2a..Competition Act

8/6/2019 2a..Competition Act

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Competition Commission of India

Competition Act 2002


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1. Scope of the act

2. Objectives

3. Definitions4. Prohibition of certain behavior

5. Competition commission of India

6. Director general7. Duties of D G

8. Penalties


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In the process of L P G, India has opened up its economy andcontrols are removed giving way for development of

commerce and trade.

As a consequence of this Indian market has to face not onlythe national market but international market also.

The earlier MRTP law became obsolete and needs to be facelifted or new law needed to replace this MRTP.

A high power committee on competition policy and law wasappointed by the Govt of India which submitted its report

On 22.05.2002 recommending:

1. Abolition of M R T P

2. Passing of competition act

BAC K GROUND


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Competition act seeks to ensure fair competition in

India by prohibiting trade practices which causesappreciable adverse effects on competition inmarkets within Indian and to provide establishmentof a quasi-judicial body to be called as

Competition commission of IndiaCompetition law deals with enterprises behavior by

prohibiting such restrictive business practices ascompetition- restricting horizontal as agreementsacquisitions and abuse a dominant position as wellas substantially restrictive vertical distribution as

agreements.


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It is stated in the preamble itself that this is

an act to provide for the establishment of acommission in order to prevent those practices

having adverse effect on the competition keeping inview the economic development to promote andprotect the competition in the market.

This is also to protect the consumers and to ensurefreedom to traders in the market.


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The entire act is indicated for controlling the competition.

It says that

it shall not be lawful for any enterprise or association ofenterprises or person or association of persons

To enter into an agreement in respect of

ProductionSupply

Storage

Distribution

Acquisition or

Control of goods or provision of service which causes or likely tocause an appreciable adverse effect on competition

In India


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It extends to whole of India except Jammu &Kashmir

It has 66 sections detailing various definition andestablishment of the CCI, their powers and functionand also investigation, contraventions and offencesand penalties

It seek to ensure fair competition in India byprohibiting those practices which cause adverseeffect on competition.

It aims to curb negative aspect of competitionthrough establishment of CCI


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Cartel

Association of producers, seller, distributors, tradersor service providers who by agreement amongst

themselves, limit, control or attempt to control

Production, distribution, sale or price of or trade ingoods or providing services.

Consumer

Who buys goods and services for consideration,

Hirer/user etc


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EnterpriseMeans a person or department of the Govt. who or which is

or has been engaged in any activity relating toProductionSupplyStorageDistributionAcquisition or control of goods or services of anykind orIn investment or in Business of acquiring, holdingunderwriting or dealing with shares, debentures or

other securities of any other body corporate eitherdirectly or through one or more of its units ordivision or subsidiaries, where such unit is located atthe same place where the enterprise is located or atdifferent places. But not includes Govt. related

activity like Defence, Energy & Currency.


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2. If any person enters in to such agreementit is void.

i e it is not enforceable in the court of law.

3. If any agreement is entered in tobetween Enterprises or person or

association of person including cartelsengaged in the similar Business which-

a. Directly or indirectly determines the

pricesb. Limits are control production, supply,

market, technical development,investment or service


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Shares the market or source of production

or service by way of allocation ofGeographical area of market or types ofgoods &service or number of customer inthe market or any other similar way

Directly or indirectly results in bid rigging

or collusive bidding, shall be presumed tohave an appreciable adverse effect onthe competition.


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Bid rigging means any agreement between enterprises

engages in identical trading of goods & services whichhas the effect of eliminating ir reducing competition for

bid or adversely affect or manipulates the process of

bidding.4.Any agreement amongst enterprises or persons atdifferent stages of production chain in different marketrefuse to be or , resale price maintenance or any supply

agreement or tie agreement is not allowed if suchagreement causes or likely to cause appreciable adverseeffect on competition in India.


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5. Nothing in this section5. Nothing in this section

affect the following act.affect the following act.

1. The copyright act

2. Patent act

3. Trade marks act

4. Geographical indication of goods (Registration &protection act)

5. The design act6. The semi-conductor Integrated Circuits Layout-Design

act


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B. Abuse of dominant position:. Abuse of dominant position:

No enterprise shall abuse be dominant position.

There shall an abuse of dominant position if an enterprisedirectly or indirectly imposes unfair or discriminatory condition inpurchase or sale of goods and services or

Price in purchase or sale of goods & services,

->Limits or restrict

production of goods or provision of service

Technical or scientific development

Indulges in or restrict market access

insisting supplementary obligation which have noconnection with the subject contract

Uses its dominant position in one relevant market to

enter in to or protect other relevant market


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Dominant position means a position of strengthEnjoyed by an enterprise in the relevant marketIn India which enables it toOperate independently of competitive forcesaffects its competitors or consumerOr the relevant market in itsfavour


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C. Merger or combination:C. Merger or combination:The acquisition of one or more enterprises by one or more person or merger

or amalgamation of enterprises shall be a combination of such enterprisesand persons or enterprises if

(a) Any acquisition where-

(i) the parties to the acquisition, being the acquirer and theenterprises,

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 more than rupees onethousand crore or turnover more than Rs.3000 crore; or

(B) In India or outside India, in aggregate, the asset of the valueof more than 500 million US $ or turnover more than 1500million US $ or


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(ii) If the group after acquiring the enterprise or

controlling shares if after the acquisition has

A. the total assets are more than 4000 crores orturnover more than 12000 crores

B. In India or outside India an aggregate asset value ofmore than 2 Billion US $ or turnover of more than 6billion US $.

if the above position is reached it amounts to acombination:


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Sec 5 of the act deals with combination of enterprises and persons. The acquisition ofone or more enterprises by one or more

persons or acquiring of control or merger oramalgamation of enterprises under certaincircumstances specified in the said clause

shall be construed as combinations


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Sec 6 says no person or enterprises shall

enter into a combination which is likely tocause or causes an appreciable adverseeffect on the competition with in therelevant market in India

However,

There are certain exception provided under theact

So that those combination are kept outside thepreview of this act/provisions.


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No two or more person or enterprises are allowed tomake a combination to defeat the completion.

Example: if all the cell phone service providercombine together and fix a rate of call as Rs.5/- percall, it will destroy the health competition and itbecomes combination to affect the public, hence such

combination to defeat the competition is void.

In case of any person or enterprise who wants tomake any combination by merger or acquisition maygive notice to the commission in the prescribed formwith fee, within 7 days giving details of merger andacquisition Or

Execution of any agreement or other documents foracquisition to get control on the other unit.


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When the commission receives the notice, it willexamine the same and take decisions as per the

provisions of the act.

What are the exemptions given under the act ?

1. Combination of public financial institution

2. FII- foreign institutional investors

3. Banks

4. Venture capital fund


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THE MOST IMPORTANT PART OF THE ACT IS THEESTABLISHMENT OF THECOMPETITION COMMISSION OF

INDIA TO TAKECAR

EOF TH

ECONTROL AND R

EGUALTIONOF THECOMPETITION.

The commission is a body corporate having perpetualsuccession and a common seal.

This commission is having power to

Acquire

Hold

Dispose of

Property.

It can establish branches.


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Composition of commission

1 chairpersonand not less than two and not more than ten other

members to work for whole time appointed by Govt.

The chairperson shall have the qualification to be a judge of

a high court or has special knowledge of and professionalexperience of not less than 15 years in

International trade

Economics

Business

commerce., law, finance, accountancy, management,industry, public affairs, administration or any other matter

which central govt, approves.


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For investigation purpose there isA Director General.

The Central Govt. will

Appoint a D.G.He may be assisted by a

Dy DGAsst DG

Addl DGJoint DG


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Duties of director general

1. The main duty is to investigate into any

contravention of the provisions of thisact/rules/regulations etc.,

2. DG will have the powers that are given bycommission

3. They got full powers like an inspector under colaw


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DUTIESDUTIES

1. THE MAIN DUTY IS TO ELIMINATE PRACTICES HAVINGADVERSEEFFECT ON COMPETION

2. PROMOTE AND SUSTAIN COMPETITION

3. PROTECTION OF INTEREST OF CONSUMERS

4. TO ENSURE FREEDOM OF TRADECARRIED ON BYOTHER PEOPLE IN THE MARKET IN INDIA

5. ENTERING INTO ANY AGREEMENT WITH ANY AGENCIESIN THECOUNTRY OR WITH FOREIGH AGENCIES ETCWITH THE PRIOR APPROVAL OF THECENTRAL GOVT.


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Enquiry into certain agreements and Dominantposition

The commission enquires into any alleged

contravention of the provisions.It can act suo moto

Or on application or complaint received.

Or when a reference made by Govt.


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Powers and functionsPowers and functions

1.1. It will investigate whether an agreement enteredIt will investigate whether an agreement enteredinto by persons and enterprises has any adverseinto by persons and enterprises has any adverseeffect on the competitioneffect on the competition

-- whether it will create any barriers to the newwhether it will create any barriers to the new

entrantsentrants

-- whether it will drive out the competition fromwhether it will drive out the competition from

the marketthe market

-- customer benefitscustomer benefits

-- improvements in production, distribution, serviceimprovements in production, distribution, service


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It will enquire whether there is any dominant position ornot , having due regards to

market share

size and resources of enterprises

size and importance of competition

economic power of the enterprises

commercial advantages

vertical integration of the enterprises

sales and network of such enterprises

dependence of the consumer on enterprises

monopoly and dominant position


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1. Commission may enquire any combinitation tofind out after the merger or acquisition is thereany adverse effect on the competition

2. Commission may every 2 years may revalue theassets basing on the price index.

3. Commission will investigate to find out whether

the competition is affected by the actual andpotential level of competition through theimports in the market,

4. Extent of the barriers in the market for new

people5. Whether such combination result in increase in

price and the increase in profit margins, whatsubstitute are available, etc.,


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What is the procedure for inquiry on complaints

On receipt of the complaint or reference from theGovt, or saturator authority or suo moto, if thecommission is of the opinion that there exit a primafacei case it shall direct the DG to cause aninvestigation to be made into the matter.

DG on receipt of direction submit a report on findingwithin the period given by the commission,

Where on the receipt of a complaint, if it is foundthere is no case it will be dismissed.

The commission will send a report to the concerned

In case further enquiry is needed it will be directed


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If it is found that there is contravention of theprovisions then

1. If there is an abuse of dominant position, it willbe advised to discontinue

2. Impose any penalty

3. Award compensation to the parties

4. Direct the agreement if any needs to be altered

5. Direct the enterprises to obey any order orpayment of cost if any.

6. Recommend to Govt. for pass any order as itthinks fit


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Division of enterprises

1. If needed, in order to bring down the adverse effects onthe competition, the Govt may direct the combination tosubdivide and not to use dominant position

2. Transfer of vesting of property rights

3. Cancellation of any shares, stocks or securities

4. Payment of compensation

5. Winding up

6. Any other way


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01. Where the commission is of the opinion that thecombination is affecting or likely to affect thecompetition in India or has an adverse effect

on the competition within the Indian market, it will

issue SHOW CAUSE NOTICE to such combinations,calling upon such combination to reply within 30days.

02. The combination within 7 days of receiving the

response from the combination


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02. The combination within 7 days of receiving the responsefrom the combination Direct for publishing details of

the combination with in 10 days.03. The commission may invite public to file written

statement and objection if they are affected beforethe commission.

04. The commission may call for any information oradditional information from the combination within 15days from the date when the period specified expires.

05. Such additional information shall be furnished with in 15

days to the commission by the combinations

06. After getting all the information the commission will

proceed after given date is over and with in 45 days


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When the disclosure is made by the combination,the commission may enquireinto the same to find out whether thedisclosure is

true or not,correct or incorrect etc.,

And whether the combination is causing anyadverse affect on the competition or not.


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1. If the combination does not affect thecompetition it will approve the combination onapplication to it

2. If it affects the competition it will not approve

3. If some modification is made so that thecombination will not come in the way ofcompetition then the commission will propose thesame to parties. The parties has to do the needful.

4. If modification is not done, it will be deemed thatthere is adverse effect on competition and it willnot be allowed.


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5. On submission of amendments and modificationthe commission shall approve the same.

6. Time up to 30 working days may be granted toparties

7 The commission may order

a. acquisition

b. acquisition of control

c. merger and amalgamation shall not take place


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When the commission finds that anyagreement is an anti-competitionagreement or action of an enterprise is

in abuse of dominant position thecommission may pass the followingorder.


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1. Not to enter into such agreement or discontinue

2. Impose penalty

3. If cartel is involved, the penalty is 3 times the profit

4. Award compensation to the parties

5. Direct to parties to modify the agreement as required

6. Ask to comply with the direction or order or rules etcpayment of the cost

7. Recommend to central Govt for division of enterprises

8. Pass any such other order


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1. For contravention of order of commission- up to Rs.10lakhs

2. For failure to comply with direction: Rs.1 lakh per day

3. For making false statement

not less than Rs.50 lakhs - 1 crores

4. For offences in furnishing information

penalty up to Rs.10 lakhs


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2a..Competition Act

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