The Competition Act, 2002

Competition – Meaning, Objectives, 5.1

T
he Monopolies & Restrictive Trade Practices Act, 1969 is the first enactment to deal with competition
issues and came into effect on 1st June 1970. The Government appointed a committee in October 1999 to
examine the existing MRTP Act for shifting the focus of the law from curbing monopolies to promoting
competition and to suggest a modern competition law. Pursuant to the recommendations of this committee,
the Competition Act, 2002, was enacted on 13th January 2003. It was subsequently amended in 2007.It provides
for different notifications for making different provisions of the Act effective including repeal of MRTP Act and
dissolution of the MRTP Commission.
Under the Act, Competition Commission of India and the Competition Appellate Tribunal have been established
in October 2003. In accordance with the provisions of the Amendment Act, the Competition Commission of India
and the Competition Appellate Tribunal have been established. The Competition Commission of India is now fully
functional with a Chairperson and six members. The provisions of the Competition Act relating to anti-competitive
agreements and abuse of dominant position were notified on May 20, 2009.
(a) Objectives of the Act
The objectives of the Competition Act are to:
(i) prevent anti-competitive practices,
(ii) promote and sustain competition,
(iii) protect the interests of the consumers and
(iv) ensure freedom of trade.
(v) competition advocacy by creating awareness among various levels at Government, industry and consumers.
The objectives of the Act are sought to be achieved through the instrumentality of the Competition Commission
of India (CCI) which has been established by the Central Government with effect from 14th October, 2003.
(b) Few important Definitions
(i) “acquisition” means, directly or indirectly, acquiring or agreeing to acquire shares, voting rights or assets
of any enterprise; or control over management or control over assets of any enterprise;
(ii) “agreement” includes any arrangement or understanding or action in concert, whether or not, such
arrangement, understanding or action is formal or in writing; or whether or not such arrangement,
understanding or action is intended to be enforceable by legal proceedings;
(iii) Appellate Tribunal” means the National Company Law Appellate Tribunal referred under Section 410
[(Section 2(4)]
(iv) “cartel” includes an association of producers, sellers, distributors, traders or service providers who, by

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agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or
price of, or, trade in goods or provision of services;
(v) “consumer” means any person who—
buys any goods for a consideration which has been paid or promised or partly paid and partly promised,
or under any system of deferred payment and includes any user of such goods other than the person who
buys such goods for consideration paid or promised or partly paid or partly promised, or under any system
of deferred payment when such use is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use; or
hires or avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary of such services
when such services are availed of with the approval of the first-mentioned person whether such hiring or
availing of services is for any commercial purpose or for personal use;
(vi) “enterprise” means a person or a department of the Government, engaged in any activity, relating to the
production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of
services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing
with shares, debentures or other securities of any other body corporate, either directly or divisions or
subsidiaries, but does not include any activity of the Government relatable to the sovereign functions of
the Government including all activities carried on by the departments of the Central Government dealing
with atomic energy, currency, defence and space.
(vii) “goods” means goods as defined in the Sale of Goods Act, and includes—
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in India, goods imported into India;
(viii)“person” includes—
(a) an individual;
(b) a Hindu undivided family;
(c) a company;
(d) a firm;
(e) an association of persons or a body of individuals, whether incorporated or not, in India or outside
India;
(f) any corporation established by or under any Central, State or Provincial Act or a Government company
as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(g) any body corporate incorporated by or under the laws of a country outside India;
(h) a co-operative society registered under any law relating to co-operative societies;
(i) a local authority;
(j) every artificial juridical person, not falling within any of the preceding sub-clauses;
(ix) “price”, in relation to the sale of any goods or to the performance of any services, includes every valuable
consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates

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to the sale of any goods or to the performance of any services although ostensibly relating to any other
matter or thing;
(x) “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;
(xi) “relevant geographic market” means the area in which the competition for supply of goods or provision of
services are of same type or demand of goods or services are distinctly homogenous and can be distinguished
from the conditions prevailing in the neighboring areas;
(xii)“relevant product market” means a market comprising products or services which are interchangeable
or substitutable by the consumer, by reason of characteristics of the product or services, their prices and
intended use;
5.1.1. Anti Competitive Agreement
The purpose of Competition act is to encourage competition both for the benefit of consumers and regulating the
industry. Therefore, law defines few types of trade, commerce or business agreements as anti-competitive.
Agreement is defined under Section 2(b) of the Competition Act. It includes any written/ oral agreement/ arrangement
relating to production, supply, distribution, storage, acquisition or control of goods or services which causes or
may cause an appreciable adverse effect on competition in India shall be void. Agreement widely defined and
include any kind of arrangement whether express or implied, to be decided from facts and circumstantial evidence.
There can be two types of agreement under the Act-
1. Vertical
2. Horizontal
The difference between Horizontal and Vertical Agreements is that in Horizontal Agreements there is same
level of competition whereas in Vertical Agreement there is different level of competition.
Section 3(3) of the Act states that any agreement entered into between enterprises or associations of business
entities or persons or associations of persons or between any person and enterprise or practice carried on, or
concerted decision taken by, any association of enterprises or association of persons, including cartels, engaged
in identical or similar trade of goods Services. There are few recognized trade associations in India. There are
informal association and arrangement by which similar business entities. Mostly competitors join hands and exploit
the market in concerted manner.
Vertical agreements are agreements that are entered amongst enterprise or persons at different stages of the
production and distribution chain. Under the Act, such agreements are:
(a) Tie-in arrangement: sale of one product is tied up with taking of other product which may not be useful or
commercially not viable;
(i) anticompetitive agreements and assist the competition authorities in lieu of immunity or lenient treatment.
A Leniency programme is a protection to those who come forward and submit information honestly, who
would otherwise have to face stringent action by the Commission if existence of a cartel is detected by
the Commission on its own. It is based on the principle of fair competition for greater good.
A. Anti-competitive agreement shall be presumed to have appreciable adverse effect on competition and thereby
deemed to be restrictive. Some type of agreements are discussed below.
(i) 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. Any such agreement shall be void.

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(ii) Any agreement entered into between enterprises or associations of enterprises including 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, markets, technical development, investment ;
c. shares the market or source of production by way of allocation of geographical area of market;
d. directly or indirectly go for bid rigging or collusive bidding; “bid rigging” means any agreement,
eliminating or reducing competition for bids or adversely affecting or manipulating the process for
bidding, other than joint ventures business agreements are excepted .
(iii) Any agreement amongst enterprises or persons in respect of production, supply, distribution, storage, sale
or price of, or trade in goods or provision of services, including, tie-in arrangement: includes any agreement
requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
(iv) exclusive supply agreement: includes any agreement restricting in any manner the purchaser in the course
of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other
person.
Example: ABC Ltd. has appointed Soni Brothers as a supplier of raw materials with a restriction that they
can not do business with other parties.
(v) exclusive distribution agreement: includes any agreement to limit, restrict or withhold the output or supply
of any goods or allocate any area or market for the disposal or sale of the goods
(vi) refusal to deal: includes any agreement which restricts, or is likely to restrict, by any method the persons
or classes of persons to whom goods are sold or from whom goods are bought.
Example: ABC Ltd. appoints a dealer for domestic fans and restricts him to take dealership of other
product.
(vii)resale price maintenance: includes any agreement to sell goods on condition that the prices to be charged
on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that
prices lower than those prices may be charged. In other words the “ maximum retail price” shall have to
de disclosed and nobody can take more than that. Therefore, we find the MRP in most of the product on
the package.
Above restriction shall not apply to
(a) the right to restrain any infringement of Intellectual property rights under the Copyright, Patents Act, Trade
Marks , Geographical Indications , Designs and Semi-conductor Integrated Circuits Layout-Design as provided
in the respective Acts.
(b) the right of any person to export goods from India to the extent to which the agreement relates exclusively to
the production, supply, distribution or control of goods or provision of services for such export.
5.1.2. Abuse of Dominant Position
(a) when a party directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service; or
(b) indulges in practice or practices resulting in denial of market access; or

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(c) uses its dominant position in one relevant market to enter into, or protect, other 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.
(d) “predatory price” means the sale of goods or provision of services, at a price which is below the cost, as
may be determined by regulations, of production of the goods or provision of services, with a view to reduce
competition or eliminate the competitors.
5.1.3. Combinations and its Regulation
5.1.3.1. Combination defined
1. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises
shall be a combination of such enterprises and persons or enterprises, if
2. 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. 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. The thresholds are as follows.
Individual: Either the combined assets of the enterprises would value more than `2,000 crores in India or the
combined turnover of the enterprise is more than `6,000 crores in India. In case either or both of the enterprises
have assets/turnover outside India also, then the combined assets of the enterprises value more than US$ 1
billion, including at least `1,000 crores in India, or turnover is more than US$ 3 billions, including at least
`3,000 crores in India.
Group: The group to which the enterprise whose control, shares, assets or voting rights are being acquired
would belong after the acquisition or the group to which the enterprise remaining the merger or amalgamation
would belong has either assets of value of more than ` 8,000 crores in India or turnover more than ` 24,000
crores in India. Where the group has presence in India as well as outside India then the group has assets more
than US$ 4 billion including at least `1,000 crores in India or turnover more than US$ 12 billion including at
least `3,000 crores in India.
The term Group has been explained in the Act. As per Notification S.O. 634(E) dated 4th March, 2016, the
exemption to the “group” exercising less than fifty percent of voting rights in other enterprise from the provisions
of Sec. 5 of the Act under Notification No. S.O. 481(E) dated 4th March, 2011, has been continued for a further
period of 5 years.
The value of assets shall be determined by taking the book value of the assets as shown, in the audited books
of account of the enterprise, in the financial year immediately preceding the financial year in which the date
of proposed merger falls, as reduced by any depreciation, and the value of assets shall include the brand value,
value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered
trade mark, registered user, homonymous geographical indication, geographical indications, design or layout
design or similar other commercial rights, if any.
5.1.3.2. Regulation of combinations
No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse
effect on competition within the relevant market in India and such a combination shall be void. Any person or

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