38 Competition Act and Policy

Mandeep kaur

1. MEANING: With the expansion of business in globe level need was felt to provide an act for

(i) Economic development of the country

(ii) For the establishment of a commission to prevent practices having adverse effect on competition.

(iii)To promote & sustain competition in the market (iv) To protect the interest of the consumers.

(v) To ensure freedom of trade carried on by participating in the market.

The Government of India appointed a high level committee on competition policy and competition law to advise a modern competitive law to advice a modern competitive law for the above purpose in Oct, 1969. The committee presented its competition policy report to the Government in May, 2000. In November, 2000 the competition law was drafted and presented to the Government. After some discussion and consultation with the interested parties, the new law, namely, the competition Act, 2002 was passed in December 2002.

SHORT TITLE, EXTENT AND COMMENCEMENT:-

(I) This act may be called Competition Act, 2002.

(II) It extends to the whole of India except the state of Jammu & Kashmir

(iii) It shall come into force on such date as the Central Government may by notification In the official gazette, appoint

2. DEFINITIONS

The important concepts incorporated in the competition act, 2002 have been defined under section 2 of the act. These are discussed as follows:-

Acquisition [Section 2(a)]: – It means directly or indirectly acquiring or agree to acquire;

(i) Shares, voting rights, or assets of any enterprises;

(ii) Control over management or control over assets of any enterprise.

Agreement [Section 2 (b)]: –It includes any arrangement

(i) Whether or not, such arrangement,Understanding, or concert formal in writing:or

(ii)Whether or not, such arrangement,Understanding, or concert is intended to be enforceable by legal proceedings.

Cartel [Section 2(c)] It includes any association of producers, sellers or distributors, traders or service providers who, by agreement by themselves, limit control or attempts to control the production, distribution, sale or price of or, trade in goods or provision of services.

Chairperson[section 2(d)] It means the Chairperson of Competition Commission of India appointed under subsection (1) of section 8.

Commission [Section 2 (e)] It means the Competition Commission of India established under section 7 (1).

Consumers [Section 2(f)] It includes only such purchase or buyer who make purchases for their own consumption or to earn their livelihood

Director General [Section 2(g)] It means the Director General appointed under section 16(1) and also includes Additional, Joint or Deputy or Assistant Director Generals.

Enterprise [Section 2(h)] It means a person or a department who is engaged in any activity relating to production, control of goods or articles or provision of services of any kind or in investment or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities whether such unit or subsidiary is located at the same place or at different places.

Goods [Section 2(i)] it means as defined in the sale of goods act,1930 and includes;

(a) Product ,manufactured, processed or mined;

(b) Debentures ,shares and stock after allotment;

Member [Section 2(j)] It means a member of the commission appointed under section 8(1) of the act and includes a chairperson.

Notification [Section 2(k)] Notification published in the official Gazette.

Person [Section 2(l)] It includes ;

(i) An individual;

(ii) A Hindu undivided Family; (iii)A company;

(iv) A firm;

(v) An association of person;

(vi) A corporation established under Central, State or a Government Company ;

(vii) A body corporate incorporated under a law of foreign country;

(viii) A co operative society registered under any law;

(ix) Local authority;

(x) Every artificial judicial person.

Practice [Section 2(m)] It includes any practice relating to carrying on of any trade by a person or enterprise.

Prescribed [Section 2(n)] It means prescribed by the rules made under the Act by the Central Government.

Price [Section 2(o)] Every valuable consideration, Whether direct or indirect, or deferred, or includes any consideration ,which relate to sale of goods any goods.

Public Financial Institution [Section 2(p)] Public Financial institution defined in Section 4A companies Act 1956 and also includes State Financial, Industrial or Investment Corporation.

Regulation [Section 2(q)] Regulation made by the Competition Commission of India.

Relevant Market [Section 2(r)] The market ,which may be determined by the commission with reference to relevant product market.

Relevant Geographic Market [Section 2(s)]Relevant geographic market a market consist the area in which the conditions of competition for supply of goods or services are homogenous and can be differentiated from the condition prevailing in the neighboring areas.

Relevant product Market [Section 2(t)] It means a market comprising of all those products or services which are regarded as substitutable and interchangeable by the consumer.

Service [Section 2(u)]It means service of any description which is made available to potential users and includes the provision of services in connection with the business of any industrial or commercial matters like; banking, education, financing, insurance, transport, storage, energy, boarding , lodging, entertainment, construction, repair and advertising.

Shares [Section 2(v)]It means shares capital of company carrying voting rights and includes –

(i) Any security which includes the holder to receive shares with voting rights ;

(ii) Stock except where a distinction between stock and shares is expressed or implied.

Statutory Authority [Section 2(w)] It means any authority, Board, corporation, council, institute, university or a body corporate established under any State, Central, or provisional Act for the purpose of regulation of production or supply of goods or provision of any services.

Trade [Section 2(x)]It means any trade , business, industry, profession or occupation relating to production, supplies, distribution, storage or control of goods and includes the provision of any services.

Turnover [Section 2 (y)] It includes the value of goods or services.

3. FEATURES OF COMPETITION ACT, 2002

Competition Act, 2002 (Act, for brief) has essential four Features:

To prohibit Anti -Competition Agreements (Sec-3)
To prohibit Abuse of dominant position (Sec-4)
To regulate Combinations (Sec-5 & Sec 6)
Competition advocacy (Sec-49)

1. Anti Competitive Agreements:- Anti Competitive Agreements are those agreements which can cause or likely to cause an appreciable adverse effect on competition (AAEC) Such agreement may be (a) horizontal or (b) vertical.

(a) Horizontal Agreements :- These are between enterprises at the same stage of the production chain and is generally between two rivals for either fixing prices or for sharing market or for limiting production.

These are presumed to be illegal.

Example :- Cartles, Bid rigging, Collusive bidding and sharing of markets etc.

(b) Vertical Agreements: – These agreements are between enterprises at different stages of the production chain, like an arrangement between the manufacturer and distributor.

These are not presumed to be illegal.

Examples: – Tie in arrangements, refusal to deal, exclusive supply/ distribution

Agreements, resale price maintenance.

Bar from entering anti-competition agreement;- Section 3(1) of the act provides the prohibition on the following to enter into an agreement which causes or likely to cause an AAEC in India;

(a) Enterprise;

(b) Association of person;

(d) Two associations of persons

If an agreement is entered between any of the above, it would be void under the act.

Section 3(2) of the act also states that even if the agreement has been entered into outside India the CCI would have the powers to inquire into such an agreement if such agreement has an AAEC in India.

Section 3(3) of the act states that any agreement entered into

(a) Enterprise;

(b) Association of person;

(d) Two associations of persons

For similar goods or services which

(i) Directly or indirectly determines sale or purchase price (ii) limits or controls production, supply, markets or technical development (iii) shares the market or source of products or services (iv) directly or indirectly result in bid rigging or collusive bidding;

(ii) Shall be presumed to have an appreciable adverse effect on competition.

Section 3 (4) of the act states that any agreement amongst enterprise or persons at different stages in respect of production, supply, distribution, storage, sale or price including-

(a) Tie in agreement

(b) An exclusive supply 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 have an appreciable adverse effect on competition in India.

(a) Tie in agreement: these are those agreements where the purchaser is required to buy some other goods.

Example: when a gas distributor requires a customer to buy a stove if he wants to get connection of gas.

(b) An exclusive supply agreement; Any agreement which restricts any person to acquire any goods other than those of the seller.

(c) Exclusive distribution agreement; Any agreement requiring the distributor not to sell the goods from the manufacturer beyond the prescribed area.

(d) Resale price maintenance; An agreement which refuses to deal with any product or service of similar nature for a particular period.

(e) Resale price maintenance: any agreement where stipulates any condition, not to sell the goods below the stipulated price.

(2) Abuse of dominance: – “Dominant position” is defined as a position of strengths which enables the enterprise:-

(i) To operate independently of competitive forces prevailing in the market.

(ii) Affects its competitors or consumer in its favor.

Ø There is no mathematical or statistical formula to measure Dominance.

(3) REGULATION COMBINATION: – It Includes: – Merger and amalgamation, acquisition of shares, acquiring of control and voting rights.

Ø pre-mandatory notification before merger.

Ø The commission must decide in 210 days, is combination approved.

Ø The commission can take so moto action within 365 days after combination.

Section 6 of the Competition act prohibits any person or enterprise from entering into any agreement which causes an appreciable or adverse effect on competition within India and if such combination is formed that will be void.

Section 6 (2) states that any person who is entering into any agreement he must inform to the prescribed authority within 30 days together with the fees as decided by the authority.

(4). Competition Advocacy: – Under section 49 of the Competition Act Central Government or State Government may take advice from the CCI on the policy of the competition. The commission will give his opinion to the government within 60 days for the formulation of policy. The role of the commission will be advisory and will not be binding on the Government.

The commission empowered to take suitable measures for the:

Ø Promotion of competition advocacy;

Ø Creating awareness about the competition; &

Ø Imparting training about competition issues.

4. OBJECTIVES OF COMPETITION ACT, 2002:-

An Act to provide for:-

Ø Economic development of the country.

Ø For the establishment of a commission to prevent practices having adverse effect on competition.

Ø To promote & sustain competition in the market.

Ø To protect the interest of the consumers.

Ø To ensure freedom of trade carried on by the participant in the market.

5. Competition Commission of India (CCI): – The Central Government under section 7 has been empowered to establish a Competition Commission of India by issue of notification. Competition commission of India (CCI) is a body of Government of India responsible for the enforcing The competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India. It was established on 14, October, 2003.

COMPOSITION OF COMPETITION COMMISSION OF INDIA:-

Ø Section 8 of the act consists of 1 chairman and 2 to 6 other members to be appointed by the Central Government.

Ø Section 8(2) provides that they shall be the person of ability, integrity, and standing and who has knowledge of and such professional experience and must have experience of not less than 15 years in, international trade, economics, business, commerce, law, finance, accountancy, management, industry, finance, public affairs or competition matters, including competition law and policy.

Ø The chairman and other members shall be whole time members.

TERM OF OFFICE OF CHAIRPERSON AND OTHER MEMBER: – Shall hold the office for a term of 5 years and shall be eligible for re-appointment

¨ Provided that the chairperson or other members shall not hold office after attaining the age of 65 years.

¨ The senior most members shall act as a chairman in the event of death or resignation of chairperson.

¨ If any vacancy caused by resignation or removal of the chairperson or any other member by death or otherwise shall be filled by the fresh appointment in accordance with the provision of section 8 and 9.

RESIGNATION, REMOVAL AND SUSPENSION OF CHAIRPERSON AND OTHER MEMBERS:-

¨ The chairperson or any other member may, by notice in writing under his hand addressed to the central government, resign his office.

¨ The central government may remove the chairperson or any other member if :

(a) Adjudged as an insolvent

(b) Has engaged during his term of office in any paid employment.

(d) Has acquired such financial or other interest as is likely to affect prejudicially his function act as a member;

(e) Has become physically or mentally incapable of acting as a member.

Salary and terms and condition of service:- The salary allowances and other terms and conditions of service of the chairman and other member including travel expenses ,House rent allowances conveyance allowance and other medical facility shall be as such prescribed by the authority.

Appointment of Director General :- Director General is an important functionary under the act. He is to assist the commission in case of inquiries and for performing such other function as may be prescribed by the authority.

Section 16(1) empowers the Central Government to appoint Director General and such number of additional, deputy, or assistant director general or other advisors and consultant

DUTIES & FUNCTIONS OF COMPETITION COMMISSION OF INDIA:-

Ø Create equal chance for all the producers.

Ø Creation of awareness among the people.

Ø To assist common people by providing goods and services at reasonable & convenient prices.

Ø To protect interest of consumers.

Ø To eliminate practices having adverse effect on competition.

Ø Discouraging anti-competitive agreements.

¨ Competition Commission of India has been entrusted with the following two basic functions :

(a) Administration and enforcement of competition law and competition policy to foster economic efficiency and consumer welfare.
(b) Involvement proactively in government policy formulation to ensure that markets remain fair, free, open, flexible and adaptable.

Summary: Competition Act was enacted to promote & sustain competition in the market in order to protect the interest of the consumers. Important objective was to ensure freedom of trade carried on by the competitors in the market. Thus, Competition Commission of India was established on 14, October, 2003. The objective was to create equal chance for all the producers and creation of awareness among the people. The act helped to assist common people by providing goods and services at reasonable & convenient prices.

Suggested Readings;

Aggarwal, V.K. (2011), Competition Act, 2002- Principles & Practices, Jain Book Agency
Aggarwal, V.K. (2011), Bharat’s Competition Act, 2002, Bharat Laws
Cherunilam,F.(2014).Business Environment. New Delhi : Himalya Publishing House
Neelamegam,V.(2010). Business Environment.New Delhi:Vrinda Publications Websites;

www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012 https://www.mca.gov.in/Ministry/actsbills/pdf/The_competition_Act_2002.