See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/358281263

Business Law Project

Preprint · February 2022

CITATIONS READS

0 266

1 author:

Srushti Bansode
Pillai College of Arts, Commerce and Science
4 PUBLICATIONS   0 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Environmental Project View project

Law Project (Case Study) View project

All content following this page was uploaded by Srushti Bansode on 02 February 2022.

The user has requested enhancement of the downloaded file.

 MAHATMA EDUCATION SOCIETY’S

PILLAI COLLEGE OF ARTS, COMMERCE & SCIENCE

(AUTONOMOUS)
NEW PANVEL

ACADEMIC YEAR: 2021-2022

CLASS: S.Y.B.COM. DIV: B (Computer)

SEMESTER: IV SUBJECT: BUSINESS LAW II

SUBMITTED TO: POONAM GUPTA

Student: Srushti Namdeo Bansode,

Roll Number: 5209
Topic: Competition Act, 2002
Introduction:

The Government of India in April 1964 appointed the Monopolies Inquiry Commission under
the Chairmanship of Justice K. C Das Gupta, a judge of the Supreme Court, to inquire into
the extent and effect of concentration of economic power in private hands and prevalence of
monopolistic and restrictive trade practices in important sectors of economic activity other
than agriculture.

To regulate advertising, in 1984, Parliament inserted a chapter on unfair trade practices in

the Monopolies and Restrictive Trade Practices Act, 1969.

The Monopolies and Restrictive Trade Practices Commission was constituted in the year
1970.

The Monopolies and Restrictive Trade Practices Act, 1969 had its genesis in the Directive
Principles of State Policy embodied in the Constitution of India. It received the assent of the
President of India on 27 December, 1969. The Monopolies and Restrictive Trade Practices
Act was intended to curb the rise of concentration of wealth in a few hands and of
monopolistic practices. It was repealed on September 2009. The Act has been succeeded by
The Competition Act, 2002.

The Competition Bill, 2001 was introduced in Lok Sabha by Finance Minister Arun
Jaitley on 6 August 2001.

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian
competition law. It replaced the archaic The Monopolies and Restrictive Trade Practices Act,
1969. Under this legislation, the Competition Commission of India was established to prevent
the activities that have an adverse effect on competition in India. This act extends to whole of
India.

It is a tool to implement and enforce competition policy and to prevent and punish anti-
competitive business practices by firms and unnecessary Government interference in the
market. Competition laws is equally applicable on written as well as oral agreement,
arrangements between the enterprises or persons.

The Competition Act, 2002 was amended by the Competition (Amendment) Act, 2007 and
again by the Competition (Amendment) Act, 2009.
The Act establishes a Commission which is duty bound to protect the interests of free and fair
competition (including the process of competition), and as a consequence, protect the
interests of consumers. Broadly, the Commission's duty is:-

To prohibit the agreements or practices that have or are likely to have an appreciable adverse
effect on competition in a market in India, (horizontal and vertical agreements / conduct);

To prohibit the abuse of dominance in a market;

To prohibit acquisitions, mergers, amalgamations etc. between enterprises which have or are
likely to have an appreciable adverse effect on competition in market(s) in India.

In addition to this, the Competition Act envisages its enforcement with the aid of mutual
international support and enforcement network across the world.

Competition Commission of India

Competition Commission of India is a body corporate and independent entity possessing a

common seal with the power to enter into contracts and to sue in its name. It is to consist of a
chairperson, who is to be assisted by a minimum of two, and a maximum of six, other
members. It is the duty of the Commission to eliminate practices having adverse effect on
competition, promote and sustain competition, protect the interests of consumers and ensure
freedom of trade in the markets of India. The Commission is also required to give opinion on
competition issues on a reference received from a statutory authority established under any
law and to undertake competition advocacy, create public awareness and impart training on
competition issues.

Commission has the power to inquire into unfair agreements or abuse of dominant position or
combinations taking place outside India but having adverse effect on competition in India, if
any of the circumstances exists:

An agreement has been executed outside India

Any contracting party resides outside India

Any enterprise abusing dominant position is outside India

A combination has been established outside India

A party to a combination is located abroad.

Any other matter or practice or action arising out of such agreement or dominant position or
combination is outside India.

To deal with cross border issues, Commission is empowered to enter into any Memorandum
of Understanding or arrangement with any foreign agency of any foreign country with the
prior approval of Central Government.

Regulation of Combination

The term combination has a broad definition under the Act, it includes:

Any acquisition of shares,

Voting rights,

Control of assets, and

Party to merger or amalgamation of enterprises.

Any person/enterprise shall not enter into a combination that is likely to have an adverse effect on the
competition and such a combination will be void. If any person/enterprise proposes to enter into a
combination he shall intimate the Competition Commission of India within 30 days of:

Approval of the proposal relating to mergers and amalgamation by the Board of Directors of the
enterprises involved in the process.

Execution of any agreement pertaining to acquiring control.

Objectives of the Competition Act

The Act seeks to provide the legal framework and tools to ensure competition policies are
met, to prevent anti-competition practices and provide for the penalisation of such acts. The
Act protects free and fair competition which protects the freedom of trade.

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.

Anti-Competitive Agreements

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.

Case Study:

Belaire Owners’ Association vs. DLF Limited, HUDA & Ors.

FORUM:
Competition Commission of India (CCI) & Competition Appellate Tribunal (COMPAT)

Parties To The Case:

1. Informant: Belaire Owners’ Association

2. Opposite Party: DLF & Others
Issues Involved And Findings Of CCI:

Issue 1: Do the provisions of Competition Act, 2002 apply to the facts and circumstances of
the instant case?
On the issue of jurisdiction, the CCI stated that the Act applies to all the existing agreements
which entered into prior to the coming into force of Section 4. Further, Commission placed
reliance on several Supreme Court judgments to conclude that housing activities undertaken
by development authorities are considered as services and covered within the definition of
service as provided under section 2 (o) of the Consumer Protection Act, 1986. Relying on the
definition of Service under Consumer Protection Act and Sec 2 (u) of the Competition Act,
CCI held that “it is clear that the meaning of ‘service’ as envisaged under the Act is of very
wide magnitude and is not exhaustive in application, thereby including the activities
undertaken by DLF within its ambit.”

Issue 2: What is the relevant market, in the context of Section 4 read with Section 2(r),
Section 19(5), Section 19(6) and Section 19(7) of the Competition Act, 2002?
The commission on the issue of relevant product & service market held that a relevant market
is delineated on the basis of a distinct product or service market and a distinct geographic
market. These terms have been defined in Section 2(r) of the Act read with Section 2(s) and
Section 2(t). DLF’s ‘high end’ residential building in Gurgaon targets only specific
consumers, according to their capacity to pay. On the issue of relevant geographic market,
CCI stated that a decision to purchase a high-end apartment in Gurgaon is not easily
substitutable by a decision to purchase a similar apartment in any other geographical location.
Thus the Commission was of the view that Gurgaon is known to possess certain unique
geographical characteristics such as its proximity to Delhi, proximity to airports and a distinct
brand image as a destination for upwardly mobile families.

Issue 3: Is DLF dominant in the above relevant market, in the context of Section 4 read
with Section 19 (4) of the Competition Act, 2002?
The commission analysis, as per the Section 4 (a) and Section 4 (a) (ii), DLF position of
dominance in the relevant market cannot be ignored as its advantages of over competitors in
size and resources, and concluded “DLF operate independently of competitive forces
prevailing in the relevant market or to affect its competitors or consumers or the relevant
market in its favour.” It was held that DLF had the highest market share (45%), vis-a-vis the
market share of the nearest competitor (19%) which was more than twice of its competitor,
leading to hardly any competitive constraints. Further, DLF had a clear early mover’s
advantage and occupies a leadership position as real estate is a sector with natural entry
barriers due to high cost of land and brand value of incumbent market leaders.

Issue 4: In case DLF is found to be dominant, is there any abuse of its dominant position in
the relevant market?
On this issue, the CCI held that DLF has resorted to malpractice in the agreement and its acts
of abuse of dominance position can be clearly seen in this case. The abuse was alleged to be
committed by imposing unfair conditions on the buyer through the Provisional Booking
agreement, which is signed by the buyer after having paid substantial costs, therefore, DLF
leaving no option to the buyer to object to loop-sided provisions of the agreement.

There are some clauses analysed by CCI, such as DLF’s right to change the layout plan
without consent of allottees, DLF unilateral power to make changes in the agreement and the
power to supersede without any right to the allottees. DLF continues to enjoy full rights on
the community buildings and sites, there was no rights given to the buyer in this regard and
further, allottees have no exit option except when DLF fails to deliver possession within
agreed time, but even in that event he gets his money refunded without interest only after sale
of said apartment by DLF to someone else. The CCI held that these are evidences of unequal
bargaining power between the parties.

CCI Order & COMPAT:

On this case, CCI held that DLF has contravened the section 4 (2) (a) (i) and (ii), directly and
indirectly, imposing unfair or discriminatory conditions in the sale of services. CCI found
DLF guilty of abusing its dominant position in the market and imposed a penalty of Rs. 630
crores on DLF. The CCI further directed DLF to cease and desist from formulating and
imposing such unfair conditions in its Agreement with buyers in Gurgaon and to suitably
modify unfair conditions imposed on its buyers as referred to above, within 3 months of the
date of receipt of the order on DLF.

DLF challenged the CCI order before COMPAT which granted stay order against the CCI
order of imposing penalty under section 27 (b) of the Act subject to DLF furnishing an
undertaking to pay 9% interest on the amount of penalty to be determined by COMPAT for
the period from the date of order by CCI till the date of payment by DLF. Further, COMPAT
ordered that the directions of CCI for modifications of terms of the Agreement shall remain
in abeyance. However, the direction of CCI to “cease and desist” with the implementation of
the Agreement was not stayed. As per the COMPAT remand, both the parties submitted the
modified terms and conditions before CCI. The CCI after hearing both the parties, has
modified the standard terms and conditions of the flat buyers agreement in its simple meaning
order with deleting nearly 16 clauses from the agreements. This modified agreement order by
CCI was again challenged by the DLF in COMPAT. The case is still pending with the
COMPAT.

Analysis of The Judgement/order:

The recent order dated 03.01.2013 by CCI in the DLF case is not applicable to the flat buyer
agreements of the other builders. If the CCI order on modified buyer’s agreement is
supported by COMPAT, it would be huge relaxation to all the property buyers who have
invested huge amount and not satisfied with the service provided by builders. In this order,
CCI has tried to remove the unfair and one sided clauses in the Flat Buyer Agreement which
were till now common to most of similar agreements of other builders. DLF will have a
chance to go Supreme Court against COMPAT’s order. This case can make a change in the
whole real estate sector, if the apex court approves the modifications. It will affect the
industry in a big way. The real estate sector will have to stop any exploitative business
practices.

There are large numbers of cases pending in different forums because of little awareness
about the reach of the competition law. To stop exploitative business practices and unfair &
monopoly services to the consumers, there is a demand for proper guideline in this sector,
which only can be possible with the positive order by the Supreme Court. So till then, it is the
consumer and buyers have to keep their faith and patience on the CCI, COMPAT and Apex
Court.
View publication stats