The Competition Act, 2002 is an Indian legislation that aims to promote fair competition and prevent anti-competitive practices in the Indian market. The Act establishes the Competition Commission of India (CCI) as the regulator of competition in India and provides for the regulation of mergers and acquisitions that may have an adverse effect on competition.
The Competition Act, 2002 is an important piece of legislation that seeks to promote fair competition and prevent anti-competitive practices in the Indian market. It aims to create a level playing field for all market participants and promote innovation, efficiency, and consumer welfare.
Section 3 and 4 of The Competition Act, 2002 deal with anti-competitive agreements and abuse of dominance, respectively.
Section 3 prohibits anti-competitive agreements between enterprises, including horizontal and vertical agreements, that have an appreciable adverse effect on competition in India. Examples of such agreements include cartels, price-fixing agreements, bid-rigging, market sharing, and collusive bidding. These agreements are presumed to have an appreciable adverse effect on competition and are, therefore, considered to be void. However, the law provides for certain exceptions to this rule, such as agreements that promote technical development, improve product quality, or increase efficiency in production, distribution, or supply of goods or services.
Section 4 of the Act deals with abuse of dominance. It prohibits any enterprise or group from abusing its dominant position in the relevant market to the detriment of consumers and competition. Abuse of dominance includes practices such as imposing unfair conditions, predatory pricing, denial of market access, and discriminatory treatment of customers. Dominance is defined as a position of strength enjoyed by an enterprise in the relevant market that enables it to behave independently of its competitors, customers, and suppliers.
The Competition Act, 2002 empowers the Competition Commission of India (CCI) to investigate and take action against anti-competitive agreements and abuse of dominance. The CCI has the power to impose penalties and fines, order the modification or termination of agreements, and issue cease and desist orders to the offending enterprises. The objective of these provisions is to promote competition, protect consumers, and ensure a level playing field for all market participants in India.
The key features of the Competition Act, 2002 are:
- Anti-competitive agreements: The Act prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition in India. Such agreements may include price-fixing, market-sharing, bid-rigging, etc.
- Abuse of dominant position: The Act prohibits enterprises from abusing their dominant position in the market, which may include practices such as predatory pricing, exclusive dealing, etc.
- Regulation of combinations: The Act provides for the regulation of mergers, acquisitions, and amalgamations that may have an adverse effect on competition in India.
- Competition Commission of India (CCI): The Act establishes the CCI as the regulator of competition in India. The CCI is responsible for enforcing the provisions of the Act and promoting competition in the Indian market.
- Penalties: The Act provides for penalties for violations of its provisions, which may include a fine of up to 10% of the turnover of the enterprise, or imprisonment of up to three years for individuals.
Important definitions under the Competition Act, 2002
The Competition Act, 2002 contains several important definitions that are used throughout the Act. Some of the key definitions include:
- “Competition” means the presence of rival firms in a market that offer similar products or services to consumers and compete with each other for customers.
- “Anti-competitive agreement” means any agreement between enterprises that has the effect of preventing, restricting, or distorting competition in the market.
- “Dominant position” means a position of strength enjoyed by an enterprise in a relevant market, which enables it to operate independently of competitive forces or to affect its competitors or consumers or the relevant market in its favor.
- “Abuse of dominant position” means an act or omission that results in the prevention or lessening of competition, or results in the exploitation of consumers or other market participants, by an enterprise that holds a dominant position in the relevant market.
- “Combinations” means the acquisition of control, shares, assets or mergers of one or more enterprises by one or more persons or enterprises.
- “Relevant market” means the market in which the products or services of the enterprise or group of enterprises are sold or provided.
- “Turnover” means the value of the gross revenue of the enterprise derived from the sale of goods or services in India, after deducting trade discounts and taxes.
Three stage transition that The Competition Act, 2002 went through
The Competition Act, 2002 went through a three-stage transition to become the primary legislation governing competition in India. These stages are:
- Monopolies and Restrictive Trade Practices (MRTP) Act: The MRTP Act was enacted in 1969 with the objective of preventing the concentration of economic power in a few hands and the growth of monopolies in India. However, over time, it became clear that the MRTP Act was inadequate in dealing with emerging competition issues.
- Competition Act, 2002: In 2002, the Competition Act was enacted, which repealed the MRTP Act and established the Competition Commission of India (CCI) as the regulatory body responsible for enforcing competition laws in India.
- Amendments to the Competition Act, 2002: The Competition Act was amended in 2007, 2009, 2012, 2017, and 2020 to keep pace with changing economic and market conditions and to strengthen the enforcement of competition laws in India. The amendments introduced provisions related to mergers and acquisitions, abuse of dominance, and anti-competitive agreements, among others.