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THE COMPETITION ACT2002
By
KrishnaPrabhu J
Krishna Kumar R
Kannan P
KalaiArasan
Kumaresan A
Competition-What
A situation in a market, in which sellers
independently strive for buyers patronage to
achieve business objectives such as profits, sales
or market share.
It is the foundation of an efficiently working
market system.
Competition-whyThe ultimate objective of competition is to secure the
interest of the Consumer - it empowers the consumer,
best guarantee for consumer protection.
It is a means of reducing cost and improving quality.
It also implies an open market where shortages are
rapidly eliminated through the best allocation of
resources.
It accelerates growth and development; preserves
economic and political democracy.
Competition PolicyCompetition policy is defined as those
Government measures that affect the behavior of
enterprises and structure of the industry. It is to
promote efficiency and maximize welfare. (Sum of
consumers. surplus & producers. surplus and
taxes collected by the Government).
Competition Policy-GoalsPreservation and promotion of the competitive
process.
Efficiency in production and allocation of goods
and services.
Innovation and adjustment to technological
change.
Sustained economic growth.
The New LawA new law called competition act 2002 has been
enacted to replace the extant law, MRTP act 1969.
The new law was challenged in the supreme court
on the ground that the chairperson should only be
from the judiciary.
The new law has been amended on 10 sep 2007 by
the parliament.
Competition act-ObjectiveCompetition act, 2002 notified in January 2003. Stated
objective in preamble is to provide “for Establishment of a
Commission”.
to prevent practices having appreciable adverse effect on
competition;
to promote and sustain competition in markets;
to protect the interest of consumers
to ensure freedom of trade carried on by other
participants in markets, in India
Main FeaturesProhibits Anti – Competitive Agreements. (sec 3)
Prohibits Abuse of Dominant Position. (sec 4)
Provides for Regulation of Combinations. (sec
5,6)
Enjoins competition Advocacy. (sec 49)
Anti-Competitive AgreementsSection 3 of the Act deals with agreements among
enterprises or persons or association of persons,
which causes or likely to cause appreciable adverse
effect on competition. Such agreements are rendered
void pursuant to this section.
The Act deals with following kind of agreements.
Horizontal Agreements
Vertical Agreements
Horizontal AgreementsAgreements between enterprises at the same stage of
production, services, etc. and including Cartels.
Examples :
(i) directly or indirectly determines purchase or sale prices;
(ii) limit or control production, supply, technical
development etc.
(iii) allocate areas or customers
(iv) Directly or indirectly results in bid rigging or collusive
bidding.
Above agreements are presumed to cause appreciable
adverse effect on competition in the markets.
Vertical AgreementsAgreements between enterprises at different stages of
production, distribution, etc.- subject to Rule of Reason; burden
of appreciable adverse effect on competition, they are
prohibited.
Examples :
(i) Tie-in arrangement;
(ii) Exclusive supply agreement;
(iii) Exclusive distribution agreement;
(iv) Refusal to deal;
(v) Re-sale price maintenance.
Abuse of Dominance Unlike MRTP law, the Act does not frown on
dominance by market players. But the abuse of
dominance is prohibited under Section 4 of the
Act. ‘Dominance’ or ‘Dominant Position’ means a
position of strength, enjoyed by an enterprise, in
the relevant market, in India which enables it to –
Continue….a. operate independently of competitive forces in the
relevant market; sec .19(7) or
b. affect its competitors or consumers or the relevant
market in its favors sec .19(9)
Dominance is determined by several factors e.g. market
share of the enterprise concerned, market share of
competitors, entry barriers, size and resources commanded
by the enterprise or competitors, etc. sec .19(4)
Continue…Examples of abuse include –
Exclusionary practices such as predatory pricing,
denying market access, use of dominance in one market
to enter into, or protect, other relevant market.
Exploitative practices such as discriminatory pricing
and imposing discriminatory conditions of trade,
conclusion of main contract contingent upon accepting
supplementary obligations unrelated to main contract.
Regulation of Combinations.Section 5 of the Act deals with combinations. Combination
includes acquisition of shares, acquiring of control and
mergers and amalgamations. These combinations can be
horizontal, vertical or conglomerate. It is the horizontal
type of combinations that has very high potential to thwart
competition when compared to other two kinds of
combinations.
In line with the market realities, the Act provides for very
liberal regime of combination regulation. The salient
features of combination regulations are –
Continue…a. The Act has set very high threshold limit based on
turnover or assets of the enterprises involved in
combination for notification of combinations.
The objective is to keep smaller combinations outside
regulation and encouraging Indian enterprises to grow in
size as well market share in globalised market.
b. Higher threshold limit is set for combination involving
parties having operation both in India and outside India.
c. The notification of combination to the Commission is
voluntary not mandatory.
Continue…d. Such notification has to be disposed off by the
Commission within 90 working days, failing which the same
is deemed to be approved.
e. The commission also has the suo moto enquiry power.
f. Limited exemption is given to combination involving
public financial institution, foreign institutional investors
and venture capital fund.
Competition AdvocacyThe Commission shall take suitable measures to:
-Promote competition advocacy.
-create public awareness.
-Impact training about competition issues.
The commission shall opinion on a reference from
the central government on a policy/ law on
competition; not binding. [sec 49]
ExamplesInitiatives by commission in respect of:
-Department of Posts - Indian post office
(Amendment bill), 2006 – monopoly of letter mail,
USO fee, new regulator, etc.
-Department of shipping- shipping conference s-
traiff fixing; and shipping trade practices Bill, 2005
-Ministry of civil aviation- price fixing by airline
association
Power of commissionCease and desist order
Penalty up to 10% of average turnover for last
three preceding financial years.
In case of combination- can be approved,
approved with modification, or refused approval.
In case of dominant enterprise- Order for division
of dominant enterprise.
Continue…Approach commission any person; individual,
company, firm, association, statutory corporation,
government company, legal authority, etc.
Consumer means one who buys goods/ avails
services for consideration.
Reference by central/ state government, statutory
authority.
Thank You!