The Competition Act, 2002
The competition Act, 2002 is in force from 31 March 2002
Replaced the MRTP (Monopolies and Restrictive Trade Practises) Act, 1969
Objective: to implement and enforce competition policy and to prevent and
punish anti-competitive business practices by firms and unnecessary
Government interference in the market.
Two amendments till now, Competition (Amendment) Act, 2007 and 2009
Three topics we need to cover for NET syllabus under this act and all three
are covered under Chapter II of the act.
1. Prohibition of Certain Agreements (Section 3).
2. Abuse of Dominant Position (Section 4)
3. Regulation of Combinations (Section 5 and 6)
Prohibition of Certain Agreements
Section 3 Prohibits Anti-Competitive agreements.
What do we mean by Anti-Competitive agreements?
Agreements in respect of production, supply, distribution, storage, acquisition
or control of goods or provision of services, which causes or is likely to cause
an appreciable adverse effect on competition within India are void.
What do we mean by Appreciable Adverse effect?
Any Decision or agreement which does the following shall be presumed to
have an appreciable adverse effect on competition.
(a) directly or indirectly determines purchase or sale prices:
(b) limits or controls production, supply, markets, technical development,
investment or provision of services;
(c) shares the market or source of production or provision of services by way
of allocation of geographical area of market, or type of goods or services, or
number of customers in the market or any other similar way:
(d) directly or indirectly results in bid rigging or collusive bidding,
"bid rigging" means any agreement between enterprises or persons
engaged in identical or similar production or trading of goods or provision of
services, which has the effect of eliminating or reducing competition for bids
or adversely affecting or manipulating the process for bidding
The following types of agreements are also not allowed:
“tie-in arrangement" - any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods;
"exclusive supply agreement" - any agreement restricting in any manner
the purchaser in the course of his trade from acquiring or otherwise dealing in
any goods other than those of the seller or any other person
"exclusive distribution agreement" agreement to limit restrict or withhold
the output or supply of any goods or allocate any area or market for the
disposal or sale of the goods,
"refusal to deal" any agreement which restricts, or is likely to restrict, by any
method the persons or classes of persons to whom goods are sold or from
whom goods are bought;
"resale price maintenance - any agreement to sell goods on condition that
the prices to be charged on the resale by the purchaser shall be the prices
stipulated by the seller unless it is clearly stated that prices lower than those
prices may be charged.
Exceptions to this prohibition
• Any agreement entered by way of joint ventures is allowed if such
agreement increases efficiency in production, supply, distribution storage
acquisition or control of goods or. Provision of services
• The right of any person to export goods from India to the extent to which the
agreement relates exclusively to the production, supply, distribution or control
of goods or provision of services for such export.
• The right of any person to restrain any infringement of, or to impose
reasonable conditions, as may be necessary for protecting any of his rights
which have been or may be conferred upon him under
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade
Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act,
1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout Design Act, 2000 (37 of
2000);
Prohibition of Abuse of Dominant Position
Section 4 prohibits abuse of the dominant position
“dominant position” means a position of strength, enjoyed by an
enterprise, in the relevant market, in India, which enables it to operate
independently of competitive forces prevailing in the relevant market: or affect
its competitors or consumers or the relevant market in its favour.
The following shall constitute abuse of dominant position
a. directly or indirectly, imposes unfair or discriminatory
i) condition in purchase or sale of goods or service
(ii) price in purchase or sale (including predatory price) of goods or service
(“predatory price" means the sale of goods or provision of services, at a
price be the cost with a view to reduce competition or eliminate the
competitors)
(b) limits or restricts
(i)production of goods or provision of services or market therefore; or
(ii) technical or scientific development relating to goods or services to the
prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access
in any manner; or
(d) makes conclusion of contracts subject to acceptance by other
parties of supplementary obligations which, by their nature or according
to commercial usage, have no connection with the subject of such
contracts, or
(e) uses its dominant position in one relevant market to enter into, or
protect, other relevant market.
Regulation of Combinations
3 types of Combinations mentioned under Section 5.
(1) Acquisition (one entity buys another entity)
(2) Merger (When two entities combine and take up name of either company)
(3) Amalgamation (When two entities combine and take up a new name)
The combinations are regulated by Section 6 of the competition act, 2002
which says:
A combination which causes air is likely to cause an appreciable A adverse
effect on competition within the relevant market in India will be void
Any person or enterprise who ow which proposes to enter into a combination
which comes under the purview of this act shall give notice to the
competition commission within 30 days of approval of the proposal
relating to merger or amalgamation by the board of directors of the
enterprises
Combination will not come into effect until 210 days have passed from
the day of Notice.
The provisions of this section shall not apply to share subscription or
financing facility or any acquisition, by a public financial institution, foreign
institutional investor, bank or venture capital fund, pursuant to any covenant
of a loan agreement or Investment agreement.
