UNIT -1

1.'Competition law is a legal instrument in the implementation of

competition Policy.' Explain

Competition Policy means government measures, policies, statutes, and regulations including
a competition law, aimed at promoting competitive market structure and behavior of entities
in an economy. Competition law is the tool for the implementation of competition policy as it
prohibits anti competitive practices of business entities only for capturing the market.

Competition policy is a critical component of any overall economic policy framework.

Competition Policy is intended to promote efficiency and to maximize consumer/social
welfare. It also helps to promote creation of a business environment which improves static
and dynamic efficiencies, leads to efficient resource allocation and in which abuse of market
power is prevented / curbed.

There are three main areas that are covered by competition policy which are as follows:

 Restrictive Practices

Restrictive practices are controlled by competitor firms to fix the prices of the goods and
services. It is very important for the largest multinational firms to collaborate with
competitors in areas such as research and development

 Monopolies

It is the abuse of a monopoly position that is addressed through policy. The regulation of
utilities helps to transfer the large numbers of state-owned utilities into the private sector
which provide the benefits of economies associated with a monopoly network provider

 Mergers

Mergers are one of the most controversial and consequently areas of competition policy.
There always has been a controversy whether a particular merger will result in a damaging
reduction in the competition of prices without any potential benefits.

Competition Policy includes reforms in certain policy areas to make these more pro-
competition -

Industrial Policy

Industrial Policy has to address and reform licensing requirements, restrictions on capacities,
or on foreign technology guidelines on location, reservations and so on. These factors affect
free competition in the market

Trade Policy
Trade policy has important implications for development of competition in the markets.
Measures for liberalisation of trade promote greater competition e.g reducing tariffs, removal
of quotas/physical controls, investment controls, conditions relating to local content etc.

Privatization/Disinvestment

Empirical research has found that state owned enterprises generally tend to be less efficient
than private owned firms, for reasons such as manager compensation, low incentives, lack of
direct accountability, hard budget constraints for managers, etc.

The privatization of state owned enterprises is important element of competition policy.

Economic Regulation

New legislation and regulations to promote competition and to bring about restructuring of
major industrial sectors is essential for implementation of competition policy. Legislation has
to aim at separating natural monopoly elements from potentially competitive activities and
the regulatory functions from commercial function and also create several competing entities
through restructuring of essential competition activities and to create a competitive
environment in the following sectors.

National Competition Policy:

The national competition policy of India is formulated by the government of India. The main
aim of the national competition policy is to achieve a high employment rate, high economic
growth, standards of living for the people of India, entrepreneurship, protect economic rights,
social development and promote economic democracy and support good governance by
restricting rent-seeking practices.

2."Competition means a struggle or contention for superiority in the

commercial world". Elucidate

Introduction
When man invented the wheel, an opportunity for business emerged. This was the first ever
innovative opportunity for man and he used his invention to earn profits in whichever way he could,
at that time.
In the beginning, there was a monopoly in the selling of his invention but with the passage of time,
more people began selling the same product. There were few people who began manufacturing the
invention and few who just sold the end product.
With the introduction of more sellers/manufacturers into the market, the ultimate benefit was to
the people who were buying the product, i.e., the consumers. Thus, a new concept emerged which
came to be known as competition.

Definition
Competition means a struggle or contention for superiority. In the commercial world, it means a
striving for customer business at the market place.
Effects of Competition
-Profit Margin
There are desirable effects that follow from perfect competition. The price at which goods or
services is sold never rises above the marginal cost of production. In this case costs for this purpose
include a sufficient profit margin to encourage the producer to invest his capital in the industry in
the first place but no more than that.

--Innovation
In the competitive market, it is said that producers will constantly innovate and develop new
products as part of the continuing battle of striving for consumer business. Thus, competition may
have the desirable dynamic effect of stimulating important new technological research. These
beneficial effects would flow from a state of perfect competition if such a state could ever exist.
-Competition
What perfect competition means is that on any particular market, there is a very large number of
buyers and sellers all producing identical or similar products and that consumers have perfect
information about market conditions. Also, that resources can freely flow from one area of
economic activity to another and that there are no barriers to entry which might prevent the
emergence of new competition nor barriers to exit which might hinder firms wishing to leave the
industry.
The consumer is said to be sovereign

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-Equilibrium
In the long run the tendency of this will be to force producers to incur the lowest cost possible in
order to be able to earn any profit. Eventually the point will be reached where price and the average
cost of producing goods necessarily coincide and this will mean that price will never rise above cost.
If on the other hand price were to fall below cost, there would be an exit of capital from that
industry and as the output would therefore decrease price would be restored to a competitive level.

-Competition Theory
Competition occurs when there is a fight among firms for customers by offering them a better of
price, quality, range, reliability and associated services. According to Michael Porter there are 5
basic forces on which the competition depends:

Forces Governing Competition in Industry

1. Competitive Rivalry. This looks at the number and strength of the competitors. Where rivalry is
intense, companies can attract customers with aggressive price cuts and high-impact marketing.
In markets with lots of rivals, the suppliers may decide to move to another Market.
On the other hand, where competitive rivalry is minimal, healthy profits are expected.
2. Supplier Power.
The more the suppliers to choose from, the easier it will be to switch to a cheaper alternative.
But the fewer suppliers there are, the stronger their position and their ability to charge you
more.
3. Buyer Power.
When there are only a few savvy customers, they have more power, but decreases if there are
many customers.
4. Threat of Substitution. This refers to the likelihood of customers finding a different way of doing
a thing. For example, An electrical bicycle instead of a moped. A substitution that is easy and
cheap to make is a threat.
5. Threat of New Entry. If the market is easy to enter, there is a threat from new entries.

Competition Policy
Man has never been satisfied with the existing societal norms and is greedy to earn a little more.
This ‘little more’ is achieved by suppressing the buyers by either rigging bids, increasing prices and
other anti-competitive activities.
This is where the law and policy come into existence in order to curb the human greed. But this
policy has to cover various aspects and finally promoting competition in the end. This is the end aim
of any competition law and policy.

1. Definition of Competition Policy

A possible definition is “the set of policies and laws which ensure that competition in the
marketplace is not restricted in a way that is detrimental to society”.
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2. Objectives of Competition Policy

-establishing a competitive order as an end in itself to safeguard economic freedom,
-maintaining a competitive order to foster economic efficiency and technological and economic
progress,
-providing for a level playing field of fair competition, which implies prohibition of deceptive and
fraudulent practices, threat, extortion and blackmail as well as unfair advantages through
government subsidies,
-maintaining a decentralized structure of supply because small and medium-sized enterprises are
considered as the backbone of a democratic society.

UNIT 5

1. Explain the duties and powers of Director General

under the Competition Act, 2002. 5x
The DG (Director General) is the investigation wing of the CCI (Competition Commission of
India), which probes into any alleged anti-competitive conduct by enterprises in India. The
DG assists the CCI in enforcing the Competition Act, 2002, and has wide-ranging powers to
conduct investigations, gather evidence, examine witnesses, and impose penalties.

The DG’s role is crucial in maintaining a level playing field, promoting healthy competition,
and safeguarding consumer interests. The DG’s investigative prowess ensures that no anti
competitive deed goes unnoticed, ultimately contributing to a fair and vibrant marketplace.
Appointment of DG
The DG is appointed by the Central Government from a panel of names recommended by a
Selection Committee. The procedure for appointment is given under Section 16 of the Act.

 Section 16(1) states that the Central Government shall appoint a Director General and
such number of additional, joint, deputy or assistant Directors General as it may think
fit for the purposes of assisting the Commission in conducting inquiry into
contravention of any of the provisions of this Act or any rules or regulations made
thereunder1.

 Section 16(2) states that the Central Government shall, in consultation with the
Commission, appoint a person to be the Director General who shall be the head of the
office of Director General and exercise such powers and discharge such functions as
may be prescribed1.
 Section 16(3) states that the Central Government shall, in consultation with the
Commission, appoint a person to be an additional, joint, deputy or assistant Director
General who shall exercise such powers and discharge such functions as may be
delegated to him by the Director General1.

 Section 16(4) states that the qualifications and experience required for the
appointment of the Director General and other Directors General shall be such as may
be prescribed1.
 Section 16(5) states that the salary and allowances payable to and the other terms and
conditions of service of the Director General and other Directors General shall be
such as may be prescribed1.
 Section 16(6) states that the Central Government shall, in consultation with the
Commission, constitute a Selection Committee consisting of the Chairperson of the
Commission, the Secretary in the Ministry or Department of the Central Government
dealing with the Ministry of Corporate Affairs and the Chief Secretary of the State
Government where the Director General or any other Director General is to be posted,
for making recommendations to the Central Government for appointment of the
Director General and other Directors General

Powers of DG

According to the Competition Act, 2002, the powers of the DG are:

 To assist the CCI in investigation: According to Section 16(1), The DG shall assist the
CCI, when so directed by the CCI, in investigation of any contravention of the
provisions of the Act or its rules and regulations. The DG can investigate any matter
related to the alleged anti-competitive conduct, even if it is not mentioned in the
prima facie order of the CCI. This is because the DG has the discretion to investigate
any matter that has a bearing on the alleged violation, and the CCI cannot interfere
with the DG’s investigation process. The DG can also expand the scope of the
investigation to include any other product, service, market, or enterprise that is found
to be relevant or connected to the alleged anti-competitive conduct.

 To exercise the same powers as the CCI: The DG has all the powers conferred upon
the CCI under Section 36(2) of the Act, such as summoning and enforcing the
 attendance of any person, requiring the discovery and production of documents,
receiving evidence on affidavit, issuing commissions for the examination of witnesses
or documents, and requisitioning any public record or document from any office.
These powers enable the DG to gather all the necessary and relevant information and
evidence for the investigation, and to examine any person who has knowledge of the
facts and circumstances of the case. The DG can also seek the assistance of any other
authority or agency for the purpose of investigation.
 To expand the scope of the investigation: The DG has the authority to expand the
investigation beyond the original allegations. If during the course of their inquiry,
they discover additional enterprises, facts, or events related to anti-competitive
conduct, they can include them in their investigation. This flexibility allows the DG to
delve deeper and uncover hidden practices. The DG can also look into any agreement
that is related to the subject matter of the investigation, even if it is not specifically
mentioned in the prima facie order of the CCI. The DG can also investigate any
enterprise that is found to be involved in the alleged anti-competitive conduct, even if
they are not named in the prima facie order of the CCI.

Duties of DG

The Director General is responsible for performing a number of important duties,

which are outlined below:

1. Conducting Investigations: The primary duty of the DG is to investigate cases where

there is a suspicion of anti-competitive behavior by businesses or individuals. The DG
may conduct investigations on its own initiative, or on the basis of a complaint filed
by a party. In conducting investigations, the DG has the power to summon witnesses,
call for the production of documents, and conduct search and seizure operations.
2. Gathering Evidence: In the course of investigations, the DG is responsible for
gathering evidence in order to establish whether there has been a contravention of the
Competition Act. This may involve interviewing witnesses, examining documents and
records, and analyzing economic data.

3. Preparing Reports: Once an investigation is complete, the DG is required to prepare a

report outlining its findings. The report must contain details of the alleged anti-
competitive conduct, the evidence gathered during the investigation, and the DG's
conclusions as to whether there has been a contravention of the Competition Act.
4. Providing Expert Opinions: The DG is often called upon to provide expert opinions
and advice to the Competition Commission of India (CCI) on matters related to
competition law and policy. This may include providing advice on proposed mergers
and acquisitions, conducting market studies, and assessing the impact of government
policies on the competition.
5. Assisting the CCI: The DG is required to assist the CCI in the discharge of its
functions under the Competition Act. This may include providing technical and
administrative support, assisting in the preparation of cases, and presenting evidence
before the CCI.

6. Prosecuting Offences: In cases where the DG concludes that there has been a
contravention of the Competition Act, it is responsible for initiating prosecution
proceedings before the Competition Commission of India.
 7. Conducting Advocacy: The DG also plays an important role in promoting competition
advocacy, which involves raising awareness about the benefits of competition and
advocating for policies and practices that promote competition in the marketplace.

Scope of investigative powers of the DG

1. Wide and Comprehensive Investigation:

The DG’s mandate extends beyond the prima facie order issued by the CCI. In other words,
they can investigate matters even if those specific issues were not explicitly mentioned in the
initial complaint or order. This broad scope ensures that no stone is left unturned when it
comes to identifying anti-competitive behavior.

The legal basis for this wide scope is Section 26(1) of the Competition Act, 20021, which
states that:

If the Commission is of the opinion that there exists a prima facie case, it shall direct the
Director General to cause an investigation to be made into the matter.

This section does not limit the DG’s investigation to the matters specified in the prima facie
order, but rather gives them the discretion to investigate any matter related to the alleged anti-
competitive conduct.

2. Expanding the Investigation:

The DG has the authority to expand the investigation beyond the original allegations. If
during the course of their inquiry, they discover additional enterprises, facts, or events related
to anti-competitive conduct, they can include them in their investigation. This flexibility
allows the DG to delve deeper and uncover hidden practices.

The legal basis for this expansion is Section 36(2) of the Competition Act, 20021, which
states that:

The Commission shall have the same powers as are vested in a civil court under the Code of
Civil Procedure, 1908 (5 of 1908) while trying a suit, in respect of the following matters,
namely:— (a) summoning and enforcing the attendance of any person and examining him on
oath; (b) requiring the discovery and production of documents; (c)receiving evidence on
affidavit; (d) issuing commissions for the examination of witnesses or documents; (e)
requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act,
1872 (1 of 1872), any public record or document or copy of such record or document from
any office; (f) any other matter which may be prescribed.

This section empowers the DG to exercise the same powers as a civil court in gathering
evidence and information from any person or source, even if they are not originally named or
involved in the prima facie order.

3. Judicial Recognition and Affirmation:

Various courts, including the Supreme Court, the Delhi High Court, and the Competition
Appellate Tribunal, have upheld the DG’s wide-ranging powers. Their independence and
ability to explore all relevant aspects have been consistently recognized and reinforced by
judicial decisions.

Some notable cases that have affirmed the DG’s scope are:

 Excel Crop Care Limited v. CCI & Anr.: The Supreme Court held that the DG can
investigate any enterprise that is found to be involved in the alleged anti-competitive
conduct, even if they are not named in the prima facie order. The Court also held that
the DG can look into any agreement that is related to the subject matter of the
investigation, even if it is not specifically mentioned in the prima facie order.

 Google Inc. & Ors. v. CCI & Anr.: The Delhi High Court held that the DG can expand the
scope of the investigation to include any other product or service offered by the enterprise
under investigation, even if they are not related to the original complaint. The Court also
held that the DG can examine any person who has relevant information or documents, even
if they are not a party to the proceedings.

2.Explain the procedure for imposition of penalty under Competition Act.

 Contravention of Orders of Commission (Section 42)
a)The Commission may cause an inquiry to be made into compliance of its
orders or directions made in compliance of this Act
b) if any person, without any reasonable cause, fails to comply with any
order or directions of the Commission issued under Sections
6,27,28,31,32,33,42A,4, 43A,44 and 45 shall be liable to pay a penalty which
may extend to 1 Lakh rupees for each day during which such noncompliance
occurs, subject to maximum of rupees 10 crores as the Commission
determine.
c) If any person does not comply with the Orders or Directions issued or fails
to pay the fine, he shall be punishable with imprisonment for a term which
may extend to three years or with fine which may extend to rupees twenty
five crores or with both.

• Compensation in case of Contravention of Orders of

commission (Sec.42A)
 a) Any person may make an application to the Appellate
Tribunal for an order for the recovery of compensation
from any enterprise for any loss or damage shown to
have been suffered, by such person as a result of the
said enterprise violating directions issued by the
Commission or contravening, without any reasonable
ground, any decision or order of the Commission issued
under sections 6,27, 28, 31, 32 and 33
b) Penalty for failure to comply with directions of
Commission and Director General (Sec.43)
c) If any person fails to comply, without reasonable
cause, with a direction given by
- The Commission under Sub-sections (2) and (4) of
section 36; or
- The Director General while exercising powers
referred to in sub-section (2) of section 41,
d) such person shall be liable to pay a penalty which may
extend to rupees one lakh for each day during which such
failure continues subject to a maximum of rupees one crore,
as may be determined by the Commission.
• Penalty for failure to comply with directions of
Commission and Director General (Sec.43)
If any person fails to comply, without reasonable cause, with
a direction given by
a) The Commission under Sub-sections (2) and (4) of
section 36; or
b) The Director General while exercising powers referred to
in sub-section (2) of section 41,
• such person shall be liable to pay a penalty which may
extend to rupees one lakh for each day during which such
failure continues subject to a maximum of rupees one crore,
as may be determined by the Commission.
Power to impose penalty for non-furnishing of information
on combination (Sec.43A)
• If any person or enterprise who fails to give notice to the
Commission under section 6(2), the Commission shall impose
on such person or enterprise a penalty which may extend to
one per cent of the total turnover or the assets or value of
transaction referred to in section 5(d), whichever is higher, of
such a combination.
Penalty for making false statement (Sec.44)
• If any person, being a party to a combination,
a) makes a statement which is false in any material
particular, or knowing it to be false; or
b) omits to state any material information particular
knowing it to be material,
• such person shall be liable to a penalty which shall not
be less than rupees fifty lakhs but which may extend to
rupees five crore, as may be determined by the Commission
Power to impose lesser penalty (Sec.46)
• If any producer, seller, distributor, trader or service
provider included in any cartel, which is alleged to have
 violated Section 3, has made a full and true disclosure in
respect of alleged violations and such a disclosure is vital, the
Commission may impose upon him a lesser penalty than as
prescribed under the Act or rules or
regulations.
• However, the lesser penalty shall not be imposed where
before making such disclosure, the report of Director General
under Section 26 has been received in the Commission.
• Further, the lesser penalty shall be imposed only in
respect of the producer, seller, distributor, trader or service
provider included in the cartel, who has made a full, true and
vital disclosures under this Section.
• Any producer, seller, trader or service provider included
in the cartel shall also be tried and liable to the imposition of
penalty, if in the course of proceedings, had-
• (a) not complied with the condition on which the lesser
penalty was imposed by the Commission; or
• (b) given false evidence; or
• (c) the disclosure made is not vital.

Crediting sums realised by way of penalties to Consolidated

Fund of India - Section 47.

All sums realised by way of penalties under this Act shall be credited
to the Consolidated Fund of
India.
Contravention by Companies (Sec.48)
• Where any rule, regulation, order made by the
Commission or any direction issued there under is
contravened by a company, every person who, at the time
the contravention was committed, was in charge, and was
responsible to the company for conducting business of the
company, as well as the company, shall be deemed to be
guilty of the contravention and the Commission may impose
such penalty on such persons, as it may deem fit which shall
not be more than ten per cent. of the average of the income
for the last three preceding financial years
• Provided that in case any agreement referred to in
section 3(3) has been entered into by a cartel, the
Commission may unless otherwise provided in this Act,
impose upon such persons referred to in sub-section (1), a
penalty of up to ten per cent. of the income for each year of
the continuance of such agreement
• If the person proves that the contravention was
committed without his knowledge or that he has exercised all
due diligence to prevent the commission of an offence, he
will not be liable to be punished .
• Where a contravention of any of the provisions of this
Act or any rule, regulation, order made or direction issued
there under has been committed by a company and it is
proved that contravention has taken place with the consent
or connivance of, or it is attributable to any neglect on the
part of, any director, manager, secretary or other officer of
the company,
• such director, manager, secretary or other officer shall
also be deemed to be guilty of the contravention and the
Commission may impose such penalty on such persons, as it
may deem fit which shall not be more than ten per cent. of
the average of the income for the last three preceding
financial years