COMPETITION ACT, 2002

• The term ‘competition’ is generally understood as a process

whereby the economic enterprises compete to secure customers
for their product.
• - In the process, the enterprises compete to outsmart (defeat)
their competitors, sometimes to eliminate their rivals.
• - Competition in the sense of economic rivalry is unstable and
has a natural tendency to give way to a monopoly.
• - Thus, competition kills competition.
Meaning

• Competition in the market means sellers

striving independently for buyers’ patronage
(support) to maximize profit (or other business
objectives).
Competition Act
• The Competition Act, 2002 which aims to eliminate
anti-competitive behavior by prohibiting anti-
competitive agreements and mistreating market
domination situations.

• Example if all cement manufacturing company decides

to keep the same price. Means by doing this u are
trying to create monopoly and kill competition. This
cannot happen under Competition Act.
• The Competition Act, 2002 is an improvement on the MRTP Act, 1969

MRTP (Monopolistic and Restrictive Trade Practice) Act, 1969.

 MTRP Competition Act

Meaning MRTP Act, is the first competition law Competition Act, is implemented to promote and keep
made in India, which covers rules and up competition in the economy and ensure freedom
regulations relating to unfair trade of business.
practices.

Focuses on Consumer interest at large Public at large

Penalty No penalty for offense Offenses are penalize

Objective To control monopolies To promote competition

Agreement Required to be registered. It does not specify any provision relating to

registration of agreement.

Appointment By the Central Government By the Committee

of Chairman
Objective

To Establish
Competition To Prevent To Promote
Commission of monopoly Competition
India(CCI)

To protect To protect Interest

Freedom of Trade of Consumers
Important Definitions
• Acquisition – Section 2(a)
• It means directly or indirectly, acquiring or agreeing to acquire: a)
shares, voting rights or assets of any enterprise; b) control over
management or control over assets of any enterprise

• Agreement – Section 2(b)

• Agreement includes any arrangement or understanding or action in
consent – a) whether or not, such arrangement, understanding or
consent is informal or in writing; or b) whether or not such
arrangement, understanding or consent is intended to be enforceable
by legal proceedings
Cartel – Section 2c
• Cartel includes an association of – a) producers; or b) sellers; or c)
distributors; or d) traders or e) service providers
• who, by agreement amongst themselves limit ,control or attempt to
control,
• a) production; or
• b) distribution; or
• c) sale or price of or,
• d) trade in goods or provision of services

• Eg: All cement manufacturing companies coming together forming an

association , and decides on the price.
Objective of Cartel
• – To raise price above competitive levels,resulting in injury to consumers to the
economy.
• For the consumers, cartelisation resultsin higher prices, poor quality and or no choice
for goods or/and services.

• Conditions necessary for cartelization –

• high concentration
• few competitors
• high entry and exit barriers
• homogeneity of the products (similar products)
• similar production costs
• Predatory Pricing- It means the sale of goods or provision of services,
at a price below cost of production to reduce competition or
eliminate the competitors. The main objective of such price is to
reduce competition or to eliminate the competitors
Scope
Prohibition
of Anti-
competitive
Agreements -
Section 3 Prohibition
Regulation of of abuse of
Combination dominant
s - Section 5 position
Section 4
Anti-Competitive Agreements – Section 3
• No person or no enterprise shall enter into any agreement in
respect of supply, distribution, acquisition or control of goods or
provision of services, which causes or is likely to cause an
appreciable adverse effect on competition. (AAEC)
• If the agreement is anti-competitive it will be wholly void.
• Cartel is a form of entering into anti-competitive agreements
Types of Anti-Competitive Agreements
• Horizontal Agreements
• Horizontal agreements are arrangements between enterprises
at the same stage of production (Aggreement between 13
cement players)

• Vertical Agreements –
• Vertical agreements are those agreements which are
entered into between two or more enterprises operating at
different levels of production ( Maruti Suzuki with dealers)
• Maruti Suzuki, was found guilty of unfairly controlling freedom of its
dealers to give discounts on cars sold thereby controlling the resale
price of its cars.
• The Competition Commission of India (CCI) imposed a penalty of
INR 200 Crore on Maruti Suzuki India Limited (MSIL) for the
imposition of a Discount Control Policy (DCP) amounting to resale
price maintenance (RPM) .
Horizontal
• 1.Such agreements includes 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 .
• c) Shares the market or source of production
• d) Directly or indirectly results in bid rigging or collusive bidding

• it is presumed that it causes AAE(appreciable adverse effect) on

competition and burden of proving will be on defendant
Types of Horizontal Agreements
• 1) Price Fixing Agreement
a) Agreement to raise or stabilize price b) Establish uniform discount or
eliminate discount c) Set uniform price as Starting point for negotiation d)
Discontinue free service e) Impose Mandatorily surcharge f) Restrict price
advertising

2) Facilitating practices:
This include agreements that make it easier for competitors to collectively
exercise market power, and to avoid competing with each other
What is Bid Rigging / Collusive Bidding?
• Collusive bidding or Bid rigging means any agreement between
enterprises or persons which has the effect of eliminating or reducing
competition for bids or adversely affecting or manipulating the process
for bidding.
• Bidders make an agreement to work together and keep the bid amount
at a price which they decide earlier.
• Bidders act together to manipulate the bid and therefore it results in
anti- competitive agreement.
• The bidding method is used by the Government and private bodies to
get the bid at a favourable price from the market but if the bidders work
together then they will have to select the lowest or higher bid and then
compromise on the bid.
Examples of Collusive bidding or Bid rigging
are –
• agreements to submit identical bids
• agreements as to who shall submit the lowest bid
• agreements not to bid against each other
• agreements on common norms to calculate prices or terms of bids 
agreements to squeeze out outside bidders
• agreements designating bid winners in advance on a rotational basis,
or on a geographical or customer allocation basis
Types Vertical Agreements –
• 1) Tie-in arrangement –
• It is a type of arrangement or an agreement which states that
the person who is buying goods has to first purchase other goods
as a condition of the agreement.
• Therefore, it means that the buyer who wants to buy product 'A'
must also purchase product 'B'.

• For eg – A consumer who wants to buy connection of domestic

cooking gas has to buy a gas stove as a condition of the
agreement.
• 2) Exclusive supply agreement –
• An agreement which restricts a person (purchaser/franchisee) from
selling goods from any other supplier of the same kind.
• So, if a manufacturer tells a retailer or a wholesaler to sell only his
product and not his competitor’s products, it is an exclusive supply
agreement.
• The manufacturer puts the condition that the seller cannot sell any
other goods at all and if he does so, the manufacturer will not supply
his goods anymore.
• 3) Exclusive distribution agreement –

• An agreement which limits, restricts or withholds the supply of

goods or an agreement which allocates a particular area for the
supply of goods is called Exclusive distribution agreement.
• In this agreement, the distributor tells the seller to sell the
product in a particular area and not beyond that.
• 4) Refusal to deal –
• An agreement which restricts the dealer to whom the goods are sold
or from whom the goods are bought. (restricting the person to whom
the goods are sold).
• 5) Resale price maintenance –
• It is an agreement between the seller and the buyer in which the
seller decides the price at which the product should be sold.
(selling goods with conditions or resale at stipulated price).
• The buyer cannot sell the product at a lower price if the seller
does not agree.
• Any condition stating that the dealer should not sell below the
agreed price is a ‘resale price maintenance’ practice and is an
anti-competitive practice.
Thus WHAT IS AN ANTI-COMPETITIVE
AGREEMENT?
• An anti-competitive agreement is an agreement having appreciable
adverse effect on competition.
• Anti-competitive agreements include, :-
• agreement to limit production and/or supply;
• agreement to allocate markets;
• agreement to fix price;
• bid rigging or collusive bidding;
• conditional purchase/ sale (tie-in arrangement);
• exclusive supply / distribution arrangement; resale price maintenance; and
refusal to deal
Prohibition of abuse of dominant position –
Section 4
a) A dominant position means a position at the top and has
strength in the market.
b) Prohibition of abuse of dominant position means that a group
is restricted from abusing its dominant position that is a position
of strength.
• c) A group is said to be in a dominant position when –
• 1) It can operate independently that means the competition
cannot affect its market.
• 2) It can affect the consumers or it’s competitors or a relevant
market in its own favour.
When an enterprise will have Dominant
position
• The Commission shall consider the following factors – 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; 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
• Reliance Jio entered the Telecom sector 2016. The regulation of
telecommunications in India is carried out along with the Competition
Commission of India, ensures that there shall be fair competition in the
telecommunication.
• Bharti Airtel Ltd. presented a case against Reliance that the holding
company i.e. Jio practised a strategy that was anti-competitive and
had caused “appreciable adverse effect” on the competition of the
market. This allegation was made as Reliance Jio had free services from
September 5th, 2016 which amounted to predatory pricing.
• Airtel had also alleged that the free services that were rendered by
Reliance Jio were amounting to the abuse of the dominant
position of the Reliance group. It alleged that Reliance was indulging in
“predatory pricing” with free services to eliminate competition in the
telecom market.
• The CCI stated that just by providing free services in the market
does not amount to be anti-competitive in nature.
• For Reliance to be held guilty of “predatory pricing”, it must be in a
dominant position as per Section 4 of the Competition Act 2002.
• Since Jio was a new entrant in the Telecom market it can not be said
that Reliance Jio was in a “Dominant Position” and can not be held
guilty of “predatory pricing”. Even though it had a negative effect on
existing businesses and it did not have a suitable business model to
sustain lower tariffs for a very long period of time the accused was
not in the “Dominant Position” and cannot be held guilty.
Combinations – Section 5
• Combination under the Act means
• -acquisition of control, shares, voting rights or assets, acquisition of
control by a person over an enterprise –
• where such person has direct or indirect control over another
enterprise engaged in competing businesses, and –
• mergers and amalgamations between or amongst enterprises when
the combining parties exceed the thresholds set in the Act.
• The thresholds are specified in the Act in terms of assets or turnover
in India and outside India.
• Entering into a combination which causes or is likely to cause an
appreciable adverse effect on competition within the relevant market
in India is prohibited and such combination shall be void.
THRESHOLDS FOR FILING NOTICE
Competition Commission of India (CCI)–
• Establishment – Section 7
• Central Government has been empowered to establish a Commission
to be called “Competition Commission of India” by issuing a
Notification.
• The Commission is a body corporate having perpetual succession and
a common seal.
• The Head Office of the Commission shall be at such place as the
Central Government may decide from time to time and has Head
Office at New Delhi.
• The Commission has also been authorized to establish its office at
other places in India. Thus, the law provides for setting up of CCI’s
offices at places other than that of its Headquarter.
Composition – Section 8
• The Commission shall consist of –
• Chairperson and
• 2 ≤ Other Members ≤ 6 (Not less than 2 and not more than 6) to be
appointed by the Central Government.
• Qualification:
• 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 ≥ 15 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
Term of office of Chairperson and other
Members
• The Chairperson and every other Member shall hold office as such for
a term of 5 years up to the age of 65 years and shall be eligible for
reappointment.
Power of Commission
• 1) The Commission has been empowered to lay down its own
procedure and regulations and is not bound by the procedure laid
down by the Code of Civil Procedure, 1908 but shall have to observe
the principles of natural justice and subject to the provisions of the
Act. It shall also be subject to the rules made by the Central
Government
2) While trying the suit, the Commission shall have the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908 for
the following matters-
• Receiving evidence on affidavits
• - issuing commissions for the examination of witnesses and
• documents requiring the discovery and production of document
• summoning and enforcing the attendance of any person and
• examining him on oath
• subject to the provisions of the Indian Evidence Act, 1872,
requisitioning any public record or document or copy of such record
or document from any office
• 3) The Commission may direct any person –

• To produce before the Director General or the Secretary or an officer

authorized by it, such books, or other documents in the custody or
under the control of such person or any trade or such other
information as may be in his possession in relation to the trade
carried on by such person.