Competition Protection
The main legislation governing competition in India is the Competition Act, 2002 which repealed the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 and provided for a modern framework of competition protection. The main objectives of the Act are: -
(i) to provide for the establishment of a commission to prevent practices having adverse effect on competition;
(ii) to promote and sustain competition in markets in India;
(iii) to protect the interests of consumers;
(iv) to ensure freedom of trade carried on by the participants in the markets in India and for related matters.
Scope:
Competition refers to a market situation in which sellers independently strive for buyer's patronage in order to achieve the business objectives of profits, sales or market share. In other words, it is the act of competing by an enterprise against other business enterprises for the purpose of achieving dominance in the market or attaining a reward or goal. It is the foundation on which a market system works. For market economy to function effectively, this competition has to be free and fair. Such a competition:- stimulates innovation and productivity and thus leads to the optimum allocation of resources in the economy; guarantees the protection of consumer interests; reduces costs and improves quality; accelerates growth and development and preserves economic and political democracy.
In the absence of adequate safeguards, enterprises may undermine the market by resorting to unfair practices for their short term gains. As a result, market-distortion practices and anti-competitive forces may restrict the working of healthy competition in an economy. Thus, there arises the need to have a proper regulatory environment which can ensure a healthy competition so that all business enterprises can grow and expand and stimulate economic development of the country. Accordingly, Government has formulated a Competition Policy which protects the interests of consumers and producers by promoting and sustaining a fair competition. As per the provisions of the Competition policy, the Government of India has enacted the Competition Act.
Under the Act, an autonomous body called Competition Commission of India (CCI) has been set up with regulatory and quasi-judicial powers. To build and further strengthen the capacity of the functionaries of the Commission, the Competition Commission of India has established a Competition Forum with eminent personalities in the field of law, economics, finance, public administration, management and such other fields as are deemed appropriate.
The main provisions of the Act are:-
# The Central Government may, by notification, establish a Commission to be called the 'Competition Commission of India'. It shall be the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India.
# The Act prohibits anti-competitive agreements. It declares void any agreement by an enterprise or association of enterprises which restricts the production, supply, distribution, acquisition or control of goods or provision of services. It recognizes horizontal and vertical agreements as having potential of restricting competition in an economy.
The horizontal agreements are the agreements between those enterprises which are at the same stage of production, services, etc. It includes, any collusive agreement which:-
• Directly or indirectly determines purchase or sale prices;
• Limits or controls production, supply, markets, technical development, investment or provision of services;
• Shares the market or source production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or in any other similar way;
• Directly or indirectly results in bid rigging or collusive bidding.
The vertical agreements are the agreements between those enterprises which are at the different stages of production, distribution, etc. It includes the following agreements:-
• Tie-in arrangement;
• Exclusive supply agreement;
• Exclusive distribution agreement;
• Refusal to deal;
• Resale price maintenance.
# The Act prohibits abuse of dominant position by any enterprise. Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market in India. Such a position enables a firm 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.
According to the Act, abuse of dominance by an enterprise will include the following practices:-
• Directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods and services;
• Restricting the technical or scientific development relating to goods or services to the prejudice of consumers;
• Indulging in practice(s) resulting in denial of market access;
• Making conclusions of contracts subject to acceptance by other parties, which have no connection with the subject of such contracts;
• Using dominant position in one relevant market in order to enter into another market.
Conclusion:
The Act regulates the various forms of business combinations and not prohibits their formation. Under it, no person or enterprise shall enter into a combination, in the form of an acquisition, merger or amalgamation, which causes or is likely to cause an appreciable adverse effect on competition in the relevant market and such a combination shall be void. But, all combinations do not call for scrutiny unless the resulting combination exceeds the threshold limits in terms of assets or turnover as specified by the Competition Commission of India (CCI). Thus, the Act does not seek to eliminate combinations and only aims to eliminate their harmful effects. If any person contravenes, without any reasonable ground, any order of the Commission, or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any matter has been accorded, given, made or granted under this Act or fails to pay the penalty imposed under this Act, he shall be liable to be detained in civil prison.
The author can be reached at: shyamsundertak@legalserviceindia.com
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