Nature And Scope of Competition Act 2002

“A horse never runs so fast as when he has other horses to catch up and outpace.”  – Ovid

INTRODUCTION

In the third week of December 2002, the Competition Act or Antitrust Law was passed by the Lok Sabha to curb the tendency of creating monopolies in trade, commerce, and industry. This act was an outcome of a committee chaired by Shri S.V.S. Raghvan on ‘Competition Policy and Law’ in 1999. This act has an implication all over the Republic of India except the Jammu and Kashmir. This act provides the Constitution to the Competition Commission of India as this act prevents the practices from having an adverse effect on competition and to promotes healthy competition in business surroundings and also ensures freedom to trade in the Indian market. The Competition Act, 2002 guides only those industries having assets of more than 1,000 Crore or having an annual turnover of more than 3,000 Crore.[1]

OBJECTIVES[2]

  1. The main objective behind the enactment of this act is to promote fair business practices and healthy competition in the market;
  2. To prevent the practices having an adverse effect on competition and ensuring freedom to trade;
  3. To serve as a forum for complaints and disputes regarding the competition by regulating the operations, mergers, amalgamations, and acquisitions.

THREE MAJOR ELEMENTS OF COMPETITION LAW

1. Anti-Competitive Agreements[3]:

As per Section 3(2) of the Competition Act, 2002, all those agreements come within the definition as mentioned under Section 3(1) of the same act, shall be void. These are those agreements that restrict competition or cause an appreciable adverse effect on competition in the business environment of India. Section 3(3) provides us with the considerations regarding the agreements having an appreciable adverse effect on competition in India. Those agreements having:

  1. Indirectly or directly regulate the purchase or sale prices;
  2. Limits or controls the production, market, supply, investments, technical developments or provisions for services;
  3. Share the market or provisions of service or source of production by allocating the geographical area of market or nature of goods and services or number of customers or by any other similar way;
  4. Indirectly or directly results in collusive bidding or rid bidding.

According to Section 3(4) of the Competition Act, 2002, any agreement amongst any persons or enterprise at different levels or stages of the production chain in various markets in forms of production, distribution, supply, storage, trading, selling of goods and services, including:

  1. Tie-in agreement;
  2. Exclusive supply agreement;
  3. Exclusive distribution agreement;
  4. Refusal to deal;
  5. Resale price maintenance,

shall be assumed as an anti-competition arrangement, if such arrangement causes or likely to cause an appreciable adverse effect on competition in the business environment of India.

Section 3(5) ) of the Competition Act, 2002, exempts intellectual property rights as an anti-competitive agreement that has an appreciable adverse effect on competition in India. This section talks about the rights of any person by imposing reasonable restrictions as may be necessary for the protection in the form of:

  1. Copyright Act, 1957;
  2. Patents Act, 1970;
  3. Trade Marks Act, 1999;
  4. Geographical Indications of Goods (Registration and Protection) Act, 1999;
  5. Designs Act, 2000;
  6. Semi-conductor Integrated Circuits Layout-Design Act, 2000.

2. Abuse of Dominant position[4]:

Section 4(1) of the Competition Act, 2002 prohibits an enterprise from abusing its dominant position while Section 4(2) said that if any enterprise indulges in abuse of dominant position like:

  1. Indirectly or directly imposes discriminatory or unfair conditions and price in sale or purchase of goods and services;
  2. Limits or restricts the production of goods and services or market therefore; or limits or restricts the technical or scientific development of that product to the prejudice of the potential customers;
  3. Indulges into such practice or practices that result in denial of market access;
  4. Concludes those contracts which have no link with the main subject matter of such contract;
  5. Utilizing the dominant position to enters into a relevant market or protect other relevant markets.

3. Regulation of combinations[5]:

According to Section 5 of the Competition Act, 2002 the word combination would cover the acquisition of control, mergers, amalgamations, shares and voting rights, and the value of assets. Section 6 of the Competition Act, 2002, prohibits all those combinations shall be void if entered by persons or by any enterprise which causes or likely to cause an appreciable adverse effect on competition in the business environment of India.

If any person or enterprise wanted to enter into a combination shall give notice to the Competition Commission of India within the 30 days of such merger with the prescribed fee, as mentioned under Section 6(2) of the act but Section 6 don’t restrict Public Financial Institutions, Banks, Venture Capital Funds, Foreign Institutional Investors, and those enterprises established with the common interest of national security and public interests.

OTHER FEATURES OF COMPETITION ACT, 2002

1. Jurisdiction:

As per Section 18 of the Competition Act, 2002 the Competition Commission of India has to govern and eliminate such unfair practices having an appreciable adverse effect on competition in the business environment of India. As per Section 32 of the Competition Act, 2002, the commission has empowered to take actions against the parties located outside India which has an appreciable adverse effect on competition in the business environment of India.

2. Penalties:

Various penalties have introduced under this act. Competition Commission of India has empowered to penalize any person or enterprise indulges in anti-competition practices or abusing its dominant position, or any merger, acquisition, the combination having an appreciable adverse effect on competition in the Indian market.

3. Remedies:

Competition Commission of India itself advanced towards reporting the unfair competition practices to indulge in the market and also Competition Commission of India has empowered to act suo-moto.

4. Confidentiality:

As per Section 57 of the Competition Act, 2002, any information related to the person or enterprise received by the commission could be sensitive and could not amount to disclosure without the prior permission of that enterprise, as it may results in harm to that enterprise or business.

5. Competition Advocacy to Central/State government:

According to Section 49 of the Competition Act, 2002, before forming any policy related to competition, central or state government may take references or seek the opinion of the Competition Commission of India on every possible aspect of that competition policy.[6]

CONCLUSION

The Competition Act, 2002 is one of the landmark legislation that aims to promote fair competition and to protect Indian businesses from unfair and anti-competition practices. This act has enacted to meet achieve every aspect of economic growth both at the national as well as at the international level regarding competition law. This legislation curbs all anti-competition agreements restricts the abuse of dominant position and regulate the combination having an appreciable adverse effect on competition in the business environment of India.

[1] Natasha Kwatiah, Essay on the Competition Act, 2002, “Economics Discussion” <https://www.economicsdiscussion.net/essays/essay-on-the-competition-act-2002/19158> Retrieved on June 23, 2020

[2]All Answers ltd, Introduction to Competition Act, “Lawteacher.net” <https://www.lawteacher.net/free-law-essays/international-law/introduction-to-competition-act-international-law-essay.php?vref=1>Retrieved on 24 June 2020

[3] Section 3 of the Competition Act, 2002

[4]Section 4 of the Competition Act, 2002

[5]Section 5 of the Competition Act, 2002

[6] Prashant Kumar, Competition Law in India – An Overview, “Linkedin” <https://www.linkedin.com/pulse/20140821065102-73187306-competition-law-in-india-an-overview> Retrieved on June 23, 2020

This article is authored by Vividh Jain, 3rd Year, B.Com. L.L.B. (Hons.) at Institute of Law, NIRMA University.

Also Read – The Competition Commission of India & The Director General to Investigate Contraventions.

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