02/03/2021

Competition Act, 2002

Object of the Act
• The Act has the following objectives :

1. to prevent practices having adverse effect on competition.

2. to p
promote and sustain competition
p in market
3. to protect the interests of consumers
4. to ensure freedom of trade carried on by other participants in
markets in India

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Definitions
• Acquisition (Sec. 2(a))

It means, directly or indirectly, acquiring or agreeing to acquire :

a. Shares,, votingg rights
g or assets of anyy enterprise,
p , or
b. Control over management or control over assets of any
enterprise.

• Cartel (Sec. 2(c))

It includes an association of 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.

Definitions
• Agreement (Sec. 2(b))

It includes any arrangement or understanding or action in concert :

a. Whether or not, such arrangement, understanding or action is
f
formal l or in
i writing,
iti or
b. Whether or not such arrangement, understanding or action in
intended to be enforceable by legal proceedings.

Agreements may be horizontal agreements and vertical

agreements.

Horizontal agreements are agreements among competitors

engaged in the same activity.
Vertical agreements are agreements between non‐competing
undertakings.

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Definitions
• The points to be kept in mind are :

a. Whether there is union of thought and actions among the

parties concerned?
b. Whether uniformity in the actions of competitors amounts to
an agreement depends on the following :
(i) how pervasive is the uniformity?
(ii) how long has the uniformity continued?
(iii) what is the time lag, if any, between a change by one
competitor and that of the other or others?
(iv) is the product involved homogenous or differentiated?
(v) can the product, no matter, how uniform, be adequately
explained by independent business justification?

Definitions
• Consumer (Sec. 2(f))

Same as in Consumer Protection Act.

• Goods (Sec. 2(i))

As defined in the Sale of Goods Act

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Anti‐competitive agreements (Sec. 3)
• 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.

• This rule applies to association of enterprises and association of

persons.

• Any agreement entered into in contravention of the provisions

contained herein shall be void.

Anti‐competitive agreements (Sec. 3)
• Adverse effect on competition

Any agreement entered into between competitors which :

a. Directlyy or indirectlyy determines p
purchase or sale p prices
b. Limits or controls production, supply, markets, technical
development, investment or provision of services.
c. 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 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 engaged in
identical or similar production or trading of goods or provision of
services,
which has the effect of eliminating or reducing competition for
bids
or adversely affecting or manipulating the process for bidding.

An agreement which causes or is likely to cause an appreciable

adverse effect on competition, includes the following agreements
also :
a. Tie‐in arrangement
b. Exclusive supply agreement
c. Exclusive distribution agreement
d. Refusal to deal
e. Resale price maintenance.

Anti‐competitive agreements (Sec. 3)
• Tie‐in arrangements
includes any arrangement requiring a purchaser of goods,
as a condition of such purchase,
to purchase some other goods.
For example, requiring a purchaser of scooter to purchase helmet
also.
Likewise, refusing to give gas connection unless the buyer
purchases gas stove also.

• Exclusive supply agreement

includes any 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 or any other person.
For example, insisting that a dealer of Samsung products will not
deal with Sony or LG products.

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Anti‐competitive agreements (Sec. 3)
• Exclusive distribution agreement
includes any 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.
In other words, dealer is not allowed to distribute his products in an area
other than the one allotted to him.

• Refusal to deal
includes any agreement which restricts, or is likely to restrict, by any
method, the persons or classes of persons to whom goods are sold or
from whom goods are bought.

• Resale price maintenance

includes 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 these prices
may be charged.

Anti‐competitive agreements (Sec. 3)
• Factors which cause adverse effect on competition

In determining whether an agreement has an adverse effect on

competition, the following factors shall be considered :
a. Creation of barriers to new entrants in the market
b. Driving existing competitors out of the market.
c. Foreclosure of competition by hindering entry into the market.
d. Accrual of benefits to consumers
e. Improvements in production or distribution of goods or
provision
i i off services
i
f. Promotion of technical, scientific and economic development by
means of production or distribution of goods or provision of
services.

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Prohibition of abuse of dominant position (Sec. 4)
• The Competition Act prohibits the use of dominant position by any
enterprise or group.

• Dominant position means a position of strength, enjoyed by an

enterprise or group in the relevant market which enables it to operate
independently of competitive forces or affects its competitors or
consumers in its favour.

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

imposes :
‐ unfair or discriminatory condition or price in purchase or sale of goods
or services
‐ limits or restricts production of goods or provision of services or
technical
h i l or scientific
i ifi development
d l relating
l i to goods d or services
i to the
h
prejudice of consumers
‐ indulges in practices resulting in denial of market access
‐ contracts with supplementary obligations on other parties which have
no connection with such contracts
‐ uses its dominant position to enter one market or protect other market.

Combinations (Sec. 5)
• The acquisition of one or more enterprises by one or more persons
or merger or amalgamation of enterprises shall be treated as
‘combination’ of such enterprises and persons or enterprises in the
following cases :

1. Acquisition by large enterprises

Any acquisition where the parties to the acquisition (acquirer and

enterprise being acquired) jointly have or would have :
a. Either in India assets more than Rs. 1,000 crores or turnover
more than Rs. 3,000 crores
b. In India or outside India in aggregate, assets more than USD 500
million dollars including atleast Rs. 500 crores in India or turnover
more than USD 1,500 million dollars including at least Rs. 1,500
crores in India.

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Combinations (Sec. 5)
2. Acquisition by group

Any acquisition where the group to which the enterprise which is

being acquired, would after the acquisition jointly have :
a. Either in India, assets valued at more than Rs. 4,000 crores or
turnover more than Rs. 12,000 crores
b. In India or outside India, in aggregate, assets of the value of
more than USD 2 billion dollars including at least Rs. 500 crores in
India or turnover more than USD 6 billion dollars including at least
Rs. 1,500 crores in India.

Combinations (Sec. 5)
3. Acquisition by enterprises having similar goods/services

Acquiring of control by a person over an enterprise

‐ when such person already has direct or indirect control over
another
th enterprise
t i engaged d in
i production,
d ti di t ib ti
distribution, or trading
t di
of a similar or identical or substitutable goods or provision of a
similar or identical or substitutable service
‐ if the enterprise over which control has been acquired along with
the enterprise over which the acquirer already has direct or
indirect control jointly have :
a. Either in India,, the assets of the value of more than Rs. 1,000
,
crores or turnover more than Rs. 3,000 crores
b. In India or outside India, in aggregate, assets of the value of
more than USD 500 million dollars including at least Rs. 500 crores
in India or turnover more than USD 1,500 million dollars including
at least Rs. 1,500 crores in India.

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Combinations (Sec. 5)
4. Acquisition by enterprises having similar goods/services by a goup

Acquiring of control by a person over an enterprise

‐ when such person already has direct or indirect control over another
enterprise
i engaged d in
i production,
d i di ib i
distribution, or trading
di off a similar
i il or
identical or substitutable goods or provision of a similar or identical or
substitutable service
‐ if the group or its constituent enterprise remaining after merger or the
enterprise created as a result of the amalgamation, as the case may be
have :
a Either in India,
a. India the assets of the value of more than Rs.
Rs 4,000
4 000 crores or
turnover more than Rs. 12,000 crores
b. In India or outside India, in aggregate, assets of the value of more
than USD 2 billion dollars including at least Rs. 500 crores in India or
turnover more than USD 6 billion dollars including at least Rs. 1,500
crores in India.

Combinations (Sec. 5)
5. Merger of enterprises

Any merger or amalgamation in which the enterprise remaining

after merger or the enterprise created as a result of the
amalgamation, as the case may be, have
a. Either in India, the assets of the value of more than Rs. 1,000
crores or turnover more than Rs. 3,000 crores
b. In India or outside India, in aggregate, assets of the value of
more than USD 500 million dollars including at least Rs. 500 crores
in India or turnover more than USD 1,500 million dollars includingg
at least Rs. 1,500 crores in India.

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Combinations (Sec. 5)
6. Merger in group company

The group, to which the enterprise remaining after the merger or

the enterprise created as a result of the amalgamation, would
belong after the merger or the amalgamation, as the case may be,
would have
a. Either in India, the assets of the value of more than Rs. 4,000
crores or turnover more than Rs. 12,000 crores
b. In India or outside India, in aggregate, assets of the value of
more than USD 2 billion dollars includingg at least Rs. 1,500 crores in
India.

Regulation of combinations (Sec. 6)
• Sec. 6(1) prohibits any person or enterprise to 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.

• Combination is not prohibited.

• It shall be void only if it adversely affects competition in an

appreciable manner.

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