The Competition Act, 2002
The Competition Act, 2002 is a law that governs commercial competition in India.
It replaces the erstwhile Monopolite and Restrictive Trade Practices Act, 1969.
The Competition Act aims to prevent activities that have an adverse effect on
competition in India
History of the Competition Act, 2002
The Monopolies Inquiry Commission was established in April 1964 under Justice
KC Das Gupta, a Supreme Court judge. The objective of the commissions was to
inquire about the effect and extent of monopolistic and restrictive trade practices in
important sectors of the Indian economy
To regulate advertising, in 1984, Parliament inserted a chapter on unfair trade
practices in the Monopolies and Restrictive Trade Practices Act, 1969
The Monopolies and Restrictive Practices Act of 1969 was enacted to limit the
concentration of wealth in a few hands and limit monopolistic practices, but it was
too archaic in its definitions of what is a ‘monopolistic practice’. Thus, it was
decided that a new law governing competition in India was required
Keeping the above purpose in mind the Competition Act, 2001 was introduced
in Lok Sabha by Finance Minister Arun Jaitley on 6 August 2001.
Competition Act 2002 – UPSC Notes:-Download PDF Here
Definitions under the Competition Act
The following are the definitions cited under the Competition Act
1. Acquisition: Acquisition is defined as the direct or indirect agreement to acquire
shares, voting rights or control of assets over any enterprise.
2. Cartel: A cartel is defined as an association of producers, sellers, distributors,
traders ore service providers who limit control or attempt to control the production,
distribution, sale or promotions on goods or services upon an agreement among
themselves
3. Position: A dominant position means a position of strength enjoyed by an
enterprise in the relevant market. It enables the enterprise to function
independently and bend the market to its will
4. Predatory pricing: Predatory pricing is where the pice of goods and services is
reduced to well below the cost of production in order to eliminate competition.
5. Rule of reason: 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 the consumer.
Find the list of commissions and committee in India through the linked article
Salient Features
The following are the features of the Competition Act:
1. Anti Agreements: Enterprises, persons or associations of enterprises or persons,
including cartels, shall not enter into agreements in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of services, which
cause or are likely to cause an “appreciable adverse impact” on competition in
India. Such agreements would consequently be considered void.
2. Abuse of dominant position: There shall be an abuse of dominant position if an
enterprise imposes directly or indirectly unfair or discriminatory conditions in
purchase or sale of goods or services or restricts production or technical
development or create hindrance in the entry of new operators to the prejudice of
consumers.
3. Combinations: The Act is designed to regulate the operation and activities of
combinations, a term, which contemplates acquisition, mergers or amalgamations.
A combination that exceeds the threshold limits specified in the Act in terms of
assets or turnover, which causes or is likely to cause an adverse impact on
competition within the relevant market in India, can be scrutinized by the
Competition Commission of India.
4. Competition Commission of India: The Competition Commission of India 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 six, other members. It is the duty of the Commission to eliminate
practices having an 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 an 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.
If any person fails to comply with the orders or directions of the Commission shall
be punishable with fine which may extend to ₹ 1 lakh for each day during which
such non-compliance occurs, subject to a maximum of ₹ 10 crores.
Abuse of dominant position- Concept
Abuse is expressed to happen when an undertaking or a group of endeavors uses its
prevailing situation in the significant market in an exclusionary or/and in an
exploitative way. The Act gives a comprehensive list of practices that will
comprise abuse of a dominant position and, in which circumstances these are
disallowed. Such practices will establish misuse just when received by an endeavor
getting a charge out of a prevailing situation in the pertinent market in India. Abuse
of dominant position is decided as far as the predefined sorts of acts committed by
a prevailing undertaking. Such acts are precluded under the law. Any abuse of
dominant position indicated in the Act by a prevailing firm will stand denied.
As per explanation affixed to Section 4 of the Competition Act, 2002, dominant
position implies the quality of an endeavor in the significant market in India which
empowers the enterprise to work autonomously of serious powers winning in the
market and to influence the customers or contenders or the market in support of it.
Factors to determine the dominant position
Dominance has been customarily characterized as far as the part of the market
share of the enterprise or group of undertakings are concerned. In any case, various
different elements assume a role in deciding the impact of an undertaking or a
group of endeavors in the market. These include:
1. a market share.
2. the size and assets of the undertaking.
3. size and significance of contenders or competitors.
4. the financial intensity of the undertaking.
5. a vertical combination or integration.
6. a reliance on customers on the undertaking or undertaking.
7. degree of section and exit barriers in the market.
8. countervailing purchasing power.
9. market structure and size of the market.
10.a source of dominant position viz. regardless of whether acquired because
of resolution or statute and so on.
11.social expenses and commitments and commitment of big business
getting a charge out of the prevailing situation to financial improvement.
The Competition Commission of India is additionally approved to consider
whatever other factors which it might think about applicability for the assurance of
dominance.
