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The Competition Act 2002 And Its Role In Corporate Sector

Competition is a process of economic rivalry between market players to attract customers. Competition also refers to a situation in a business environment where businesses independently strive for the patronage of customers in order to achieve their business objective. Free and fair competition is one of the pillars of an efficient business environment.

In the recent years the Indian economy has been one of the best performers and is on high growth path. Infusion of greater degree of competition can play a catalytic role in unlocking the fuller growth potential in many critical areas of the economy.

In the interest of consumers, and the economy as whole, it is necessary to promote an environment that facilitates fair competition outcomes in the market, restrain anti-competitive behavior and discourage market players from adopting unfair trade practices. Therefore, competition has become a driving force in the global economy.

With the pursuit of globalization and liberalization of the economy, introduction of the Act was a key step in India’s march towards facing competition both from within the country and from international players. The Act is not intended to prohibit competition in the market.

What the Act primarily seeks to regulate, are the practices that have an adverse effect on competition in the market in India. In addition, the Act intends to promote and sustain competition in markets, protect consumer interests, and ensure freedom of trade in the market in India. At the heart of the Act are various activities that will be prohibited as being anticompetitive.

The activities comprise:
  1. Anti-competitive arrangements.
  2. Abuse of dominant position.
  3. Mergers and acquisitions that have an appreciable adverse effect on competition in India.
Competition Commission of India is a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India. The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws.

The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and merger and acquisition which causes or likely to cause an appreciable adverse effect on competition within India.

To achieve its objectives, the Competition Commission of India endeavours to do the following:

  1. Make the markets work for the benefit and welfare of consumers.
  2. Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy.
  3. Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.
  4. Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
  5. Effectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.

Previously we use to have Monopoly Restrictive Trade Practices Act, 1969 which would regulate unfair trade practices. This act is repealed by the Competition Act, 2002.

The salient features of the Act are:

• Prohibition of anti-competitive agreements.
• Prohibition of abuse of dominant position.
• Regulation of combinations.
• Establishment of Competition Commission of India.
• Penalties for contravention and non-compliance.
• Competition advocacy.
• Constitution of Competition Fund.

Prohibition of anti-competitive agreements

Agreements between the enterprises have the potential of restricting competition.
Such agreements are of two types;
  1. Horizontal
  2. Vertical.
Horizontal agreements refer to agreements amongst competitors which are at the same stage of production and in the same market.

Vertical agreements, to an actual or potential relationship of buying or selling to each other which are at different stages of or levels of production chain and, therefore, in different markets.

Both could be anti-competitive; horizontal agreement when they relate to prices, quantities, bids (collusive tendering) and market sharing. Vertical agreements, when they are tie-in arrangements, exclusive supply/distribution agreements and refusal to deal.

The Act provides for the prohibition of entering into anti-competitive agreements, in respect of production, supply, storage, distribution, acquisition or control of goods or provision of services which causes or is likely to cause an appreciable adverse effect on competition within India. Such agreements are those which have been entered into between the competitors (horizontal) as also between enterprises at different stages or levels of production chain in different markets (vertical).

Abuse of dominance

The Act does not frown upon dominance, but upon abuse. Abuse of dominance by any enterprise is prohibited. Dominance is the position of strength enjoyed by an enterprise which enables it to operate independently of competitive pressure in the relevant market and also to appreciably affect the relevant market, competitors, and consumers by its actions. It enjoys position of such economic strength that it can behave independently of its competitors and customers.

The Act prohibits the abuse of such dominant position which, inter alia, includes imposition, either directly or indirectly, of unfair or discriminatory purchase or selling prices or conditions, including predatory prices of goods or services, limiting production or restricting of goods or provision of service, indulging in practices resulting in denial of market access, making the conclusion of contracts subject to acceptance by other parties of supplementary obligations and using dominant position in one market to enter into or protect other market.

Regulation of combinations

As an anti-competitive agreement is forbidden, combination between the enterprises is also forbidden under the Act, if it is likely to cause or causes an appreciable adverse effect on competition within the relevant market in India. Such combination is achieved by acquisition of one or more enterprises by one or more persons or acquiring of control or merger or amalgamation of enterprises under certain circumstances specified in the Act.

Competition Commission of India (CCI)

It is a statutory body of the Government of India responsible for enforcing the Competition Act, 2002; it was duly constituted in March 2009.
The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of Raghavan committee. Competition Commission of India aims to establish a robust competitive environment.

Through proactive engagement with all stakeholders, including consumers, industry, government and international jurisdictions. By being a knowledge intensive organization with high competence level. Through professionalism, transparency, resolve and wisdom in enforcement.

The Competition Act was passed in 2002 and has been amended by the Competition (Amendment) Act, 2007. It follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established. Government replaced Competition Appellate Tribunal (COMPAT) with the National Company Law Appellate Tribunal (NCLAT) in 2017.

Composition of CCI

The Commission consists of one Chairperson and six Members as per the Competition Act who shall be appointed by the Central Government. The commission is a quasi-judicial body which gives opinions to statutory authorities and also deals with other cases. The Chairperson and other Members shall be whole-time Members.

Eligibility of members: The Chairperson and every other Member shall be a person of ability, integrity and standing and who, has been, or is qualified to be a judge of a High Court, or, has special knowledge of, and professional experience of not less than fifteen years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which, in the opinion of the Central Government, may be useful to the Commission.

Functions and Role of CCI

  1. To eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
     
  2. To give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

The Competition Commission of India takes the following measures to achieve its objectives:
  1. Consumer welfare: To make the markets work for the benefit and welfare of consumers.
     
  2. Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of the economy.
     
  3. Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.
     
  4. Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
     
  5. Effectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.
     
  6. The Competition Commission is India’s competition regulator, and an antitrust watchdog for smaller organizations that are unable to defend themselves against large corporations.
     
  7. CCI has the authority to notify organizations that sell to India if it feels they may be negatively influencing competition in India’s domestic market.
     
  8. The Competition Act guarantees that no enterprise abuses their 'dominant position' in a market through the control of supply, manipulating purchase prices, or adopting practices that deny market access to other competing firms.
     
  9. A foreign company seeking entry into India through an acquisition or merger will have to abide by the country’s competition laws.
     
  10. Assets and turnover above a certain monetary value will bring the group under the purview of the Competition Commission of India (CCI).

Judgements of CCI
CCI imposed a fine of Rs63.07 billion (US$910 million) on 11 cement companies for cartelisation in June 2012. It claimed that cement companies met regularly to fix prices, control market share and hold back supply which earned them illegal profits. CCI imposed a penalty of Rs522 million (US$7.6 million) on the Board of Control for Cricket in India (BCCI) in 2013, for misusing its dominant position.

The CCI found that IPL team ownership agreements were unfair and discriminatory and that the terms of the IPL franchise agreements were loaded in favor of BCCI and franchises had no say in the terms of the contract. CCI imposed a fine of Rs10 million upon Google in 2014 for failure to comply with the directions given by the Director General (DG) seeking information and documents. CCI imposed a fine of Rs258 crores upon Three Airlines in 2015.

Competition Commission of India (CCI) had penalized the three airlines for cartelisation in determining the fuel surcharge on air cargo. CCI ordered a probe into the functioning of Cellular Operators Association of India (COAI) following a complaint filed by Reliance Jio against the cartelization by its rivals Bharti Airtel, Vodafone India and Idea cellular. The commission ordered an antitrust probe against Google for abusing its dominant position with Android to block market rivals.

This probe was ordered on the basis of the analysis of a similar case in the EU where Google was found guilty and fined. CCI issued letters to handset makers in 2019, seeking details of terms and conditions of their agreement with Google. This is to ascertain if Google imposed any restrictions on them for using the company's apps in the past 8 years from 2011.

Need of CCI

  1. Promote free enterprise: Competition laws have been described as the Magna Carta of free enterprise. Competition is important for the preservation of economic freedom and our free enterprise system.
     
  2. Protect against market distortions: The need for competition law arises because market can suffer from failures and distortions, and various players can resort to anti- competitive activities such as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer welfare. Thus, there is a need for competition law to provide a regulative force which establishes effective control over economic activities.
     
  3. Promotes domestic industries: During the era in which the economies are moving from closed economies to open economies, an effective competition commission is essential to ensure the continued viability of domestic industries, carefully balanced with attaining the benefits of foreign investment increased competition.

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