Competition Act, 2002

( an up gradation to the MRTP

Act 1969)

Prof. Shrinivas V K

Prof.SVK
 Introduction & Interpretation

An act to provide, 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 trades carried on by other
participants in markets, in India, and for matters
connected therewith or incidental thereto.

- The Competition Act, 2002, Opening para.

Prof.SVK
 Competition act , 2002
• Predecessor : MRTP Act, 1969.
• Followed by : Competition ( Amendment) Act

Some of the objectives of Competition Act are as follows :-

• Establishment of a Commission to prevent adverse effect on competition.

• Promotion and sustenance of competition in the market.

• Protection of consumers’ interests.

• Freedom of trade.

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 Competition Act,2002 v/s MRTP
Act,1969
• Competition concepts expressly • Competition concepts not defined
defined. clearly.

• Provisions for regulation of • No provisions for regulation of

Combination. Combination.

• Power to impose penalty. • No power to impose penalty.

• Statutory authority can seek •No authority to seek opinion.

CCI’s opinion.

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Competition Act,2002 v/s MRTP Act,1969

• Based on post reforms scenario. •Based on pre-reforms scenario.

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

•Relatively more autonomy for the •Very little financial and administrative
Competition Commission. autonomy.

• Penalties for offences. • No penalties for offences.

• Proactive & Flexible. • Reactive and Rigid.

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Activities Prevented Under Competition
Act
• Price fixing :
If two or more supplier fixes the same price for supplying the
goods then it will be restricted practice.
• Bid rigging :
If two or more supplier exchange sensitive information of bid,
then it will also be restricted practice and against competition.
• Re-sale price fixation :
If the producer sells the goods to the distributors on the
condition that he will not sell on any other price which is not
fixed by the producer.
• Exclusive dealing :
This is also restricted practice. If the distributor purchases the
goods on a condition that supplier will not supply the goods to
any other distributor.
All the above activities promote monopoly
Prof.SVK and will not be entertained by
Competition Commission.
 Important Definitions
Under Competition Act, 2002

• Acquisition[Sec.2(a)].It means, directly or

indirectly, acquiring or agreeing to acquire-
(i) shares, voting rights or assets of
any enterprise
(ii) control over management or
control over assets of any enterprise.

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 Definitions
• Agreement[Sec.2(b)].It includes any arrangement
or understanding or action in concert-
(i) Whether or not, such arrangement, understanding
or action is formal or in writing; or
(ii) Whether or not such arrangement, understanding
or action is intended to be enforceable by legal
proceedings.

Prof.SVK
 Definitions
• Consumer[Sec.2(f)]. “Consumer” means any person who-
(i) Buys any goods for a consideration. The consideration may have been
paid or promised or partly paid and partly promised, or under any
system of deferred payment.
“Consumer” includes any user of the goods other than the person
who buys them for consideration paid or promised to be paid in the
above manner. When such use is made with the approval of the
owner, it makes no difference whether the 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.
(iii) Consumer includes any beneficiary of services.

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 Definitions
• Enterprise[2(h)].It means a person or a department of the
Government, who or which is, or has been or is proposed to
be, engaged in any activity, relating to the-
(i)production,storage,supply,distribution, acquisition, or control
of articles or goods, or
(ii)provision of services of any kind, or
(iii)investment, or in the 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 it’s units or divisions or subsidiaries.

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 Definitions
• Goods[2(i)]. “Goods” means goods as defined in
the Sale of Goods Act,1930 and includes-
(A) Products manufactured, processed or mined.
(B) Debentures, stocks and shares after allotment;
(C) In relation to goods supplied, distributed or
controlled in India, goods imported in India.

Prof.SVK
 Definitions
• Person[Sec.2(l)]. “Person” includes-
(i) an individual;
(ii) a Hindu undivided family;
(iii) a company
(iv) a firm;
(v) an association of persons or a body of
individuals, whether incorporated or not, in
India or outside India; [cont’d..]

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 Definitions
[ being cont’d..]
• (vi) any corporation established by or under any Central,
State or Provincial Act or a Government Company as defined
in the Sec.617 of the Companies Act, 1956;
• (vii) any body corporate incorporated by or under the laws
of a country outside of India;
• (viii) a co-operative society registered under any law
relating to co-operative societies;
• (ix) local authority; and
• (x) every artificial judicial person, not falling within any
of the preceding sub-clauses.

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 Definitions
• Price[Sec.2(o)]”Price” in relation to the sale of any
goods or to the performance of any services,
includes every valuable consideration, whether
direct or indirect, or deferred. It also includes any
consideration which in effect relates to the sale of
any goods or to the performance of any services
although ostensibly relating to any other matter or
things.

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 Definitions
• Relevant Market[2(r)]:It means a market
which may be determined by the
Competition Commission with reference
to the relevant product market or the
relevant geographic market or with
reference to both the markets.

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 Definitions
• Relevant Geographic Market [Sec.2(s):
• It means a market comprising the area in which the
conditions of competition for supply of goods or
provision of services or demand of goods or services
are distinctly homogeneous and can be
distinguished from the conditions prevailing in the
neighboring areas .

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 Definitions
• Relevant Product Market [Sec.2(t)]: It means a
market comprising all those products or
services which are regarded as
interchangeable or substitutable by the
consumer, by reason of characteristics of the
products or services, their prices and intended
use.

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 Definitions
– Services[Section2(u)].It means service of any
description which is made available to potential
users. It includes the provision of services in
connection with business of any industrial or
commercial matters such as accounting, banking,
communication, education, financing, insurance, chit
funds, real estate, transport, storage, material treatment
, processing, supply of electrical or other energy,
boarding, lodging, entertainment, amusement,
construction, repair, conveying of news or information
and advertising.

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 Definitions
• Shares[Sec.2(v)]. It means shares in the capital of a company
carrying voting rights and includes-
(i) any security which entitles the holder to receive shares with
voting rights;
(ii) stock except where a distinction between stock and share is
expressed or implied.
Trade[Sec.2(x)].It means any trade, business industry,
profession or occupation relating to the
production,supply,distribution,storage or control of goods and
includes the provision of any services.

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 Definitions
• Turnover [Sec.2(y)].
It includes value of sale of goods or
services.Words and expressions used but
defined in this Act and defined in the
Companies Act, 1956 shall have the same
meanings respectively assigned to them in
that Act [Sec.2(z)].

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 WHAT IS A ‘COMBINATION’ UNDER THE ACT?

• The provisions relating to combinations have not yet been

notified.
• Broadly, combination includes acquisition of control, shares,
voting rights or assets, acquisition of control by a person
over an enterprise where such person has control over
another enterprise engaged in competing businesses, and
mergers and amalgamations between or amongst enterprises
where these exceed the thresholds specified in the Act in
terms of assets or turnover.
• If a combination causes or is likely to cause an appreciable
adverse effect on competition within the relevant market in
India, it is prohibited and can be scrutinized by the
Commission.
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Prohibition of Certain Agreements, Abuse
of Dominant Position & Regulation of
Combinations
No enterprise or association of enterprises or person or
association of persons 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 effect on
competition within India.
-The Competition Act , 2002, Section 3(1)

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 Prohibition of certain agreements, abuse of dominant position
and regulation of combinations
[Chapter II-Sec. 3 to 6]

• SECTION.3 provides for prohibition of entering in to anti-

competitive agreements.
• SECTION.4 prohibits abuse of dominant position by any
enterprise.
• SECTION.5 deals with combination of enterprises and
persons: 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, shall be construed as combination.
• SECTION.6 provides that no person or enterprise shall enter
in to combination which is likely to cause or causes an
appreciable adverse effect on competition within the
relevant market in India.

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 WHAT CONSTITUTES ABUSE OF DOMINANCE?

• Dominance refers to a position of strength which

enables an enterprise to operate independently of
competitive forces or to affect its competitors or
consumers or the market in its favor. Abuse of
dominant position impedes fair competition
between firms, exploits consumers and makes it
difficult for the other players to compete with the
dominant undertaking on merit.

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 WHAT CONSTITUTES ABUSE OF DOMINANCE?

Abuse of dominant position includes:

• imposing unfair conditions or price,
• predatory pricing,
• limiting production/market or technical development ,
• creating barriers to entry,
• applying dissimilar conditions to similar transactions,
• denying market access, and
• using dominant position in one market to gain advantages in
another market.

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 WHAT IS AN ANTI-COMPETITIVE AGREEMENT ?

An anti-competitive agreement is an agreement having appreciable

adverse effect on competition (AAEC). Anti-competitive agreements include,
but are not limited to:-
• agreement to limit production and/or supply;
• agreement to allocate markets;
• agreement to fix price;
• bid rigging or collusive bidding;
• conditional purchase/ sale (tie-in arrangement);
• exclusive supply / distribution arrangement;
• resale price maintenance; and
• refusal to deal.

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 A FIRM PROPOSING TO COMBINE HAVE TO NOTIFY THE
COMMISSION

A firm proposing to enter into a combination,

shall notify the Commission
• in the specified form disclosing the details of
the proposed combination
• within 30 days of the approval of such
proposal by the board of directors or
execution of any agreement or other
document.

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IS THERE COMPULSORY WAIT PERIOD FOR A COMBINATION TO
TAKE EFFECT?

• Yes. The proposed combination cannot take effect

for a period of 210 days from the date it notifies the
Commission or till the Commission passes an order,
whichever is earlier. If the Commission does not pass
an order during the said period of 210 days the
combination shall be deemed to have been
approved.

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The above thresholds are presented in the form of a
table below:

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 Anti-Competitive Agreements (Sec.3)

• Sec.3 provides that no enterprise or person shall

enter in to any agreement in respect of production,
supply, distribution, storage acquisition or control
of goods or provision of services, which causes or
likely to cause an appreciable adverse effect on
competition within India. This rule applies to
association of enterprises and association of persons
while entering in to any such agreement[Sec.3(1)]
• Any agreement entered in to contravention of the
provisions contained in Sec.3(1) shall be
void[Sec.3(2)]

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 Anti-Competitive Agreements (Sec.3)

• Adverse effect on competition: Any agreement

entered in to between enterprises or associations of
enterprises or persons or association of persons or
between any person and enterprise or practice
carried on, or decision taken by, any association of
enterprises or association of persons, including
cartels, engaged in identical or similar trade of goods
or provision of services, which-
• (a) directly or indirectly determines purchase or sale
prices;
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 ……….Anti-Competitive Agreements

• (b) limits or controls production, supply, markets, technical

development, investment or provision of services;
• © shares the market or source of production or provision of
services by way of allocation of geographical area of market,
or type of goods or services or number of customers in the
market or any other similar way;
• (d) directly or indirectly results in bid rigging or collusive
bidding.
Shall be presumed to have an appreciable adverse effect on
competition.

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 Anti-Competitive Agreements (Sec.3)

• “Bid rigging” means any agreement, between enterprises or

persons referred to above engaged in identical or similar
production or trading of goods or provision of services, which
has the effect of eliminating or reducing competition forbids
or adversely affecting or manipulating the process for
forbidding.
• “Cartel” includes an association or producers, sellers,
distributors, traders or service providers who, by agreement
amongst themselves, limit, control or attempt to control the
production, distribution, sale or price of, or trade in goods or
provision of services[Sec.3(3)].

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 Anti-Competitive Agreements (Sec.3)

• An agreement which causes or is likely to cause an

appreciable adverse effect on competition, includes the
following agreements also:
(a) tie- in arrangement; requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods
(b) Exclusive supply agreement; restricting in any manner the
purchaser in the course of his trade from acquiring or
otherwise dealing in any goods other than those of the
seller.

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 [cont’d]……….An agreement which causes or is likely to cause an appreciable
adverse effect on competition, includes the following agreements also;

© Exclusive supply agreement; to limit , restrict or withhold

the output or supply of any goods or allocate any area or
market for the disposal or sale of the goods.
(d) Refusal to deal; restricts by any method the persons or
classes of any persons to whom goods are sold or from
whom goods are bought.
(e) Resale price maintenance: Any agreement to sell goods on
condition that the prices to be charged on the resale by the purchaser
shall be the prices stipulated by the seller unless it is clearly stated
that prices lower than those prices may be charged [Sec.3(4)].

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 Anti–competition
• Also known as anti-trust competition.

• 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.

• The anti-trust agreements that the companies enter

into are of two types, viz. Horizontal & Vertical. These are
in contravention of the provisions of the Competition Act,
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 Horizontal v/s Vertical
• These are agreements made
between two or more competing
firms. Basically called as formation
of CARTEL.
- Any agreements violating the
above Sec.3(1) are void.
The reasons are –
• Directly or indirectly determines
the sale or purchase prices,
• Limits or controls production,
supply, markets etc.
• Shares the market or source of
production of services by way of
allocation of geographical area etc.
• Directly or indirectly involves in
bid rigging or collusive bidding.
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• These are agreements between
firms relating to actual or potential
relationship of purchasing or
selling to each other with a
purpose of dominating the market.
- Any agreements violating the
above Sec.3(1) are void.
The reasons are –
• Tie-in arrangement,
• Exclusive supply agreement,
• Exclusive distribution agreement,
• Refusal to deal,
• Resale price maintenance.
 Horizontal Practices
• Horizontal merger: Two firms in the same industry
merge
• Horizontal Price Fixing (Collusion):Explicit or implicit
agreements in an industry to control prices.
• Price Discrimination: Charging customers different
prices that are not justified by cost differences of
serving these customers.
• Predatory pricing: Selling at price below cost to drive
out arch rival firms.

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 Vertical Practices
• Refusal to deal: A manufacturer refuses to sell to distributor
or retailer.
• Exclusive dealing:A manufacturer grants another firm an
exclusive right to distribute a product.
• Exclusive Territory:A manufacturer grants an exclusive
territory to a seller and no other is permitted to sell in that
territory.
• Retail Price Maintenance: A manufacturer sets a minimum
price below which a retailer cannot sell.

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 [Non-application of Section.3]
Section.3 does not apply to-

• 1.The right of any person to restrain any infringement of, or to

impose reasonable conditions, as may be necessary for
protecting any of his rights which have been conferred under
the Copy rights Act,1957,Patents Act,1970, the Trade and
Merchandise Marks Act, 1958, the Trade Marks Act, 1999, the
Geographical indications of Goods(Regulation and Protection)
Act,1999, the Designs Act, 2000 and Semi Conductor
Integrated Circuits Layout Designs Act,2000.

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Competition commission of India (CCI)
(1) With effect from such date as the Central Government may,
by notification, appoint, there shall be established, for the
purposes of this Act, a Commission to be called the ‘Competition
Commission of India’.

(2) The Commission shall be a body corporate by the name

aforesaid having perpetual succession and a common seal with
power, subject to the provisions of this Act, to acquire, hold and
dispose of property, both movable and immovable, and to
contract and shall, by the said name, sue or be sued.
The head office of the Commission shall be at such place as the
Central Government shall decide from time to time.
The Commission may establish offices at other places in India.

- The Competition
Prof.SVK Act, 2002, Sec.7,(1-4)
Competition Commission of India [CCI]
Establishment of commission(Sec.7): With effect from
such date as the Central Govt. may appoint, there
shall be established, for the purposes of this Act, a
Commission to be called the “Competition
Commission of India”.
Corporate body:It shall be a body corporate.
Offices: The head office shall be at a place as the
Central Govt. may decide from time to time.

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 Composition of Commission(Sec.8)
• A chairperson and not less than two and not more than ten
members to be appointed by the Central Govt.
• The Central Govt. shall appoint the Chairperson (Devender
Kumar Sikri) and the members during the first year of
operation.(Sec.8(1))
• Qualifications: The Chairperson and every member shall be
the persons of ability, integrity and standing, who-
(a) are, or have been, or qualified to be , a Judge of a High Court;
(b) Have special knowledge of, and professional experience in, not
less than 15 years, international trade, economics, business,
commerce, law, finance, accountancy, management, industry,
public affairs, administration or in any other matter which, in the
opinion of the Central Government, be useful to the
Commission(Sec.8(2))
(c) The chairperson and other members shall be whole time
members.(Sec.8(3)).
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 Competition Commission of India

• Selection of Chairperson and other Members(Sec.9)

• Term of office of Chairperson and other Members(Sec.10)
Vacancy and Oath of Office
• Resignation, Removal and Suspension of Chairperson and other
members(Sec.11)
• Restriction on employment in certain cases (Sec.12)
• Salary and Allowances(Sec.14)
• Vacancy not to invalidate the proceedings of the Commission(Sec.15)
• Appointment of Director General, etc.(Sec.16)
salary and appointment
• Registrar and officers and other employees of he Commission(Sec17).

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 Duties and Powers of CCI
• Sec.18-20 deals with the duties.

- Summary of the duties are :

• Eliminate practices having adverse effect on
competition.
• Promote and sustain competition.
• Protect the interests of the consumers.
• Ensure freedom of trade carried on by other
participants in the market.
• Conduct enquiry into cases of abuse of dominant
position and combinations.

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WHAT ORDERS THE COMMISSION CAN PASS IN CASE OF ANTICOMPETITIVE
AGREEMENTS AND ABUSE OF DOMINANT POSITION?

• During the course of inquiry, the Commission

can pass interim order restraining a party from
continuing with anti competitive agreement
or abuse of dominant position.

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WHAT ORDERS THE COMMISSION CAN PASS IN CASE OF ANTICOMPETITIVE
AGREEMENTS AND ABUSE OF DOMINANT POSITION?

The Commission can impose a penalty of not more than 10% of

the average turnover for the last 3 preceding financial years of
the enterprise. In case of a cartel, the Commission can impose
on each member of the cartel, a penalty of up to 3 times its
profit for each year of the continuance of such agreement or up
to 10% of its turnover for each year of continuance of such
agreement, whichever is higher.

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WHAT ORDERS THE COMMISSION CAN PASS IN CASE OF ANTICOMPETITIVE
AGREEMENTS AND ABUSE OF DOMINANT POSITION?

After the inquiry, the Commission may direct a delinquent

enterprise to discontinue and not to re-enter anti-competitive
agreement or abuse its dominant position. The Commission may
also direct modification of such agreement.
The Commission may direct division of enterprise in case it
enjoying dominant position to ensure that such enterprise does
not abuse its dominant position.

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 Case study : 1
(Relating to the Dominance abuse and Appellate function)

Relating Yash Raj films and “Son of

Sardar”
The tassel between Yash Raj films and Ajay Devgan Films

- Case no. 66 of 2012

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 • Informant:

- Ajay Devgan Films

• Opposite Parties:

- Yash Raj films

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• The informant’s grievance :

Opposite party released a mega starrer film ’ Ek

Tha Tiger’ on 15th August 2012.
Meanwhile, they were also contemplating
release of the film ‘Jab Tak Hain Jaan’ during
Diwali.
They have put a condition on single screen
and multiplex owners that if they wanted to
exhibit ETT then they would have to
simultaneously agree to exhibit the other film
JTHJ.

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•Claim highlights :

i. Abuse of dominance

ii. Violation of Sec 3 and Sec 4 of the CCI

iii. Informant feared that he will not get enough theatres for his own film
‘Son of Sardar’

iv. Tie in arrangement and vertical agreements

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 • Result of the case :

i. Case dismissed.

ii. CCI did not find any misgivings on the opposition’s side.

iii. Fit for closure under section 26 (2) of the act.

• Reasons for Closure :

i. Tie in arrangements are not violative of Sec. 3, if it does not cause appreciable
adverse effect on competition of India.
ii. Market cannot be constricted to EID and Diwali. Market is considered as a whole
throughout the year.
iii. Sec. 4- domination of market not defined.

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 Case study : 2
(Relating to the Bid Rigging and Price Fixation)

Aluminium Phosphate tablets Manufacturer’s Case

- Case no. 02/2011

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• Informant:

- Food Corporation of India (FCI)

• Opposite Parties:

- United Phosphorous Limited

- Sandhya Organic Chemicals Pvt. Ltd.
- Excel Crop Care Limited
- Agrosynth Chemicals Limited

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• Allegations:

- During last 8 years the opposite parties had quoted identical rates and
negotiations are also reduced to same rate.

- The manufacturers of the ALP tablets have formed a cartel.

- One of the manufacturers is using its dominance to compel others to quote

at same rates.

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Prof.SVK
• Result of the Case:

- CCI decides to impose penalty at a rate of 9% on average of three year

turnovers of the three companies.

- This works out to Rs 252 crores for UPL, Rs 63 crores for Excel Crop Care and
Rs 1.57 crores for Sandhya Organics.

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 Case study : 3
(Relating to the Cartel Formation and Price manipulation)

Advertising Agencies Guild

VS
Indian Broadcasting Foundation & its members

- Case no. 35 of 2013

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• Informant:

- Advertising Agencies Guild

• Opposite Parties:

- Indian Broadcasting foundation &

its members (IBF)

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•Case Highlights

- Opposite parties were forcing the advertising agencies to agree to

the new mechanism of billing (Gross Billing To Net Billing)

- They collectively boycotted and did not broadcast advertisements on

their Channels for two days viz. 01.05.2013 & 02.05.2013.

- Violation of section 3(3)

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 Result of Case

• Case was dismissed.

• IBF wasn't found to be abusing their dominance.

• The agreement deadline was increased to one month.

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 Reasons for Closure

• Billing system has no restriction under competition Act.

• Competition Act is applicable only to price fixation, market sharing

collusive bidding etc..,

• The boycotting was pre-mentioned by the so formed committee of

IBF.

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• Informant:

- Indian Glycols Ltd.

• Opposite Parties:

- Indian Oil Corporation Ltd (IOCL).

- Hindustan Petroleum Corporation Ltd (HPCL).
- Bharat Petroleum Corporation Ltd (BPCL).
- Indian Sugar Mills Association (ISMA).
- And the corresponding ministries..

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 • The informant’s grievance :

- The fixing of price of Ethanol to Rs27/ltr by

Indian Sugar Mills Association (ISMA) with the
collaboration of Cabinet Committee of v/s
Economic Affairs.
- Enforcement of agreement of Cartelization on
the government body by the president of
ISMA.
- The price fixation by the four OMC’s and by
various suppliers who are in horizontal
relationship with each other.
- The chain from ISMA to certain Ministries and
then to OMCs were inter related in the fixing
the prices.

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 •Claim highlights

- Act of price fixation

- Section 3 (3) (a), (b) & (c) are violated.
- Act of abuse of dominant position.
- Section 4 (2) (a) & (e) are violated.

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•Results

I. Case was dismissed.

II. The Commission did not find any violation in the section 3 and 4 of the
act.
III. The order was given under section 26 (2) of the competition act, 2002.
IV. All the opposite parties came out clean in the case.

•Reasons

I. The price fixed by the Cabinet Committee of Economic Affairs (CCEA), for the
procurement of Ethanol cannot be considered as anti competitive in nature as it
is set up to encourage the farmers to produce more sugarcane as ethanol comes
from molasses in sugarcane.
II. The Formation of cartelization was not found.
III. Sec. 4- domination of market not defined.

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