Competition and Consumer Laws

(Unit-4:) - MCG

Prof. C. Anand

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 Unit-IV: Competition & Consumer Laws
1. The Competition Act, 2002
2. Objectives of the Competition Act
3. Features of Competition Act
4. Components of Competition Act
5. CCI, CAT, Offences & Penalties under the Act
6. Consumer Protection Act, 1986
7. Definition of the Terms Consumer, Consumer
Dispute, Defect, Deficiency, Unfair Trade
Practices, and Services.
8. Consumer Redressal Agencies – District Forum,
State Commission, National Commission.
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 1. The Competition Act, 2002
1. The Competition Act, 2002: The Competition Act provides ( keeping in view the
economic development of the country) for the establishment of a commission to
prevent practices having adverse effect of competition to promote and sustain
competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets. Thus, the
Competition Act is to cut or prevent the practices of competition which create
adverse effect for growth of the market. Both consumers and traders should enjoy
their freedom in the markets and it should give way to the growth of the Indian
Economy.
Def. of Competition: Competition is a situation in a market in which firms or
sellers independently strike for buyer’s patronage to achieve a particular business
objective, for example, profit, sales or market share (World Bank, 1999).

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 1. The Competition Act, 2002
Competition Laws, also known as “Anti-Trust Laws”, make illegal
of certain practices, which hurt both the businesses and
consumers. Many countries use the term Competition Law, while
US uses it as Anti-Trust Laws. A business with monopoly over
certain products/services may be in violation of Anti-Trust Laws.
The following business activities in the nature of monopoly are
generally prohibited:-
1. Bid Rigging: It is a form of price fixing & involves an agreement
in which one party of bidders will be designated to win the bid.
2. Predatory Pricing: The practice of selling at very low price to
drive competitors out of market to bar entry of new competitors.
3. Price Fixing: It is an agreement between business competitors
selling the same product or services regarding its pricing.
4. Tying: It is the practice of making the sale of one goods
conditional on the purchase of a second distinctive goods.
5. Vendor Lock-in: It is a situation in which a customer is to
depend on a vendor for products and services that he or she
cannot move to another vendor without substantial switching
costs, real and or perceived.
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 2. Objectives of the Competition Act
2. Objectives of the Competition Act, 2002: They are:
1. To promote healthy competition in the market.
2. To prevent such practices which have adverse effect on
competition.
3. To protect the interests of concerns in a suitable manner.
4. To ensure freedom of trade in Indian markets.
5. To prevent abuses of dominant position in the market actively.
6. Regulating the operations and activities of combinations
(acquisitions, mergers and amalgamations).
7. Creating awareness and imparting training about the Competition
Act.

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 3. Features of Competition Act
3. Features of Competition Act:
1. It is compact & small legislation which has just 66
sections; 2. Competition Commission of India (CCI) is
constituted under the Act; 3. The Act restricts agreements
having adverse effect on Competition in India; 4. The Act
suitably regulates acquisitions, mergers and amalgamations
of enterprises; 5. Under its provisions Central Govt.
appointed Director General for conducting detailed
investigation of anti-competition agreements; 6. This Act
is flexible enough to change its provisions as per needs; 7.
Civil courts do not have any jurisdiction to entertain ay suit
which is within the purview of this Act; 8. This Act
processes penalty provisions; Competition Act has replaced
Monopolies & Restricted Trade Practices Act (MRTP Act);
10. Under this Act, ‘Competition Fund’ has been created.
 4. Components of Competition Act
There are three major Components/Elements of Competition Act.
They are: 1. Anti-Competitive Agreements; 2. Abuse of Dominant
Position; 3. Merger, Amalgamation & Acquisitions Control.
1. Anti-Competitive Agreements: These agreements are those that
restrict competition. Sec.3 of the Competition Act, 2002 prohibits
any agreements with respect to production, supply, distribution,
storage and acquisition or control of goods or services which
causes or likely to cause an adverse effect on competition in
India. Such agreements need not be formal, in writing or intended
to be justifiable in a court of Law and an informal agreement to fix
prices will be hit by the provisions of the Competition Act, 2002.
Section 3(2) of the Competition Act, declares that any anti-
competitive Agreement within the meaning of Sec.3(1) of the
Competition Act, 2002 shall be void. The Whole Agreement is
construed as void if it contains anti-competitive clauses having
appreciable adverse effect on the competition.
According to Sec.3(3), following are the agreements which will
have ‘appreciable adverse effect on Competition’:-
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 4. Components of Competition Act
(i) Directly or indirectly determine sale or purchase prices.
(ii) Limits or control production, supply, markets, technical
developments investments or provision of services.
(iii) Share the market or source of production/services by allocation
of geographical area of market, nature of goods or no. of
customers, or any other similar way.
(iv) Directly or indirectly result in bid rigging or collusive bidding.
Sec.3 (4) provides that any agreement among enterprises or
persons of different stages or levels of production chain in different
markets, in respect of production, supply, distribution, storage,
sale or price, etc. shall be presumed as an anti-competitive
agreement, if they have adverse effect on competition in India.
Sec. 3(5) of the Act gives due recognition to Intellectual Property
Rights (IPRs) provide that the prohibition against anti-competitive
agreements shall not restrict the right of any person to restrain any
infringement of any rights under Copy Right, Patents, Designs,
Geographical Indications of Goods, Semi-Conductor ICs Acts. Any
agreements for restraining IPRs are against anti-competition laws.
 4. Components of Competition Act
  2. Abuse of Dominant Position: Sec.4 of Competition Law expressly prohibits
any enterprise or group abusing its dominant position, which implies the
position of strength enjoyed by them in relevant market which enables it to a.
Operate independently of competitive forces prevailing in independent
market, or b. Affect the competitors or consumers or relevant market in its
favor. Dominance is the market power i.e. the ability of the firm to raise prices
or reduce output or does both independently of the rivals and consumers.
Abuse of Dominant Position: This will happen if an enterprise indulges into
the following activities:-
1. Directly or indirectly imposing discriminatory conditions in purchase
and/or sale of goods or services or setting their prices.
2. Limiting or restricting production of goods/services or limiting their
technical or scientific development relating goods/services.
3. Indulging in practices resulting in denial of market access.
4. Utilization of dominant position in one relevant market enter into, or
protect, another relevant market.
 4. Components of Competition Act
3. Mergers, Amalgamations, Acquisitions Control: Sec.6 of the Competition
Act prohibits any person/enterprise from entering into a combination which
causes adverse effect on competition within the relevant market in India
and if such a combination is formed, it shall be void.
According to Sec.6(2), any person/enterprise who proposes to enter into
any combination, shall give a notice to the Competition Commission of
India (CCI), disclosing the details of the proposed combination in the
prescribed form and submit the same in 30 days of approval of (i) the
proposal relating to merger or amalgamation by the Board of the enterprise;
(ii) Execution of any agreement or document for acquisition or control.
Under Section 31, the Competition Commission may allow the combination
if it will not have any adverse effect on competition in India or pass an order
that the combination doesn’t take effect in case if it is going to have
appreciable adverse effect on competition.
The provisions of Sec.6 don’t apply, if there is any share subscription or
financing facility or any acquisition by Public Financial Institutions, Bank,
Venture Capital, due to loan covenants.
 5. CCI, CAT, Offences & Penalties under the Act
CCI = Competition Commission of India (CCI)
CAT = Competition Appellate Tribunal (CAT)
Remedies under the Competition Act, 2002: empowered
CCI can be approached to report any unfair competition practices; CCI is also
empowered to act suo motu or on the reference. Its details are:-
1. Jurisdiction: Sec.32 of Competition Act empowers CCI to take action with
regard to conduct what has occurred outside India and with respect to the parties
located outside India provide the conduct has an appreciable adverse effect on
competition in the relevant market in India. In support of this provision, Sec.18 of
the Act empowers CCI to enter into a Memorandum of Arrangement with any
agency of any foreign country with prior approval of Central Govt.
Private as well as Public Enterprises and even Govt. Deptts. are covered by the
provisions of Competition Act, 2002.
An enquiry or complaint can be initiated or filed before the Bench of CCI if
within the local limits of its jurisdiction the respondents actually or voluntarily
reside, carry on business or work for personal gain, or where the cause of action
wholly or in part arises.

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5. CCI, CAT, Offences & Penalties under the Act
2. Competition Advocacy: It is most crucial component of
Competition Law. Central/State Govts. may seek the opinion of
CCI on the possible effects of the policy on competition or any
other matter. In this context, Sec.49 envisages that while
formulating a policy on Competition, Govt. may make a reference
to CCI for its opinion on possible effect of such a policy on
competition, or any other matter.
On receipt of such a reference, CCI shall give an opinion of it to
Central/State Govts., within 60 days and Govt. may formulate
policy as it deem fit. The role of CCI is advisory and the opinion
given by CCI shall not be binding upon State/Central Govts. In
formulating such a policy. Further the Act provides that CCI shall
take suitabule measures for promotion of competition advocacy,
creating awareness and imparting training about competition
issues, or any other matter. On receipt of such a reference, CCI
shall give its opinion on it to CG/SGs, within 60 days & Govts. may
formulate policies as they deem fit. Role of CCI is advisory &
Govts. are not binding to formulate such policy. The Act provides
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CCI shall take measures for promotion of Competition. 2
5. CCI, CAT, Offences & Penalties under the Act
3. Confidentiality: Competition Act recognizes that information
received by CCI could be commercially sensitive and its disclosure
could result in harm to the business.
Sec.57 of the Act provides that no information relating to any
enterprise shall be disclosed without the prior written permission
of the enterprise, except in compliance with or for the purpose of
the Act or for any other Law, for the time being in force. Thus it
provides protection of confidentiality, to the enterprises.
4. Penalties: CCI has powers in relation to anti-competitive
agreements and abuse of dominant positions. If CCI finds that there
is an unfair competition practice which can cause an appreciable
adverse effect on competition in India, it may pass all or any of the
following orders:-
a. A cease or desist order which direct the parties involved in such
agreements to discontinue acting upon such agreements as well as
those which abuse dominant positions.
b. An order which imposes a monetary penalty as deemed fit but
doesn’t exceed 10% of average turnover for last 3 preceding FYs13
on each party to the agreement or abuse.
5. CCI, CAT, Offences & Penalties under the Act
CCI, its Functions, Review of its Functions, etc.: Competition
Commission of India (CCI) was set up in 2002 to replace MRTP
Commission. It has a Chairman and 6 members.
a. Functions & Roles of CCI: 1. Playing the role of a market regulator,
with focus on anti-competitive behavior of companies that may
distort competition. 2. To prohibit abuse of dominant position by
enterprise or group. 3. To regulate combinations (Acquisition,
Acquisition of Control, Mergers & Acquisitions) that may cause/likely
to cause adverse effect on Competition within India. To create
awareness & impart training on competition, etc.
Some of major orders issued by CCI include:-
1. In 2011, NSE was fined for abusing its dominant position in
currency derivatives market. 2. In 2011, DLF was fined for abusing
dominant market position. 3. In 2012, 11 Cement Cos. fined for
cartilisation in price fixing. 4. In 2014, BCCI was fined for anti-
competitive practices in IPL. 5. In 2014, Coal India was fined for
abusing dominant position in fuel supplies. 6. In 2015, Jet Airways,
Indigo & SpiceJet, were fined for cartelization in fixing fuel
surcharge for cargo. The Competition Appellate Tribunal (COMPAT)
has struck down lot of CCI orders mainly for violation of principle of
natural justice that provides fair hearing.
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5. CCI, CAT, Offences & Penalties under the Act
Future Challenges before CCI: 1. CCI has to streamline its
processes to reduce the time taken to clear merger filings. Initially
it took less than 30 days, but because of rising no. of applications,
the time period rose up to 60 days. 2. While giving speedy
decisions, quality must also be maintained. 3. CCI has to align its
regulatory procedures more closely with legal architecture of the
Indian Judicial System. 4. CCI has to move away from 19-20th
Century tools and modernize to use latest tools and promote fair
competition. CCI may take 5-6 years more to become fully mature.
COMPACT (Competition Appellate Tribunal): COMPACT was set
up in 2009 under Competition Act, 2002. It hears appeals from
decisions of CCI. COMPACT can have one Chairperson and a
maximum of 2 other members. All of them serve for 5 years. They
are all eligible for re-appointment unless they reach the age of 68
in the case of Chairperson and 65 in case of members. Only a
former Supreme Court Judge or Chief Justice of High Court can be
appointed as Chairmperson of COMPACT.
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5. CCI, CAT, Offences & Penalties under the Act
CAT of Competition Act: In exercise of the powers conferred by
Sec.53A of the Competition Act, 2002, Central Govt. established
the Competition Appellate Tribunal (CAT), with its HQ at Delhi.
Functions of CAT:
1. To hear the appeals against any direction issued or decision
made or order passed by the Commission.
2. To adjudicate on claim for compensation that may arise from
the findings of the Commission or the orders of the Appellate
Tribunal in an appeal against the findings of the Commission or
under Sec.42A or under Sec. 42A or under Sec. 53Q(2) of the Act
and pass orders for the recovery of compensation under Sec.53N
of the Act.
Offenses & Penalties under the Act:Competition Act has
provisions for imposing penalties. These provisions include-
1. Contraventions of Orders of Commission; however,
Commission has powers to impose less penalty; 2. Contravention
by companies also, subject to be punished. Directors, Managers
or other responsible persons for such offences are also punished.
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 6. Consumer Protection Act, 1986
Consumer protection Act, 1986: Its main object is to protect the
consumers of goods & services from the unfair trade practices by the
traders. Features of the Act are as follows:-
1. Consumer Redressal Forum (CRF): Act provides for speedy
redressel to consumer complaints and such forums are provided at
every district level and National level at the center. The State
Commission will be at original jurisdiction to settle upto Rs.20 lakhs.
National Commission will entertain cases for damages above it. State
Commission will be vested with appropriate appellate and revisional
powers.
2. Consumer Councils: These are available to involves consumers
known as Consumer Protection Councils. Its objective is to protect
consumers.
3. Goods and services are covered in the councils/forums.
4. Filing of complaints can be by consumers/organisations/societies.
5. Check will be on unfair trade practices.
6. Redressal machinery will be inexpensive. 7. It is a social welfare
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legislation.
 6. Consumer Protection Act, 1986
Objectives of CPA, 1986: 1. Better protection of consumers; 2.
Protection of rights of consumers; 3. Consumer Protection
Councils; 4. Quasi-judicial machinery for speedy redressal of
consumer disputes.
CPA: It is intended to protect the interest of consumers against
traders, suppliers, etc. It provides expeditious remedies and
enforcement of its orders by imposing imprisonment and fines.
Consumer Rights: 1. Right to Safety; 2. Right to be Informed and
Representation; 3. Right to choose his quality goods; 4. Right to be
Heard; 5. Right to Seek redressal; 6. Right to Consumer Education.
Consumer Duties: 1. Adhere to Product Safety Labels; 2. Utilise
Information; 3. Make the Best decision; 4. Speak up; 5. Obtain
Compensation; 6. Educate through research; & 7. Act responsibly.

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 7. Definition of the Terms
Definition of the Terms Consumer, Consumer Dispute, Defect,
Deficiency, Unfair Trade Practices, and Services:
Consumer: Any person who buys any goods, any user of goods,
not one who obtains goods for resale, & beneficiary of services.
Consumer Dispute: Dispute between consumer and seller, where a
complaint has been made and it has been denied by the other.
Defect: It means any fault, imperfection, or shortcoming in the
quality, potency, purity or standard to be maintained.
Deficiency: Fault, shortcoming, inadequacy in quality, nature,
carelessness in service, or bad service.
Unfair Trade Practices: Any trader who uses any unfair method in
promoting sale, service such as false representation of quality,
quantity, grade, composition, style or model, re-built, renovated.
Services: It means services of any kind like banking, financing,
insurance, transport, supply of energy, house construction,
entertainment, amusement, providing news or other information.
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 8. Consumer Redressal Agencies
Consumer Protection Councils: Consumer Protection Act
postulates establishment of Consumer Protection Councils at
Central & State Levels for spreading computer awareness. Its
object is to promote & protect the rights of consumers:-
A. Central Consumer Protection Council; B. State Consumer
Protection Council; C. District Consumer Protection Councils.
Their objectives are to protect the rights of consumers at Central,
State, and District levels under their jurisdictions.
Consumer Redressal Agencies: Redressal Forums have been at
three different levels; 1. District Forum (State Government); 2.
State Commission (State Government); 3. National Commission
(Central Government). In their jurisdiction areas they entertain
complaints, look into the appeals against orders, and entertain
revision petitions.

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