The Competition Act, 2002

CS Monica Suri
Amity Law School, Noida
 The Competition Act, 2002

• It was enacted by the Parliament of India and

governs THE INDIAN COMPETITIONS AND MAL
PRACTICES.
• It replaced the MRTPC 1969. Under this
legislation, the CCI was established to prevent
activities that have an adverse effect on
competition in India.
• This act extends to whole of India except the
State of Jammu and Kashmir.
 OVERVIEW
• This is an act to establish a commission, protect the interest
of the consumers and ensure freedom of trade in markets
in India-
• To prohibit the agreements or practices that restricts free
trading and also the competition between two business
entities,
• To ban the abusive situation of the market monopoly,
• To provide the opportunity to the entrepreneur for the
competition in the market,
• To have the international support and enforcement
network across the world,
• To prevent from anti-competition practices and to promote
a fair and healthy competition in the market.
• After MRTP Act, 1969 became obsolete in the
wake of international economic developments
and the focus got shifted from curbing
monopolies to promoting competition, the
Government enacted the Competition Act, 2002
(‘the Act’).
The three main elements of the Act are :
• Anti-competitive agreements
• Abuse of dominant position
• Regulation of combinations
 SECTION 3
• ANTI COMPETEIVE AGREEMENTS
CONCEPT OF AAEC …..Appreciable
Adverse Effect on Competition
 Section 3 – Anti Competitive
Agreements
• Anti-competitive agreements are those agreements that restrict competition.
Section 3 of the Act provides that any agreement which causes or is likely to cause
an appreciable adverse effect on competition (‘AAEC’) in India is deemed to be
anti-competitive.

• Although there is no thumb rule to determine whether a particular agreement

causes or likely to cause AAEC, sub-section (3) of section 19 of the Act provides for
certain factors that CCI shall have ‘due regard to all or any of them’ to determine
AAEC under section 3.

These factors are as follows :

• Creation of barriers to new entrants in the market

• Driving existing competitors out of the market
• Foreclosure of competition by hindering entry into the market
• Accrual of benefits to consumers
TYPES OF ANTI COMPETETIVE
AGREEMENTS
Improvements in production or distribution of
goods or provision of services, promotion of
technical, scientific and economic development by
means of production or distribution of goods or
provision of services.

The CCI, in the backdrop of these factors,

examines the allegations of cartelisation with the
help of the material put on record to determine
the true nature of the agreements entered into
between the competing enterprises.

Cartelisation is one of the most malicious forms

of anti-competitive agreements.
 WHAT IS A CARTEL
• A cartel is an agreement between enterprises to
control prices or exclude entry of a new competitor in
any market. The term cartel includes any association of
producers, sellers, distributors, traders or service
providers who, by agreeing amongst themselves, limit,
control or attempt to control the production,
distribution, sale or price of, or trade in goods or
provisions of service.
• Thus, a cartel may be an explicit or implicit agreement
to fix prices, to limit production and supply, to allocate
market share or sales quotas, or to engage in collusive
bidding or bid-rigging in one or more markets
 THE CEMENT CARTEL CASE

BUILDER ASSOCIATION OF INDIA

VS
CEMENT MANUFACTURER’S ASSOCIATION CASE
 SECTION 4
ABUSE OF DOMINANT POSITION
 Dominant Position

• Dominant position: It means a position of

strength, enjoyed by an enterprise, in the
relevant market which enables it to operate
independently of competitive forces
prevailing in the market or affect its
competitors or consumers in their
operations.
 Factors responsible
• ]
• Dominance has been traditionally defined in terms of market share of
the enterprise or group of enterprises concerned. However, a number
of other factors play a role in determining the influence of an enterprise
or a group of enterprises in the market. These include:market share,
• the size and resources of the enterprise;
• size and importance of competitors;
• economic power of the enterprise;
• vertical integration;
• dependence of consumers on the enterprise;
• extent of entry and exit barriers in the market; countervailing
buying power;
• market structure and size of the market;
• source of dominant position viz. whether obtained due to statute
etc.;
• social costs and obligations and contribution of enterprise enjoying
dominant position to economic development.
 SECTION 4(2)….Factors
• Section 4(2) of the Act provides that there shall be an abuse of a
dominant position if an enterprise or a group:

• directly or indirectly imposes unfair or discriminatory conditions or

prices in the purchase or sale of goods or services;
• restricts or limits production of goods or services in the market; etc.

• As per Section 4(2)(c) of Act of the Act, there shall be an abuse of

dominant position if any enterprise indulges in a practice resulting in
denial of market access in any manner.
• It states that it means the market which may be determined by the
Commission with reference to the relevant product market or the
relevant geographic market or with reference to both markets.
• Predatory pricing: Predatory pricing means the sale of
goods or provision of services, at a price which is
below the cost of production of the goods or provision
of services, with a view to reduce competition or
eliminate the competitors from the Market

• Rule of reasons: It is the analysis of any activity under

the challenge on the basis of business justification,
competitive intent, market impact, impact on
competition and on consumer. It is the logic behind the
conclusion for any order.
 Concept of Relevant Market
While Investigating the cases , CCI looks into
dominance into .Relevant Market:

1. Product Market;
2. Geographical Market
PENALTY FOR CONTRAVENTION
 SECTION 5
COMBINATIONS
 Concept
• According to Section 5 of the Competition
Act, 2002 a combination is an

“acquisition of one or more enterprises by

one or more persons or merger or
amalgamation of enterprises shall be a
combination of such enterprises and
persons or enterprises”.
•
• a combination can be defined as a merger, acquisition,
amalgamation between two or more enterprises or
businesses. …..

• The aforesaid act puts up a responsibility on the

government to control such merger, acquisition and
amalgamations by the MNC’s, as MNCs with their huge
power and resources tend to dominate the Indian small
scale industries.
• HENCE …… the provisions of the Competition Act, 2002
ensures that there is fair competition in the market.
 Competition Commission of India

• It is a body corporate and independent entity possessing a

common seal with the power to enter into contracts and to sue in
its name. It is to consist of a chairperson, who is to be assisted by a
minimum of two, and a maximum of ten, other members.

• It is the duty of the Commission to eliminate practices having

adverse effect on competition, promote and sustain competition,
protect the interests of consumers and ensure freedom of trade in
the markets of India.

• The Commission is also required to give opinion on competition

issues on a reference received from a statutory authority
established under any law and to undertake competition advocacy,
create public awareness and impart training on competition issues.
• Commission has the power to inquire into unfair
agreements or abuse of dominant position or
combinations taking place outside India but having
adverse effect on competition in India, if any of the
circumstances exists:
• An agreement has been executed outside India
• Any contracting party resides outside India
• Any enterprise abusing dominant position is outside
India
• A combination has been established outside India
• A party to a combination is located abroad.
• Any other matter or practice or action arising
out of such agreement or dominant position
or combination is outside India.
• To deal with cross border issues, Commission
is empowered to enter into any Memorandum
of Understanding or arrangement with any
foreign agency of any foreign country with the
prior approval of Central Government.
• Review of orders of Commission
• Any person aggrieved by an order of the Commission
can apply to the Commission for review of its order
within thirty days from the date of the order.
Commission may entertain a review application after
the expiry of thirty days, if it is satisfied that the
applicant was prevented by sufficient cause from
preferring the application in time.
• No order shall be modified or set aside without giving
an opportunity of being heard to the person in whose
favour the order is given and the Director General
where he was a party to the proceedings.
 FAQ – COMPETETION ACT 2002, AND
FEMA
• Q1. Discuss the provisions relating to AAEC
• Q2. Short notes on :
• - Anti Compt. Agrt
• - Abuse of Dominant Position
• Q3. Can Cartels have a positive impact on
competition ?
• Q4. Discuss the role of CCI as a regulator
• Q5. What are the different types of
Combinations . Substantiate with recent cases.

• Q6. Briefly Discuss the overview of

Competition Act 2002.

• Q7. Compare the provisions of Competition

with earlier existing MRTP.
 FEMA
• Q1. Discuss overview of FEMA Provisions .
• Q2. Compare the basics of FEMA with earlier laws
of FERA
• Q3. What are the foreign currency regulations
• Q4. Discuss Authorised Dearlers under the Act
• q5,. Differentiate between Current account and
Capital account transactions
• Q6. What are the contemporary changes under
the Act