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Competition Act, 2002

2. CompetitionIs a situation in a market in which firms or
sellers independently strive for the buyers patronage in order to
achieve a particular business objective for example, profits, sales
or market share (World Bank, 1999)
3. Competition is an age-old phenomenonBenefits of
Competition: Companies : Efficiency, cost-saving operations,
better utilization of resources, etc. The Consumer : Wider choice
of goods at competitive prices The Government : Generates
economic efficiency in both static and dynamic senseprotecting
consumers from the undue exercise of market powerfacilitating
economic liberalization, including privatization. Deregulation and
reduction of external trade barriersPreserving and promoting the
sound development of a market economy
fairness and equity in market place transactions Protecting the
public interest including in some cases considerations relating
to industrial competitiveness and employment Protecting
opportunities for small and medium business
9. Competition Law It is a tool to implement and enforce
competition policy and to prevent and punish anti-competitive
business practices by firms and unnecessary Government
interference in the market. Competition Law generally covers 3
areas: Anti - Competitive Agreements, e.g., cartels, Abuse of
Dominant Position by enterprises, e.g., predatory pricing, barriers
to entry and Regulation of Mergers and Acquisitions (M&As).
10. Contd The need for Competition Law arises because
market can suffer from failures and distortions, and various
players can resort to anti-competitive activities such as cartels,

abuse of dominance etc. which adversely impact economic

efficiency and consumer welfare. Thus there is need for
Competition Law, and a Competition Watchdog with the authority
for enforcing Competition Law.
11. Elements of Competition Policy Putting in place a set of
Policies that enhance competition in local and national markets.
A Law designed to prevent anti competitive business practices
and unnecessary government intervention.
12. Competition Policy It includes Reforms in certain Policy
areas to make these more pro-competition:- Industrial policy
Trade policy Privatization/disinvestment Economic
Regulation State aids Labour policy Other such policies
13. Industrial Policy Industrial Policy has to address and reform
licensing requirements, restrictions on capacities, or on foreign
technology tie ups, guidelines on location of industries,
reservations for small scale industry, etc. These adversely affect
free competition in the market.
14. 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.
15. Privatization/Disinvestment Thus privatization of state
owned enterprises is important element of competition policy.
However, in privatization/ disinvestment process, care is to be
taken that state monopoly is not replaced by private monopoly.
16. 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. State owned enterprises

are generally insulated from market forces and receive

protection/benefits such as government imposed barriers to entry,
price regulation and subsidies.
17. Economic Regulations New legislation and regulations to
promote competition and to bring about restructuring of major
industrial sectors is essential. Legislation to aim at separating
natural monopoly elements from potentially competitive
activities, and the regulatory functions from commercial
functions, and also create several competing entities through
restructuring of essential competition activities and to create a
competitive environment . Examples: Electricity sector
Telecommunications sector Ports
18. State Aids Several state aids create unequal operating
conditions for businesses. Examples: Subsidies Tax rebates
Preferential loans Capital injection Experience suggests that
such policy measures rarely have successful results and destroy
incentives for firms to become efficient. Temporary specific
state- aid for well stated public purpose can be justified.
19. Evolution of Competition Law Before MRTP Act came into
force (1970), limited provisions existed under : The Indian
Contract Act Directive Principles of State Policy (Nonenforceable) The MRTP Act brought in a four-pronged thrust :
Concentration of economic power Restrictive Trade Practices
Monopolistic Trade Practices Unfair Trade Practices
20. MRTPs vis--vis Competition ActUnder the Competition Act :
No provision for Unfair Trade Practices Only Consumer Courts
will have jurisdiction Pending cases will be continued by MRTPC
for 2 years After 2 years : All cases (except Disparagement
Cases) will be transferred to National Commission under CPA All
Disparagement Cases will be transferred to Competition

21. Status of the Competition Commission It is a body corporate

It has Regulatory and quasi-judicial powers; functions through
Benches Each Bench shall consist of at least two Members and
one of such Members must be a judicial Member
22. Suo Moto Inquiry Commission has suo moto power to enquire
whether an Anti-Competitive Agreement or Abuse of Dominant
Position causes or is likely to cause an appreciable adverse effect
on competition This power must be exercised within one year
from the date combination has taken effect
23. Anti-competitive AgreementsThese are agreements which
cause or are likelyto cause an appreciable adverse effect
oncompetition within India: Horizontal Agreements:These are
between and among competitors who are at the same stage of
production, supply, distribution, etc.These are presumed to be
illegalExamples: cartels, bid rigging, collusive bidding, sharing
ofmarkets, etc.
24. Anti-Competitive AgreementsVertical Agreements: Vertical
Agreements are between parties at different stages of production,
supply, distribution, etc. These are not presumed illegal; are
subject to rule of reason.Examples: tie-in arrangements, exclusive
supply/distribution agreements, refusal to deal.
25. Agreement Any arrangement or understanding or action in
concert Whether or not such arrangement or understanding is
formal or in writingOr whether or not such understanding or
arrangement is intended to be enforceable by legal proceedings
26. Adverse effect on competition Creation of barriers to entry
Driving existing competitors out of market Benefits to
consumers Benefit to Scientific and technical knowhow
27. Agreements presumed to have adverse effect Directly or
indirectly determines purchase or sales price Limits or controls

production, supply, technical know how Shares the market or

sources of production Results in bid rigging or collusive bidding
28. CCI orders against Anti-competitive agreements Penalty
equal to three times the amount of profit made out of such
agreement or 10% of average turnover of the cartel for preceding
three years whichever is higher Modification directed to the

29. Powers of Competition Commission as Regards Agreements

After the inquiry into the Agreement, Competition Commission
can: direct parties to discontinue the agreement prohibit
parties from re-entering such agreement direct modification of
the agreement impose penalty upto 10% of average turnov er
of the enterprise
Competition ActThe prohibition on horizontal and vertical
agreements do not restrict the right of any person to impose
reasonable restrictions to protect any of his rights under the
Copyright Act, the Patents Act, the Trade and Merchandise Marks
Act, Designs Act
31. For those who would want to know more aboutanti
competitive agreements --- pls. visit thesite given below; it is a
good ppt by CCI
32. Abuse of Dominance Dominant position is defined as a
position of strength which enables the enterprise to operate
independently of competitive forces in the market, or to affect
its competitors or consumers in its favor. No mathematical or
statistical formula is adopted to measure dominance

33. Abuse of Dominant PositionIncludes practices like: Unfair

or discriminatory conditions or prices, Limiting or res tricting
production or technical/scientific development, Denial of
market access, and Predatory pricing.
34. Power of the Competition Commission After inquiry into
abuse of dominant position, the Competition Commission can
order: discontinuance of abuse of dominant position impose
a penalty upto 10% of the average turnover of the enterprise
35. Combinations Regulation Combinations, in terms of the
meaning given to them in the Act, include mergers,
amalgamations, acquisitions. in order to establ ish whether the
higher concentration in the market resulting from the merger will
increase the possibility of collusive or unilaterally harmful
behavior, it must first be established as to what the relevant
market is
36. ContdHorizontal MergersVertical MergersConglomerate
MergersPre-Notification The requirements for prior notification
37. Relevant Product Market Physical characteristics or end-use
of goods Price of goods or service Consumer preferences
Exclusion of in-house production Existence of sp ecialized
producers Classification of industrial products
38. Factors to be considered while determining Dominance
Dominant position linked to a host of factors Market share of
enterprise Size and resources of enterprise Size and
importance of competitors Commercial advantage of enterprise
over competitors
39. Relevant Geographic market Relevant geographic market
can be defined as the area in which products are available at
approximately the same price given transport costs and any
increase in demand can be met from neighboring areas profitably

40. Mergers and Acquisitions Commission is expected to

regulate Combinations, i.e., large mergers, acquisitions, etc.
likely to have appreciable adverse effect on competition.
Threshold:For single enterprise Assets > Rs.1000 crores
Turnover > Rs.3000 crores
41. Mergers and AcquisitionsThreshold:For group of enterprises
Assets > Rs.4000 crores Turnover > Rs.12000
croresSimilarly, threshold is provided for overseas groups.
42. Mergers & Acquisitions Notification of Combination to
Commission is voluntary If notified, Commission to take a
decision within 90 days on the combination. Decision may allow,
disallow, modify, etc. the combination.
43. Powers of Commission Cease and desist order Impose
penalty up to 10% of turnover. In case of cartel, penalty can be
10% of turnover or 3 times of profit illegally gained from cartel
activity, whichever is higher.
44. Powers of Commission Recommend to Government the
division of dominant Enterprise Various penalties ranging from
Rs.1 lac upto Rs.1 crore are also provided for failure to comply
with direction/order of Commission.
45. Competition Advocacy The Competition Commission of
India, in terms of advocacy provisions in the Act, is enabled to
participate in the formulation of the countrys economic policies
and to participate in the reviewing of laws related to competition
at the instance of the Central Government. Commission is
required to take measures for promotion of Competition
Advocacy, creating Awareness and imparting Training about
competition issues [Section 49(3)]
46. Contd Advocacy means competition promotion through
non- enforcement measures For promotion of competition
advocacy and creation of awareness about competition issues,

the Commission may:- i) Undertake appropriate programmes /

activities etc.; ii) Encourage and interact with the organizations of
stakeholders, academic community etc. to undertake activities,
programmes, studies, research work, etc. on competition issues;