CHAPTER 2

INDIAN COMPETITION LAW

2.1 Introduction

The Preamble to the Constitution of India has embodied the word “Socialist” with a
very high object. The idea of inclusion of the word “Socialist” is to ensure equality in
income, status and standard of life.1 This objective can be attained if the State
activities are concentrated more and more on nationalization and state ownership of
industries.2 The word "Socialist" is to be read with the expression “social justice”
which casts obligation on the government to remove economic inequalities, to ensure
decent standard of living irrespective of the rich and the poor and to protect the
interests of the weaker sections of the society.3

The Hon’ble Supreme Court of India in the case of the Competition Commission of
India v. SAIL4, summarized the concept and importance of a fair and healthy
competition as:

“Over all intention of competition law is to limit the role of market power that
might result from substantial concentration in a particular industry. The major
concern with monopoly and similar kinds of concentration is not that being big
is necessarily undesirable. However, because of the control exerted by a
monopoly over price, there are economic efficiency losses to society and
product quality and diversity may also be affected. Thus, there is a need to
protect competition. The primary purpose of competition law is to remedy
some of those situations where the activities of one firm or two lead to the
breakdown of the free market system, or, to prevent such a breakdown by
laying down rules by which rival businesses can compete with each other. The
model of perfect competition is the economic model that usually comes to an
economist’s mind when thinking about the competitive markets.”

1
D.S. Nakara v. Union of India, AIR 1983 SC 130: (1983) 1 SCC 305: 1983 (1) SCJ 188.
2
Excel Wear v. Union of India, AIR 1979 SC 25: (1978) 4 SCC 224: (1979) 1 SCR 1009.
3
Samatha v. State of Andhra Pradesh, (1997) 8 SCC 191: AIR 1997 SC 3297: 1997 AIR SCW 3361.
4
(2010) 10 SCC 744.
 Chapter 2: Indian Competition Law

Like all other legislations, the competition legislations in India derive their validity
through the Constitution of India. Under the directive principles of state policy,
Article 38 and Article 39 impose a duty upon the state regarding the economic and
social welfare for its citizens.
Article 38 and 39 of the Constitution of India provides:
38. State to secure a social order for the promotion of welfare of the
people:

(1) 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.

(2) The State shall, in particular, strive to minimise the inequalities in income,
and endeavour to eliminate inequalities in status, facilities and opportunities,
not only amongst individuals but also amongst groups of people residing in
different areas or engaged in different vocations.5

39. Certain principles of policy to be followed by the State:

The State shall, in particular, direct its policy towards securing –

(a) that the citizens, men and women equally, have the right to an adequate
means of livelihood;

(b) that the ownership and control of the material resources of the community
are so distributed as best to subserve the common good;

(c) that the operation of the economic system does not result in the
concentration of wealth and means of production to the common detriment;

(d) that there is equal pay for equal work for both men and women;

(e) that the health and strength of workers, men and women, and the tender
age of children are not abused and that citizens are not forced by economic
necessity to enter avocations unsuited to their age or strength;

5
Article 39, the Constitution of India.

45
 Chapter 2: Indian Competition Law

(f) that children are given opportunities and facilities to develop in a healthy
manner and in conditions of freedom and dignity and that childhood and youth
are protected against exploitation and against moral and material
abandonment.6

The Government of India under these mandates wanted that the operation of the
economic system does not result in the concentration of economic power to the
common detriment and to prohibit monopolistic and restrictive trade practices against
the public interest.

2.2 Development of Competition Law in India

2.2.1 The Monopolies and Restrictive Trade Practices Act, 1969

The first law on competition adopted in India was the Monopolies and Restrictive
Trade Practices (MRTP) Act, 1969.7 On the basis of the recommendations of the
Monopolies Inquiry Commission (MRTP Commission), the government laid down the
Monopolies and Restrictive Trade Practices Bill before both the Houses of Parliament
in 1966 and accordingly, the MRTP Act, 1969 was passed. The MRTP Act had been
enacted to restrain the concentration of economic power which was not a mechanism
to deal with issues relating to the protection and preservation of competition. Various
factors had contributed to this position, such as the high cost entry into industry, the
rigid control by the Central Government by issue of capital by companies, issue of
industrial licences, etc. As it was the need of that time, the primary goal of the Act
was to regulate the further activities of those industries that by the definition of the
MRTP Act under Chapter III were undertakings where economic power was
concentrated. Concentration was measured in terms of the prescribed value of the
assets owned or controlled by any undertaking, singly or along with interconnected
undertakings or as a dominant undertaking.

The objective that was sought to be achieved at that time through the MRTP Act was
ensuring that large industrial houses, which were covered by the definition under

6
Article 38, the Constitution of India.
7
Nomani, M.Z.M. & Aijaj A. Raj, Competition Laws and Policies in BRICS Region: Challenges and
Opportunities, 1 (2) MANUPATRA COMPETITION LAW REPORTS 131 (2016).

46
 Chapter 2: Indian Competition Law

Section 20 of Chapter III of that Act, in terms of the value of the assets they
controlled, did not deprive smaller enterprises of their share of the resources of the
country and that large industrial houses fell in line with the country’s planning
priority. The main purpose of the MRTP Act was containment of concentration of
economic power, not issues relating to competition though prohibition of
monopolistic and restrictive trade practices restraining competition was also within
the scope of the Act.

Thus, the purpose for which the MRTP Act was enacted in 1969 was relevant at that
time. But, the Act has become obsolete in view of international economic
developments for removing controls and resorting to liberalisation by opening up the
economy of the country to face competition from the country and outside. The
changing environment demanded a new machinery to meet the upcoming challenges
for the protection and promotion of competition.

2.2.2 High Level Committee on Competition Policy and Law

In 1991, widespread economic reforms had shifted the world economy from
“Command-and-Control” to “Laissez Faire” economy based more on free market
principles. With the changing perspectives of competition law in the globalised
economy, the objective has been shifted from preventing monopoly to promoting
competition in the market. Like other countries, economic liberalisation has taken root
in India and the need for an effective competition law and policy has been felt. India,
acknowledging the liberalization, privatization and globalization, opened up its
economy by removing controls during the Economic liberalisation.

A High Level Committee on Competition Policy and Law was appointed by the
Central Government in 1999 to study the Indian economic scene and to make
appropriate recommendations for competition policy that would meet the changing
economic needs of the country and provide the basis for competition legislation.8 The
Committee submitted its report on May 22, 2000 to the government. The government
consulted various trade and industry associations and also the general public on this

8
Nomani, M.Z.M. & Aijaj A. Raj, Legal Policies For Competition & Free Trade In BRICS Region,
RISING INDIA, CHINA SOUTH AFRICA AND BRAZIL: CHALLENGES AND STRATEGIC
OPTIONS 99-105 (Mohammad Gulrez ed., PIP) (2016).

47
 Chapter 2: Indian Competition Law

subject. All these efforts finally culminated into the drafting of the Competition Bill,
2001.9 The President gave his assent to the Competition Act, 2002 on 13 January
2003. In the context of the new economic policy paradigm, India has enacted the new
competition law i.e., the Competition Act, 2002.10

The Preamble to the Act set out its object as to provide for the establishment of a
Competition Commission, “...to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other participants in markets,
in India...” and for incidental matters. The main objective is to have a law relating to
competition that will ensure that the competition is not left to the enterprises to
manipulate the market to their advantage and to the disadvantage of consumers.

To have a complete view of the development of the new competition law in India, we
need to understand the economic milieu which led India to enact this Act. With
India’s move to liberalizing trade and the entry of large multinational companies into
India, numbers of factors led to the development, the important among them are the
obligations came from the World Trade Organization (WTO) Agreements, viz. the
General Agreement on Trade and Services (GATS), Trade Related Aspects of
Intellectual Property Rights (TRIPS), etc. More importantly, India began to realize
that, without having legislation on competition; the process of competition cannot be
protected.

2.2.3 World Trade Organisations’ Obligations

The WTO is a common institutional framework for the conduct of trade relations
among its members. The obligations under the agreements of the WTO, made it
necessary for the government to provide all legal means to ensure reciprocal rights to
the other members of the WTO. The material agreements under the WTO are the
GATS, 1994 and the TRIPS, 1995. These multilateral agreements are entered into by
the governments of the member states. India is a member of the WTO. GATT and
GATS provide for the liberalization of the international movement of goods, services,

9
DR. H. K. SAHARAY, TEXTBOOK ON COMPETITION LAW 5 (2d ed. 2016).
10
Surabhi Singhi, Competition Act, 2002 And Its Relevance (Jan. 4, 2018)
http://www.legalserviceindia.com/articles/compet.htm.

48
 Chapter 2: Indian Competition Law

and service providers. The TRIPS Agreement is in recognition of “the need to

promote effective and adequate protection of intellectual property rights and to ensure
that measures and procedures to enforce intellectual property rights do not themselves
become barriers to legitimate trade”. These agreements also provide guidelines for the
member states as to their trade regulations and other laws as they may affect trade.

General Agreement on Trade and Services

GATS provides a multilateral framework of principles and rules for trade in services
with a view to the expansion of such trade with transparency and ensuring progressive
liberalization. GATS applies to measures by members affecting trade in services.
Trade in services means the supply of a service. The supply may be

(a) from one’s own territory into a territory of another member;

(b) in one’s own territory to a consumer visiting that country (for example,
tourism);

(c) the supply of a service in another territory through the commercial

presence of a service supplier (for example, banking);

(d) through the presence of natural persons representing a service supplier of

one territory in another territory (for example, construction projects or
circumstances).

Services are defined as including any service in any sector except services supplied in
the exercise of governmental authority.

Substance of the Articles of General Agreement on Trade and Services

The Articles GATS that are relevant for the purpose of the law relating to competition
are the following:

Domestic Regulation

Article VI11 requires that any member that has undertaken specific commitments in
any sector relating to the supply of any service shall ensure that its measures, which

11
Article VI, General Agreement on Trade and Services.

49
 Chapter 2: Indian Competition Law

mean governmental action, affecting trade in services,12 are administered in a

reasonable, objective, and impartial manner. The purpose is that enterprises of one
country operating in another country do not have cause for complaining that they are
discriminated against.

There should also be provided, subject to the constitutional provisions of that

member, a mechanism for review, at the request of an affected supplier of a service,
of administrative decisions affecting trade in services. The qualification requirements,
technical standards, licensing requirements and procedures should not create
unnecessary barriers to trade in services.

In sectors where professional services are needed to be undertaken, each member

shall provide for adequate procedures to verify the competence of professionals of any
other member. The member country, through harmonization, or agreement with the
country concerned, or by itself, may determine the requisite criteria for certification of
such service suppliers. The recommendation is that wherever appropriate, recognition
should be based on multilaterally agreed criteria.13

Monopolies and Exclusive Service Suppliers

Article VII requires the member states to ensure that any monopoly supplier of a
service in its territory, does not, in the supply of the monopoly service in the relevant
market, act in conflict with the obligations of that member to give equal treatment to
all services and service suppliers to all countries and does not also act against any
specific commitments that may have been given by that member. 14

A “monopoly supplier of a service” means any person, public or private, which in the
relevant market of the territory of a member is authorized or established formally or in
effect by that member as the sole supplier of that service.

The provisions of this Article shall also apply to cases of exclusive service suppliers,
where a member, formally or in effect

(a) authorizes or establishes a small number of service suppliers; and

12
Article 1.1, General Agreement on Trade and Services.
13
Article VII, General Agreement on Trade and Services.
14
Article VIII, General Agreement on Trade and Services.

50
 Chapter 2: Indian Competition Law

(b) substantially prevents competition among those suppliers in its territory.

Business Practices

Article IX provides the means for members to deal with certain business practices of
service suppliers, other than monopoly and exclusive suppliers of services 15, covered
by Article VIII, which may restrict trade in services by restraining competition. The
issue is expected to be resolved through consultations among the members involved,
with a view to eliminating such practices.

Trade Related Aspects of Intellectual Property Rights

The TRIPS aims “to promote effective and adequate protection of intellectual property
rights, and to ensure that measures and procedures to enforce intellectual property
rights do not themselves become barriers to legitimate trade”. The principal objective
of TRIPS is to “obtain the establishment of legislation in member states that would
prevent the abuse of intellectual property rights by right holders, or their resort to
practices which unreasonably restrain trade or adversely affect the international
transfer of technology”.16 It makes provisions relating to copyright and related rights,
trademarks, geographical indications, industrial designs, patents, layout-designs
(topographies) of integrated circuits, protection of undisclosed information, and
control of anti-competitive practices in contractual licences.

Article 40 of TRIPS providing for the control of anti-competitive practices in

contractual licences is relevant. It permits members to specify in their legislation what
would constitute an abuse of intellectual property rights having an adverse effect on
competition in the relevant market. The members may also take appropriate measures
to prevent or control such practices. The following practices are given as examples of
such practices: exclusive grant-back conditions, conditions preventing challenges to
validity and coercive package licensing.

15
Article IX., General Agreement on Trade and Services.
16
Article 8(2), Trade Related Aspects of Intellectual Property Rights.

51
 Chapter 2: Indian Competition Law

2.2.4 World Trade Organisation Agreements and India

The obligations following from the WTO Agreements provided the immediate need
for a governmental policy requiring actions to be reasonable, objective, impartial, and
non-discriminatory in relation to suppliers who enter the Indian market pursuant to the
liberalization of any sector on the commitment given by India to provide for market
access. Nevertheless, the country, with its domestic and overseas suppliers already
based in lndia, needed a competition policy and law for the pre-WTO market itself.
Only, the new suppliers, who have changed the composition of the market, its mix,
and its capabilities have brought into focus the urgency for a law to regulate the
overseas providers of goods and services operating in India also so that, while they
are assured of a policy relating to competition that is fair to everyone, they submit to
the law of the country intended for preserving the process of competition from
manipulation.

Some of the clauses of these agreements also require that an overseas supplier of a
product or a service entering the Indian market taking advantage of the-liberalization
process is not discriminated against. It may be noted that the provisions of these
agreements do not directly confer on any individual supplier any substantive tight to
enforce any of these obligations. The agreements are between governments and it is
only an affected member state that may complain of a failure by another member state
to comply with any part of any of the agreements and seek redress.17

2.2.5 The Committees Assessment

The Committees assessment on Competition Policy and Law of the new business
environment, the obligations on India by the GATS and TRIPS, and the relationship of
those obligations in relation to the Act are discussed in detail below. The Committee
had made an assessment of the Indian economy through the various economic and
fiscal policies of the government over past decades. After making an extensive study
of the government’s policies and their effect on the business environment in India, the
Committee found the existing policies inadequate to give the industries a competitive
environment due to various factors responsible for the same. The Committee also

17
T. RAMAPPA, COMPETITION LAW IN INDIA POLICY, ISUES, AND DEVELOPMENTS 7-13
(1st ed. 2006).

52
 Chapter 2: Indian Competition Law

came to the conclusion that necessary steps were needed to have a legal framework to
provide an environment in which competition may be preserved.

The assessment report of the Committee, submitted in 2000 was as follows:

To summarize, the strategy of import substituting development along with the

distorted price structure led to an allocation of resources towards heavy
industry and the capital goods sector, which was not based on the principles of
comparative advantage. The absence of domestic competition, along with the
unconditional protection from imports provided to domestic industry together
with the other aspects of the licensing regime fostered a high cost industrial
structure which was domestically inefficient in the utilization of resources and
not competitive abroad. In addition to the static misallocation and inefficient
utilization of resources, the system was also dynamically inefficient in so far
as it was not likely to encourage technical change. On the other hand, a
competitive market structure with ‘right’ prices would have promoted a
dynamic, efficient, productive and competitive industrial sector. A competitive
financial sector would have ensured better utilization of scarce financial
resources and have had a positive impact on the productivity of the industrial
sector.

The major recommendations by the Committees were:

(a) the MRTP Act should be repealed and an Act called the Indian Competition
Act, 2002 be enacted; that this Act would regulate anti-competitive agreements
or practices, abuse of dominance and combinations, which would include
mergers;

(b) there should be a progressive reduction and ultimate elimination of

reservation of products for the small-scale industries and the handloom sector;

(c) the economic reforms of liberalization, deregulation, and privatization

should be further progressed; government should divest its shares and assets in
state monopolies and public enterprises and privatize them in all sectors other
than those sub serving defence and security needs;

53
 Chapter 2: Indian Competition Law

(d) the proposed legislation should cover all industries in the public and
private sector and professional services.

2.2.6 Statement of Objects and Reasons - The Competition Bill, 2001

The Statement of Objects and Reasons of the Competition Bill, 200118 lays down the
principal objectives which are reproduced below:

1. In the wake of globalisation, India too has responded by opening up its

economy, removing market barriers and resorting to liberalisation. This
demanded that the Indian market should be conductive to face competition
from within the country and outside. In this aspect, the MRTP Act, 1969 has
become obsolete in the light of international economic scenario particularly
with respect to competition laws and there is a need to shift the focus from
curbing monopolies to promoting competition.
2. A High Level Committee on Competition Policy and Law was
constituted by the Central Government. The Committee submitted its report on
the 22nd May, 2000 to the Central Government. The Central Government
consulted all concerned, including the trade and industry associations and the
general public. The Central Government after considering the suggestions of
the trade and industry and the general public decided to enact a law on
competition.
3. The Competition Bill, 2001 seeks to ensure fair competition in India by
prohibiting trade practices which cause appreciable adverse effect on
competition in markets within India and, for this purpose, provides for the
establishment of a quasi-judicial body to be called the Competition
Commission of India (CCI) which shall also undertake competition advocacy
for creating awareness and imparting training on competition issues.
4. Through the establishment of the CCI, the Bill also aims at curbing
negative aspects of competition. CCI will have a Principal Bench and
Additional Benches and will also have one or more Merger Benches. It will
look into violations of the Act, a task which could be undertaken by the

18
Gazette of India, 6-8-2001, Pt. II, Section 2, Extra, P. 29 (No. 25).

54
 Chapter 2: Indian Competition Law

Commission based on its own knowledge or information or complaints

received and references made by the Central Government, the State
Governments or statutory authorities. The Commission can pass orders for
granting interim relief or any other appropriate relief and compensation or an
order imposing penalties, etc. An appeal from the orders of the Commission
shall lie to the Supreme Court. The Central Government will also have powers
to issue directions to the Commission on policy matters after considering its
suggestions as well as the power to supersede the Commission if such a
situation is warranted.
5. The Director General for the Commission is empowered with the
power of investigation. The Director General would be able to act only if so
directed by the Commission but will not have any suo moto powers for
initiating investigations.
6. The CCI is given the power to levy penalty for contravention of its
orders, failure to comply with its directions, making of false statements or
omission to furnish material information, etc. The CCI can levy upon an
enterprise a penalty of not more than ten percent of its average turnover for the
last three financial years. It can also order division of dominant enterprises. It
will also have power to order demerger in the case of mergers and
amalgamations that adversely affect competition.
7. The Bill also provides for the creation of a fund to be named the
Competition Fund. The grants given by the Central Government, costs realised
by the Commission and application fees charged will be credited into this
Fund. The pay and allowances and the other expenses of the Commission will
also be borrowed out of this Fund. The Bill provides for empowering the
Comptroller and Auditor General of India to audit the accounts of the
Commission. The Central Government will be required to lay the annual
accounts of the Commission, as audited by the Comptroller and Auditor-
General and also the annual report of the Commission before both the Houses
of Parliament.
8. The Bill also provides for repealing the MRTP Act, 1969 and the
dissolution of the MRTP Commission. The Bill provides that the cases pending
before the MRTP Commission will be transferred to the CCI except those

55
 Chapter 2: Indian Competition Law

relating to unfair trade practices which are proposed to be transferred to the

relevant for a established under the Consumer Protection Act, 1986.19

2.2.7 The New Competition Law - Repealing the Monopolies and Restrictive
Trade Practices Act, 1969

Following the report submitted to the government, the Competition Act, 2000, was
passed. The Competition Act, 2002 repealed the MRTP Act, 1969. Section 66 of the
Competition Act provides for the repeal of the MRTP Act and for connected matters.
The repeal is on the ground that with the new liberal business environment, the MRTP
Act is no more suited to deal with issues of competition.

Section 66 has been amended twice, first in 2007 and then in 2009. As provided in the
original Act of 2002, the MRTP Commission could not be dissolved on the coming
into force of Section 66, as The CCI had not then been established, and cases pending
before the MRTP Commission on its dissolution could not be transferred to the CCI as
directed by the original Section 66. The 2007 amendment provided that the MRTP
Commission was authorized to continue to exercise jurisdiction and power under the
repealed Act for a period of two years from the date of the commencement of the 2007
Act and Section 66 was not brought into force. On 1 September, 2009, Section 66 of
the Act was brought in force. The 2009 amendment of Section 66 provides, among
other matters, for the transfer of pending cases and investigations on the
commencement of the Competition Amendment Act, 2009, to the specified authorities
under the Competition Act, 2002, as amended.

The Committee had in its report observed that in comparison with the competition
laws of other countries the MRTP Act was inadequate for regulating anti-competitive
practices.

The definition of a restrictive trade practice under that Act did not cover the numerous
categories of anti-competitive agreements, practices, etc. The Committee specifically
considered the following forms of anti-competitive conduct for which the MRTP Act
had not made express provision: abuse of dominance, cartels, collusion and price
fixing, bid rigging, boycotts and refusal to deal, and predatory pricing. Emphcising

19
SHARAY, supra note 9, at 5-7.

56
 Chapter 2: Indian Competition Law

the need to bring mergers under the new Indian Competition Act, 2002, the
Committee recommended for transferring the Sections in the MRTP Act dealing with
unfair trade practices to the Consumer Protection Act (CPA), 1986 and the new
Competition Act.

2.2.8 The Draft National Competition Policy, 2011

A committee for framing of National Competition Policy and related matters was
constituted by the Ministry of Corporate Affairs. The draft report dated 28 July, 2011,
has been placed on the Commission’s Website inviting comments from the public.
Some of the major recommendations are discussed below. It is best that this is read
along with the report of the High-Level Committee on Competition Policy and Law
appointed by the Central Government in I999, relating to competition policy and
related matters, which have been discussed in the previous paragraphs of this chapter,
particularly the following comments, especially its emphasis on the importance of the
proper coordination of different policy measures of the government that would affect
the effectiveness of a competition policy.

To ensure the effectiveness of the competition policy, the Committee emphasized the
importance of the proper coordination of different policy measures of the government.
It also identified specific areas in which micro-industrial governmental policies could
support or adversely impinge on the application of competition policy. They include
industrial policy; reservations for the small-scale industrial sector; privatization and
regulatory reforms; trade policy, including tariffs, quotas, subsidies, anti-dumping
action, domestic content regulations and export restraints (essentially WTO-related);
state monopolies policy; labour policy; environment; healthcare and financial
markets. For the government to consider and take appropriate action, specific
recommendations on each field were made by the Committee.

It also identified specific areas in which micro-industrial governmental policies could

support or adversely impinge on the application of competition policy. These included
industrial policy; reservations for the small-scale industrial sector; privatization and
regulatory reforms; trade policy, including tariffs, quotas, subsidies, anti-dumping
action, domestic content regulations and export restraints (essentially WTO related);
state monopolies policy; labour policy; environment; healthcare and financial

57
 Chapter 2: Indian Competition Law

markets. The Committee made recommendations relating to each field for the
government to consider and take appropriate action.

In the introductory part, the draft 2011 report states that “this Policy is aimed at laying
down an overarching policy framework for infusing competition principles in various
policies, statutes and regulations and promoting a competitive market structure in the
economy, thereby striving to achieve maximum economy efficiency in various
spheres, and public welfare.” In its view competition policy includes government
measures, policies, statutes, and regulations including a competition law, aimed at
promoting competitive market structure and behaviour of entities in an economy and
that it is a proactive and positive effort to build a competition culture in an economy.
Notable among its premises of what a national competition policy will seek to achieve
is to “strive for single national market” as fragmented markets are impediments to
competition. This Committee appointed in 2011 has suggested in its draft report a list
of parameters that would enable a study, for purposes of competition assessment of
what government policies or institutions limit competition. The proposal in its final
shape is yet to be progressed.

The Committee noted the steps already taken to increase competition and suggested
the following:

Although significant effort has been made to increase competition in various

sectors of the economy, for a better competition policy a number of essential
steps need to be taken. A Competition Law Tribunal as a watchdog for the
introduction and maintenance of competition policy will be needed. With the
introduction of the required changes in the competition policy it will not only
protect and promote competitive environment, it will also be pro-active in
advocacy function for competition. Competition Law should deal with anti-
competitive practices, particularly cartelisation, price-fixing and other abuses
of market power and should regulate mergers. The Committee also expressed
its concern that such legislation should not itself become anti-competitive and
pose a threat to competition. For this, the law should be precise and the
discretion should be kept at a minimum.

58
 Chapter 2: Indian Competition Law

2.3 An Overview of the Competition Act, 2002

The main provisions of the Competition Act, 2002, dealing with competition are: (a)
Section 3 that deals with anti-competitive agreements, (b) Section 4 that discusses
abuse of a dominant position, (c) Section 5 that deals with combinations and Section 6
that provides for the regulation of combinations.

The Act provided for the establishment of the CCI and it started its operations on
October 14, 2003. The CCI is a quasi-judicial body. The Commission is empowered
with the power to inquire into the alleged infringement of the provisions of the Act. It
can do so either on its own or on the receipt of the information by any person or a
reference made to it by the Central Government, State Government or a statutory
authority. The orders passed by the CCI can be appealed before the Competition
Appellate Tribunal (COMPAT) and similarly, the orders of the COMPAT can be
appealed in the Supreme Court.

Under the Act as originally enacted, the CCI was the authority to deal with
competition issues arising out of markets conditions and complaints of violations of
the Act. In Brahm Dutt v. Union of India20 it was successfully challenged that the CCI
could not combine in itself the roles of a market regulator and an adjudicatory body.
This led to a large number of amendments to the Act in 2007, the principal ones being
the basic nature of the functions of the CCI in that the CCI is left to function only as a
market regulator, an expert body with advisory and regulatory functions and the
establishment of a COMPAT as a quasi-judicial adjudicatory body.

On 20 May, 2009, with the notifications of the provisions relating to anti-competitive

agreements and abuse of dominant position, the Competition Act was partially
enforced. The combination regulations were also notified in May 2011 and from 1
June, 2011, it became operative.

Main Provisions of Indian Competition Law

The main tenants of the Act that covers four areas of competition contained in the
following substantive provisions:

20
(2005) 64 CLA 214 SC.

59
 Chapter 2: Indian Competition Law

a) Anti - Competitive Agreements (Section 3)

b) Abuse of Dominance (Section 4)
c) Combinations Regulation (Sections 5 and 6)
d) Competition Advocacy (Section 49)

2.3.1 Anti - Competitive Agreements

The Competition Act, 2002 prohibits anti-competitive agreements. Firms may enter
into agreements, which may restrict competition. Anti-competitive agreements are the
agreements which cause or are likely to cause appreciable adverse effect on
competition. Section 3 of the Competition Act, 2002 prohibits anti-competitive
agreements.

Section 3 - Anti-Competitive Agreements (1) 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 is likely to cause an
appreciable adverse effect on competition (AAEC) within India.

(2) Any agreement entered into in contravention of the provisions contained in

subsection (1) shall be void.

(3) Any agreement 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,

60
 Chapter 2: Indian Competition Law

Shall be presumed to have an appreciable adverse effect on competition:

Provided that nothing contained in this sub-section shall apply to any

agreement 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.

Explanation.- For the purposes of this sub-section, “bid rigging” means any
agreement, between enterprises or persons referred to in sub-section (3)
engaged in identical or similar production or trading of goods or provision of
services, which has the effect of eliminating or reducing competition for bids
or adversely affecting or manipulating the process for bidding.

(4) Any agreement amongst enterprises or persons at different stages or levels

of the production chain in different markets, in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or provision of
services, including -

(a) tie-in arrangement;

(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance, 21

shall be an agreement in contravention of sub-section (1) if such agreement

causes or is likely to cause an appreciable adverse effect on competition in
India.

Section 3(1) of the Act is very general and broad in scope. It prohibits agreement
between enterprises in respect of production, supply, distribution, storage, acquisition,
or control of goods or provision of services, which causes, or is likely to cause an
appreciable adverse effect on competition within India and declares the same as void.
The Act has not defined the term “appreciable adverse effect on competition” used in
section 3. However, the Act specifies a number of factors which the CCI must take

21
Section 3, the Competition Act, 2002.

61
 Chapter 2: Indian Competition Law

into account while determining whether an agreement has an appreciable adverse

effect on competition or not.22 Section 3(2) provides that any agreement entered into
in contravention of the provisions contained in Section 3(1) shall be void. Section 3(3)
provides that certain anti-competitive agreements that may be entered into, or
practices that may be carried on, by enterprises supplying identical or similar goods or
services, or cartels. Those agreements or practices carried on by that class of
enterprises are presumed to have an appreciable adverse effect on competition under
Section 3(3). They are per se violations of the Act.

The anti-competitive agreements may be relating to price-fixing, resale price

maintenance, allocation of the areas among suppliers, imposition of high prices by
reducing supply or output, exclusive dealing agreements, tie-in arrangements etc.

Anti-competitive agreements can be divided under two major categories. They are:
horizontal agreements and vertical agreements. Horizontal agreements are the
agreements among competitors and vertical agreements are the agreements relating to
an actual or potential relationship of purchasing or selling to each other.

Horizontal Agreements

Horizontal agreements are the agreements between two or more enterprises that are at
the same stage of the production chain and in the same market. An example of such
agreement is the one between enterprises dealing in the same product or products. If
parties to the agreement are both producers or retailers (or wholesalers) they will be
deemed to be at the same stage of the production chain.

The Competition Act presumes that the following four types of agreements between
enterprises, involved in the same or similar manufacturing or trading of goods or
provision of services have an appreciable adverse effect on competition :

Agreements Regarding Prices - These include all agreements that directly or

indirectly fix the purchase or sale price. This is also known as Price-fixing. (Section
3(3)(a)) "Price" in relation to the sale of any goods or to the performance of any

22
Prashant Kumar, Competition Law in India: An Overview (Aug. 21, 2014)
https://www.linkedin.com/pulse/20140821065102-73187306-competition-law-in-india.

62
 Chapter 2: Indian Competition Law

services, includes every valuable consideration, whether direct or indirect, or deferred,

and includes any consideration which in effect relates to the sale of any goods or to
the performance of any services although ostensibly relating to any other matter or
thing.

The prices can be fixed by buyers or sellers. The term price includes many
components of price consisting of discounts, rebates, delivery charges, special fees
etc. So an agreement concerned with any of these components of price amounts to
price fixing. Price fixing requires a conspiracy between two or more sellers or buyers;
the purpose is to coordinate pricing for mutual benefit of the traders.

Agreements Regarding Quantities - These include agreements aimed at limiting or

controlling production, supply, markets, technical development, investment or
provision of services. (Section 3(3)(b)) An agreement to restrict production or output
is illegal because reducing the supply of a product will ultimately result in increase in
its price.

Agreements Regarding Market Sharing - These include agreements for sharing of

markets or sources 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. (Section 3(3)(c)) Competitors in order to make
more benefits, agree with each other to divide the markets by territory or on the basis
of the customers. Such agreements between competitors are illegal by nature.

Agreements Regarding Bids (Collusive Bidding or Bid Rigging)

These include tenders submitted as a result of any joint activity or agreement. (Section
3(3)(d)) However there is an exception that the presumption would not apply to a joint
venture agreement which increases efficiencies in production, supply, distribution,
storage, acquisition or control of goods or provisions of services.

Bid Rigging

Bid rigging is defined as any agreement between enterprises or persons engaged in

identical or similar production or trading of goods or provision of services, which has
the effect of eliminating or reducing competition for bids or adversely affecting or

63
 Chapter 2: Indian Competition Law

manipulating the process for bidding. (Explanation to Section 3(3)) In simple words,
bid rigging is a form of fraud in which a commercial contract is promised to one party
even though for the sake of appearance, several other parties also present bids. The
bids end up suiting a single player. Besides affecting the end-consumer‘s interest,
these anti-competitive practices take a toll on the public exchequer as public money is
flushed out to wrong hands.

Vertical Agreements

Besides horizontal agreements, there is another kind of anti-competitive agreements

which are termed as vertical agreements. Vertical agreements are the restrictions
amongst enterprises at different stages or levels of the production chain in different
markets. As for example, agreements between producers and suppliers between
producers and distributors are vertical agreements.23

Vertical restraints both cover supply of goods as well as services. A typical example
of vertical agreement is between a manufacturer and a retailer selling his goods. A
manufacturer stipulating that a dealer shall not sell the goods purchased from him
below the price indicated by the manufacturer is engaged. In the anti-competitive
practice of resale price maintenance, the vice consists in restricting the freedom of the
dealer to sell at a price considered by him to be profitable. What is restricted is the
ability of the dealer to compete. Vertical restraints are to be examined under the rule
of reason.

For establishing vertical restraint, the agreement need not be a formal or written
agreement. Proof of appreciable adverse effect on competition is sufficient to
establish the same.

The Competition Act, 2002 envisages various types of vertical agreements as:

a) Tie-in-Arrangement (Section 3(4)(a))

Tie-in arrangements are those kinds of agreements in which a purchaser of the goods
is required to purchase different goods that are not required by him. In other words, in
such an agreement, the customer is pressurized or forced to buy a particular product

23
Ibid.

64
 Chapter 2: Indian Competition Law

or lease a product or service without his interest by threatening him of withholding

any other product or service.

A tie-in arrangement will become illegal when an enterprise uses its market power
that it has on a particular product and by taking advantage does not sell or lease that
product to the customer until and unless he agrees to buy another product that the
enterprise wants him to buy.

As for example, if a medical shop in a remote place puts a condition on sale of

medicines that anyone willing to buy medicines from that shop will also have to buy
two litres of orange juice. In such a way, the customer is compelled to buy the orange
juice even though he might not be interested to buy the juice. In this situation, the
medical shop has misused its market influence by forcing the customer to buy an
entirely different product along with the medicine he actually required.

b) Exclusive Supply Agreement (Section 3(4)(b))

Exclusive supply agreement restricts the purchaser in the course of his trade from
acquiring or dealing in any goods other than those of the seller or any other person.
Such agreements cause great harm to the competition preventing the competitive
sellers from competing in the market.24

However, arrangements can be made on the basis of quality, specifications, quality

control, raw materials, packing materials, quantities, terms of delivery, etc. But, if
either the buyer or the seller has significant market share, then entering into a long-
term exclusive supply agreement may cause competition concerns. As for example, if
an influential buyer in the market asks the supplier not to supply the identical goods
for any other buyer, the same would be considered to be anti-competitive.

24
Nomani, M.Z.M. & Rahman F., Regulation of Anti-Competitive Practices and Trade Secret Laws
under Competition Legislation of India: A Paradigmatic Analysis, MANUPATRA INTELLECTUAL
PROPERTY REPORTS (2013).

65
 Chapter 2: Indian Competition Law

c) Exclusive Distribution Agreement (Section 3(4)(c))

When any arrangement is made to limit, restrict or withhold the output or supply of
goods or to allocate any area or market for the disposal or sale of the goods it will be
called as exclusive distribution agreement.

As for example, the supplier and wholesaler-distributor of a product agree that the
wholesaler-distributor will exclusively deal with the products of the supplier only.
Such arrangements prevent the supplier's competitors from accessing the marketplace
by creating an exclusive distribution network. Such an agreement will tend to create a
monopoly in the market and thus is a violation of competition law.

d) Refusal to Deal (Section 3(4)(d))

Refusal to deal is another kind of anti-competitive agreement that restricts or is likely

to restrict, by any method the persons or classes of persons to whom goods are sold or
from whom goods are bought. In businesses there is freedom to determine who to deal
with and vice versa. No absolute right to be supplied is there and under certain
circumstances, refusal to deal may be anti-competitive and thus illegal. As for
example, when the competitors, with the intention of causing damage to the
businesses or reducing the competition in the market, agree not to deal with others or
to do so only on collectively determined terms it will be illegal.

e) Resale Price Maintenance (Section 3(4)(e))

Resale price maintenance denotes any agreement to sell goods with the condition that
the prices 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.

In other words, in resale price maintenance, an upstream supplier attempts to control

or maintain the minimum price at which the product is to be resold. The resellers are
thus prevented from competing too fiercely. By controlling the resale price of a

66
 Chapter 2: Indian Competition Law

product be resold at a specific margin, or restricting the reseller from offering any
discounts, it prevents the reseller from setting a price of his choice.25

Two comments may be made on the provisions of Section 3 that is intended for
‘prohibition of certain agreements’. The basic one is on the starting point for
determining that an agreement is an anti-competitive agreement within the meaning of
the Act. The other relates to the rules of treatment, in considering whether an
agreement is a per se violation, or is an agreement the anti-competitive effect of
which is to be decided under the rule of reason.

There are certain exceptions provided under Section 3(5). Section 3(5) of the Act
provides26:

(5) Nothing contained in this Section shall restrict -

(i) 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 (14 of 1957);

(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade
Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection)
Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37
of 2000);

(ii) 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.

25
CA Rajkumar & S. Adukia, An Overview of Provisions Relating to Competition Laws & Consumers
Protection Laws in India (Jan. 4, 2018) http://www.caaa.in/
26
Section 3(5), the Competition Act, 2002.

67
 Chapter 2: Indian Competition Law

Section 19(1) of the Act provides for the procedure for initiation of the process of
inquiry into an anti-competitive agreement. After the amendment of 2007, the
Commission may inquire into any alleged contravention of the provisions contained in
Section 3(1) either on its own motion, or on the receipt of information. It provides as
under27:

Section 19. (1) The Commission may inquire into any alleged contravention of the
provisions contained in subsection (1) of Section 3 or sub-section (1) of section 4
either on its own motion or on –

(a) receipt of any information, in such manner and accompanied by such fee as may
be determined by regulations, from any person, consumer or their association or trade
association; or

(b) a reference made to it by the Central Government or a State Government or a

statutory authority.

2.3.2 Abuse of a Dominant Position

Section 4 of the Competition Act, 2002 prohibits abuse of a dominant position by an

enterprise. A dominant position in substance means the capacity of an enterprise to act
independently of competitive forces prevailing in the market or to affect the relevant
market in its favour. Such practices include: imposition of discriminatory prices or
trading conditions or predatory pricing, limiting supply of goods or services, denial of
market access, using a dominant position in one relevant market to enter into, or
protect, other relevant market. However, by the mere fact of its enjoying a dominant
position by an enterprise is not a violation under the Act. The Act prohibits only the
abuse of the dominant position by any of the anti-competitive practices set out in
Section 4. Whether an enterprise is guilty of abuse its dominant position can be
determined through three stages. First of all, the relevant market is to be defined. In
second stage, it is to be determined whether a particular undertaking is in a dominant
position and has monopoly power in that relevant market. In the third stage it is to be
examined whether the undertaking enjoying dominant position in the market has

27
Section 19 (1), the Competition Act, 2002.

68
 Chapter 2: Indian Competition Law

engaged in any anti-competitive activities prohibited under the Act amounting to

abuse of dominant position.28

Section 4: (1) No enterprise or group shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an

enterprise or a group -

(a) directly or indirectly, imposes unfair or discriminatory -

(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or
service.

Explanation - For the purposes of this clause, the unfair or discriminatory

condition in purchase or sale of goods or service referred to in sub-clause (i)
and unfair or discriminatory price in purchase or sale of goods (including
predatory price) or service referred to in sub-clause (ii) shall not include such
discriminatory condition or price which may be adopted to meet the
competition; or

(b) limits or restricts—

(i) production of goods or provision of services or market there
for; or
(ii) technical or scientific development relating to goods or services
to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access in
any manner; or
(d) makes conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such
contracts; or
(e) uses its dominant position in one relevant market to enter into, or
protect, other relevant market.29

28
Srishti Dutt, Competition Law in India, US And UK: A Comparative Analysis (Nov., 2012)
(Internship Report).

69
 Chapter 2: Indian Competition Law

The Competition Act, 2002 contains a definition of dominant position that takes into
account whether the concerned enterprise is in such a position of economic strength
that it can operate independently of competitive forces or can affect the relevant
market in its favour. Explanation (a) to Section 4 of the Indian Competition Act, 2002
defines dominant position as dominant position means a 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.

Thus, a dominant position in substance means the capacity of an enterprise to act

independently of competitive forces prevailing in the market or to affect the relevant
market in its favour. A dominant position is usually acquired by an enterprise over a
period of time and factors such as state of technology, barriers to entry, scale of
operations, etc., influence the achievement of a dominant position.

The Competition Act, 2002 expressly provides in Section 19(5) that the CCI shall
have due regard to the relevant product market and the relevant geographical market
in determining whether a market constitutes a relevant market for the purposes of the
Act. The definition of relevant market provided by Section 2(r) of the Act also states
that the relevant market means the market that may be determined by the Commission
with reference to the relevant product market or the relevant geographical market or
with reference to both - relevant product market and - relevant geographic market
have been specifically defined in the Indian Competition Act, 2002. Section 2 (t)
defines the relevant product market as a market comprising all those products or
services which are regarded as interchangeable or substitutable by the customer, by
reason of the characteristics of the product or service, the prices and the intended use.
Section 2 (s) defines the relevant geographic market as a market comprising the area
in which the conditions of competition for supply of goods or provision of services

29
Section 4, the Competition Act, 2002.

70
 Chapter 2: Indian Competition Law

are sufficiently homogeneous and can be distinguished from the conditions prevailing
in neighbourhood areas.30

However, the basic position is that there is no violation of the Act by an enterprise by
the mere fact of its enjoying a dominant position. It is a violation, only when the
enterprise abuses that position by engaging in any one of the anti-competitive
practices set out in Section 4 that is prohibited.

Section 19 (4) of the Competition Act, 2002 provides certain factors to be considered
by the Commission in determining whether an enterprise is in a dominant position. It
provides31:

Section 19. (4) The Commission shall, while inquiring whether an enterprise
enjoys a dominant position or not under section 4, have due regard to all or
any of the following factors, namely:—

(a) market share of the enterprise;

(b) size and resources of the enterprise;

(c) size and importance of the competitors;

(d) economic power of the enterprise including commercial advantages over

competitors;

(e) vertical integration of the enterprises or sale or service network of such

enterprises;

(f) dependence of consumers on the enterprise;

(g) monopoly or dominant position whether acquired as a result of any statute

or by virtue of being a Government company or a public sector undertaking or
otherwise;

30
Ibid.
31
Section 19 (4), the Competition Act, 2002.

71
 Chapter 2: Indian Competition Law

(h) entry barriers including barriers such as regulatory barriers, financial risk,
high capital cost of entry, marketing entry barriers, technical entry barriers,
economies of scale, high cost of substitutable goods or service for consumers;

(i) countervailing buying power;

(j) market structure and size of market;

(k) social obligations and social costs;

(l) relative advantage, by way of the contribution to the economic

development, by the enterprise enjoying a dominant position having or likely
to have an appreciable adverse effect on competition;

(m) any other factor which the Commission may consider relevant for the
inquiry.

The most important factor to consider in determining whether a particular undertaking

is in a dominant position is the market share of that enterprise in the relevant market.
If the market share of a particular undertaking is above the specified level as provided
under the Act, the existence of a dominant position is presumed.

There is a point of difference in the position between the UK and EC with India.
Under the UK and EC laws, the conducts specified “may” amount to abuse of
dominant position whereas under the Competition Act, 2002, the word “shall” is used
and thus in India, the conducts specified under the Act “shall” amount to abuse of
dominance. In India, the Competition Act, 2002 specifically mentioned the conducts
that will be abuse of dominant position, like the practices of denial of market access
and using dominant position in one market to enter into or protect other relevant
markets etc. But, neither the UK, nor the EU laws has mentioned so specifically. On
the other hand, the UK and EU law mentions about applying dissimilar conditions to
equivalent transactions with other trading parties, thereby placing them at a
comparative disadvantage, which has not been included in the Indian law.32

32
Dutt, supra note 28.

72
 Chapter 2: Indian Competition Law

2.3.4 Combinations

The Competition Act, 2002 in Section 5 provides for combination. “Combination” is

defined by providing threshold limits in terms of assets and turnover. Subject to the
other prescriptions of the Section, ‘combination’ would be the monetary thresholds of
assets or turnover of the enterprises specified therein in the Act.

Section 5 of the Act provides:

5. The acquisition of one or more enterprises by one or more persons or

merger or amalgamation of enterprises shall be a combination of such
enterprises and persons or enterprises, if -

(a) any acquisition where—

(i) the parties to the acquisition, being the acquirer and the enterprise,
whose control, shares, voting rights or assets have been acquired or are
being acquired jointly have, -
A. either, in India, the assets of the value of more than rupees one
thousand crores or turnover more than rupees three thousand
crores; or
B. [in India or outside India, in aggregate, the assets of the value of
more than five hundred million US dollars, including at least
rupees five hundred crores in India, or turnover more than fifteen
hundred million US dollars, including at least rupees fifteen
hundred crores in India; or]
(ii) the group, to which the enterprise whose control, shares, assets or
voting rights have been acquired or are being acquired, would belong
after the acquisition, jointly have or would jointly have, -
A. either in India, the assets of the value of more than rupees four
thousand crores or turnover more than rupees twelve thousand
crores; or
B. [in India or outside India, in aggregate, the assets of the value of
more than two billion US dollars, including at least rupees five

73
 Chapter 2: Indian Competition Law

hundred crores in India, or turnover more than six billion US

dollars, including at least rupees fifteen hundred crores in India; or]

(b) acquiring of control by a person over an enterprise when such person has
already direct or indirect control over another enterprise engaged in
production, distribution or trading of a similar or identical or substitutable
goods or provision of a similar or identical or substitutable service, if -

(i) the enterprise over which control has been acquired along with
the enterprise over which the acquirer already has direct or
indirect control jointly have,—
A. either in India, the assets of the value of more than rupees
one thousand crores or turnover more than rupees three
thousand crores; or
B. [in India or outside India, in aggregate, the assets of the
value of more than five hundred million US dollars,
including at least rupees five hundred crores in India, or
turnover more than fifteen hundred million US dollars,
including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which enterprise whose control has been acquired,
or is being acquired, would belong after the acquisition, jointly
have or would jointly have, -
A. either in India, the assets of the value of more than rupees
four thousand crores or turnover more than rupees twelve
thousand crores; or
B. [in India or outside India, in aggregate, the assets of the
value of more than two billion US dollars, including at least
rupees five hundred crores in India, or turnover more than
six billion US dollars, including at least rupees fifteen
hundred crores in India; or]

(c) any merger or amalgamation in which -

(i) the enterprise remaining after merger or the enterprise created

as a result of the amalgamation, as the case may be, have, -

74
 Chapter 2: Indian Competition Law

A. either in India, the assets of the value of more than rupees

one thousand crores or turnover more than rupees three
thousand crores; or
B. [in India or outside India, in aggregate, the assets of the
value of more than five hundred million US dollars,
including at least rupees five hundred crores in India, or
turnover more than fifteen hundred million US dollars,
including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which the enterprise remaining after the merger or
the enterprise created as a result of the amalgamation, would
belong after the merger or the amalgamation, as the case may
be, have or would have, -
A. either in India, the assets of the value of more than rupees
four-thousand crores or turnover more than rupees twelve
thousand crores; or
B. [in India or outside India, in aggregate, the assets of the
value of more than two billion US dollars, including at least
rupees five hundred crores in India, or turnover more than
six billion US dollars, including at least rupees fifteen
hundred crores in India;] 33

Thus, according to this provision of the Act, any acquisition, merger or amalgamation
falling within the ambit of the prescribed thresholds will constitute a combination.

2.3.5 Regulation of Combinations

In a given case, a combination could be a way to eliminate the competitors. So, the
Competition Act, 2002 also provides for regulation of combinations. Combination
includes acquisition of shares, control, voting rights or assets, mergers and
amalgamations. But, the Act provides for regulation of those combinations only
whose total assets or the turnover exceeds the prescribed threshold limits.34 It is

33
Section 5, the Competition Act, 2002.
34
Rajkumar, supra note 25.

75
 Chapter 2: Indian Competition Law

important to note that before the enactment of the Competition Act, 2002, the already
existing law did not prohibit anti-competitive mergers or acquisitions.35

Again, Section 6(1) prohibits the combinations which causes, or is likely to cause, an
appreciable adverse effect on competition within the relevant market in India. Such a
combination is declared void under the Act. The regulation of combinations is
provided under Section 6(2) of the Act.

For the application the Section 6 of the Act, two necessary pre-conditions need to be
fulfilled. They are:

(i) it must involve total assets or turnover, with separate criteria for domestic
and international entities; and

(ii) it must have a territorial nexus within India

Before the amendment in the Competition Act, 2002, the reporting of a combination
was optional. After the changes in the original Act, it mandates compulsory
notification within 30 days of the decision of the parties' boards of directors or of
execution of any agreement or other document for effecting the combination.36

2.3.6 Competition Advocacy

The World Bank has defined “Competition Advocacy” as the ability of the
competition office to provide advice, influence and participate in economic and
regulatory policies of the government in order to promote more competitive industry,
structure, firm behaviour and market performance.

The International Competition Network (ICN) defines competition advocacy as

under:

Competition advocacy refers to those activities conducted by a competition

authority related to the promotion of a competitive economic environment by
means of non-enforcement mechanisms, mainly through its relationship with

35
RAMAPPA, supra note 17, at 1-7.
36
Ibid.

76
 Chapter 2: Indian Competition Law

other Governmental entities and by increasing public awareness of the benefits

of competition.37

Section 49 of the Competition Act, 2002 provides for competition advocacy. Section
49 has been amended thrice. The original Section was as follows:

Section 49: (1) 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 a possible effect of such policy on
competition and on receipt of such a reference, the Commission shall, within
sixty days of making such reference, give its opinion to the Central
Government, which may thereafter formulate the policy as it deems fit.

(2) The opinion given by the Commission under sub-section (1) shall not be
binding upon the Central Government in formulating such policy.

(3) The Commission shall take suitable measures, as may be prescribed, or the
promotion of competition advocacy, creating awareness and imparting training
about competition issues.

The amendments made in Section 49 are: (i) sub-section (1) has been substituted by a
new Section; (ii) in sub-section (2) “or the state government, as the case may be” has
been inserted; (m) in sub-section (3) the words “as-may be prescribed” have been
deleted. After the amendments, the new Section 49 is as follows:

Section 49: (1) The Central Government may, in formulating a policy on

competition (including review of laws related to competition) or any other
matter, and a State Government may, in formulating a policy on competition
or on any other matter, as the case may be, make a reference to the
Commission for its opinion on possible effect of such policy on competition
and on the receipt of such a reference, the Commission shall, within sixty days
of making such reference, give its opinion to the Central Government, or the
State Government, as the case may be, which may thereafter take further
action as it deems fit.

37
Rajkumar, supra note 25.

77
 Chapter 2: Indian Competition Law

(2) The opinion given by the Commission under sub-section (1) shall not be
binding upon the Central Government 79[or the State Government, as the case
may be in formulating such policy.

(3) The Commission shall take suitable measures 80 for the promotion of
competition advocacy, creating awareness and imparting training about
competition issues.

The High Level Committee on Competition Policy and Competition Law has
explained competition advocacy and the role of the Commission. It stated:

The mandate of the CCI needs to extend beyond merely enforcing the
competition law. It needs to participate more broadly in the formulation of the
country’s economic policies, which may adversely affect competitive market
structure, business conduct and economic performance. The CCI therefore,
needs to assume the role of competition advocate, acting proactively to bring
about governmental policies, that lower barriers to entry, promote de-
regulation and trade liberalization, and promote competition in the market
place. There is a direct relationship between competition advocacy and
enforcement of competition law. The aim of competition advocacy is to foster
conditions that will lead to more competitive market structure and business
behaviour without the direct intervention of the Competition Law Authority,
namely, the CCI.

The new sub-section (1) does not appear to give full effect to this objective. It relates
to what the government, whether the Central Government or a state government, will
do on receipt of the opinion of the Commission on the reference made to the
Commission. Whereas the previous sub-section ended by stating that the government
“may thereafter formulate the policy as it deems fit”, the new sub-section (1) ends by
stating that the government “may take further action as it deems fit”. It is common
ground that the government is not bound by the opinion of the Commission and also
that the making of any policy is the exclusive right of the government. But having
asked for an opinion, it should not be that the opinion lies in limbo without any
response whatever. At least the Commission is entitled to know how it was dealt with
and the reasons for that action.

78
 Chapter 2: Indian Competition Law

As part of its Advocacy Series, addressed for the layman, the CCI has brought quick
guides on abuse of dominance, bid rigging, cartels, combination, competition
compliance for enterprises, and the Competition Act - an overview. The CCI has also
decided a number of cases.

2.4 Enforcement Mechanism of the Indian Competition Law

The main objective of competition law and policy is to promote economic efficiency
and maximise consumer welfare. Consumer welfare is the ultimate goal of
competition. The consumers’ welfare is ensured by protecting the right to free and fair
competition in the market. For the protection of this right of the consumers, there
must be some institutional support to ensure a competitive environment in the market.
As for example, easy availability of information about the market, free and easy
communication and ready accessibility of goods and services etc. are responsible for
ensuring free and fair competition in India.

In India basically there are three institutions responsible for enforcement of

competition law in India. They are:

(1) The Competition Commission of India,

(2) The Director General and

(3) The Competition Appellate Tribunal. (Now the National Company Law Appellate
Tribunal (NCLAT))38

(4) The Supreme Court

The Competition Act, 2002, for the purposes of the Act, provides for the establishment
of the CCI,39 appointment of a Director General for the purpose of assisting the CCI
in conducting inquiry into contravention of any of the provisions of the Act and for
performing such other functions as may he provided by the Act, 40 and the COMPAT,

38
Rini Mitra, Enforcement Of Competition Law In India: A Comparative Analysis With U.K & EU
(Jan. 3, 2018) http://www.legalservicesindia.com/article/print.php?art_id=392.
39
Section 7, the Competition Act, 2002.
40
Section 16, the Competition Act, 2002.

79
 Chapter 2: Indian Competition Law

(Now the National Company Law Appellate Tribunal) for exercising appellate powers
as specified in the Act.41

2.4.1 The Competition Commission of India

The CCI is an expert body which plays the lead role as a regulator in preventing anti-
competitive activities in the country. The CCI, a quasi-judicial and corporate body,
also performs its duty as an advisory functionary and competition advocacy
authority.42

The CCI, established by Central Government is required to take care of the activities
situation which can lead to the market failure thereby causing harm to market
competition. The CCI endeavours to achieve the following objectives:

1. Make the markets work for the benefit and welfare of consumers.
2. Ensure fair and healthy competition in economic activities in the country for
faster and inclusive growth and development of economy.
3. Implement competition policies with an aim to effectuate the most efficient
utilization of economic resources.
4. Develop and nurture effective relations and interactions with sectoral
regulators to ensure smooth alignment of sectoral regulatory laws in tandem
with the competition law.
5. Effectively carry out competition advocacy and spread the information on
benefits of competition among all stakeholders to establish and nurture
competition culture in Indian economy.

Composition of the Competition Commission of India

The composition of the CCI and the mode of selection of the chairperson and the
members of had been at the centre of the criticism of the Act. Section 8 of the Act as it
stood before the 2007 amendments provided for the composition of the CCI.43

It was as follows:

41
Chapter VIIIA.
42
Mitra, supra note 39.
43
NOMANI, M. Z. M., S. C. TRIPARTHI ON COMPETITION LAW, CENTRAL LAW
PUBLICATIONS (2019).

80
 Chapter 2: Indian Competition Law

Section 8: (1) The Commission shall consist of a Chairperson and not less than
two and not more than ten other members to be appointed by the Central
Government: Provided that the Central Government shall appoint the
Chairperson and a Member during the first year of the establishment of the
Commission.

(2) The Chairperson and every other Member shall be a person of ability,
integrity and standing and who has been, or is qualified to be, a judge of a high
court or, has special knowledge of, and professional experience of not less
than fifteen years in international trade, economics, business, commerce, law,
finance, accountancy, management, industry, public affairs, administration or
in any other matter which, in the opinion of the Central Government, may be
useful to the Commission.

(3) The Chairperson and other Members shall be whole-time Members.

Apart from the delay in filling up the positions in the CCI, the government was, as the
litigation showed, conceptually in error in its idea of the functions of the Commission
and therefore in creating an appropriate structure suitable for the purpose. Following
from that, its determination of the necessary qualifications was shown as not matching
the functions. More than that, as far as the necessary experience for carrying out the
functions of the Commission, the original Section 8 did not contain the basic
experience, viz. experience in dealing with issues relating to competition in the supply
of goods and services. Experience in business, commerce, law, finance, etc., stated in
the original Section 8 were too general. There was no recognition of the need to lay
emphasis on the requirement of skills and knowledge necessary to make an effective
competition analysis of the acts of business organizations. The government did not
take note of how other countries provided-for the constitution of the CCI. The
appointment of a civil servant as the chairperson led to the pursuit of a judicial
pronouncement, in Brahm Dutt v. Union of India44, on the validity of the basis of the
constitution of the Commission before the amendment of the Act.

44
(2005) 64 CLA 214 SC.

81
 Chapter 2: Indian Competition Law

However, after the amendment of the provision following the Brahm Dutt case, the
CCI would act as a market regulator, an expert body performing “advisory and
regulatory functions”. The new Section 8 reflects this in the description of the
composition of the CCI.

The new Section 8 is as follows45:

Section 8: (1) The Commission shall consist of a Chairperson and not less than
two and not more than six other Members to be appointed by the Central
Government.

(2) The Chairperson and every other Member shall be a person of ability,
integrity and standing and who has special knowledge of, and such
professional experience of not less than fifteen years in, international trade,
economics, business, commerce, law, finance, accountancy, management,
industry, public affairs or competition matters, including competition law and
policy, which in the opinion of the Central Government, may be useful to the
Commission.

(3) The Chairperson and other Members shall be whole-time Members.

It may be noted that the new Section 8 is different in two important elements. The
first relates to the composition. The qualification that for one to be a member of the
Commission, he or she should be one who, has been, or is qualified to be, a judge of a
high court has been omitted. The obvious reason is that it is intended that the
Commission would be an expert body and act as a market regulator. The
establishment of the COMPAT acting as an adjudicatory body is another reason for so
designing the composition of the Commission. The other material change in Section 8
is that one of the conditions for eligibility for appointment as a member of the
Commission, which includes the chairperson, is that the person to be considered for
appointment should have special knowledge and professional experience in
competition matters, including competition law and policy. The present Chairperson
of the CCI is Ashok Kumar Gupta. Ms. Sangeeta Verma and Bhagwant Singh Bishnoi
are the two other members presently serving in the Commission.

45
Section 8, the Competition Act, 2002.

82
 Chapter 2: Indian Competition Law

Selection of the Chairperson and Members

Section 9 of the pre-amendment Act was, in itself, unsatisfactory. The Section simply
stated that the chairperson and other members shall be selected in the manner as may
be prescribed. Rule 3 of the Competition Commission of India (Selection of
Chairperson and Other Members of the Commission) Rules, 2003, enacted pursuant
to Section 9 was attacked in Brahm Dutt v. Union of India46 on the ground that the
appointment of the judicial members of the Commission should rest with the Chief
Justice of India or his nominee and that Rule 5 did not so provide. Section 9 has been
substituted by a new Section which is as follows47:

Section 9: (1) The Chairperson and other Members of the Commission shall be
appointed by the Central Government from a panel of names recommended by a
Selection Committee consisting of –

a) the Chief Justice of India or his nominee - Chairperson;

b) the Secretary in the Ministry of Corporate Affairs - Member;
c) the Secretary in the Ministry of Law and Justice - Member;
d) two experts of repute who have special knowledge - Members.

of, and professional experience in international trade, economics, business,

commerce, law, finance, accountancy, management, industry, public affairs or
competition matters including competition law and policy

(2) The term of the Selection Committee and the manner of selection of panel of
names shall be such as may be prescribed.

Recommendation of the Standing Committee Ignored

Having recognized that the members of the Competition Commission would be

chosen for their expertise in commercial issues and their ability to make effective
competition analyses, it was inappropriate to provide for machinery for selection as
provided by Section 9. In fact it goes against what the Standing Committee
recommended.

46
(2005) 64 CLA 214 SC.
47
Section 9, the Competition Act, 2002.

83
 Chapter 2: Indian Competition Law

The Observation of the Standing Committee

With regard to the composition of the Selection Committee, the Committee did not
find the government’s inclusion of the Chief justice of India or his nominee as
chairman of the Selection Committee to select the chairperson as well as the other
members of CCI not tenable.

The Ministry, in their justification for the inclusion of the Chief justice of India or his
nominee as chairman of the Selection Committee was that this would ensure the
selection the chairperson as well as the other members of CCI more fair and
transparent. The Committee did not agree with this view as bringing transparency and
fairness in selection of suitable candidates is definitely possible otherwise too. They
have highlighted the more important aspect to be considered that CCI was intended to
be an expert body in the field of competition, which apart from law, also involves
expert knowledge in the domain of economics, commerce, business, finance,
management, industry, international markets, companies, accounts, consumer welfare
and so on. Emphasising the “role that would be played by the CCI and the economic
and financial stakes involved, it is absolutely critical to have a board-based Selection
Committee of high stature and experience who are well aware of the trends in
economics, commerce, trade and business” etc. the Committee also put forward its
argument that Selection Committees for Chairpersons and Members of other statutory
regulatory bodies like Insurance Regulatory and Development Authority (IRDA), the
Securities and Exchange Board of India (SEBI) and the Central Electricity regulatory
Commission (CERC) etc. are also headed by experts, and not Chief Justice or his
nominees.48

Therefore, the Committee opined in favour of having a board-based Selection

Committee for the selection of the Chairperson and other members of the CCI who
would be in a better position to appreciate the candidate’s expertise and experience in
the requisite areas. The Committee submitted that the Clause 5 should be reviewed by
the Ministry and be suitably amended in a way so that the Selection Committee for

48
NOMANI, M. Z. M. & RAHMAN, F., COMPETITION LAW, UNIVERSITY BOOK HOUSE
(PVT.) LTD. (2018).

84
 Chapter 2: Indian Competition Law

Chairperson and other members of the Commission be board-based and headed by an

expert with good experience in the practical fields.

The government has not considered legislation of other countries that have initiated
and are successfully implementing competition law over the years. It has not
recognized, or perhaps is not willing to accept, that more than the mode of selection,
the calibre of the members of the Commission is the key to its effective functioning
and acceptability in the commercial world. In the European Union, it is the European
Parliament that approves the appointment of the President of the European
Commission and the commissioners. The position in the UK is that the Secretary of
State appoints the members of the Competition Commission. The judiciary is not
involved in the selection process, relating to the Competition Commission, in these
jurisdictions.

Again, sub-section (2) of Section 9 which states that the manner of selection of panel
of names shall be such as may be prescribed is open to criticism as this is certainly not
a matter to be left to be decided by the government under its rule making powers.
Section 8(2) is sufficiently clear for any committee to match the experience of an
individual considered for appointment to the Commission with the functions to be
exercised by the Commission. This is certainly unnecessary as the constitution of
Selection Committee constituted under Section 9(1) is such that it should be left free
to take into account the relevant criteria for eligibility for appointment.

Skill and Knowledge Requirements

The Indian Competition Act, 2002 is comparatively a recent legislation, and is vital to
the economic growth of the country which is presently in a transitional stage.
Therefore, for effective, and therefore credible, enforcement machinery, more than
ordinary care should be taken in ensuring a proper composition of the Commission.
The first step towards this would be unlearning the practice of paying too much
emphasis on the formal qualifications of the persons to be appointed to the
Commission. Equally so, one should not fall into the temptation to overawe others
with reference to their past experience that may or may not be relevant to their duties
as members of the Commission. What is essential is the necessary analytical skills that
will ensure the protection of the structure of a market so that competition is preserved,

85
 Chapter 2: Indian Competition Law

ultimately serving the interests of the consumers. Past service in howsoever a high
position in an unrelated field is no automatic guarantee that a member would bring to
bear the required knowledge and skills necessary to perform his present duties, under
the Act, which should in no case be permitted to be considered as an exercise of some
administrative powers. While experience with the methods of operations of business
enterprises would help a sufficient degree of flexibility and creativity is necessary for
offering the appropriate remedies to be considered by the contending parties, who
may be expected to take extreme and rigid positions, so that the needs of the market
are sub served and the terms of anti-competitive arrangements are rendered of no
effect. But then this requires knowledge of the business, including the prevailing
practices in that business.

In addition to knowledge of the business and the practices of that business, knowledge
of how enterprises abroad carry on such businesses and the usual anti-competitive
practices that have been prohibited in those countries is equally necessary. The
purpose of any competition analysis is to determine if and how a market has been
distorted by the alleged anti-competitive activity. Information is easy to obtain in the
case of established businesses but new services such as telecommunications and
internet services present problems of inaccessibility to information on practices,
relevant data on costs, pricing principles, etc. The need to exercise resourcefulness in
dealing with such situations is obvious.

The basics in the composition of a commission are well known. In all jurisdictions,
what is sought after in the composition of a commission is knowledge of the
mechanics of trade and industry and the markets in which they operate. The issues
that any commission will have to consider relate to anti-competitive conduct in
myriad ways, which will include the abuse of a dominant position in the market and
mergers and acquisitions eliminating or restricting competition in the business of the
enterprises effecting the merger or acquisition. What is necessary is a knowledge of
the markets, their structure, the sub-markets, the level of concentration, if any, the
factors that affect their operations, the position of buyers and consumers, their
preferences, what products are substitutable, the reasonableness or otherwise of prices
charged as anti-competitive and related issues. Further, these are not to be considered
in a vacuum but are to be decided with reference to the factors set out in Section 19(5)

86
 Chapter 2: Indian Competition Law

relating to anti-competitive agreements, Section 19(4) for examining the existence of

a dominant position, and Section 20(4) for assessing if the combination has, or is
likely to have an appreciable adverse effect on competition in the relevant market.
Determination of issues such as market power, a dominant position, particularly in
new services, is a highly demanding and challenging task, requiring a deep knowledge
of the business and the willingness to take expert advice, if necessary. The net is to be
cast wide in the selection of members and the chairman, so that the Commission is
perceived as a body with the necessary knowledge and understanding of the issues
with the consequent competence to resolve complex commercial issues to the
satisfaction of the parties seeking redress.

Term of Office

Section 10 originally provided that the term of office of the Chairperson and every
other Member as five years from the date on which he entered upon his office and
shall be eligible for reappointment. The 2007 amendment has introduced a proviso to
Section 10(1) to the effect that the upper age limit for a Chairperson as well as a
member shall be sixty five years.

Restriction on Employment

Section 12 prescribes the period for which the chairperson and other members of the
Commission are not to accept any employment, in certain cases, after ceasing to hold
office in the Commission. Section 12 provides as under:

Section 12: The Chairperson and other Members shall not, for a period of two
years from the date on which they cease to hold office, accept any
employment in, or connected with the management or administration of, any
enterprise which has been a party to a proceeding before the Commission
under this Act:

Provided that nothing contained in this section shall apply to any employment
under the Central Government or a State Government or local authority or in
any statutory authority or any corporation established by or under any Central,
State or Provincial Act or a Government company as defined in Section 617 of
the Companies Act, 1956 (1 of 1956).

87
 Chapter 2: Indian Competition Law

Under the pre-amendment Section 12, the prohibition was for a period of one year
from the date of their ceasing to hold office in the Commission. The amendment has
raised this period to two years from that date. Such a provision, regardless of the
period which is the subject of the amendment, is difficult to justify. The presumable
objective should be that the members should not be exposed to the influence,
howsoever speculative or distant, of a possible employment, after their leaving the
Commission, with any litigant before the Commission. Where the decisions are of the
Commission acting as collegiums, every litigant knows that no one member may act
out of personal interest in favouring any of the parties.

But there is no logic in the proviso to Section 12 which excludes from this prohibition
any member taking up any employment under the Central Government or a state
government or local authority or in any statutory authority or any corporation
established by or under any Central, State or Provincial Act or a government company
as defined in Section 617 of the Companies Act, 1956. (1 of 1956). Even if any
justification may be found for the prohibition, it should apply to employment with any
business, whether in the private sector or the public sector. On the other hand, towards
a more effective method of taking personal interest out of the process of making a
decision, the Commission may, under Section 36, which enables it to regulate its own
procedure, prescribe, on the lines of the Companies Act, 1956, that any member
personally interested in the enterprise in proceedings before it shall declare that
interest in writing and shall not participate in the proceedings relating to that
enterprise.

In this context, the recommendations of the Standing Committee are to be noted. It

said:

The Committee is broadly in agreement with the proposed amendment of

Section 12, which proposes to prohibit the Chairperson and Members of the
Commission to take employment in any enterprise that /had been a party to a
proceeding before the Commission, for two years after ceasing to hold office.
However, they feel that the restriction of 2 years on re-employment should
also be made applicable for the Director General, who has a very significant
position in conducting inquiries and other investigative functions of the

88
 Chapter 2: Indian Competition Law

Commission, if he is borne permanently on the cadre of Competition

Commission. In this connection, the Committee understand that at present the
Director General is a Joint Secretary level officer on deputation to the
Commission. In such a situation, the suggestion for 2-year restriction on his re-
employment will not be applicable. Therefore, the Committee are of the view
that while framing the rules, government should see that the Director General
is an officer who is an expert borne permanently on the cadre of Competition
Commission and not a deputarionist on whom such a restriction could be
imposed. The Committee recommend that the government may examine the
matter and carry out necessary changes in Clause 7 to that effect.49

2.4.2 Director General

The Central Government shall appoint a Director General for assisting CCI in
conducting inquiry into contravention of any provisions of the Act or to perform other
functions as provided by or under the Act. The director shall, when so directed by the
Commission, assist rules or regulations made there under. The Additional, Joint,
Deputy and Assistant Director General or such officers or other employees so
appointed shall exercise his powers and discharge his functions, subject to the
supervision and direction of the Director General. The Director General shall have
all powers as are conferred upon the Commission under Section 36(2).50

Appointment and Function of Director General

Section 16 of the Act provides for the appointment of a Director General, additional,
joint, deputy or assistant directors general or such other advisers, consultants or
officers.

The amendments to this Section were two. The amendment to sub-section (1) limited
the role of the Director General and the other was the introduction of the new sub -
section (IA), providing for the appointment of Additional Directors General and
others.

49
RAMAPPA, supra note 17, at 26-34.
50
Mitra, supra note 38.

89
 Chapter 2: Indian Competition Law

The amended Section 16 is as follows51:

16. (1) The Central Government may, by notification, appoint a Director

General for the purposes of assisting the Commission in conducting inquiry
into contravention of any of the provisions of this Act and for performing such
other functions as are, or may be, provided by or under this Act.

(1A) The number of other Additional, Joint, Deputy or Assistant Directors

General or such officers or other employees in the office of Director General
and the manner of appointment of such Additional, Joint, Deputy or Assistant
Directors General or such officers or other employees shall be such as may be
prescribed.

(2) Every Additional, Joint, Deputy and Assistant Directors General or such
officers or other employees, shall exercise his powers, and discharge his
functions, subject to the general control, supervision and direction of the
Director General.

(3) The salary, allowances and other terms and conditions of service of the
Director General and Additional, Joint, Deputy and Assistant Directors
General or, such officers or other employees, shall be such as may be
prescribed.

(4) The Director General and Additional, Joint, Deputy and Assistant
Directors General or such officers or other employees, shall be appointed
from amongst persons of integrity and outstanding ability and who have
experience in investigation, and knowledge of accountancy, management,
business, public administration, international trade, law or economics and such
other qualifications as may be prescribed.

The noticeable difference in the new sub-section is that now the work of the Director
General will be limited only to assisting the Commission in

(a) conducting inquiry into contravention of any of the provisions of the Act
and

51
Section 16, the Competition Act, 2002.

90
 Chapter 2: Indian Competition Law

(b) performing such other functions as are, or may be, provided by or under
this Act.

The responsibility for conducting cases before the Commission has been omitted. The
reason is not known, though it could be said that it could be covered by the general
functions to be discharged under the Act. Section 41(1) of the Act defining the duties
of the Director General only states that he “shall, when so directed by the
Commission, assist the Commission in investigating into any contravention of the
provisions of this Act or any rules or regulations made there under.”

Secretary to the Commission, Experts, and Other Professionals

The newly amended Section 17 of the Act provides for the appointment of a secretary,
other officers and employees and experts and professionals. The original Section
provided only for the appointment, by the Commission, of a registrar and other
employees as it may consider necessary for the efficient performance of its functions
under this Act. Section 17 provides as under52:

17 (1) The Commission may appoint a Secretary and such officers and other
employees as it considers necessary for the efficient performance of its
functions under this Act.

(2) The salaries and allowances payable to and other terms and conditions of
service of the Secretary and officers and other employees of the Commission
and the number of such officers and other employees shall be such as may be
prescribed.

(3) The Commission may engage, in accordance with the procedure specified
by regulations, such number of experts and professionals of integrity and
outstanding ability, who have special knowledge of, and experience in,
economics, law, business or such other disciplines related to competition, as it
deems necessary to assist the Commission in the discharge of its functions
under this Act.

52
Section 17, the Competition Act, 2002.

91
 Chapter 2: Indian Competition Law

Power to Make Rules, Regulations

Section 65 of the Act sets the matters on which the Central Government may make
rules under the Act and the amendment of Section 63 effects the changes necessary to
provide for matters required for the purposes of the amended Act.

Power of the Commission to Make Regulations

Section 64 provides the power to the Commission to make regulations to carry out the
purposes of the Act. After its establishment, the Competition Commission has issued a
number of notifications and regulations dealing with the Competition Commission of
India (General) Regulations, 2009, the Competition Commission of India
(Transactions of Business) Regulations, 2009, and the Competition Commission of
India (Procedure in Regard to the Transaction of Business Relating to Combinations)
Regulations, 2011.

Jurisdiction over Acts of Persons from Abroad Affecting Competition in India

A common problem in the enforcement of any Anti-trust legislation is countering the

anti-competitive acts of those outside the country and not subject to the jurisdiction of
local authorities, where the effects of those acts adversely affect competition within
the country. Developed countries are equally keen to agree upon a workable
mechanism that would give some legal basis for taking action to protect themselves
from the fall-out within their countries of the effects of such activities. To be specific,
they are concerned about cartels operating from outside their countries and affecting
their commerce.

The Competition Act, 2002, under Section 32, as amended in 2007, empowers the CCI
to take action with respect to conduct that has occurred outside India and with respect
to the parties located outside India provided that the conduct had an appreciable
adverse effect on competition in the relevant market in India.

Section 32. The Commission shall, notwithstanding that53, -

(a) an agreement referred to in Section 3 has been entered into outside India;
or
53
Section 32, the Competition Act, 2002.

92
 Chapter 2: Indian Competition Law

(b) any party to such agreement is outside India; or

(c) any enterprise abusing the dominant position is outside India; or

(d) a combination has taken place outside India; or

(e) any party to combination is outside India; or

(f) any other matter or practice or action arising out of such agreement or
dominant position or combination is outside India, have power to inquire in
accordance with the provisions contained in Sections 19, 20, 26, 29 and 30 of
the Act into such agreement or abuse of dominant position or combination if
such agreement or dominant position or combination has, or is likely to have,
an appreciable adverse effect on competition in the relevant market in India
and pass such orders as it may deem fit in accordance with the provisions of
this Act.

The amendments are that the inquiry should be in accordance with the provisions
contained in Sections 19, 20, 26, 29, and 30 of the Act and the orders that may be
passed are as deemed fit in accordance with the provisions of this Act.

The principal defect in this Section is that it does not state what the Commission is
supposed to do at the end of the inquiry. It should have provided for the kind of orders
that it would be competent to pass and also have provided the means of enforcing its
orders under this Section.

With this regard, Section 14 of the MRTP Act was much more explicit. It was as
follows:

Section 14. Orders where the party concerned does not carry on business in
India - where any practice substantially falls within monopolistic, restrictive or
unfair, trade practice, relating to the production, storage, supply, distribution
or control of goods of any description or the provision of any services and any
party to such practice does not carry on business in India; an order may be
made under this Act with respect to that part of the practice which is carried
on India.

93
 Chapter 2: Indian Competition Law

After all, the final implementation ‘of an anti-competitive act in India requires an
Indian party and if that party is restrained from participating in giving effect in India
to any anti-competitive act caused from abroad, the Act would have been enforced to
some extent. But where the consequences of anti-competitive acts taking place outside
India and affecting the process of competition in India are sufficiently serious by
affecting a larger market, the issue is one to be resolved by bilateral agreements
providing for reciprocity in collecting information, evidence and prosecution of the
offender in his host country. But courts have always maintained their authority to
exercise jurisdiction even where a person does not carry on business in the country
where the effects of his unlawful acts result. In the well-known Wood Pulp case,
discussed in later chapters, the European Court of Justice (ECJ) established what is
usually called the ‘Effects Doctrine’. It was a case where wood pulp producers,
having their registered offices ‘outside the EC, in different countries, but not carrying
on business within the EC entered into price-fixing agreements among themselves
covering supplies to be made to purchasers within the EC. Some applicants raised
submissions regarding the Community’s jurisdiction to apply its competition rules to
them. Their contention was regulation of conduct restricting competition adopted
outside the territory of the Community merely by reason of the economic
repercussions, which that conduct, produced within the Community would be against
public international law. The ECJ rejected this contention and held that these
suppliers were to be held as to be in competition for the supply of wood pulp in the
common market and that the rules of the EC competition applied to their conduct also
and upheld the fines levied on some of the applicants.

However, in support of the Section 32, the Competition Act, 2002 in Section 18
empowers the CCI to enter into memorandum of understanding with any agency of
any foreign country with the prior approval of the Central Government.54 How
bilateral agreements between countries are used to meet such problems is discussed in
the last chapter on “Transnational Application of Indian Competition Law”.

54
Kumar, supra note 22.

94
 Chapter 2: Indian Competition Law

2.4.3 Competition Appellate Tribunal

The Competition Act, 2002 did not provide for Competition Appellate Tribunal
(COMPAT). After the decision of the case Brahm Dutt v. Union of India55, made the
CCI a market regulator, the Competition (Amendment) Act, 2007 was brought which
provided for the establishment of COMPAT. Having, it was necessary to establish a
separate body to perform adjudicatory functions under the Competition Act, 2002, and
the 2007 amendment introduced by a new chapter, Chapter VIIIA. Chapter VIIIA
provided for the establishment of the COMPAT, its functions, powers, composition,
selection, and related matters, through Sections 53A to 53U.

Appeals against the Orders of the Competition Commission India

The Competition Act, 2002 provided for filing appeals against the orders of the CCI,
under Sections 53A to 53U. The Finance Act, 2017, has amended Sections 53C to
53L of the Competition Act, 2002. An appeal may be made by the Central
Government or the state government or a local authority or an enterprise or any
person, aggrieved by any direction, decision or order referred to above and also in
respect of a claim for adjudication of compensation within 60 days. The compensation
can be claimed under Section 42A or 52Q(2) of the Competition Act. The other party
will be given the opportunity of hearing and then the order will be passed. Both the
CCI and the parties to appeal will be given copies of the order.

2.4.4 National Company Law Appellate Tribunal

As per the recent amendments brought by the Finance Act, 2017, the COMPAT has
ceased to exist effective from 26 May, 2017. The National Company Law Appellate
Tribunal (NCLAT) will be exercising the appellate functions provided under the
Competition Act, 2002. These amendments were brought under the provisions of part
XIV of Chapter VI of the Finance Act, 2017.

The Finance Act primarily amends Section 53 A of the Competition Act, 2002 which
was the core provision in relation to filing an appeal against specific orders of the
CCI. The amendment replaces the appellate body COMPAT with the NCLAT.

55
(2005) 64 CLA 214 SC.

95
 Chapter 2: Indian Competition Law

However, the substantive provisions relating to the right to appeal remains un-
amended. Thus, right to appeal before the NCLAT would be the same as the pre-
existing right of appeal before the COMPAT. In addition, like its predecessor, the
NCLAT would also be the relevant authority to seek compensation under the
Competition Act.

The amendment coming into force on 26 May, 2017, all fresh appeals from this date
would be filed with the NCLAT. Likewise, after this date, all cases pending before the
COMPAT will be transferred to the NCLAT. The matters can either be heard afresh or
continue from the state pending before the COMPAT.

However, this amendment, i.e., the transition is likely to create problems in

technicalities, such as in the procedure for filing the appeal. Moreover, the substantive
provisions relating to appeal has not been amended. The right to appeal under the
Competition Act has been restricted to only certain orders of the CCI - leaving a
significant lacuna for relief against orders not listed under Section 53 A. The
amendment could not address this gap.

Again, the efficacy of the NCLAT in dealing with the appeals against the orders of the
CCI is the most important question. In the eight years of its existence, the COMPAT
proved to be successful and effective in the strict adherence to due process and natural
justice in adjudicating appeals against the orders of the CCI. Being a specialized
appellate body, the COMPAT was more effective and successful in understanding and
applying the nuances of competition law. On the contrary, the NCLAT, responsible for
adjudicating matters under the Indian Companies Act, 2013 and the Insolvency and
Bankruptcy Code, 2016 cannot be expected to deal with the appeals against the orders
of the CCI as effectively as the COMPAT. Whilst the amendment by the government
sought to avoid the multiplicity of various tribunals, it is afraid that making the
NCLAT, the appellate Competition Law authority may frustrate the main goals of
competition law in dealing with competition specific issues.

2.4.5 The Supreme Court

Any person aggrieved by any decision or order of the Appellate Tribunal (Now,
NCLAT) may file an appeal to the Supreme Court within the prescribed period of sixty

96
 Chapter 2: Indian Competition Law

days. Section 53T provides for an appeal to the Supreme Court by the Central
Government or any state government or the Commission or any statutory authority or
any local authority or any enterprise or any person. The time limit for appeal to the
Supreme Court be made within sixty days from the date of communication of the
decision or order of the Appellate Tribunal to the appellant. But the Supreme Court
may extend this period if it is satisfied that the applicant was prevented by sufficient
cause from filing the appeal within the prescribed period. An appeal should be
entertained only on a question of law.

The Competition Appeal Tribunal, United Kingdom

The position in the United Kingdom relating to the constitution of the Competition
Appeal Tribunal56 which is also a quasi-judicial body is governed by Section 12(2) (a-
c) of the Enterprise Act, 2002. The Tribunal is consisted of:

(a) a person appointed by the Lord Chancellor to preside over the Tribunal
‘the President’;

(b) members appointed by the Lord Chancellor to form a panel of chairmen;

and

(c) members appointed by the Secretary of State to form a panel of ordinary

members.

Paragraph 1 of Schedule 2 to the Enterprise Act, 2002, prescribes the qualifications

for being appointed as president and chairman of a panel.

A Paragraph 1(1) is as follows:

A person is not eligible for appointment as president unless (a) he has a 10

year general qualification; (b) he is an advocate or solicitor in Scotland of at
least 10 years’ standing; or (c) he is a member of the Bar of Northern Ireland
or solicitor of the Supreme Court of Northern Ireland, of at least 10 years’
standing; and he appears to the Lord Chancellor to have appropriate
experience and knowledge of competition law and practice.

56
Section 53A (1).

97
 Chapter 2: Indian Competition Law

Paragraph 1(2) states:

A person is not eligible for appointment as a chairman unless (a) he has a 7

year general qualification; (b) he is an advocate or solicitor in Scotland of at
least 7 years’ standing; or (c) he is a member of the Bar of Northern Ireland or
solicitor of the Supreme Court of Northern Ireland of at least 7 years’
standing; and he appears to the Lord Chancellor to have appropriate
experience and knowledge (either of competition law and practice or any other
relevant law and practice).

Cases are heard before a panel consisting of three members: either the president or a
member of the panel of chairmen and two ordinary members. The members of the
panel of chairmen are judges of the Chancery Division of the high court and other
senior lawyers. The ordinary members have expertise in law and/or related fields.

2.5 Problems in Enforcement of Competition Law in India

The key problem in enforcement, particularly entailing criminal sanctions, is the

extent of effective supervision of the activities of those engaged in commerce. In a
large country such as India, and in a new area like regulation of competition, the
magnitude of the task in terms of the resources needed such as manpower, their skills,
training and motivation, and the need to create a vibrant and flexible enforcement
machinery would be apparent. Those dealing with breaches such as these should also
understand that they are to be resolved consistent with the objective of the
preservation of the process of competition. A mechanical approach would certainly
not serve the purposes of the Act. Since all enterprises, whether in the private or
public sector, except activities of the government relatable to its sovereign functions,
are covered by the Act, a consistent and uniform enforcement of the Act against all
these enterprises would lend it credibility and make it more acceptable to all
enterprises, domestic and foreign.

The business environment in India described earlier is likely to present some special
problems in the regulation and early recognition of those areas that would aid in the
effective implementation of the Act. One is the gradual elimination of state
monopolies consequent on deregulation, requiring from those enterprises the

98
 Chapter 2: Indian Competition Law

flexibility to adapt to the new regime by reorienting their attitude to doing business in
the new legal and commercial environment. Just as important it is for those businesses
to cease to expect a special treatment; the enforcing authorities also should treat them
simply as commercial enterprises falling under the Act.

The Standing Committee, dealing with “Pre- requisites for a Competition Policy”,
emphasized the need “to pursue an appropriate Competition Policy without being
constrained by or conflicting with other public policy objectives.” The following are
the areas, listed by the report, of micro-industrial governmental policies that may
support or adversely impinge on the application of competition policy: “industrial
policy, reservations for the small-scale industrial sector, privatization and regulatory
reforms, trade policy, including tariffs, quotas, subsidies, anti-dumping action,
domestic content regulations and export restraints (essentially WTO-related) state
monopolies policy and labour policy.” The report has cautioned that building too
many objectives into the competition policy such as protection of the small-scale
sector, trade, investment and regional development policies, etc., would, where the
thrust of any on these policies ignores the economic inefficiencies that may either
result from any of those policies, or shields economic inefficiency, defeat purposes of
the legislation on competition. The acquiescence in the poor management of the
public sector undertakings is an example of a policy that would help continue
economic inefficiency. The continuance of a policy of reservation for the small-scale
industry is an example of a policy that shields economic inefficiency. Here, consider
the position relating to two areas: the small-scale industry and state monopolies.

Industrial Policy - Small-scale Industry

While it is generally understood that industrial licensing as a means of controlling or

directing industrial activity in areas other than defence, atomic energy and the
sovereign functions of the government, is no longer relevant and is certainly an
interference with the growth of industrial activity, the lack of logic in reserving
certain items exclusively for the small-scale industry is overlooked for reasons other
than economic justification. The value of the assets of the business treated, as a small-
scale industry for this purpose, is not an appropriate test either for exempting it from
industrial licensing or following from that position, for restricting the entry of other

99
 Chapter 2: Indian Competition Law

enterprises into the reserved sector. For one thing, the ceiling on investment in plant
and machinery to qualify for being treated as a small-scale industry is fixed by the
government as an administrative decision and that ceiling has been frequently revised.
On the other hand, any exemption, if based on the small-scale industry is status, for
example, if it were a co-operative society, not operating for profit, would be logical.
But the present division, as a policy of the government, does not aid free competition.

The Standing Committee was of the view that no reservation should be given to the
small-scale sector in products which are on Open General Licence (OGL) for imports
and it rather suggested progressive reduction and ultimate elimination in reservation
of products for the small-scale industrial and handloom sectors. As the Committee has
rightly pointed out, the inefficiencies of the small-scale sector would infect the
industries to which they supply their products, leading to the overall poor quality of
products to consumers. The latest industrial policy of the Government of India states
that as of now there are only twenty one industries in the small-scale sector and their
number was reduced after continual review.

2.6 Competition Law Review Committee

The Central Government has constituted a Competition Law Review Committee to

review the Competition Act, 2002 to ensure that the legislation is in sync with the
changing business environment. The Committee was set up to suggest if any
necessary change is required. The press release that notified the appointment of the
Committee forwarded its justification as: “It is essential that the Competition Law is
strengthened, and re-calibrated to promote beat practices which result in the citizens
of this country achieving their aspirations and value for money.”

After consulting various stakeholders, including industry chambers, professional

institutes, Government Departments/ Ministries, NGOs and experts, The Committee
finally submitted its Report of the Competition Law Review Committee to Union
Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman on 26 July, 2019
recommending certain amendments to the Competition Act, 2002. The ease doing
business, encouraging start-ups and meeting the challenges of the new economy were
the main points of focus of the Committee Report.

100
 Chapter 2: Indian Competition Law

The key recommendations of the Competition Law Review Committee can be

highlighted as follows:

1) Introduction of a ‘Green Channel’ for combination notifications to enable

fast-paced regulatory approvals for vast majority of mergers and
acquisitions that may have no major concerns regarding appreciable
adverse effects on competition. The aim is to move towards disclosure
based regime with strict consequences for not providing accurate or
complete information.
2) Combinations arising out of the insolvency resolution process under the
Insolvency and Bankruptcy Code will also be eligible for “Green Channel”
approvals.
3) Introduction of a dedicated bench in NCLAT for hearing appeals under the
Competition Act. The NCLAT is overburdened with its own cases. So, to
meet the requirement of the Competition Act for speedy disposal of such
appeals, within a period of six months, it recommended that a dedicated
bench should be created to hear appeals under the Act.
4) Introduction of express provisions to identify ‘hub and spoke’ agreements
as well as agreements that do not come under typical horizontal or vertical
anti-competitive structures to cover agreements related to business
structures and models synonymous with new age markets.
5) Additional enforcement mechanism of ‘Settlement & Commitments” in
the interests of speedier resolution of cases of anti-competitive conduct.
The Committee rightly noted that jurisdictions like the European Union
accept remedies from parties to antitrust disputes. These remedies may be
in the form of settlements and commitments. Settlements are generally
available for cartels and require an admission of guilt from the parties.
6) Enabling provisions to prescribe necessary thresholds, inter alia, deal-
value threshold for merger notifications.
7) CCI to issue guidelines on imposition of penalty to ensure more
transparency and faster decision making which will encourage compliance
by businesses. The penalties imposed by the CCI for violations of
competition law are often alleged as disproportionate and excessive.

101
 Chapter 2: Indian Competition Law

Therefore, the Committee recommended that CCI should issue guidance on

calculation and imposition of penalties under the Act.
8) Strengthening the governance structure of CCI with the introduction of a
Governing Board to oversee advocacy and quasi-legislative functions,
leaving adjudicatory functions to the Whole-time Members.
9) Merging DG’s Office with CCI as an ‘Investigation Division’ as it aids
CCI in discharging an inquisitorial rather than adversarial mandate. The
DG is appointed by the Central Government and is directly accountable to
it. To improve administrative efficiency, it recommended that the office of
the DG be subsumed within the CCI.
10) Opening of CCI offices at regional level to carry out non-adjudicatory
functions such as research, advocacy etc. and interaction with State
Governments and State regulators.

However, the Report of the Competition Law Review Committee could not properly
address many important issues of competition law and policy in India. Some of them
are:

1) The Committee has failed to address the issue of implementation of the

draft National Competition Policy, which has become very indispensable
for structural reforms in the economy especially in today’s slowing
economy.
2) Proper guidelines on the enforcement of extra territorial jurisdiction under
the Competition Act have become the need of the hour. But, the Committee
has not worked upon on the important issue.

With the change in the international economic environment, the Competition Act,
2002 also requires to review about its working as well as the effectiveness. However,
the Commission is not bound by the opinion of the government and Commission may
formulate competition policy as it deems fit. The Commission also owns the
responsibility for the promotion of competition advocacy, to take necessary measures
for creating awareness and providing training about competition issues.

102