Competition

Act, 2002
 Evolution of Competition
Law
• The MRTP Act brought in a four-pronged thrust :
– Concentration of economic power
– Monopolistic Trade Practices
– Restrictive Trade Practices
– Unfair Trade Practices
 Competition

Is “a situation in a market in which firms or

sellers independently strive for the buyers’
patronage in order to achieve a particular
business objective for example, profits, sales or
market share”
 Benefits of Competition

 Companies : Efficiency, cost-saving operations, better

utilization of resources, etc.

 The Consumer : Wider choice of goods at competitive

prices
 The Government : Generates revenue

 But all these benefits are lost if Competition is

UNFAIR or NON-EXISTANT
 Competition Act 2002
Since the adoption of economic reforms
performance in 1991, corporate have been
pressing for the scraping of MRTP Act.
The argument is that the MRTP Act lost has its
relevance in the new liberalized and global
competitive scenario.
In fact it is said that only large companies can
survive in the new competitive markets.
Thus, there is a need to shift our focus from
curbing monopolies to promoting competition.
 Competition Act 2002
In view of this the government appointed an
expert committee headed by S.V.S Raghavan to
examine the whole issue.
The Raghavan Committee submitted its report
to the government on May 22nd, 2000 wherein
it proposed the adoption of a new competition
law and doing away with the MRTP Act.
 Competition Act 2002
• Accordingly, the government decided to enact a law on
competition. Competition Bill, 2001 was introduced in
Parliament and passed in Dec 2002. The Act is called
Competition Act, 2002.
• It has been enacted to provide for the establishment of
a commission to prevent practices having adverse
effect on competition, to promote and sustain
competition in market, to protect the interest of
consumer at large, and to ensure freedom of trade
carried on by other participants in markets in India,
and for matters connected with or incidental there to.
 Competition law
• It extends to the whole of India except the
State of Jammu and Kashmir.
• 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.
 OBJECTIVES OF COMPETITION LAW

 Promoting economic efficiency in both static and

dynamic sense
 Protecting consumers from the undue exercise of
market power
 Facilitating economic liberalization, including
privatization. Deregulation and reduction of external
trade barriers
 Preserving and promoting the sound development of a
market economy
 Cont…

 Ensuring fairness and equity in market place

transactions

 Protecting the ‘public interest’ including in some cases

considerations relating to industrial competitiveness
and employment

 Protecting opportunities for small and medium

business
 Competition Law

• Competition Law generally covers 3 areas:

– Anti - Competitive Agreements

– Abuse of Dominant Position by enterprises

– Regulation of Combination
 Prohibition of Anti Competitive agreements
• Sec 3 of the act makes provision for prohibition of
anti competitive agreements.
• According to section 3(1) of the act, ‘no enterprise or
association of enterprises or person or association of
persons shall enter into any agreement in respect of
production, supply, distribution, storage, acquisition
or control of goods or provision or services, which
causes or is likely to cause an appreciable adverse
effect on competition within India”
• Sec 3(2) states that any agreement entered into in
contravention of the provisions contained in sec3 (1)
shall be void.
Prohibition of Abuse of Dominant Position
• Sec 4(1) of the act states that “no enterprises shall misuse its
dominant position.” It may be noted that “Dominant position”
itself is not prohibited. What is prohibited is its misuse.
• There shall be an abuse of dominant position if
i. an enterprise directly or indirectly imposes unfair or
discriminatory condition in purchase or sale of goods or
services or imposes unfair price in purchase or sale of such
goods or services.
ii. An enterprise limits or restricts production of goods or
provision of services or markets therefore , or technical or
scientific development relating to goods or services or
indulges in practices resulting in denial of market access, or
uses its dominant position in one market to enter into other
relevant market.
 Regulation of Combination
Section 5 of the act defines combination while sec 6 is concerned with
regulation of combination.
According to 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:-
a) Acquisition by large enterprises
b) Acquisition by group
c) acquisition of enterprises having similar goods/services
d) acquiring enterprises having similar goods or services by a group
e) merger of enterprises
f) merger in group company.
 Regulation of Combination
Sec 6 of the act relates to “regulation of combinations”.

According to sec 6 (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.
 EXEMPTIONS

GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE COMPETITION

LAW

 ANY CLASS OF ENTERPRISES IN THE INTEREST OF NATIONAL

SECURITY/PUBLIC INTEREST.

 ANY PRACTICE/AGREEMENT ARISING OUT OF INTERNATIONAL

TREATY/AGREEMENT

 ANY ENTERPRISE PERFORMING A SOVEREIGN FUNCTION ON BEHALF OF

GOVERNMENT

 DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.

 Competition Commission of India
• The Competition Act provides that there shall
be established by the central government a
commission to be called the CCI, consisting of
a Chairperson and not less than two and not
more than 10 other members.

• In Accordance with the provision of the act

the Government of India has setup a
Commission known as Competition
Commission of India.
Competition Commission of India ...
Sec 7 provides for the establishment of CCI.
Sec 8 of the act says that the chair person of CCI shall
i. be an ex- High Court Judge or
ii. be capable of being a High Court Judge or
iii. Either have knowledge of or 15 years experience of
International trade, economics, law, finance,
management, administration or in any other matter
which in the option of the central govt. may be
useful to the commission.
 Status of the Competition
Commission

• It is a body corporate

• It has Regulatory and quasi-judicial powers;

functions through Benches

•
 Power of the Competition
Commission

After inquiry into abuse of dominant position, the

Competition Commission can order:

• discontinuance of abuse of dominant position

• impose a penalty upto 10% of the average

turnover of the enterprise
Cont..

• Cease and desist order

• Impose penalty up to 10% of turnover.

• In case of cartel, penalty can be 10% of

turnover or 3 times of profit illegally gained
from cartel activity, whichever is higher.
Cont..

• Recommend to Government the division of

dominant Enterprise

• Various penalties ranging from Rs.1 lac upto

Rs.1 crore are also provided for failure to
comply with direction/order of Commission.