Competition Act, 2002

The Competition Act, 2002 is a important legal instrument in India that supervises and

manages commercial competition.

It came into existence to replace the Monopolies and Restrictive Trade Practices Act, 1969

which was outdated and no longer viable.

The Competition Act 2002 is a law that aims to protect the interests of customers from anti-

competitive behavior, encourage and maintain market competition, defend consumer rights,

and ensure the freedom of trade of other market players.

 What is Competition Law?

Competition Law is codification of rules designed to promote and sustain market

competition. Across the globe, these laws are prevalent with active enforcement &advocacy

functions.

Today, over 100 countries have competition law regimes and competition law enforcement

agencies.
Competition laws perform three main functions in society.

• To uphold free-enterprise:the competition laws have been called the Magna Carta of
free enterprise.

• Security against market distortions:there is a constant risk of various people resorting

to market distortions and abusing their dominant positions to resort to anti-competitive
activities, thus competition laws are required to ensure that the market is safe from the
various distortions.
 Aid in the promotion of domestic industries: Competition laws are required to ensure that the

domestic industries do not get suppressed with an increase in globalization. They play a quintessential

role in determining the viability of the domestic industries. However, to keep the Indian competition

laws updated with the businesses of the digital world which include not many assets, the Indian

government has established a Competition Law Review Committee.

Monopolies and Restrictive Trade Practices Act (MRTP Act).

 The first legislation to restrain abuse of market power was enacted in 1969,i.e., Monopolies and
Restrictive Trade Practices Act (MRTP Act).

 The MRTP Act was enacted to ensure that the economic system didn't result in concentration of

economic power, to provide for control of monopolies and to prohibit monopolistic and restrictive trade
practices.

 As India moved steadily on the path of reforms it did away with the MRTPAct, 1969 as it was
realised that the Act had outlived its utility and control of monopoly was not appropriate to support
the growth aspirations of more than 1 billion Indians.
 Competition Act, 2002

 A High Level Committee on Competition Policy and Law was constituted under chairmanship of Mr.

Raghavan.

 The Committee submitted its report on 22nd May 2000 recommending replacement of the MRTP

Act with a modern competition law for nurturing competition and for removing anticompetitive

practices in the economy.

 After referring the stakeholders, Competition Bill, 2001 was introduced in the Parliament which

eventually became the Competition Act, 2002

 purpose of the Competition Act,

“An Act to provide, keeping in view of the economic development of the country, for the establishment

of a Commission to prevent practices having adverse effect on 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, in India, and for matters connected therewith or incidental thereto.”
The Competition Act, 2002 (“Competition Act”), as amended by the Competition(Amendment) Act,
2007.

Objectives of the Act:

• To prevent practices having adverse effect on 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, in India,and for matters
connected therewith or incidental thereto.
 Competition Commission of India

The Competition Act provides for the establishment of a quasi-judicial body, namely, the Competition

Commission of India (Commission) for the administration of the Act.

The Amendment Act of 2007 created two separate bodies, namely,

(a) the Commission as a seven-member (one chairperson and 2-6 members)expert Body to
function as a market regulator for preventing and regulating anticompetitive practices in the
country and to carry on the advisory and advocacy functions in its role as a regulator; and

(b) the Competition Appellate Tribunal(COMPAT) as a three-member quasi-judicial body to hear

and dispose of appeals against any direction issued or decision made or order passed by the
Commission.
 Members Composition

The members of the CCI are appointed by the Central Government. The Competition
Commission of India is currently functional with a Chairperson and two members.

The Chairperson and every other Member shall be a person of ability, integrity, and who,
has been, or is qualified to be a judge of a High Court, or, has special knowledge of, and
professional experience of not less than fifteen years in international trade,
economics, business, commerce, law, finance, accountancy, management, industry,
public affairs, administration or in any other matter which, in the opinion of the Central
Government, may be useful to the Commission.
The Commission comprises the Chairperson and six members. As on 31st March 2016, it has

considered more than seven hundred cases related to section 3 and section 4 i.e. anti-competitive

agreements and/ or abuse of dominance.

These cases are from diverse sectors ranging from real estate, pharmaceuticals, cement, steel, civil

aviation and commodities among others.

 The Act focuses on the following four areas:

Anti-competitive Agreement (Section 3)

Abuse of Dominance (Section 4)

Regulation of Combinations (Section 5 & 6)

Competition Advocacy and Reference (Section 49 and 21)

 Prohibition of Anti-competitive Agreements

Any agreement which restricts the production, supply, distribution, acquisition or control of

goods or provision of services, which causes or is likely to cause an appreciable adverse effect on

competition (AAEC) within India ,is prohibited and void.

Anti-competitive agreements may include Horizontal and Vertical Agreements.

 Horizontal agreements (Section 3(3)

“Horizontal Agreement” means an agreement between enterprises, each of which operates at the
same level in the production or distribution chain.

Vertical Agreements (Section 3(4)

Vertical Agreements are agreements between firms at different levels of the manufacturing or
distribution processes. For example, an agreement between the manufacturer and a distributor is a
vertical agreement.
 Vertical Agreements

Tie-in arrangements;

Exclusive distribution agreements;

Refusal to deal;

Resale price maintenance

 Prohibition of Abuse of Dominance

The Act prohibits a dominant player from abusing its market power by either restricting competition or
by imposing unfair terms and conditions on its customers.

A company has a dominant position if it enjoys a position of economic strength (and market
power) to behave independently of its competitors, customers, and consumers to an
appreciable extent. In other words, dominant position is a position of strength enjoyed by a firm
which enables it to behave/act independently of the market forces i.e. in the determination of price of
the product.

Dominant companies have a special responsibility to behave responsibly. They have to comply
with special rules that are designed to protect competitors, customers and market structure
from abusive behaviour. Abuse of dominance is violation of section 4 of the Competition Act.
• In order to make competition regime successful vigorous advocacy is required, in addition to the
enforcement of the competition law. Competition advocacy is aprocess of outreach to influence the
economic behavior of enterprises, elicit supportfor adhering to the principles of competition and
convince the stakeholders about the innate advantages as a result of the fair competition.

• Section 49 of the Indian Competition Act enjoins the Commission to take suitable measures to for
the promotion of competition culture and impart training for competition awareness.

• Competition advocacy has two dimensions. First, as a proponent for increased public understanding
and acceptance of competition principles (Section 49 (2)).And the second is, about the advisory role
of the Commission
 cases

 Competition Commission of India v. State of Mizoram, Civil Appeal No. 10820-10822 of 2014

 Google Inc. & Ors v. Competition Commission of India, Competition Appeal (AT) No.01 of 2023

 Rohit Arora v. Zomato (P.) Ltd., Case No. 54 of 2020

 https://www.legalbites.in/competition-law/10-important-competition-law-cases-962631
 Abuse of dominant position covers:

• Imposing Unfair Condition Or Price, Including Predatory Pricing;(lowering pricing)

• Limiting Production/Market Or Technical Or Scientific Development

• Denying Market Access, And

• Making Conclusion Of Contracts Subject To Conditions, Having No Nexus With Such

Contracts; And

• Using Dominant Position In One Relevant Market To Gain Advantages In Another Relevant
Market.
 Power of CCI to Investigate Anti-Competitive Agreements

Section 19 of the Competition Act, the CCI has the authority to inquire into agreements

made by enterprises intending to abuse their dominant position in the market.

These agreements encompass various anti-competitive practices, such as price-fixing

agreements, exclusive supply agreements, and agreements that create barriers to entry for

new players.
 CCI can Approve Mergers and Acquisitions

The CCI also has the power to approve or scrutinise mergers and acquisitions that may

lead to the formation of a monopoly or grant a company a dominant position in the market.

This power is derived from Chapter VI of the Competition Act.

An example of this power in action was the intervention in the Amazon and Future Group

deal. Initially, the CCI approved the acquisition; however, subsequent reviews revealed that

Amazon had concealed or misrepresented certain aspects of the deal. As a result, the CCI

revoked its approval and imposed a fine of Rs. 200 crores on Amazon.
 Power of CCI to Establish Regulations

The CCI has the power to establish regulations consistent with the provisions of the

Competition Act. Section 64 empowers the Commission to formulate regulations, which can

be presented to the Parliament for approval. These regulations serve as guidelines for

businesses and help ensure fair competition practices.

 Crucial Role in Promoting Competition

• The powers vested in the Competition Commission of India play a crucial role in maintaining a

competitive market environment and safeguarding consumer interests.

• By actively investigating anti-competitive agreements, scrutinising mergers and acquisitions, and

establishing regulations, the CCI ensures fair competition and protects the rights of consumers.

When wielded effectively, these powers contribute to the growth of a robust and healthy market

economy in India.
• The Competition Commission of India (“CCI”) has been given the authority to direct any

enterprise or person to modify, discontinue and not re-enter into anti-competitive

agreement and impose penalty, which can be 10% of the average of the turnover for the

last three years.

• Anti-competitive agreements are agreements among competitors to prevent, restrict or

distort competition.