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The Competition Act, 2002

OBJECTIVES
1.Establish a Commission to prevent practices having
adverse effect on competition.
2.Promote and sustain competition and protect the
interests of consumers.
4.Ensure freedom of trade carried on by other
participants in markets, in India.
Core function areas
A. Prohibition of Anti-competitive Agreements.
B. Prohibition of Abuse of Dominant Position.
C. Regulation of Combinations
Note: the competition commission is not yet fully
functional,

ANTI-COMPETITIVE AGREEMENTS
This Act, sought to replace the MRTP Act.
Basic Rule: [S.3] No enterprise, person or association
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 in India. An agreement that
contravenes the above Rule is void.
Agreement includes any arrangement or
understanding: (i) whether or not the same is formal
or in writing; or (ii) whether or not the same is
intended to be enforced.

ANTI-COMPETITIVE AGREEMENTS
Enterprise means any person (individual, Indian/
foreign company, authority etc.) or government.
Excluding sovereign functions of the Government,
including activities relating to atomic energy,
currency, defence and space.
[S. 3(3)] - The following agreement(s) presumed to
have appreciable adverse effect on competition
*determines purchase or sale prices.
*limits or controls production, supply, markets,
technical development, investment or provision of
services.

ANTI-COMPETITIVE AGREEMENTS
*allocation of geographical area of market, or types
of goods or services, or number of customers in the
market or any other similar way.
*results in bid rigging or collusive biddings
Exception to the above rule:
An agreement entered into by way of joint
ventures if such agreement increases efficiency in
production, supply, distribution, storage, acquisition
or control of goods or provision of services.

Anti-competitive Agreements
[S. 3(4)]
The following shall be considered anticompetitive if it causes or is likely to cause an
appreciable adverse effect on competition in India.
*Tie-in arrangement requiring to purchase some
other goods as a condition.
*Exclusive supply agreement restraint dealing
with goods of any other person.
*Exclusive distribution agreement to limit,
restrict, or withhold output or supply of goods or
allocate any area or market for the disposal or sale
of the goods.

Anti-Competitive Agreements
*Refusal to deal to restrict from whom goods may be
bought or sold.
*Resale price maintenance prescribing the price at
which the goods may be resold unless it clearly states
that a lower price may be charged.
Exceptions to Section -3
*Right of any person to restrain any infringement of
intellectual property rights -copyright, trademarks,
patents, designs, geographical indications etc.
*Right of any person to export goods from India to
the extent to which the agreement relates exclusively
to the production, supply, distribution or control of
goods or provision of services for such export.

Abuse of Dominant Position


S. 4(1) -No enterprise or group shall abuse its dominant
position.
Group means two or more enterprises, which directly
or indirectly, are in a position to: (i) exercise 26% or
more of the voting rights in the other enterprise; or (ii)
appoint more than 50% of the members of the Board of
Directors of the other; or (iii) control the management
or affairs of the other enterprise.
Dominant position - a position of strength enjoyed by
an enterprise, in the relevant market, in India, which
enables it to operate independently of competitive
forces prevailing in the relevant market; or affect its
competitors or consumers or the relevant market in its
favour.

Abuse of Dominant Position


There shall be an abuse of dominant position if an
enterprise or group does any of the following:
* imposes unfair or discriminatory
(i) condition in purchase or sale of goods or services;
or (ii) price in purchase or sale (including predatory
price) of goods or service.
Exception: such unfair or discriminatory conditions
or prices adopted to meet the competition.
Predatory price means the sale of goods or provision
of services, at a price, which is below the cost, as may
be determined by regulations, with a view to reduce
competition or eliminate competitors.

Abuse of Dominant Position


limits or restricts (i) production of goods or provision
of services or market thereof; or (ii) technical or
scientific development relating to goods or services to
the prejudice of consumers.
*Indulges in practice or practices resulting in denial of
market access in any manner.
*Makes contracts subject to acceptance by other
parties of supplementary obligations, which, by their
nature and commercial usage, have no connection with
the subject of such contracts.
*Uses its dominant position in one relevant market to
enter into, or protect, other relevant market.

CCIs decisions
If the CCI finds the agreement or action of an
enterprise in dominant position to be in contravention
of law, it may pass orders like
(i) direct discontinuation of such agreement or
discontinuation of such abuse of dominant position;
(ii)impose penalty;
(iii) direct modification of agreements;
(iv) other directions including payment of costs;
(v)pass such other orders or directions as appropriate.
This Act shall be in addition to and not in derogation
of any other law.

Regulation of Combinations
[S. 5] (a)The acquisition of one or more enterprises by
one or more persons; or (b) Merger or amalgamation of
enterprises shall be a combination if any of the
specified parameters are met.
The specified parameters relate to value of assets and
turnover of the entities or group involved including
that in India.
[S. 6]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 combination shall be
void.

Regulation of Combinations
[S. 6] Any person or enterprise that proposes to enter
into a combination, shall give notice to the CCI within
30 days of (i) approval of the proposal by the Board of
Directors; or (ii) execution of any document for
acquisition.
Exceptions: This section is not applicable 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.

Regulation of Combinations
Per S.6(2), No combination shall come into effect until
expiry of 210 days from the date of notice to CCI or
until CCI has passed appropriate orders, whichever is
earlier.
CCI, after detailed inquiry, may approve, suggest
modifications or reject a Combination.
In addition, u/S. 28, the CCI has powers to order
division of enterprise in order to ensure that such
enterprise does not abuse its dominant position.

Appeals and Other Provisions


*Appeals from orders/ directions/ decisions of the CCI
within 60 days to the Competition Appellate Tribunal
(CAT)
*Appeals from orders/ decision of CAT within 60 days to
the Supreme Court. CAT has powers to award
compensation.
*Information relating to an enterprise obtained by the CCI
or CAT shall not be (without permission of that enterprise)
disclosed otherwise than in compliance with the Act or
any other law for the time being in force.
*Provisions of this Act shall have effect notwithstanding
anything inconsistent therewith contained in any other
law.

Simulated exercises
1.A manufacturer of electrical goods
stipulated to his retailers that they should
not sell the goods below the minimum price,
nor above the maximum price nor with any
variation in the stipulated price. Does this
amount to resale price maintenance?

Exercises......
2. A dealer agrees to issue new gas
connections with the sale of gas stoves
only. Does it involve anti-competition
agreement?

Exercises ........
3. A bank requires a customer to keep a
fixed deposit while allotting him a locker.
Does this amount to anti-competition
agreement?

Exercises.....
An automobile dealer, while selling his
product, includes the price of a
comprehensive insurance policy and a
safety device in the price of the vehicle.
Does this affect competition law?

Exercises.......
A dealer in pressure cookers requires the
purchasers, as a precondition to sale of the
pressure cookers, to purchase containers
and separators along with the pressure
cookers. Does this amount to violation of
competition law?