Competition Act, 2002

The MONOPOLISTIC AND RESTRICTIVE TRADE PRACTICES ACT (‘MRTP’) has been replaced by the more strong and stringent Competition Act, of 2002 (‘Competition Act’). While the old act required to be polished and refined to bring it up to tackle the present requirement of regulating the trade and the deceptive practices which has gathered global dimensions, it was necessary to introduce an enactment 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, to promote and sustain competition in markets. Under the new legislation, the Competition Commission of India (‘CCI’) was established to prevent activities that have an adverse effect on competition in India. The ultimate aim is to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. Hopefully to bring about an even playing field for competition amongst the manufacturers and the markets so as afford to the consumers a fair choice which resonates with the right of the consumer to choose from amongst the products available and at an affordable price.

It has always been a dream of a Ramrajya, but one must admit that there were laws even then to promote as well as to regulate the way the businessman sold his wares. Thus the Competition Act, is an attempt to regulate the markets, the marketing and also to promote fairness in the competition where the pricing would not be deceptive as is if I may say the Chinese policy, which our government and more so citizens needs to extremely careful about. A word of caution against such cheap, throw away goods can only strangulate the good and sincere manufacturers of goods which are intended to be good in quality, besides creating a lot trash of cheap and probably un-recyclable goods which could be hazardous if allowed to remain on Indian soil.

The enactment has attempted to give very strong teeth to the CCI appointed to adjudicate the disputes that may be filed as also giving suo moto powers to look into any unadventurous unfair trade practices, including takeovers of companies.

The cases under the MRTP Act, which were earlier referred to the National Consumer Disputes Redressal Commission have been taken over by the CCI. The said enactment has been spread over nineteen chapters which cover almost every aspect of trade and business, such as

A. PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF DOMINANT POSITION AND REGULATION OF COMBINATIONS

Section 3 of Competition Act: Anti-competitive agreements

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. Any agreement entered into in contravention of this provision shall be void.
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–

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 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;
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 above 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.

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.

B. Prohibition of abuse of dominant position of one as against the others

Section 4 of Competition Act: Abuse of dominant position

No enterprise shall abuse its dominant position.
There shall be an abuse of dominant position under sub-section (1), if an enterprise,—
1. directly or indirectly, imposes unfair or discriminatory–
  1. condition in purchase or sale of goods or service; or
  2. price in purchase or sale (including predatory price) of goods or service.
    
    Explanation.-For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service 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 condition or price which may be adopted to meet the competition; or
2. limits or restricts–
  1. production of goods or provision of services or market therefor; or
  2. technical or scientific development relating to goods or services to the prejudice of consumers; or
3. indulges in practice or practices resulting in denial of market access; or
4. 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
5. uses its dominant position in one relevant market to enter into, or protect, other relevant market.

C. Functioning of CCI

Section 7 of the Competition Act: Establishment of CCI

The CCI shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
The head office of the Commission shall be at such place as the Central Government may decide from time to time.
The Commission may establish offices at other places in India.

Section 8 of the Competition Act: Composition of CCI

The CCI shall consist of a Chairperson and not less than two and not more than ten other Members to be appointed by the Central Government:

D. Duties, Powers and Functions of CCI

Section18 of the Competition Act: Duties of CCI

Subject to the provisions of this Act, it shall be the duty of the CCI 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:

Provided that the CCI may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country.

Section 19 of the Competition Act: Inquiry into certain agreements and dominant position of enterprise

The CCI may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4 either on its own motion or on–
1. receipt of a complaint, accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or
2. a reference made to it by the Central Government or a State Government or a statutory authority.

Without prejudice to the provisions contained in sub-section (1), the powers and functions of the Commission shall include the powers and functions specified in sub-sections (3) to (7).

The CCI shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors, namely:–
1. creation of barriers to new entrants in the market;
2. driving existing competitors out of the market;
3. foreclosure of competition by hindering entry into the market;
4. accrual of benefits to consumers;
5. improvements in production or distribution of goods or provision of services;
6. promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.
The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely:–
1. market share of the enterprise;
2. size and resources of the enterprise;
3. size and importance of the competitors;
4. economic power of the enterprise including commercial advantages over competitors;
5. vertical integration of the enterprises or sale or service network of such enterprises;
6. dependence of consumers on the enterprise;
7. monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;
8. entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;
9. countervailing buying power;
10. market structure and size of market;
11. social obligations and social costs;
12. relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;
13. any other factor which the Commission may consider relevant for the inquiry.
For determining whether a market constitutes a “relevant market” for the purposes of this Act, the Commission shall have due regard to the “relevant geographic market” and “relevant product market”.
The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the following factors, namely:–
1. regulatory trade barriers;
2. local specification requirements;
3. national procurement policies;
4. adequate distribution facilities;
5. transport costs;
6. language;
7. consumer preferences;
8. need for secure or regular supplies or rapid after-sales services.
The Commission shall, while determining the “relevant product market”, have due regard to all or any of the following factors, namely:–
1. physical characteristics or end-use of goods;
2. price of goods or service;
3. consumer preferences;
4. exclusion of in-house production;
5. existence of specialised producers;
6. classification of industrial products.

Section 20 of the Competition Act: Inquiry into combination by Commission

The Commission may, upon its own knowledge or information relating to acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of section 5 or merger or amalgamation referred to in clause (c) of that section, inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on competition in India:

Provided that the Commission shall not initiate any inquiry under this sub-section after the expiry of one year from the date on which such combination has taken effect.

The Commission shall, on receipt of a notice under sub-section (2) of section 6 or upon receipt of a reference under sub-section (1) of section 21, inquire whether a combination referred to in that notice or reference has caused or is likely to cause an appreciable adverse effect on competition in India.
Notwithstanding anything contained in section 5, the Central Government shall, on the expiry of a period of two years from the date of commencement of this Act and thereafter every two years, in consultation with the Commission, by notification, enhance or reduce, on the basis of the wholesale price index or fluctuations in exchange rate of rupee or foreign currencies, the value of assets or the value of turnover, for the purposes of that section.
For the purposes of determining whether a combination would have the effect of or is likely to have an appreciable adverse effect on competition in the relevant market, the Commission shall have due regard to all or any of the following factors, namely:–
1. actual and potential level of competition through imports in the market;
2. extent of barriers to entry into the market;
3. level of combination in the market;
4. degree of countervailing power in the market;
5. likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
6. extent of effective competition likely to sustain in a market;
7. extent to which substitutes are available or are likely to be available in the market;
8. market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
9. likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
10. nature and extent of vertical integration in the market;
11. possibility of a failing business;
12. nature and extent of innovation;
13. relative advantage, by way of the contribution to the economic development, by any Combination having or likely to have appreciable adverse effect on competition;
14. whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Section 27 of the Competition Act: Orders by Commission after inquiry into agreements or abuse of dominant position

Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:–

direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;
impose such penalty, as it may deem fit which shall be not more than ten per cent. of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse:

Provided that in case any agreement referred to in section 3 has been entered into by any cartel, the Commission shall impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or ten per cent, of the average of the turnover of the cartel for the last preceding three financial years, whichever is higher;
award compensation to parties in accordance with the provisions contained in section 34;
direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;
direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;
recommend to the Central Government for the division of an enterprise enjoying dominant position;
pass such other order as it may deem fit.

Section 29 of the Competition Act Procedure for investigation of combinations

Where the Commission is of the opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to combination calling upon them to respond within thirty days of the receipt of the notice, as to why investigation in respect of such combination should not be conducted.
The Commission, if it is prima facie of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall, within seven working days from the date of receipt of the response of the parties to the combination, direct the parties to the said combination to publish details of the combination within ten working days of such direction, in such manner, as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination.
The Commission may invite any person or member of the public, affected or likely to be affected by the said combination, to file his written objections, if any, before the Commission within fifteen working days from the date on which the details of the combination were published under sub-section (2).
The Commission may, within fifteen working days from the expiry of the period specified in sub-section (3), call for such additional or other information as it may deem fit from the parties to the said combination.
The additional or other information called for by the Commission shall be furnished by the parties referred to in sub-section (4) within fifteen days from the expiry of the period specified in sub-section (4).
After receipt of all information and within a period of forty-five working days from the expiry of the period specified in sub-section (5), the Commission shall proceed to deal with the case in accordance with the provisions contained in section 31.

E. Provision of filing appeal

Section 40 the Competition Act: filing appeal

Any person aggrieved by any decision or order of the Commission may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Commission to him on one or more of the grounds specified in section 100 of the Code of Civil Procedure, 1908 (5 of 1908):

Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days:

Provided further that no appeal shall lie against any decision or order of the Commission made with the consent of the parties.

F. Duties of Director General

Section 41 of the Competition Act: Director-General to investigate contraventions

The Director General shall, when so directed by the Commission, assist the Commission in investigating into any contravention of the provisions of this Act or any rules or regulations made thereunder.
The Director General shall have all the powers as are conferred upon the Commission under sub-section (2) of section 36.
Without prejudice to the provisions of sub-section (2), sections 240 and 240A of the Companies Act, 1956 (1 of 1956), so far as may be, shall apply to an investigation made by the Director General or any other person investigating under his authority, as they apply to an inspector appointed under that Act.

The teeth to the Commission is provided under section 42 for the PENALTIES

Section 42 of the Competition Act: Contravention of orders of Commission

Without prejudice to the provisions of this Act, 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 for a term which may extend to one year, unless in the meantime the Commission directs his release and he shall also be liable to a penalty not exceeding rupees ten lakhs.
The Commission may, while making an order under this Act, issue such directions to any person or authority, not inconsistent with this Act, as it thinks necessary or desirable, for the proper implementation or execution of the order, and any person who commits breach of, or fails to comply with, any obligation imposed on him under such direction, may be ordered by the Commission to be detained in civil prison for a term not exceeding one year unless in the meantime the Commission directs his release and he shall also be liable to a penalty not exceeding rupees ten lakhs.

43 of the Competition Act: Penalty for failure to comply with directions of Commission and Director General .-

If any person fails to comply with a direction given by–

the Commission under sub-section (5) of section 36; or
the Director General while exercising powers referred to in sub-section (2) of section 41, the Commission shall impose on such person a penalty of rupees one lakh for each day during which such failure continues.

44 of the Competition Act: Penalty for making false statement or omission to furnish material information

If any person, being a party to a combination,–

makes a statement which is false in any material particular, or knowing it to be false; or
omits to state any material particular knowing it to be material, such person shall be liable to a penalty which shall not be less than rupees fifty lakhs but which may extend to rupees one crore, as may be determined by the Commission.

45 of the Competition Act: Penalty for offences in relation to furnishing of information

Without prejudice to the provisions of section 44, if any person, who furnishes or is required to furnish under this Act any particulars, documents or any information,–
1. makes any statement or furnishes any document which he knows or has reason to believe to be false in any material particular; or
2. omits to state any material fact knowing it to be material; or
3. wilfully alters, suppresses or destroys any document which is required to be furnished as aforesaid, the Commission shall impose on such person a penalty which may extend to rupees ten lakhs.
Without prejudice to the provisions of sub-section (1), the Commission may also pass such other order as it deems fit.

It is hoped that the new enactment serves the purpose of being ultimately in the interest of consumer and fairness in the market place for the consumer and the manufacturers and does not land in the hands of person so as to be reduced into the state the Consumer Protection Act, 1986, has come to, if I may say grossly misused, misunderstood and failing to serve the purpose of consumers vis-vis fairness of justice.