COMPETITION ACT, 2002

The Competition Commission of India imposed the fine late on

Tuesday saying Coal India abused its dominant position and
imposed unfair conditions in fuel supply agreements with
customers.. Rs. 1770 crore penalty.
Dec 11, 2013
Micromax has filed a complaint to the CCI that Ericsson has
used its position of power to impose exorbitant royalty rates
on Micromax. Instead of basing the royalties on the value of the
patents, Ericsson is said to have based them on the price of the
phone, which makes them much higher.
Nov 29, 2013

SYNOPSIS
1. INTRODUCTION
2. DEFINITIONS
3. ANTI-COMPETITIVE AGREEMENTS
4. ABUSE OF DOMINANCE POSITION
5. REGULATION OF COMBINATIONS
6. COMPETITION COMMISSION OF INDIA
7. MISCELLANEOUS PROVISIONS
8. CONCLUSION

INTRODUCTION
Based on Articles 38 and 39 of the Constitution of India.

Mandates inter alia, that the State shall strive to

promote the welfare of the people by securing and
protecting as effectively, as it may, a social order in
which justice social, economic and political shall inform
all the institutions of the national life, and the State
shall, in particular, direct its policy towards securing:
1. That the ownership and control of material resources
of the community are so distributed as best to sub
serve
the
common
good;
and
2. That the operation of the economic system does not
result in the concentration of wealth and means of
production to the common detriment.

Introduction ..Contd.

MRTP Act obsolete in the light of the economic

developments relating more particularly to competition
laws
Need was felt to shift the focus from curbing
monopolies to promoting competition.
Preamble of the Act is to provide, keeping in view of the economic
development of the country,
(i.) for the establishment of a Commission to prevent practices having
adverse effect on competition,
(ii.) to promote and sustain competition in markets,
(iii.) to protect the interest of consumers and
(iv.) to ensure freedom of trade carried on by other participants in
markets, in India, and for matters connected therewith or incidental
thereto.

Distinction between MRTP Act and Competition Act

1.

Based on pre-reforms scenario.

1.

Based on post-reform scenario.

2.

Competition offences implicit or not

defined

2.

Competition offences explicit and

defined

3.

Complex in arrangement and language

3.

4.

Frowns upon dominance

Simple in arrangement and

language and easily
comprehensible

5.

Registration of agreements compulsory

4.

Frowns upon abuse of dominance

6.

No combinations regulation

5.

7.

Competition Commission appointed by

the Government

No requirement of registration of
agreements

6.

Combinations regulated beyond a

high threshold limit.

7.

Competition Commission selected

by a Collegium (search committee)

Distinction ..Contd.

8.

Very little administrative and

financial autonomy for the
Competition Commission

9. No competition advocacy role for the

Competition Commission
10. No penalties for offences
11. Reactive and rigid
12. Unfair trade practices covered

8. Relatively more autonomy for the

Competition Commission
9. Competition Commission has
competition advocacy role
10. Penalties for offences
11. Proactive and flexible
12. Unfair trade practices omitted
(consumer fora will deal with them)

 Competition Act comprises of 66 Sections.

Competition Act, 2002 has essentially four
compartments:
1. Anti - Competition Agreements
2. Abuse of Dominance
3. Combinations Regulation
4. Competition Advocacy

DEFINITIONS
Section 2 defines various expressions used in the Act.
Important definitions:
1. Cartel: It includes an association of producers, sellers,
distributors, traders or service providers who, by
arrangement amongst themselves, limit, control or
attempt to control the production, distribution, sale or
price of, or trade in goods or provision of services.
2. Commission: Means the Competition Commission of
India established under Section 7(1).

Definitions..Contd.

3. Consumer: means any person who

(i) buys any goods for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred
payment and includes any user of such goods other than the person who
buys such goods for consideration paid or promised or partly paid or
partly promised, or under any system of deferred payment when such
use is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been
paid or promised or partly paid and partly promised, or under any
system of deferred payment and includes any beneficiary of such
services other than the person who hires or avails of the services for
consideration paid or promised, or partly paid and partly promised, or
under any system of deferred payment, when such services are availed
of with the approval of the first-mentioned person whether such hiring
or availing of services is for any commercial purpose or for personal
use;

Definitions..Contd.

4. Enterprise: means a person or a department of the Government, who

or which is, or has been, engaged in any activity, relating to the
production, storage, supply, distribution, acquisition or control of articles
or goods, or the provision of services, of any kind, or in investment, or in
the business of acquiring, holding, underwriting or dealing with shares,
debentures or other securities of any other body corporate, either directly
or through one or more of its units or divisions or subsidiaries, whether
such unit or division or subsidiary is located at the same place where the
enterprise is located or at a different place or at different places, but does
not include any activity of the Government relatable to the sovereign
functions of the Government including all activities carried on by the
departments of the Central Government dealing with atomic energy,
currency,defence and space.

Definitions..Contd.

Explanation.-For the purposes of this clause,

(a) "activity" includes profession or occupation;
(b) "article" includes a new article and "service" includes a new
service;
(c) "unit" or "division", in relation to an enterprise, includes
(i) a plant or factory established for the production, storage, supply,
distribution, acquisition
or control of any article or goods;
(ii) any branch or office established for the provision of any service.
5. Relevant Market: 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 the markets;

Definitions..Contd.

6. Relevant Geographic Market: means a market comprising

the area in which the conditions of competition for supply of
goods or provision of services or demand of goods or services
are distinctly homogenous and can be distinguished from the
conditions prevailing in the neighbouring areas.
7. Relevant Product Market: means a market comprising all
those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of
characteristics of the products or services, their prices and
intended use.

ANTI-COMPETITIVE AGREEMENTS
Section 3 provides for prohibition of entering into anticompetitive agreements.
No enterprise or association of enterprises or
person or association of persons shall enter into
any agreement in respect of production, supply,
distribution, storage, acquisition or control of
goods or provision of services, which causes or
likely to cause an appreciable adverse effect on
competition within India .
Any agreement entered into in contravention of
this provision shall be void.

Anti-competitive AgreementContd.

Agreements entered into between enterprises or associations of

enterprises or persons or associations of persons or between any
person and enterprise or practice carried on, or decision taken by,
any association of enterprises or association of persons, including
cartels, engaged in identical or similar trade of goods or provision of
services, which
(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,
shall be presumed to have an appreciable adverse effect on
competition.

Anti-competitive AgreementContd.

Some Agreements that are void under this Section are:

1. Tie in Agreement Includes an agreement requiring a
purchaser of goods, as a condition of such purchase, to
purchase some other goods.
2. Exclusive Supply Agreement: Includes any agreement
restriciting 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.
3. Exclusive Distribution Agreement: Includes any
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.

Anti-competitive AgreementContd.

4. Refusal to deal: Includes any agreement which restricts,

or is likely to restrict, by any method the persons or class of
persons to whom goods are sold or from whom goods are
bought.
5. Resale Price Maintenance: Includes any agreement to sell
goods on condition that the price 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.
The provision does not apply to agreements entered into
by way of joint ventures if such agreement increases
efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.

Anti-competitive AgreementContd.

The provision of Section 3 does not apply to:

1. 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.
(b) the Patents Act, 1970.
(c) the Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999
(e) the Designs Act, 2000.
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000.
2. 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.

Anti-competitive agreements are classified into:

Vertical agreements that include Tie-in arrangements,
Exclusive supply agreements, Exclusive distribution
agreements and Resale price maintenance.
Horizontal agreements (in relevant markets) that include
Prices, Quantities, Bids, Market sharing and Refusal to
deal.

ABUSE OF DOMINANT POSITION

Section 4 prohibits abuse of dominant position by any
enterprise.
Dominant

Position has been appropriately

defined in the Act in terms of the position of
strength, enjoyed by an enterprise, in the
relevant market, in India, which enables it to (i)
operate independently of competitive forces
prevailing in the relevant market; or (ii) affect
its competitors or consumers or the relevant
market, in its favour.

Abuse of Dominant PositionContd.

Dominant

position is abused when an

enterprise imposes unfair or discriminatory
conditions in purchase or sale of goods or
services or in the price in purchase or sale of
goods or services.

There is no control whatsoever to prevent

enterprises from coming into or acquiring
position of dominance. All that the Act
prohibits is the abuse of that dominant
position.
The Act therefore targets the abuse of
dominance and not dominance per se.

REGULATION OF COMBINATIONS
Sections 5 & 6 deal with combination of enterprises and persons.
Regulates the operation and activities of combinations,
a term, which contemplates acquisitions, mergers or
amalgamations.
Competition Act is not confined to transactions strictly
within the boundaries of India but also such
transactions involving entities existing and/or
established overseas.
The Act has made the pre-notification of combinations
voluntary for the parties concerned.
if the parties to the combination choose not to notify
the CCI, as it is not mandatory to notify, they run the
risk of a post-combination action by the CCI, if it is
discovered subsequently, that the combination has an
appreciable adverse effect on competition.
Rider to the provision - CCI shall not initiate an inquiry
into a combination after the expiry of one year from the

Threshold:

In India

Applicabl
e to

As sets
(In
Rupees)

Turnover
(In
Rupees)

Individual
parties

1000 cr.

3000 cr.

Group

4000 cr.

12000 cr.

Applicable to

In India
and
outside

Assets

Turnover

Total

Minimum
Indian
Component
out of total

Total

Minimum
Indian
Component
out of total

Individual
parties

$500 m

Rs. 500 cr.

$
1500
m

Rs. 1500cr

Group

$2,000 m Rs. 500 cr.

$
6000

Rs. 1500cr

Horizontal/Vertical agreements relating

to prices, discounts, output or the sharing
of the markets often restrain the
competitors and directly or indirectly limit
access to market.
Such agreements are prohibited by
competition law as per se offences.

COMPETITION COMMISSION
Sections 7-40 deal with the Competition Commission, its
composition, powers, duties, jurisdiction, inquiries,
procedures for inquiriesetc.
Competition Commission of India (CCI) is the apex
body vested with the responsibility of:
a. eliminating practices having adverse effect on
competition
b. promoting and sustaining competition
c. protecting the interest of the consumers and
d. ensuring freedom of trade carried on by other
participants in India
Successor to the MRTP Commission.

Competition Commission..Contd.

CCI consists of a chairman, who is to be

assisted by a minimum of two, and a
maximum of ten other members to be
appointed by the Central government.
Functions of CCI:
a.Acts as a law enforcement agency
b. actively involved in the formulation of the
country's economic policies
c. advise the government on competition
policy
d. take suitable measures for the promotion
of competition advocacy

Competition Commission..Contd.

e. To create awareness and impart training about

competition issues.
f. The Commission assumes the role of competition
advocate
g. Section 49 deals exclusively with competition
advocacy.
h. In formulating a policy on competition (including
review of laws related to competition), the Central
Government may make a reference to the
Commission for its opinion on possible effect of such
policy

MISCELLANEOUS PROVISIONS
1. Power to grant interim relief (S.33)
2. Power to award compensation (S.34)
3. Power of Commission to regulate its own procedure(S.36)
4. Constitution of Fund (S.51)
(a.) All government grants received by the Commission,
monies received as costs and fees received under the Act to
constitute fund.
(b.) Fund to be applied for meeting salaries and allowances
to those employed to the Commission and other
administrative expenses.
(c.) Fund to be administered by those appointed by the
Chairman.

Misc. Provisions..Contd.

5. Penalties:
a. Contravention of orders of Commission (S.42) liable
to be detained in civil prison for 1 year or penalty upto
Rs.Ten Lakhs as the Commission directs.
b. Penalty for failure to comply with directions of
Commission and Director General (S 43) Penalty of
Rs.One lakh for each day of failure.
c. Penalty for making false statement or omission to
furnish material information (S.44) penalty of not less
than Rs. 50 lakh upto Rs. One crore.
d. Power to impose lesser penalty (S.46)

CONCLUSION
Vigorous Competition vital to innovation, strong
and effective markets, consumer interest and
productivity growth in the economy.
Liberal trade policy along with sound
competition policy by preventing anticompetitive business practices and unnecessary
government intervention- essential to achieve
maximum economic efficiency.
A good competition policy , along with a sound
competition law, helps in fostering competition,
economic efficiency, consumer welfare and
freedom of trade, which should equip the Govts
in meeting the challenges of globalization by
increasing competition in local and national

A dealer compels and pressurizes the purchaser of a

refrigerator to take post warranty service contract at
the time of purchase of the fridge as a condition of
such purchase. Does this amount to anti-competition
agreement?

Do the following amount to anti-competitive agreements?

Give reasons in support of your answer:
(i) An agreement requiring a distributor not to sell the goods
of the manufacturer in the States other than Gujarat and
Maharashtra
(ii) A stipulation in an agreement that the dealer shall not sell
the goods below the stipulated price
(iii) An agreement containing a clause that there will be
discontinuation in the supply of goods if the dealer is
also dealing in the product of suppliers competitors
(iv) An agreement stipulating the source of raw material for
ensuring the quality of goods to be exported

v. 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.
vi. Agreement not to bid beyond a particular price.