THE COMPETITION ACT2002

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-whyThe 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 PolicyCompetition 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-GoalsPreservation 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 LawA 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-ObjectiveCompetition 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 FeaturesProhibits 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 AgreementsSection 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 AgreementsAgreements 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 AgreementsAgreements 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 –

Continue….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)

Continue…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 –

Continue…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.

Continue…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 AdvocacyThe 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]

ExamplesInitiatives by commission in respect of:

-Department of Posts - Indian post office

(Amendment bill), 2006 – monopoly of letter mail,

USO fee, new regulator, etc.

-Department of shipping- shipping conference s-

traiff fixing; and shipping trade practices Bill, 2005

-Ministry of civil aviation- price fixing by airline

association

Power of commissionCease 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.

Continue…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.

Thank You!