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The Competition Law, 2002 & Its Development Factors

Written by: Thakar Foram - First year student of B.A.LL.B.(Hons.), Institute of Law Nirma Univesrity (ILNU), Ahmedabad
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Today, the whole world is facing the thought cut competition and to stand ‘in’; every nation is trying to pull their economy up. The globalization and urbanization is also playing a good role in the same. To have a fair and healthy competition, our nation has set up a body – judicial body which is known as the ‘competition commission of India’ [CCI]. In India there was an act regarding the competition in the market named MRTP Act [Monopolistic & Restrictive Trade Practice Act] but as the time changed this act was not able to prevent the needed defense for the society and market, and thus new act named The Competition Act enacted in 2002 which is widely known as the ‘antitrust act’ in United States. The substance and practice of this act differ from jurisdiction to jurisdiction.

In today’s world this law is being seen as the way to provide better public services. The history of this law was from the Roman Empire.

It is said that the competition act is, “an act to provide, keeping in view of the economic development of the country, for the establishment of a commission to prevent practices having adverse effect on competition in the market, to protect the interest of consumers and to ensure freedom of trade carried on by other participants in the markets, in India, and for matters connected there with or incidental thereto.”

II. Objectives:
The preamble of this act states that this is an act to establish a commission, protect the interest of the consumers and ensure freedom of trade in markets in India.

There are some elements or the objectives for the act.
1. To prohibit the agreements or practices that restricts free trading and also the competition between two business entities.
2. To ban the abusive situation of the market monopoly.
3. To provide the opportunity to the entrepreneur for the competition in the market.
4. To have the international support and enforcement network across the world.
5. To prevent from anti-competition practices and to promote a fair and healthy competition in the market.

III. Safeguarding Welness provided by the Act:
What has been prohibited?
This law prohibits the deliberate exploitation of a dominant market position by a firm. it also prohibits the limiting access. And willful acquisition has also been prohibited.

Here mentioning the market power is a necessity. It has been defined as the power to control prices or exclude competition and market share is the most important factor in measuring the market power.

Unlawful monopolization is an offence under the competition law and consists of following two elements:
Possession of market power in the relevant market. And

The willful acquisition or maintenance of the power, as distinguished, from the growth and development.
There has been made an ‘anti-competition agreement’ for the same. It includes;
o Agreement to limited production or supply.
o Agreement to allocate market.
o Agreement to fix price.
o Big rigging or collusive bidding.
o Refusal price maintenance. &
o Exclusive supply.

The question arises is besides of all these why do we need competition in the market? The answer is it makes the enterprises more efficient and it gives a wider choice to the consumers at lower prices, fair competition is beneficiary for all

IV. Legislative Development:
Now, paying attention to the legislative part, the government has enacted the MRTP Act,1969 is the first enactment to deal with the competition issued and it came into force on 1st june,1970. The MRTP Act was not well adequate for the market; thus, with some new notifications the Act of Competition, 2002 had been enacted.

The competition Act, 2002 received assent of the president of India on January 13, 2003 and was published in the gazette of India dated January 14, 2003. Some of the sections of the act were brought into force on March 31, 2003 and majority of the other sections on July 19, 2003. However, the entire act has not come into force.

The CCI is a body corporate having perpetual succession and a common seal. The members of CCI should be appointed by the central government and the SC penal.

Even under the article 38(1) of the constitution of India, social order on the bases of justice-regarding political, economic and social reviews, this concept has been given. The new clause aims at equality in all spheres of life. It would unable the state to have a national policy on wages and eliminate inequalities in various spheres of life.
And, the article 39, specifically deals with the principles of policy to be followed by the state for securing economic justice.

This article states:
‘ to ensure that the economic system should not result in concentration of wealth and means of production to the common detriment.’

These both articles embody the jurisprudence doctrine of ‘distributive justice’. The constitution permits & even directs the state to administer what may be termed “distributive justice”. This concept in the sphere of law-making cannot, inter alia, the removal of economic inequalities rectifying the injustice resulting from dealing and transactions between unequal societies.

V. Major Areas in Focus:
1. Anti-competitive agreements.
Section-3. (1) No enterprise or association of enterprises or person or association of persons shall enter into 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.

(2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.

(3) Any agreement entered into between enterprises or associa­tions of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, 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 or provision of services;

(c) shares the market or source of 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 any other similar way;

(d) directly or indirectly results in bid rigging or collu­sive bidding,

shall be presumed to have an appreciable adverse effect on compe­tition:
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribu­tion, storage, acquisition or control of goods or provision of services.

Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding;

(4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.
2. Abuse of dominant position.
Section-4

(a) directly or indirectly, imposes unfair or discriminato­ry—

(i) condition in purchase or sale of goods or services; or

(ii) price in purchase or sale (including predatory price) of goods or service; or

Explanation.—For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or services referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory conditions or prices which may be adopted to meet the competition; or

(b) limits or restricts—

(i) production of goods or provision of services or market therefor; or

(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or

(c) indulges in practice or practices resulting in denial of market access 2[in any manner]; or

(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or

(e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.

3. Regulation of combinations
Section-5. 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—

(a) any acquisition where—

(i) the parties to the acquisition, being the acquirer and the enterprise, 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 of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being acquired, would belong after the acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or

(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, if—

(i) the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control jointly have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the acquisition, jointly have or would jointly have,—

(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or

(c) any merger or amalgamation in which—
(i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case may be, have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or

(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores.
VI. Conclusion:
India is a country of differences and thus, the US or other model of this act may not work for India. India is waving its own chemistry for politics and social and economic conditions and so it might become a difficult task for India for the setting. And moreover India is also taking the unique challenges from judiciary.
Taking an example;
Mr. Dipak chatterji as the chairman of CCI was elected and the questions raised that he cannot stand above all the SC judges. Government arged that ‘CCI is a body which need a experienced in the field and which cannot be supplied by the judiciary people. But under Article 226 and 32 of the constitution of India the SC and HC respectively able to exhibited such judicial activism and thus, the SC took a firm stand against government in January, the central govt. assured the SC that amendments would be made in the competition act to enable the chair person and the member to be elected by a committee presided over by the chief justice of India or his nominees. The SC on January 20, 2005 disposed off the petition in the view of the submission made by the govt. and thus, govt. made CCI a truly functional body.

Here has given the comparison of both the MRTP and Competition Act:
And by this view we can assure that the Competition Act, 2002 is needed for the country.
MRTP ACT COMPETITION ACT
Based on the pre-reforms scenario Based on the post-reforms scenario
Based on size as a factor Based on structure as a factor
Competition offences implicit or not defined Competition offences explicit and defined
Complex in arrangement and language Simple in arrangement and language and easily comprehensible
14 per se offences negating the principles of natural justice 4 per se offences and all the rest subjected to rule of reason.
Frowns upon dominance Frowns upon abuse of dominance
Registration of agreements compulsory No requirement of registration of agreements
No combinations regulation Combinations regulated beyond a high threshold limit.
Competition Commission appointed by the Government Competition Commission selected by a Collegium (search committee)
Very little administrative and financial autonomy for the Competition Commission Relatively more autonomy for the Competition Commission
No competition advocacy role for the Competition Commission Competition Commission has competition advocacy role
No penalties for offences Penalties for offences
Reactive and rigid Proactive and flexible
Unfair trade practices covered Unfair trade practices omitted (consumer fora will deal with them)
Does not vest MRTP Commission to inquire into cartels of foreign origin in a direct manner. Competition Law seeks to regulate them.
Concept of ‘Group’ Act had wider import and was unworkable Concept has been simplified

The author can be reached at: thakarforam@legalserviceindia.com / Print This Article

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