Angshuman Hazarika

IIM Ranchi
angshuman.hazarika@iimranchi.ac.in

Any logos, brand names or trademarks are used only for educational purposes and no rights are claimed over the same. Names of companies are used for discussion
only using publicly available material. No claims are made against them.
 What is competition and competition law?

Competition in markets means rivalry between competitors to attract customers which results in
enhanced consumer welfare by way of more choices, newer products and low prices.
- V.K. Singh, IICA

Competition Law means any Law that prohibits, restricts or regulates actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
- Common definition found in agreements

Importance of Competition Law

• Acts as a control over the situations which may not be regulated by a free market scenario.
• Prevents acts by firms which may harm consumer interests by impeding competition and may prevent
other entrepreneurs from surviving in the market.
• Blocks prohibitive activities by businesses which may enjoy a dominant position in the market.
• Check mergers and acquisitions which may prevent or restrict competition.
 Competition
Enacted after the
Monopolies Act 2002 ‘Raghavan
and Committee’ report
Restrictive Restrictive submitted in May
Practices Trade
Practices 2000.
Act 1956
Clayton Act 1969
Act 1914

Sherman
History of Competition Law
Act 1890

The overall intention of competition law policy has not changed markedly over the past century. Its intent 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.
- CCI v SAIL (2010) 10 SCC 744
 Key elements of the Competition Act, 2002

• Provides for the establishment of the Competition Commission of India which is a quasi judicial authority for
investigating and passing decisions in situations which may impede competition
• Three major areas of regulation under the Act-
• Anti-competitive agreements (Section 3)
• Abuse of dominant position (Section 4)
• Combinations (Section 5 & 6)
• Commission also entrusted with the responsibility to provide advice to the central or state governments when it
seeks its opinion. It also creates awareness on issues of competition law.
 Key definitions under the Act:
• “agreement” includes any arrangement or understanding or action in concert,— (i) whether or not, such arrangement,
understanding or action is formal or in writing; or (ii) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceedings;
• “cartel” includes an association of producers, sellers, distributors, traders or service providers who, by agreement
amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods
or provision of services;
• “relevant market” means the market which may be determined by the commission with reference to the relevant
product market or the relevant geographic market or with reference to both the markets;
• “relevant geographic market” means a market comprising the area in which the conditions of competition for supply
of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished
from the conditions prevailing in the neighbouring areas;
• “relevant product market” means a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices
and intended use;
• “turnover” includes value of sale of goods or services;
 Prohibition on Anti-competitive agreements

• Section 3(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 within India. - Key Term: AAEC

Agreements which may cause

AAEC

Horizontal Agreements (S. Vertical Agreements (S.

3(3)) (Ex. Bid rigging, control 3(4))(Ex. Exclusive supply
of purchase and sale price) agreement)

Presumption of
AAEC Needs to be
Cartels are a key indicator of
proved by the
anti-competitive agreements CCI
 Abuse of Dominant Position
• Determining the relevant market is the key here. It is determined using both the
product market and the geographical market.
• Once a dominant position of an enterprise has been found in a relevant market has
been found, then indulging in any of the following activities (not a comprehensive
list) may be considered as an abuse of dominant position:
• Imposing directly or indirectly unfair conditions or restrictions on purchase or
sale of goods or services.
• Predatory pricing (selling below cost price as per the specific regulation
• Limiting or restricting production of goods or services
• Denying market access
• Using dominant position to protect another relevant market
• “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
 Regulating Combinations

Under Indian Competition Law, acquisition of one or more enterprises by one or more
persons or merger or amalgamation of enterprises is considered as a combination of such
enterprises and persons or enterprises.

Three different situations are considered for a combination:

Section 5(a): Acquisition of control, voting rights or assets;
Section 5(b): Acquisition of control by a person over an enterprise where such person has
control over another enterprise in similar or identical business;
Section 5(c): Mergers and Acquisitions.

According to Section 6, combinations which cross a definite threshold should be reported to

the Commission within 30 days of board approval or execution of any agreement and the
combination will not come into effect until 210 days have passed since notification.

Commission also has the power to regulate transactions in foreign countries

which may have effect on competition in India
 Penalties which can be imposed by the Commission
For Anti-competitive Agreements and abuse of dominant position
• Order to discontinue the agreements and not to reenter into such agreements.
• Impose penalty which can be a maximum of 10% of turnover of last thee financial years for all
parties which were a part of the agreements.
• In case of a cartel, three times of the profit or 10% of turn over for each year when the
agreement was in force.
Special provision for enterprise enjoying dominant position
• The commission may order an enterprise enjoying dominant position to divide.
For combinations

• May direct that combination will not occur

• May propose modification to the combination
• If not notified, then CCI can impose penalty which can extend to 1% of total turnover or assets
whichever is higher
• If CCI does not clear a transaction, then it is not completed
• See Exemptions under Schedule I