The competition act 2002

The old law on Competition: MRTP Act, 1969 (Monopolies and Restricted Trade Practises Act)

Economic liberalisation has taken root in India and the need for an effective competition regime has also been recognised. In the context of the new economic policy paradigm, India has chosen to enact a new competition law called the Competition Act, 2002. The MRTP Act has metamorphosed into the new law, Competition Act, 2002. The new law is designed to repeal the extant MRTP Act1969.. As of now, only a few provisions of the new law have been brought into force and the process of constituting the regulatory authority, namely, the Competition Commission of India under the new Act, is on. Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India.
Salient features of competition act A. The pattern of the law In line with prevailing pattern of modern competition laws, the Act seeks to 1. prohibit anti-competitive agreements, which determine prices or control or limit or share markets among players or result in bid rigging. 2. prohibit abuse of dominance through unfair and discriminatory prices or conditions limiting or restricting production, denying market access, etc. 3. regulate combination (acquisition, mergers and amalgamations etc.) that causes or likely to cause appreciable adverse effect on competition. 4. entrust the Competition Commission of India the responsibility of undertaking competition advocacy, awareness and training about competition issues. B. Wide coverage of the Act Section 2(h) - Enterprise means a person or a department of government engaged in all the activities of a value chain of products and services directly or indirectly. However the activity of the Government relatable to sovereign functions and the activities carried on by the departments of the government dealing with atomic energy, currency, defence and space are kept out of the purview of the Act. Even statutory authorities regulating production or supply of goods or provision of any services or any markets for these are covered within the ambit of the Act. C. Anti-competitive agreements Section 3 -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. a. Horizontal Agreements, including cartels, which: - fix (determine) prices - limit or control production, supply, technical development etc. - allocate areas or customers - bid rigging or collusive bidding These type of agreements are presumed to cause appreciable adverse effect on competition.

b. Vertical Agreements such as: - tie in sales - exclusive supply or distribution - refusal to deal - resale price maintenance These type of agreements are not outright prohibited but subject to rule of reasoning. Only if they cause or likely to appreciable adverse effect on competition, they are prohibited. However, exemption has been provided to agreements involving intellectual property rights (IPRs) and to the right of any person to export goods from India to the extent the agreement relates exclusively to production, supply, distribution or control of goods or provision of services for such exports.

D. Abuse of dominance Section 4 - Dominance or Dominant Position means a position of strength, enjoyed by an enterprise, in the relevant market, in India which enables it to a. operate independently of competitive forces in the relevant market; or b. affect its competitors or consumers or the relevant market in its favour 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. 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. E. Regulation of combinations Section 5- 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 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. 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.

F. Remedies in Competition Act. Section 27 of the Act provides various remedies for restoring competition and penalizing the offenders in case of contravention of this law. They are - passing cease and desist order - providing agreements having appreciable adverse effect on competition to be void - imposing penalty upto 10% of the turnover or 3 times of cartelised profit, whichever is higher - awarding compensation or damages as per Section 34 - directing modifications to agreements - in case of combinations, they can be approved with or without modification or even be refused approval - in case of dominant enterprise, order can recommend division as provided in Section 28 of the Act G. Extra territorial application Section 32 of the Act covers Anti competitive practices committed overseas but having effect in India. In order to enable the Commission to implement this section, enabling provision (section 18) has been provided whereby the Commission, with the prior approval of the Central Government, may enter into arrangements and memorandum of understanding with foreign agencies and enforce the law by way of effects doctrine. H. Other salutary features of the Act a. Every order passed by the Commission is appealable. Writ jurisdiction of High Courts is available since the new Commission continues to be an instrumentality of a State under Article 12 of the Constitution b. Review and rectification of orders of Commission have been provided for under sections 37 and 38 respectively. c. Jurisdiction of civil courts (including sectoral regulators when functioning as civil courts) to adjudicate issues relating to competition matters have been expressly excluded under section 61 of the Act. d. Under section 35 of the Act, chartered accountants, company secretaries, cost accountants and advocates have been made eligible to cause appearance for and on behalf of their respective clients.