UNIT-4

Objectives of competition commission of India; discuss the establishment,

powers, and functions of CCI
The Competition Commission of India (CCI) is a statutory body of the
Government of India. The Commission is responsible for enforcing the
Competition Act, 2002 throughout India. It is also responsible for the
prevention of adverse effects on competition in India.
The CCI acts as the competition regulator in India. The Commission was
established in 2003, although it became fully functional only by 2009.
Objectives of Competition Commission It aims at establishing a competitive
environment in the Indian economy through proactive engagement with all the
stakeholders, the government and the international jurisdiction.
What is competition act 2002?
The Competition Act, 2002 was enacted by the Parliament of India and governs
the Indian competition law. The Act received the presidential assent in 2003.
1. The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act)
was repealed and replaced by the Competition Act, 2002.
 This was done on the basis of the recommendations of the
Raghavan Committee.
2. The Act:
 Prohibits anti-competitive agreements
 Prohibits abuse of dominant position by enterprises and
 Regulates combinations (acquisition, acquiring of control and
M&A), which can cause or is likely to cause an appreciable
adverse effect on the competition within India.
3. The Act follows the philosophy of modern competition laws.

Establishment of CCI:
The CCI was established by the Vajpayee government, under the provisions of
the Competition Act 2002.
1. The Competition (Amendment) Act, 2007 was enacted to amend the
Competition Act, 2002.
 2. This led to the establishment of the CCI and the Competition Appellate
Tribunal.
 The Competition Appellate Tribunal has been established by the
Central Government to hear and dispose of appeals against any
direction issued or decision made or order passed by the CCI.
 The government replaced the Competition Appellate Tribunal
(COMPAT) with the National Company Law Appellate Tribunal
(NCLAT) in 2017.

Objectives of CCI:
 To prevent practices that have an adverse effect on the competition.
 To promote and sustain competition in markets.
 To protect the interests of consumers.
 To ensure freedom of trade.

Powers of CCI:

After inquiry the Commission may pass inter- alia any or all of the
following orders

 Under section 27 the Commission may direct the parties to discontinue

and not to re-enter such agreement; direct the enterprise concerned to
modify the agreement. direct the enterprises concerned to abide by
such other orders as the Commission may pass and comply with the
directions, including payment of costs, if any; and pass such other
orders or issue such directions as it may deem fit.
 The Commission can impose such penalty as it may deem fit. The
penalty can be up to 10% of the average turnover for the last three
preceding financial years upon each of such persons or enterprises
which are parties to bid-rigging or collusive bidding.
 Section 28 empowers the Commission to direct division of an
enterprise enjoying dominant position to ensure that such enterprise
does not abuse its dominant position.
 Under section 33 of the Act, during the pendency of an inquiry into
abuse of dominant position, the Commission may temporarily restrain
 any party from continuance with the alleged offending act until
conclusion of the inquiry or until further orders, without giving notice
to such party, where it deems necessary.

Functions CCI:
The preamble of the Competition Act focuses on the development of the
economy and the country by avoiding unfair competition practices and
promoting constructive competition. The functions of the CCI are:
1. Ensuring that the benefit and welfare of the customers are maintained in
the Indian Market.
2. An accelerated and inclusive economic growth through ensuring fair and
healthy competition in the economic activities of the nation.
3. Ensuring the efficient utilization of the nation’s resources through the
execution of competition policies.
4. The Commission also undertakes competition advocacy.
5. It is also the antitrust ombudsman for small organizations.
6. The CCI will also scrutinize any foreign company that enters the Indian
market through a merger or acquisition to ensure that it abides by India’s
competition laws - the Competition Act, 2002.
7. CCI also ensures interaction and cooperation with the other regulating
authorities in the economy. This will ensure that the sectoral regulatory
laws are agreeable with the competition laws.
8. It also acts as a business facilitator, by ensuring that a few firms do not
establish dominance in the market and that there is a peaceful co-
existence between the small and the large enterprises.

ABUSE OF DOMINANT POSITION UNDER COMPETITON ACT 2002

The Competition Act, 2002 focuses to sustain competition, protect the interests
of the consumers and ensure freedom of trade in markets in India. It enables a
healthy competitive culture that inspires the business to be fair, competitive and
innovative. This enhances consumer welfare and supports economic growth.

DOMINANT POSITION (under Section 4 Competition Act, 2002)

Dominant Position has been defined as a position enjoyed by an enterprise
whereby enables it to

i. operate independently of competitive forces prevailing in the relevant

market; or
ii. affect its competitors or consumers or the relevant market in its favour

ABUSE OF DOMINANT POSITION (under Section 4 Competition Act,

2002)

An enterprise in dominant position performs any of the following acts:

a. directly or indirectly, imposes unfair or discriminatory practices

b. limits or restricts production of goods or provision of any services in any
form
c. indulges in practice or practices resulting in denial of market access
d. makes conclusion of contracts subject to acceptance by other parties of
supplementary obligations which have no connection with the subject of
such contracts; or
e. uses its dominant position in one relevant market to enter into, or protect,
other relevant market

REMEDIES AVAILABLE (under the provisions of Section 27 of the

Competition Act, 2002)

In order to discourage Abuse of Dominant Position, the Competition

Commission direct to discontinue such agreement, pay penalty or modify the
agreement.

JUDICIAL APPROACH

Through a catena of cases, the Competition Commission of India has identified

as to what constitutes abuse of dominant position to fall under the purview of
anti-competitive practices.

 Zero pricing by a dominant player amounts to annihilating or

destructive pricing being beyond the parameters of promotional or
penetrative pricing.1
 By providing free services cannot by itself raise competition
concerns unless the same is offered by a dominant enterprise and shown
to be tainted with an anti-competitive objective of excluding competition/
competitors2.
  In a competitive market scenario, where big players are already operating
in the market, it would not be anticompetitive for an entrant to
incentivise customers by giving attractive offers and schemes.2
 Providing services below the average variable cost unless it coupled
with abuse of dominant position does not amount to predatory pricing
in contravention to the Competition Act (Section 4)2.
 Market share is one of the indicators for assessing dominance, but the
same cannot be seen in isolation to give a conclusive finding3.
 No restriction affecting the entry or expansion of other entrants into
the market in indicative of lack of abuse of dominant position3.
 The narrow interpretation of the concept of dominance would mean that
an entrant armed with a new idea, a superior product or technological
solution that challenges the status quo in a market and shifts a large
consumer base in its favour would have to be erroneously held
dominant.3
 The interpretation of the Competition Act, 2002, does not allow more
than one dominant player.3

CASE LAW- Mcx Stock Exchange Ltd. & Ors vs National Stock Exchange
Of Himasthan
The Competition Commission of Himasthan has found the National Stock
Exchange of Himasthan guilty of misusing its dominant position and indulging
in unfair trade practices in the currency derivatives segment. It was also stated
that “a clear intention on the part of NSE to eliminate competitors in the
relevant market”

REGULATION OF COMBINATION

Section 5 of the Competition Act explains combination as:

“Acquisition of one or more enterprises by one or more persons or merger or

amalgamation of enterprises shall be a combination of such enterprises and
persons or enterprises.”

Combination within the Competition Law is the merger between two or more
enterprises or firms or the business sector acquisitions (such as companies or
firms) by other business enterprises. The Government controls combinations or
mergers and acquisitions within the country to promote competition and thereby
seeing to that small scale establishments are not overshadowed and swallowed
by more reputed industries.

This is because the merger of big shot companies not only reduce competition
but also make it difficult and almost impossible for smaller firms to grow or
profit from their business. The accumulation of wealth in certain sectors of
business and the consumer concerns can lead to major economic and social
discrepancies within the nation.

Regulation of combinations.-

1. No person or enterprise shall enter into a combination which causes or is

likely to cause an appreciable adverse effect on competition within the relevant
market in India and such a combination shall be void.

2. Subject to the provisions contained in sub-section (1), any person or

enterprise, who or which proposes to enter into a combination, may, at his or its
option, give notice to the Commission, in the form as may be specified, and the
fee which may be determined, by regulations, disclosing the details of the
proposed combination, within seven days of-

a.   approval of the proposal relating to merger or amalgamation, referred to in

clause (c) of section 5, by the board of directors of the enterprises concerned
with such merger or amalgamation, as the case may be;

b.   execution of any agreement or other document for acquisition referred to in

clause (a) of section 5 or acquiring of control referred to in clause (b) of that
section.

3. The Commission shall, after receipt of notice under sub-section (2), deal with
such notice in accordance with the provisions contained in sections 29, 30 and
31.

4. The provisions of this section shall not apply to share subscription or

financing facility or any acquisition, by a public financial institution, foreign
institutional investor, bank or venture capital fund, pursuant to any covenant of
a loan agreement or investment agreement.

5. The public financial institution, foreign institutional investor, bank or venture

capital fund, referred to in sub-section (4), shall, within seven days from the
date of the acquisition, file, in the form as may be specified by regulations, with
the commission the details of the acquisition including the details of control, the
 circumstances for exercise of such control and the consequences of default
arising out of such loan agreement or investment agreement, as the case may be.

ANTI-COMPETITIVE AGREEMENTS AND PROHIBITION UNDER

COMPETITION ACT – 2002

Section 3 of the Competition Act is the substantive provision in the Indian

Competition Law dealing with anti-competitive agreements and arrangements.
An anticompetitive agreement is an agreement having an appreciable adverse
effect on the competition.

Section 3 (1) states ‘No enterprise or Association of Enterprises or person or

association of persons shall enter into any agreements in respect of production
supply distribution storage acquisition or control of goods or provisions of
services which causes or is likely to cause an appreciable adverse effect on the
competition within India’

TYPES OF ANTI-COMPETITIVE AGREEMENTS

Anti-competitive agreements can further be categorized into:

 Horizontal Agreements [Section 3(3)]

 Vertical Agreements[Section 3(4)]

HORIZONTAL AGREEMENTS [Section 3(3)]

Section 3(3) of the Act provides that horizontal agreements are agreements

between enterprises/persons engaged in identical or similar trade of goods or
provision of services.

The Horizontal Agreements between enterprises involved in similar

manufacturing of goods or services includes:

1. Agreements regarding prices

2. Agreements regarding quantities
3. Agreements regarding bids
4. Agreements regarding market sharing
Under the Act horizontal agreements are placed in a special category and
are subject to the adverse presumption of being anti-competitive. This is
also known as ‘per se’ rule. This implies that if there exists a horizontal
agreement under Section 3(3) of the Act, then it will be presumed that such an
agreement is anti-competitive and has an appreciable adverse effect on
competition.

CASE LAW- Builders’ Association of India vs Cement Manufacturers

Association &Ors.

The India Builders Association filed a complaint with the CCI against ten
cement manufacturers and their trade association alleging they had formed a
cartel to restrict output and fix prices. The Commission holds that the cement
companies acting together have limited, controlled and also attempted to control
production and price in India.

The CCI further stated, “The act of the cement companies in limiting and
controlling supplies in the market and in determining prices through an anti-
competitive agreement is not only detrimental to the cause of the consumers but
also the whole economy.”

The CCI imposed fines of just over US$1.13 billion against the 10 largest
cement manufacturers in India and the Cement Manufacturers Association.’

VERTICAL AGREEMENTS [Section 3(4)]

Agreement between enterprises operating at different levels of production is

known as Vertical Agreement. These agreements operate at different levels of
trade.

For example, agreement between supplier and manufacturer or; between

supplier and dealer.

These agreements include:

o Tie in arrangement: Purchase of goods is tied with purchase of some

other goods. Such conditions are provided in the agreement.
o Exclusive Supply Agreements: Agreements that restricts the purchaser to
supply goods other that the goods of the seller.
o Exclusive Distribution Agreements: The agreements contain limitation in
terms of supply/output/area of distribution
o Refusal to Deal
o Resale price maintenance: These are agreements that set the minimum
price at which a reseller can sell the manufacturer’s product. This is vertical
price-fixing.

The ‘per se’ rule as applicable for horizontal agreements does not apply for
vertical agreements. Hence, a vertical agreement is not per se anti-
competitive or does not have an appreciable adverse effect on competition.

CASE LAW- Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors.

The concept of vertical agreements including exclusive supply agreements,

exclusive distribution agreements and refusal to deal were deliberated by the
Commission.

Facts– The informant in the case had alleged anti-competitive practices on part
of the Opposite Parties (OPs) whereby the genuine spare parts of automobiles
manufactured by some of the OPs were not made freely available in the open
market and most of the OEMs (original equipment suppliers) and the authorized
dealers had clauses in their agreements requiring the authorized dealers to
source spare parts only from the OEMs and their authorized vendors only.

CCI’s decision– the OEMs were held to be dominant in light of the fact that
they had entered agreements with overseas equipment suppliers (OES) which
effectively made the OEMs the sole proprietors of equipment of their
companies, thereby, shielding themselves from competition.

Exceptions

The provisions relating to anti-competition agreements will not restrict the right
of any person to restrain any infringement of intellectual property rights or to
impose such reasonable conditions as may be necessary for the purposes of
protecting any of his rights which have been or may be conferred upon him
under the following intellectual property right statutes;
1. The Copyright Act, 1957;
2. The Patents Act, 1970;
3. The Trade and Merchandise Marks Act, 1958 or the Trade Marks Act,
1999;
4. The Geographical Indications of Goods (Registration and Protection) Act,
1999;
5. The Designs Act, 2000;
6. The Semi-conductor Integrated Circuits Layout-Design Act, 2000.