of the act 2. Objectives 3. Definitions 4. Prohibition of certain behavior 5. Competition commission of India 6. Director general 7. Duties of D G 8. Penalties

BAC K GROUND

In the process of L P G, India has opened up its economy and controls are removed giving way for development of commerce and trade. As a consequence of this Indian market has to face not only the national market but international market also. The earlier MRTP law became obsolete and needs to be face lifted or new law needed to replace this MRTP. A high power committee on competition policy and law was appointed by the Govt of India which submitted its report On 22.05.2002 recommending: 1. Abolition of M R T P 2. Passing of competition act

Competition act seeks to ensure fair competition in India by prohibiting trade practices which causes appreciable adverse effects on competition in markets within Indian and to provide establishment of a quasi-judicial body to be called as

Competition commission of India

Competition law deals with enterprises behavior by prohibiting such restrictive business practices as competition- restricting horizontal as agreements acquisitions and abuse a dominant position as well as substantially restrictive vertical distribution as agreements.

It is stated in the preamble itself that this is

an act to provide for the establishment of a commission in order to prevent those practices having adverse effect on the competition keeping in view the economic development to promote and protect the competition in the market.

This is also to protect the consumers and to ensure freedom to traders in the market.

The entire act is indicated for controlling the competition. It says that it shall not be lawful for any enterprise or association of enterprises or person or association of persons To enter into an agreement in respect of Production Supply Storage Distribution Acquisition or Control of goods or provision of service which causes or likely to cause an appreciable adverse effect on competition In India

It extends to whole of India except Jammu & Kashmir It has 66 sections detailing various definition and establishment of the CCI, their powers and function and also investigation, contraventions and offences and penalties

It seek to ensure fair competition in India by prohibiting those practices which cause adverse effect on competition. It aims to curb negative aspect of competition through establishment of CCI

********************************** Cartel Association of producers, seller, distributors, traders or service providers who by agreement amongst themselves, limit, control or attempt to control Production, distribution, sale or price of or trade in goods or providing services. Consumer Who buys goods and services for consideration, Hirer/user etc

Enterprise Means a person or department of the Govt. who or which is or has been engaged in any activity relating to Production Supply Storage Distribution Acquisition or control of goods or services of any kind or In investment or in Business of acquiring, holding underwriting or dealing with shares, debentures or other securities of any other body corporate either directly or through one or more of its units or division or subsidiaries, where such unit is located at the same place where the enterprise is located or at different places. But not includes Govt. related activity like Defence, Energy & Currency.

This Act prohibits certain agreements under section 3 : The CCI considered the following three areas 1. Agreements among enterprises 2. Abuse of dominance 3. Merges Section 3 prohibits Anti Competitive agreements The following types of agreements are prohibited: 1. No person can enter in to an agreement in respect of Production Supply Storage Distribution Acquisition or control of goods or services of any kind which causes or likely to cause adverse effect on the competetion.

2. If any person enters in to such agreement it is void.

i e it is not enforceable in the court of law.

3. If any agreement is entered in to between Enterprises or person or association of person including cartels engaged in the similar Business whicha. Directly or indirectly determines the prices b. Limits are control production, supply, market, technical development, investment or service

Shares the market or source of production or service by way of allocation of Geographical area of market or types of goods &service or number of customer in the market or any other similar way

Directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on the competition.

Bid rigging means any agreement between enterprises engages in identical trading of goods & services which has the effect of eliminating ir reducing competition for bid or adversely affect or manipulates the process of bidding.
4. Any agreement amongst enterprises or persons at different stages of production chain in different market refuse to be or , resale price maintenance or any supply agreement or tie agreement is not allowed if such agreement causes or likely to cause appreciable adverse effect on competition in India.

5. Nothing in this section affect the following act.

1. The copyright act 2. Patent act 3. Trade marks act 4. Geographical indication of goods (Registration & protection act) 5. The design act 6. The semi-conductor Integrated Circuits Layout-Design act

B. Abuse of dominant position: No enterprise shall abuse be dominant position. There shall an abuse of dominant position if an enterprise directly or indirectly imposes unfair or discriminatory condition in purchase or sale of goods and services or Price in purchase or sale of goods & services, ->Limits or restrict production of goods or provision of service Technical or scientific development Indulges in or restrict market access insisting supplementary obligation which have no connection with the subject contract Uses its dominant position in one relevant market to enter in to or protect other relevant market

Dominant position means a position of strength Enjoyed by an enterprise in the relevant market In India which enables it to Operate independently of competitive forces affects its competitors or consumer Or the relevant market in its favour

C. Merger or combination:
The acquisition of one or more enterprises by one or more person or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises if (a) Any acquisition where(i) the parties to the acquisition, being the acquirer and the enterprises, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have,(A) either, in India the assets of the value more than rupees one thousand crore or turnover more than Rs. 3000 crore; or (B) In India or outside India, in aggregate, the asset of the value of more than 500 million US $ or turnover more than 1500 million US $ or

(ii) If the group after acquiring the enterprise or controlling shares if after the acquisition has

A. the total assets are more than 4000 crores or turnover more than 12000 crores B. In India or outside India an aggregate asset value of more than 2 Billion US $ or turnover of more than 6 billion US $.

if the above position is reached it amounts to a combination:

Sec 5 of the act deals with combination of enterprises and persons. The acquisition of one or more enterprises by one or more persons or acquiring of control or merger or amalgamation of enterprises under certain circumstances specified in the said clause shall be construed as combinations

Sec 6 says no person or enterprises shall enter into a combination which is likely to cause or causes an appreciable adverse effect on the competition with in the relevant market in India
However, There are certain exception provided under the act So that those combination are kept outside the preview of this act/provisions.

No two or more person or enterprises are allowed to make a combination to defeat the completion. Example: if all the cell phone service provider combine together and fix a rate of call as Rs.5/- per call, it will destroy the health competition and it becomes combination to affect the public, hence such combination to defeat the competition is void. In case of any person or enterprise who wants to make any combination by merger or acquisition may give notice to the commission in the prescribed form with fee, within 7 days giving details of merger and acquisition Or Execution of any agreement or other documents for acquisition to get control on the other unit.

When the commission receives the notice, it will examine the same and take decisions as per the provisions of the act.

What are the exemptions given under the act ?

1. Combination of public financial institution 2. FII- foreign institutional investors 3. Banks 4. Venture capital fund

THE MOST IMPORTANT PART OF THE ACT IS THE ESTABLISHMENT OF THE COMPETITION COMMISSION OF INDIA TO TAKE CARE OF THE CONTROL AND REGUALTION OF THE COMPETITION. The commission is a body corporate having perpetual succession and a common seal. This commission is having power to Acquire Hold Dispose of Property. It can establish branches.

Composition of commission 1 chairperson and not less than two and not more than ten other members to work for whole time appointed by Govt. The chairperson shall have the qualification to be a judge of a high court or has special knowledge of and professional experience of not less than 15 years in International trade Economics Business commerce., law, finance, accountancy, management, industry, public affairs, administration or any other matter which central govt, approves.

Tenure
They hold the office for 5 years they are eligible for reappointment Chairperson maximum age up to which he can work 67 Other members 65

For investigation purpose there is A Director General. The Central Govt. will Appoint a D.G. He may be assisted by a Dy DG Asst DG Addl DG Joint DG

Duties of director general

1. The main duty is to investigate into any contravention of the provisions of this act/rules/regulations etc., 2. DG will have the powers that are given by commission 3. They got full powers like an inspector under co law

DUTIES
1. THE MAIN DUTY IS TO ELIMINATE PRACTICES HAVING ADVERSE EFFECT ON COMPETION 2. PROMOTE AND SUSTAIN COMPETITION 3. PROTECTION OF INTEREST OF CONSUMERS 4. TO ENSURE FREEDOM OF TRADE CARRIED ON BY OTHER PEOPLE IN THE MARKET IN INDIA 5. ENTERING INTO ANY AGREEMENT WITH ANY AGENCIES IN THE COUNTRY OR WITH FOREIGH AGENCIES ETC WITH THE PRIOR APPROVAL OF THE CENTRAL GOVT.

Enquiry into certain agreements and Dominant position The commission enquires into any alleged contravention of the provisions. It can act suo moto Or on application or complaint received. Or when a reference made by Govt.

Powers and functions

1. It will investigate whether an agreement entered into by persons and enterprises has any adverse effect on the competition - whether it will create any barriers to the new entrants - whether it will drive out the competition from the market - customer benefits - improvements in production, distribution, service

It will enquire whether there is any dominant position or not , having due regards to market share size and resources of enterprises size and importance of competition economic power of the enterprises commercial advantages vertical integration of the enterprises sales and network of such enterprises dependence of the consumer on enterprises monopoly and dominant position

1. Commission may enquire any combinitation to find out after the merger or acquisition is there any adverse effect on the competition 2. Commission may every 2 years may revalue the assets basing on the price index. 3. Commission will investigate to find out whether the competition is affected by the actual and potential level of competition through the imports in the market, 4. Extent of the barriers in the market for new people 5. Whether such combination result in increase in price and the increase in profit margins, what substitute are available, etc.,

What is the procedure for inquiry on complaints On receipt of the complaint or reference from the Govt, or saturator authority or suo moto, if the commission is of the opinion that there exit a prima facei case it shall direct the DG to cause an investigation to be made into the matter. DG on receipt of direction submit a report on finding within the period given by the commission, Where on the receipt of a complaint, if it is found there is no case it will be dismissed. The commission will send a report to the concerned In case further enquiry is needed it will be directed

If it is found that there is contravention of the provisions then 1. If there is an abuse of dominant position, it will be advised to discontinue 2. Impose any penalty 3. Award compensation to the parties 4. Direct the agreement if any needs to be altered 5. Direct the enterprises to obey any order or payment of cost if any. 6. Recommend to Govt. for pass any order as it thinks fit

Division of enterprises 1. If needed, in order to bring down the adverse effects on the competition, the Govt may direct the combination to subdivide and not to use dominant position 2. Transfer of vesting of property rights 3. Cancellation of any shares, stocks or securities 4. Payment of compensation 5. Winding up 6. Any other way

=================================== 01. Where the commission is of the opinion that the combination is affecting or likely to affect the competition in India or has an adverse effect on the competition within the Indian market, it will issue SHOW CAUSE NOTICE to such combinations, calling upon such combination to reply within 30 days. 02. The combination within 7 days of receiving the response from the combination

02. The combination within 7 days of receiving the response from the combination Direct for publishing details of the combination with in 10 days. 03. The commission may invite public to file written statement and objection if they are affected before the commission. 04. The commission may call for any information or additional information from the combination within 15 days from the date when the period specified expires. 05. Such additional information shall be furnished with in 15 days to the commission by the combinations 06. After getting all the information the commission will proceed after given date is over and with in 45 days

When the disclosure is made by the combination, the commission may enquire into the same to find out whether the disclosure is true or not, correct or incorrect etc., And whether the combination is causing any adverse affect on the competition or not.

1. If the combination does not affect the competition it will approve the combination on application to it 2. If it affects the competition it will not approve 3. If some modification is made so that the combination will not come in the way of competition then the commission will propose the same to parties. The parties has to do the needful. 4. If modification is not done, it will be deemed that there is adverse effect on competition and it will not be allowed.

5. On submission of amendments and modification the commission shall approve the same. 6. Time up to 30 working days may be granted to parties 7 The commission may order a. acquisition b. acquisition of control c. merger and amalgamation shall not take place

When the commission finds that any agreement is an anti-competition agreement or action of an enterprise is in abuse of dominant position the commission may pass the following order.

1. Not to enter into such agreement or discontinue 2. Impose penalty 3. If cartel is involved, the penalty is 3 times the profit 4. Award compensation to the parties 5. Direct to parties to modify the agreement as required 6. Ask to comply with the direction or order or rules etc payment of the cost 7. Recommend to central Govt for division of enterprises 8. Pass any such other order

1. For contravention of order of commission- up to Rs.10 lakhs 2. For failure to comply with direction: Rs.1 lakh per day 3. For making false statement not less than Rs.50 lakhs - 1 crores

4. For offences in furnishing information penalty up to Rs.10 lakhs