Introduction

The Parliament of India passed the Competition Act, 2002 on January 13, 2003,
which repealed the Monopolies and Restrictive Trade Practices Act, 1969. It
came into force on March 31st, 2003. The Competition Act, 2002 was changed
twice after its enactment, with the Competition (Amendment) Act, 2007 and the
Competition (Amendment) Act, 2009. It was a result of India’s drive for
globalisation and economic liberalisation. The primary goal of the Act is to
control the anti-competitive behaviour of a firm or company that has a negative
impact on competition in India’s market. Furthermore, the Act seeks to
encourage and maintain market competition, safeguard the interests of
consumers, and safeguard market freedom in our country.

The Competition Act, 2002, was adopted in India to achieve the dual goals of
regulating anti-competitive conduct and lending support to the agreements of
the World Trade Organisation (WTO). The Act also establishes the Competition
Commission of India (CCI) as a market controller for stopping and controlling
anti-competitive behaviour in the country. It also establishes the Competition
Appellate Tribunal (COMPAT), a quasi-judicial authority formed to listen to and
decide on appeals against any direction issued or decision taken by the CCI.

Evolution and development of Competition Act

The Monopolistic and Restrictive Trade Practices Act, 1969

The Monopolies and Restrictive Trade Practices Act of 1969 (MRTP Act) was the
first competition law established in India. The MRTP Act came into effect on
June 1st, 1970, with the goal of ensuring that the functioning of the market
structure did not result in the concentration of the economy in a few hands. It
also prohibited monopolistic and discriminatory acts that are harmful to the
public at large.
Economic liberalisation and the abolition of the MRTP Act in 1991

In 1991, economic liberalisation was introduced, which was a major turning

point for Indian markets in the globalised world. With the elimination of trade
barriers, the nation began to face competition from both within and beyond the
country. As a result, in order to pave the way for globalisation, India
implemented plenty of new economic plans, reduced government interference,
and progressively started opening opportunities for industry and international
investment. Among such new provisions, plenty of changes were made to
India’s competitive system, such as:

Amendment to the Monopolies and Restrictive Trade Practices Act has

eliminated-

● the method of pre-entry critical examination of investment by MRTP

Industries,
● the scope of MRTP in mergers, acquisitions, and combination, and
● the precondition of government permission for spreading and forming
new enterprises.

Following economic liberalisation in 1991, it became essential to establish a

competition law system that was more relevant to domestic economic forces
and compatible with international practices.

Emergence of Competition Act, 2002

The Indian Parliament enacted the Competition Act in 2002 to govern the
anti-competitive behaviour of firms in the Indian market. It was introduced to
avoid behaviours that have an Appreciable Adverse Effect on Competition
(AAEC). The goal of the Competition Act, 2002 is to develop and preserve an
open, just, competitive, and creative environment that will protect the interests
of consumers and foster long-term economic progress in the nation.

According to the Act, MRTP has become outdated and unnecessary as a result of
worldwide economic trends. Hence, there is a need to switch from ‘curtailing
monopolies’ to ‘supporting competition’.
The Competition Act, 2002 was modified by the Competition (Amendment) Act
2007, which came into effect on May 20, 2009, when the Indian government
notified some sections of the Competition Act relating to anti-competitive
agreements and abuse of dominant positions.

After three more years, in June 2011, certain provisions related to acquisition
control came into force.

Difference between MRTP Act, 1969 and

Competition Act, 2002
Point of MRTP Act, 1969 Competition Act, 2002
difference

Meaning The MRTP Act is India’s The Competition Act, 2002 was
first competition law, established to encourage and
consisting of laws and maintain economic competition
regulations that govern and protect commercial liberty.
discriminatory market
practices.

Basis MRTP Act 1969 was The Competition Act, 2002 is

based on the based on a modernised economy
pre-liberalisation and after liberalisation and
pre-globalisation phases. globalisation.

Purpose of To prevent monopolistic To encourage competition and

the Act markets and unjust maintain business autonomy.
practices.
 Nature of the MRTP Act, 1969 is Competition Act, 2002 is
Act reformatory in nature. punitive in nature.

Offences It contains fourteen It only acknowledges four

offences that violate the offences that are regarded to be
notion of natural justice. violative of the concept of
natural justice.

Appointment The central government The chairman of the CCI will be

of the appointed the head of chosen by a panel composed of
chairman the MRTP Commission. retired judges and other
professionals with expertise from
various fields like trade,
commerce, industries, finance,
and so forth.

Penalty There is no punishment Offences under this Act are

for the violation. punishable.

Importance of Competition Act, 2002

The Competition Act is concerned with enforcing rules to ensure that firms and
corporations compete effectively with one another. This promotes
entrepreneurship and productivity, increases customer choices and helps reduce
prices and enhance quality.

1. Low prices: Offering a lower price is the easiest approach for a firm to
achieve a large market share. Prices are driven down in a competitive
market. This is not simply beneficial to consumers; where more people
can afford to buy items, it motivates firms to produce and helps the
economy as a whole.
2. Innovation: To develop high-quality products, firms must be
innovative in their product concepts, design, manufacturing processes,
services, and so on.
 3. Better quality: The Competition Act encourages firms to enhance the
quality of their goods and services in order to attract more consumers
and extend their customer base. Quality can refer to a variety of
things, including items that last longer or perform better, better
after-sales or technical advice, and better service.
4. More options: In a competitive market, firms will seek to differentiate
their products from the competition. As a result, consumers have more
options, allowing them to choose the product that provides the most
value for money.

Features of Competition Act, 2002

The following are some of the main features of the Competition Act:

1. Anti-competitive agreements: The competition law forbids any

agreement involving two or more firms or individuals to maintain
market competition and serve the public interest in India.
2. Dominance-abuse prevention: Any firm that exploits its dominating
position will be penalised.
3. Anti-cartels: Any agreement between businesses or individuals that
harms competition is a civil offence.
4. Mergers and acquisitions: The Commission will only approve
mergers and acquisitions if they do not undermine market competition.
5. Informative nature of this act: In order to provide clarity and avoid
misunderstandings between companies or people, a business must
notify CCI of any interactions that are likely to harm market
competition prior to adopting such action or engaging in such an
agreement.

Key concepts of Competition Act, 2002

The Competition Act, 2002 primarily covers four aspects.

1. Anti-competitive agreements
2. Abuse of the dominant position
3. Combinations and their regulation
4. The Competition Commission of India
Anti-Competitive Agreements

Anti-competitive agreements are agreements among companies in a commercial

transaction that have the ability to weaken competition in a specific market or
enrich one specific group at the cost of the others. Such anti-competitive
contracts are prohibited by the Competition Act, 2002.

The word ‘agreement’, as mentioned in Section 2(b) of the Competition Act,

2002 does not necessitate the use of a legal instrument to be signed by the
parties. It may or may not be in writing. The definition provided is evidently
broad rather than exhaustive, and it includes a number of issues. The primary
reason for having a wider definition of ‘agreement’ under the Competition Act,
2002 is that those individuals who engage in anti-competitive behaviour are
unable to get into an official written contract in order to suppress their conduct.

Section 3 of the Competition Act, 2002 makes it illegal to enter into any
agreement pertaining to the manufacturing, sale, transport, warehousing,
purchasing, or management of goods and services that has or is likely to have
an adverse effect on the market in India. Section 3(2) further specifies that any
agreement entered into in contravention of this provision is null and void.

The Competition Act aims to govern two types of agreements:

1. Horizontal Agreements, and

2. Vertical Agreements.

Horizontal Agreements

Section 3(3) of the Competition Act, 2002 talks about horizontal agreements.
These are agreements between two or more business entities working at the
same level of production and distribution. Under the Competition Act, some
forms of horizontal agreements are deemed to have an appreciable adverse
effect on competition in India. This assumption does not suggest that all
horizontal agreements are always anti-competitive; the companies involved in
such a contract must produce proof that their contract will not have an
appreciable adverse effect on competition.
An example of horizontal agreement is when two manufacturers of a particular
commodity fix the price of their commodity.

Some horizontal agreements that are prohibited under the Competition Act,
2002 are as follows:

1. Agreements involving the explicit or implicit setting of the commodity’s

buying or selling price.
2. Contracts that limit or regulate the manufacturing, sales, expenditure,
or service provisions for specific goods and numbers.
3. Contract related to market sharing.
4. Contracts for bid rigging: Section 3(3)(d) defines bid rigging as an
agreement between two parties engaged in a similar business that has
the effect of removing or lowering bid competition or adversely
affecting or influencing bidding.
5. Agreements in the form of cartels: Cartels, in reality, are confidential
contracts between corporations that exist only to fix prices or share
markets. They pose a substantial danger to competition and, as a
consequence, choke free trade.

Vertical Agreements

Section 3(4) of the Competition Act, 2002 talks about vertical agreements.
These are the agreements formed between firms or individuals at various levels
or tiers of the manufacturing chain. Vertical agreements are normally allowed
unless it has been proven that they create, or are likely to induce, an
appreciable adverse effect on competition in the Indian markets. The
Competition Act contains an inclusive list of vertical agreements that may be
banned based on their impact on competition situations in India.

For example, an agreement between a producer and a supplier that has the
ability to affect competition in the market can be termed a vertical agreement.

Various vertical agreements permitted under the Competition Act, 2002 are as
follows:

● Tie-in agreement
● Exclusive supply agreement
 ● Exclusive distribution agreement
● Refusal to deal
● Maintenance of resale prices

Abuse of dominant position

When an individual or a firm is in a stronger position, which allows them to act

freely irrespective of competitive pressures in the market sector, they are said
to be in a dominant position. They also have a positive influence on their rivals,
customers, or the current market situation. A dominant position refers to a
company’s power in a particular market in India that allows it to function freely
irrespective of business pressures.

To establish an abuse of dominant position, a corporation must first have a

dominant position in terms of a specific product and the geographic market for
that product. Section 4 of the Competition Act, 2002, focuses on the prohibition
of such misuse. It implies that no firm or organisation should use its dominating
position to its benefit. It also illustrates what activities can be considered an
abuse of a dominant position. Such activities are as follows:

1. Imposing unfair or discriminatory terms on the purchase or sale of

goods and services, or increasing costs on the purchase or sale of
goods and services (particularly aggressive rates), either explicitly or
implicitly
2. To the harm of customers, reducing or controlling the manufacturing of
goods or services, or constraining scientific or technological
advancement related to goods or services.
3. Participating in activities that restrict access to markets in any manner.
4. Taking advantage of a dominating position in the market to defend or
enter another particular market.

Combinations and their regulation

A combination, as defined in Section 5 of the Competition Act, 2002, is the

active or passive procurement of shares, voting power, or resources, or
command over management or supervision over assets of more than one
enterprise by one or even more people. It is the merger or amalgamation
among companies. In the context of the competition law, a combination is
defined as the merging of two or more businesses or organisations, or the
takeover of a business sector (such as a company or firm) by another
commercial entity. In India, mergers can be of two types:

1. Merger through absorption: Absorption is the amalgamation of two

or more businesses into one ‘established business’. Apart from one, all
firms lose their identities in such a combination.
2. Merger by consolidation: A merger by consolidation is the merger of
two or more businesses into a ‘new organisation’. All firms are officially
abolished in this type of merger, and a new company is formed.

The Competition Act contains some rules and regulations regarding

combinations to ensure that such mergers do not harm competition in the
market. These rules are as follows:

● No organisation can enter into any merger that is likely to provoke an

appreciable adverse effect on competition.
● Section 6(1) prevents the establishment of combinations that seem to
have an appreciable adverse effect on competition in the pertinent
market in the country, and thus further says that certain combinations
should be regarded as void.
● If any individual or firm intends to create an amalgamation, the CCI
must approve the creation of the combination.
● The following procedures should be followed before the CCI issues a
permission or disapproval decision for the proposed merger:
1. Give notice to the Commission;
2. CCI will conduct an inquiry into the merger in accordance with Section
29 of the Competition Act, 2002;
3. Following an investigation, if the Commission determines that a merger
does not have, or is unlikely to have, a significant negative impact on
competition, the combination is permitted.

Competition Commission of India

The Competition Act provides for the formation of a CCI. It acts as the regulator
of competition in the Indian market. The commission was founded in 2003, but
it did not become fully operational until 2009. The central government appoints
a chairman and six members to the CCI. It is the commission’s responsibility to
eradicate anti-competitive activities, encourage and maintain competition,
safeguard consumer rights, and guarantee free trade in India’s marketplaces. It
is a quasi-judicial body tasked with the following duties:

1. Prevent practices that have a negative effect on competition.

2. Encourage and maintain market competition.
3. Safeguard the interests of all consumers.
4. Safeguard commercial liberty.
5. Investigate problems related to or ancillary to trade.
Application and enforcement of competition law in India

The Competition Act established the CCI, which is entirely responsible for the
application and enforcement of the Competition Act. The CCI currently has six
members and one chairperson, Ashok Kumar Gupta. The CCI can start an
investigation into an anti-competitive agreement or abuse of dominance on its
own, based on facts or evidence in its possession, or upon receiving information
or a recommendation from the state or legal authority. Anyone, including
customers and other organisations, can register a complaint or provide details
on anti-competitive agreements and misuse of dominant positions. In the case
of mergers and acquisitions, the CCI may initiate an investigation by itself or
based on information from the enterprises intending to merge. The CCI and its
inquiry team are vested with broad investigative powers with regard to
anti-competitive practices, such as the power to summon and administer the
participation of any individual, investigate them under oath, and receive
evidence on affidavit, as well as other similar powers. If CCI believes that there
is a prima facie case, it shall instruct the Director General to conduct an
investigation and submit its conclusions. The Director General is also authorised
to conduct police raids as part of its inquiry. The CCI may depend on the
recommendations of the Director General in its investigation and after providing
the accused parties with a reasonable chance to be heard. After this, they can
issue any measures they deem proper, such as an instruction to cease and
desist and impose fines. The Competition Act provides for an appeal to the
Competition Appellate Tribunal against some of the CCI rulings. A further appeal
from the COMPAT judgement may be filed with the Supreme Court of India.

About the bill in brief

● The bill intends to amend the fundamental provisions to accommodate

the demands of the modern market.
● It also intends to check anti-competitive practices in the online
business, a field that has faced significant legal and regulatory
concerns.
● It also intends to strengthen the regulatory framework by boosting the
CCI’s responsibility, adaptability, and implementation capacity.