By KrishnaPrabhu J Krishna Kumar R Kannan P

KalaiArasan
Kumaresan A

Competition-What
A situation in a market, in which sellers independently

strive for buyers patronage to achieve business objectives

such as profits, sales or market share.

It is the foundation of an efficiently working market

system.

Competition-why
The ultimate objective of competition is to secure the interest of

the Consumer - it empowers the consumer, best guarantee for consumer protection.
It is a means of reducing cost and improving quality.
It also implies an open market where shortages are rapidly

eliminated through the best allocation of resources.

It accelerates growth and development; preserves economic and

political democracy.

Competition Policy
Competition policy is defined as those Government

measures that affect the behavior of enterprises and structure of the industry. It is to promote efficiency and maximize welfare. (Sum of consumers. surplus & producers. surplus and taxes collected by the Government).

Competition Policy-Goals
Preservation and promotion of the competitive process.
Efficiency in production and allocation of goods and

services.
Innovation and adjustment to technological change. Sustained economic growth.

The New Law

A new law called competition act 2002 has been enacted to

replace the extant law, MRTP act 1969.

The new law was challenged in the supreme court on the

ground that the chairperson should only be from the judiciary.

The new law has been amended on 10 sep 2007 by the

parliament.

Competition act-Objective
Competition act, 2002 notified in January 2003. Stated objective

in preamble is to provide for Establishment of a Commission.

to prevent practices having appreciable adverse effect on

competition;
to promote and sustain competition in markets; to protect the interest of consumers to ensure freedom of trade carried on by other participants in

markets, in India

Main Features
Prohibits Anti Competitive Agreements. (sec 3)
Prohibits Abuse of Dominant Position. (sec 4) Provides for Regulation of Combinations. (sec 5,6) Enjoins competition Advocacy. (sec 49)

Anti-Competitive Agreements
Section 3 of the Act deals with agreements among enterprises or

persons or association of persons, which causes or likely to cause appreciable adverse effect on competition. Such agreements are rendered void pursuant to this section. The Act deals with following kind of agreements.
Horizontal Agreements

Vertical Agreements

Horizontal Agreements
Agreements between enterprises at the same stage of production,

services, etc. and including Cartels.

Examples : (i) directly or indirectly determines purchase or sale prices;

(ii) limit or control production, supply, technical development etc.

(iii) allocate areas or customers (iv) Directly or indirectly results in bid rigging or collusive bidding.
Above agreements are presumed to cause appreciable adverse effect on

competition in the markets.

Vertical Agreements
Agreements between enterprises at different stages of production,

distribution, etc.- subject to Rule of Reason; burden of appreciable adverse effect on competition, they are prohibited. Examples : (i) Tie-in arrangement; (ii) Exclusive supply agreement; (iii) Exclusive distribution agreement; (iv) Refusal to deal; (v) Re-sale price maintenance.

Abuse of Dominance
Unlike MRTP law, the Act does not frown on dominance by

market players. But the abuse of dominance is prohibited under Section 4 of the Act. Dominance or Dominant Position means a position of strength, enjoyed by an enterprise, in the relevant market, in India which enables it to

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a. operate independently of competitive forces in the relevant
market; sec .19(7) or b. affect its competitors or consumers or the relevant market in its

favors sec .19(9)

Dominance is determined by several factors e.g. market share of the enterprise concerned, market share of competitors, entry barriers,

size and resources commanded by the enterprise or competitors,

etc. sec .19(4)

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Examples of abuse include
Exclusionary practices such as predatory pricing, denying

market access, use of dominance in one market to enter into, or protect, other relevant market.
Exploitative practices such as discriminatory pricing and

imposing discriminatory conditions of trade, conclusion of main contract contingent upon accepting supplementary obligations unrelated to main contract.

Regulation of Combinations.
Section 5 of the Act deals with combinations. Combination includes

acquisition of shares, acquiring of control and mergers and amalgamations. These combinations can be horizontal, vertical or

conglomerate. It is the horizontal type of combinations that has very

high potential to thwart competition when compared to other two kinds of combinations.
In line with the market realities, the Act provides for very liberal regime

of combination regulation. The salient features of combination regulations are

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a. The Act has set very high threshold limit based on turnover or assets of the enterprises involved in combination for notification of combinations. The objective is to keep smaller combinations outside regulation and encouraging Indian enterprises to grow in size as well market share in globalised market. b. Higher threshold limit is set for combination involving parties having operation both in India and outside India. c. The notification of combination to the Commission is voluntary not mandatory.

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d. Such notification has to be disposed off by the Commission within
90 working days, failing which the same is deemed to be approved. e. The commission also has the suo moto enquiry power.

f. Limited exemption is given to combination involving public financial

institution, foreign institutional investors and venture capital fund.

Competition Advocacy
The Commission shall take suitable measures to:

-Promote competition advocacy. -create public awareness. -Impact training about competition issues.
The commission shall opinion on a reference from the

central government on a policy/ law on competition; not

binding. [sec 49]

Examples
Initiatives by commission in respect of:

-Department of Posts - Indian post office (Amendment bill), 2006 monopoly of letter mail, regulator, etc. -Department of shipping- shipping conference s- traiff USO fee, new

fixing; and shipping trade practices Bill, 2005

-Ministry of civil aviation- price fixing by airline association

Power of commission
Cease and desist order
Penalty up to 10% of average turnover for last three

preceding financial years.

In case of combination- can be approved, approved with

modification, or refused approval.

In case of dominant enterprise- Order for division of

dominant enterprise.

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Approach commission any person; individual, company,

firm, association, statutory corporation, government company, legal authority, etc.

Consumer means one who buys goods/ avails services for

consideration.
Reference by central/ state government, statutory

authority.