Competition Act Assignment

Q1. What are the objectives of the competition act, 2002 ?

The Competition Act seeks to provide the legal framework and tools to ensure competition
policies are met and to prevent anti-competition practices and provide for the penalisation
of such acts. The Act protects the free and fair competition which protects the freedom of
trade, which in turn protects the interest of the consumer. The Act seeks to prevent
monopolies and also to prevent unnecessary intervention by the government. The main
objectives of the Competition Act, 2002 are:
• to provide the framework for the establishment of the Competition Commission

• to prevent monopolies and to promote competition in the market

• to protect the freedom of trade for the participating individuals and entities in the
market

• to protect the interest of the consumer

Q2. What is meant by unfair competition? 

Unfair competition is a term that applies to dishonest or fraudulent rivalry in trade and
commerce. It's a branch of intellectual property law that particularly relates to the practice
of endeavouring to substitute one's own goods or products in the market for those of
another for the purpose of deceiving the public.

Q3. What is an anti-competitive agreement?

In simple words, Anti-Competitive agreements are agreements that are made by two or
more companies competing in the same market to fix prices or reduce stocks etc, so as to
manipulate the market favourably for them. This has the effect of the companies reducing
the competition in the market which adversely affects the end consumer. 

The Competition Act, 2002 defines anti-competitive agreements as such in section 3

where it states, “No enterprise or association of enterprises or individuals or association of
individuals may enter into an agreement regarding production, supply, distribution,
storage, acquisition or control of goods or provision of services which may adversely affect
the competition in the Indian market”.     
Such agreements are termed as AAEC agreement, which means the appreciable adverse
effect on competition agreements. the Act expressly states that such an agreement shall
be void.
An AAEC agreement is classified as any agreements that result in:-

• Directly affects purchase or sale prices

 • Indirectly affects purchase or sale prices
• Limits production
• Limits supply
• Limits technical development
• Limits service provision in the market
• Leads to the rigging of bids
• Leads to collusive bidding 

Q4. What constitutes abuse of dominance? 

There shall be an abuse of dominant position if an enterprise or a group:

(a) directly or indirectly, imposes unfair or discriminatory

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods or service.

Explanation: For the purposes of this clause, the unfair or discriminatory condition in
purchase or sale of goods or service referred to in sub-clause:

(i) and unfair or discriminatory price in purchase or sale of goods (including predatory
price) or service referred to in sub-clause

(ii) shall not include such discriminatory condition or price which may be adopted to meet
the competition; or

(b) limits or restricts:

(i)  production of goods or provision of services or market therefor; or

(ii) technical or scientific development relating to goods or services to

the prejudice of consumers; or

(c) indulges in practice or practices resulting in denial of market access; or

(d)  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

(e)  uses its dominant position in one relevant market to enter into, or protect, other
relevant market.

Q5. When the commission may initiate inquiry into anti- competitive agreements/
abuse of dominance?
• On its own on the basis of information and knowledge in its possession, or

• On receipt of an information, or

• On receipt of a reference from the Central Government or a State Government or a

statutory authority

Q6. What orders the commission can pass in case of anti- competitive 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.

• 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.

• 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 enjoys dominant position to
ensure that such enterprise does not abuse its dominant position.

Q7. What are the thresholds in case of combinations?         

The Competition Act provides for the following threshold limits:

• Combined assets of the enterprises value more than Rs.1,500 crores or combined
turnover is more than Rs.4,500 crores. In case either or both of the enterprises have
assets/turnover outside India also, then the combined assets of the enterprises value
more than US$ 750 millions, including at least Rs.750 crores in India, or turnover is more
than US$ 2250 millions, including at least Rs. 2,250 crores in India.

• Combined assets of the group to which the acquired enterprise would belong after
combination being more than Rs.6,000 crores or such group having a joint turnover more
than Rs. 18,000 crores after acquisition or merger. In case such group has
assets/turnover outside India, then the combined assets of the group value more than
US$ 3,000 million, including at least Rs.750 crores in India or turnover is more than US$
9,000 million including at least Rs. 2,250 crores in India.
• Group is defined in the Act. Two enterprises belong to a “group” if one is in position to
exercise at least 26% voting rights or appoint at least 50% of the directors or controls the
management or affairs in the other.