Notes on Competition Act, 2002

1. Important dates & information.

Monopolies and Restrictive Trade Practices Act, 1969 (in short MRTP) came into force 1st June,
1970 (Sachar Committee) | Competition Act, 2002 – came in to force 13th January, 2003
(Raghavan Committee) | Amendment to Competition Act, 2007 came in to force 24th September,
2007 | Notification on “Combination”- 2009.

2. Definitions
Acquisition Sec 2 (a)
Acquisition means, directly or indirectly, acquiring or agreeing to acquire
i. Shares of any enterprise,
ii. Voting rights of any enterprise,
iii. Assets of any enterprise; or
iv. Control over management of any enterprise,
v. Control over assets of any enterprise.

Agreement Sec 2 (b)

Agreement includes any arrangement or understanding or action in concert:

i. Whether or not, such arrangement, understanding or action is formal or in writing or,

ii. Whether or not such arrangement, understanding or action is intended to be
enforceable by legal proceedings.

Cartel Sec 2 (c)

Cartel includes an association of:

• Producers,
• Sellers,
• Distributors,
• Traders or,
• Service providers.

Who by agreement amongst themselves, limit, control or attempt to control the:

i. Production, distribution, sale, or,

ii. Price of or trade in goods or provision of services.

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Consumer Sec 2 (f)

Consumers means any person who:

i. Buys any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any user
of such goods other than the person who buys such goods for consideration paid or
promised or partly paid or partly promised, or under any system of deferred payment,
when such use is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use;

ii. Hires or avails of any services for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred payment and
includes any beneficiary of such services other than then person who hires or avails of
the services for consideration paid or promised, or partly paid or partly promised or
under any system of deferred payment, when such services are availed of with the
approval of the first-mentioned person whether such hiring or availing of services is
for any commercial purpose or for personal use.

Enterprise Sec 2 (h)

Enterprise means a person or a department of the Government, who or which is, or has
been, engaged in any activity, relating to the production, storage, supply, distribution,
acquisition or control of articles or goods, or the 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 of any other body corporate, either directly or through one or
more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is
located at the same place where the enterprise is located at a different place or different
places.

But does not include any activity of the Government relatable to the sovereign functions
of the Government including all activities carried on by the departments of the Central
Government dealing with atomic energy, currency, defense and space.

Herein, ‘Person’ under this section, it includes (which is defined under Sec 2 (l):

i. An individual, HUF, company body corporate, firm;

ii. AOP whether incorporated or not, in India or outside India;

iii. Any co-operative society;

iv. A local authority;

v. Every artificial juristic person.

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Notes on Competition Act, 2002

Goods Sec 2 (i)

Goods mean goods as defined in the Sale of Goods Act 1930 and include:
i. Products manufactured, processed or mined;
ii. Debentures, stock and shares after allotment;
iii. In relation to goods supplied, distributed or controlled in India, goods imported into
India.

Control Sec 5 Explanation (a)

Control includes

Controlling the affairs or management by;

i. one or more enterprise jointly or singularly over another enterprise;
ii. one or more group jointly or singularly over another group or enterprise.

Group Sec 5 Explanation (b)

Group means two or more enterprise which directly or indirectly:

i. have 26% or more Voting Right in the other Enterprise;

ii. ability to appoint more than half of the members of the Board of Directors;
iii. ability to control the management or affairs of the other enterprise.

Basic concepts of Competition Law:

Predatory Pricing- It means the sale of goods or provision of services, at a price below
the cost of production to reduce competition or eliminate the competitors. The main
objective of such a price is to reduce competition or to eliminate the competitors.

Anti-Trust law- The antitrust laws apply to virtually all industries and to every level of
business, including manufacturing, transportation, distribution, and marketing. They
prohibit a variety of practices that restrain trade; [Examples are illegal practices of price-
fixing, corporate mergers likely to reduce the competitive vigor of particular markets, and
predatory acts designed to achieve or maintain monopoly power].

Monopoly - A market structure characterized by a single seller, selling a unique product

in the market. In a monopoly market, the seller faces no competition, as he is the sole seller
of goods with no close substitute

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Perfect Competition- Perfect competition is a market system characterized by many

different buyers and sellers. In the classic theoretical definition of perfect competition,
there is an infinite number of buyers and sellers. With many market players, it is
impossible for any one participant to alter the prevailing price in the market. If they
attempt to do so, buyers and sellers have infinite alternatives to pursue.

Oligopoly- An oligopoly is similar in many ways to a monopoly. The primary difference

is that rather than having only one producer of a good or service, there are a handful of
producers, or at least a handful of producers that make up a dominant majority of the
production in the market system. While oligopolists do not have the same pricing power as
monopolists, it is possible, without diligent government regulation that oligopolists will
collude with one another to set prices in the same way a monopolist would.

Monopolistic competition – A type of market system combining elements of a

monopoly and perfect competition. Like a perfectly competitive market system, there are
numerous competitors in the market. The difference is that each competitor is sufficiently
differentiated from the others that some can charge greater prices than a perfectly
competitive firm. An example of monopolistic competition is the market/industry of music.
While there are many artists, each artist is different and is not perfectly substitutable with
another artist.

CRITERIA PERFECT MONOPOLISTIC OLIGOPOLY MONOPOLY

No of Firms Very large Many Few One
Type of product Standard Differentiated Std / Diff Unique
Control of Price None Slight Considerable Considerable, if
not regulated
Entry / Exit Free Free Barriers Barriers
Example Agri product Restaurants, Retail Automobiles, Patented drugs,
like wheat, stores etc. airlines, Baby Electric goods
soybeans etc. foods etc. etc.

Bid Rigging- Agreement between enterprise or person engaged in similar production or

trading of goods or provisions of service which has the effect of eliminating or reduce the
competition for bid.

3. Introduction to Competition Act, 2002

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of
India. These Articles are a part of the Directive Principles of State Policy. Based on the
Directive Principles, the first Indian competition law was enacted in 1969 and was labelled
the MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 (MRTP Act).

Articles 38 and 39 of the Constitution of India mandate, inter alia, that the State shall strive

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Notes on Competition Act, 2002

to promote the welfare of the people by securing and protecting as effectively, as it may, a
social order in which justice – social, economic and political – shall inform all the
institutions of the national life, and the State shall, in particular, direct its policy towards
securing:

a. the ownership and control of material resources of the community are

so distributed as best to sub serve the common good; and
b. the operation of the economic system does not result in the concentration
of wealth and means of production to the common detriment.
One of the main goals of the MRTP Act was to encourage fair play and fair deal in the
market besides promoting healthy competition. They seek to afford protection and support
consuming public by reducing Monopolistic, Restrictive and Unfair Trade Practices from
the market.

Globalization has the fundamental attributes of relying significantly on the market forces,
ensuring competition and keeping market functioning efficiently.

During the Pre-1991 reforms period, India’s planned strategic and economic development
stressed the broad policy objectives, which are as follows:

1. The development of an industrial base with a view to achieving self-reliance; and

2. The promotion of social justice.

The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws and hence focus was shifted from curbing
monopolies to promoting competition.

In October 1999, the Central Government appointed high-level committee under the
chairmanship of Mr. S. V. S. Raghavan (popularly known as Raghavan Committee). The
aim of the committee was to formulate the competition law in tune with economic reforms
and international development. The committee presented its report on May 2000. The draft
of the competition law was presented on November 2000. After certain amendments, the
Parliament passed the new law, called Competition Act 2002. The Act came into force on
January 2003.

Subsequent developments in the Act

1. The Act was amended as Competition Amendment Act, 2007 and became fully
operational from 1 June 2011.
2. The provisions relating to competition advocacy was notified on 2003.
3. The provisions regulating anti-competitive agreements and abuse of dominance were
notified with effect from 20 May 2009.
4. The provisions regulating mergers and acquisitions were notified on June 2011.

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Notes on Competition Act, 2002

The Competition Commission of India (CCI) (which administers the law) is still functional.
The Competition Appellate Tribunal (COMPAT) was operational. However, from the
effective date (26 May 2017), COMPAT cease to exist and NCLAT started operating as
the appellate body under the Competition Act, 2002 (Competition Act). In addition, like its
predecessor, the NCLAT would also be relevant authority to seek a compensation under
the Competition Act.

The Framework of Competition Act 2002 has essentially four compartments:

1. Anti- Competitive Agreements [ Section 3]

2. Abuse of Dominance [ Section 4]
3. Combination Regulation [ Section 5 & 6]
4. Competition Advocacy [ Section 49]

DIFFERENCE BETWEEN MRTP ACT AND COMPETITION ACT

BASIS MRTP COMPETITION ACT

Base It is based upon Pre- Liberalization.
Focus Curbing Monopolies.
Registration of Agreements Compulsory registration of
agreements relating to restrictive
trade practices.
Dominance Under MRTP, Dominance itself is bad.
It is based upon Post-
Liberalization.
Promoting Fair Competition.
It does not provide for
the registration of the
agreement.
Under the Competition Act,
Dominance per se is not but
only abuse of dominance is
considered bad.

Provisions for combination Does not contain provisions of Competition Act contains
combination. provisions of combination.
Penalties No Penalties for offences. Penalties for offences.
Principles Rule of law approach. Rule of reason approach.
Competition Advocacy No competition advocacy role under the CCI has competition advocacy
MRTP. Role.
Exclusion A blanket exclusion of Exclusion of intellectual
intellectual property rights. property rights, but
unreasonable restriction
covered.
Provision for Unfair Provisions were there in the MRTP Not included in the Competition
Trade practices Act (Section 36A). Act but now it is under the
purview of Consumer
Protection Act.

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Notes on Competition Act, 2002

The Competition Act, 2002 was enacted to fill the gaps left open by the MRTP Act —
certain offending trade practices such as:

1. Abuse of dominance;
2. Cartels;
3. Bid-rigging;
4. Collusive agreements;
5. Price-fixing;
6. Predatory pricing etc.

4. Salient Features of the Competition Act, 2002

The objectives of the Act

a. Facilitate & foster fair competition in the market.

b. Establish a commission to prevent practices having an adverse effect on competition in
the market.
c. Promote and sustain competition in markets.
d. Protect the interests of consumers.
e. Ensure freedom of trade in the Indian markets.

Duties of the Commission [Sec 18]

a. To eliminate Practices that have an adverse effect on competition.

b. To promote & sustain competition.
c. To protect the interests of consumers.
d. To ensure freedom of trade carried on by other participants, in markets in India.

Scope of the Act

1. Enquire into Anti-Competitive Agreements [Section - 3].

2. Enquire Abuse of Dominant Position [Section – 4].
3. Regulation of Combination & Mergers [Section – 5 to 6].
4. Undertake Competition Advocacy [Section – 49].

Exclusion from the applicability of the Act

1. Those right protected as intellectual property rights.

2. Agreement exclusively for exports.

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Notes on Competition Act, 2002

5. Anti-competitive agreements [Section 3]

Any agreement for goods or services which has an appreciable adverse effect on competition
in India is prohibited. These kinds of agreements are known as anti-competitive agreements.
An anti-competitive agreement entered into shall be void.

Section 3 of the Act states that no enterprise shall enter into:

1. Any agreement with respect to production, supply distribution, storage, acquisition

or
control of goods/provision of services which is anti-competitive is prohibited and void.
2. Such agreements must cause or be likely to cause an appreciable adverse effect on
competition (AAEC) in a relevant market in India.
3. As per Sec 19 (4) of the Competition Act, 2002, while determining whether an
agreement has an appreciable adverse effect on competition under section 3 (vertical
and horizontal agreements), have due regard to all or any of the following factors,
namely:—
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of services; or
(f) promotion of technical, scientific and economic development by means of
production or distribution of goods or provision of services.

There are two kinds of agreements

1. Horizontal agreements ( → )
2. Vertical agreements. ( )

I. Horizontal agreements (see Table 1)

They are Agreements between parties in the same line of production. Example -
agreement between manufactures, agreement between distributors.

Horizontal agreements are presumed to have AAEC if they:

• Directly or indirectly determine purchase or sale prices.
• Limit or control output, technical development, services etc.
• Share or divide markets.
• Indulge in rigging or collusive bidding.

Cartels prohibited [(Use the same definition Cartel and Horizontal Agreement) + Add]
i. Agree to limit; or
ii. Control or attempt to control production, distribution, sale or price.

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Types of Horizontal Agreements

1) Price Fixing Agreement

a) Agreement to raise or stabilize the price.

b) Establish uniform discount or eliminate the discount.
c) Set uniform price as a starting point for negotiation.
d) Discontinue free service.
e) Impose mandatorily surcharge.
f) Restrict price advertising.

2) Facilitating practices

This category includes agreements that make it easier for competitors to collectively
exercise market power, and to avoid competing with each other. Eg- Agreements to share
information Sellers agree either to meet any price, the buyer is able to obtain from another
supplier or release the buyer to purchase from another seller.

3) Quiet Life Agreements

They are agreements that restrict competition by free competitors form some significant
aspect of the competition. Eg- Agreement not to advertise agreements to limit business
hours.

4) Group Boycotts

These are agreements among competitors not to deal with other competitors, suppliers,
distributors or retailers.

5) Trade Associations
Trade associations play a very vital role in the market as they hold valuable information
regarding the relevant industry like progress of the industry, related news to that, market
trends, developments in the industry, research materials etc. It also give a relevant
opportunity to the members because of its invaluable networking opportunities. It is also
considered as an important platform to discuss the trends in the market place, any
legislation or policy proposed by the government. So it is definite that business can reap
well by joining relevant trade associations. Thereby, collusion of trade associations can
tend to make agreements which is anti-competitive in nature.

II. Vertical Agreements (see Table 1)

Vertical agreement are those agreements between non-competition undertakings

operating at different levels of manufacturing and distribution process.

Eg- The agreement between manufacturers of components and manufactures of products,

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Notes on Competition Act, 2002

between producers and whole- sellers or between producers, whole sellers and retailers.

They are prohibited if such agreements cause or are likely to cause AAEC.

Types of Vertical Agreements

1. Tie-in arrangement

Any agreement between manufacturer and distributor not to sell manufactures product at
or above a price floor at or below a price ceiling. It requires a purchaser of goods to
purchase some other goods as a condition of such purchase. E.g. – Selling ear phones of a
particular company with mobile phone of the same company.

2. Exclusive supply arrangement

An agreement restricting the purchase in course of trade from acquiring the goods of trade
from acquiring the goods of any other seller i.e. restricting a purchaser in course of his
trade from dealing in any goods other than those of the seller. For e.g. one manufacturer
enters in to an agreement with group of distributors to buy only his manufactured
products.

3. Exclusive distribution arrangement

Any agreement to limit or restrict the output or supply of any goods to ant market or area
(e.g. limiting/restricting supply of goods or allocate any area or market for the sale of
goods).

4. Refusal to deal

Any agreement which restrict or is likely to restrict by any method any person/classes of
persons to whom goods are sold or from whom goods are brought Restricting by any
method, any person/classes of persons to whom goods are sold. For e.g. – Let’s assume
ABC manufacturer produces raw material and finishing product of certain product. And
XYZ manufacturer produce the certain product using the raw material of ABC
manufacturer. Now if ABC manufacturer enters in to an agreement with the distributors to
refuse the deals between XYZ manufacturers who uses the raw material of the ABC
manufacturer to produce a particular product as produced by the ABC manufacturer then
it can be considered as refusal to deal agreement.

5. Resale price maintenance

Any agreement to sell goods on condition that the price to be charged on the resale by the
purchaser shall be stipulated by the seller unless it is clearly stated that prices lower than those
prices may be charged.

Selling goods with the condition on resale at stipulated prices.

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Notes on Competition Act, 2002

Chain of Production (Table No:1)

Supplier Supplier Supplier

Manufacturer
Manufacturer Manufacturer
Manufacturer Manufacturer

Distributor Distributor Distributor

Retailer Retailer Retailer

Vertical Agreements Horizontal Agreements

Horizontal vs vertical agreements

• Horizontal agreements are presumed to have AAEC. Vertical agreements, the onus /
Burden of proving AAEC lies on the CCI.

• The rules applies for Horizontal Agreement is Per Say rule whereas in the Vertical
Agreement it is Rule of Reason.

• Joint venture agreements are an exception to horizontal agreements, provided such

agreements increases efficiency in production, supply, distribution, storage
acquisition or control of goods or provisions of services.

• Export agreements and agreements to protect intellectual property are allowed

to have protective clauses.

Anti-competitive Agreement under Different laws of Different

Country

USA European Union Australia Canada

Section 1 Of the Article 81, Treaty of Part 4 of Trade Practice Section 45 Anti-Trust
Sharman Act Rome Act of 1974 law

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Inquiry by the Commission -

(Step -1) – As per the act the commission may inquire when there is alleged contravention of
the provision contained in:
i. Section 3(1) of the Act – Any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services by enterprise or
association of enterprises or person or association of persons which causes or is likely
to cause an appreciable adverse effect on competition within India.
ii. Section 4(1) of the Act – Abuse of dominant position.

Inquiry [under section 19] (Step -2)

In the case of any agreement mentioned under section 3, comes before the CCI shall
conduct an inquiry and adjudicate on whether the agreement has any adverse effect on
competition based on the following facts:

1. Whether there is a creation of any barrier to new entrants into the market.
2. Whether the agreement drives out existing competitors in the markets.
3. Whether there is any foreclosure of competition by hindering the entry into the market.
4. Whether there is any accrual of benefits to the consumers.
5. Whether the agreement can produce any improvement in production,
distribution or supply of goods.
6. Whether the agreement promotes technical scientific or economic development.

Orders by Commission after inquiry into agreements [Section 27] (Step-3)

If the commission finds that the agreement under section 3 is Anti-competitive, it can pass the
following orders:

1. Direct any enterprise or person to engage in such agreement to discontinue such

agreement.
2. Impose penalty not more than 10% of the average turnover of the last 3 financial years.
3. Modified the agreement to such extent and manner specified by the CCI.
4. Order for payment of the cost.
5. Any other orders as the CCI may deem fit.

The exception to Section 3

Any agreement protecting rights conferred under:

1. the Copyright Act 1957 (Amend 1999);

2. the Patents Act, 1970 (Amendment 2005);
3. the Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999
4. the Designs Act, 2000

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5. the Geographical Indication of Goods (Registration and Protection) Act, 1999.

6. the Semi-conductor Integrated Circuits Layout-Design Act, 2000.

6. Abuse of Dominant position (Section 4)

It means a position of strength, enjoyed by an enterprise, in the relevant market in India,
which enables it to:
• Operate independently of competitive forces prevailing in the relevant market or,
• affects its competitors or consumers of the relevant market in its favor.

Meaning of Relevant Market sec 2 (r)

In order to ascertain whether an enterprise has a dominant position, it is to be determined

on what the relevant market is. There are two kinds of the relevant market:

a. Relevant product Market sec 2 (t)

On the demand side, relevant product market includes all the close substitutes
to which the consumer will shift to if the price of the product increases.
On the supply side, relevant product market includes all the producers who can
produce substitutes with the existing production facility.

b. Relevant Geographical Market sec 2 (s)

The geographic dimension within which competition can take place in the
relevant market can be local, national, international or global depending upon
the product. Here the pattern of consumption, transportation are important
factors.

Enterprise or group shall not abuse its dominant position. Agreement by enterprise
or group abusing its dominant position is prohibited.

An Enterprise or group is said to have abused its dominant position if it directly or indirectly:
• Imposes unfair condition or price;
• Predatory pricing;
• Limit or restrict :
• Production of goods or provision of services or market;
• Technical or scientific development relating to goods or services;
• Creating barriers to entry;
• Denying of market access;
• Uses its dominant position in one market to gain an advantage in another
market.

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Notes on Competition Act, 2002

Where there is an abuse of dominant position then the CCI will issue the following
orders Under Section 27 (Orders by Commission after inquiry into agreements or
abuse of dominant position) and Section 28 (Division of enterprise enjoying
dominant position) of the Act.

Criteria Considered by CCI while determining Abuse of Dominant Position are as follows:

1. Market Share.
2. Size & importance of competitors.
3. Economic power of the enterprise including commercial advantage.
4. Vertical integration of the enterprise.
5. Dependence of consumers.
6. Monopoly enjoyed by means of being a Government company or PSU.
7. Counter veiling buying power.
8. Market Structure.
9. Social Obligation & Social Cost.
10. Relative advantage by way of contribution to economic development.
11. Any other relevant factor which shall be deem fit to be considered by CCI.

Orders by Commission after inquiry into agreements [Section 27]

If the commission finds that the Act constitutes Abuse of Dominant position, it can pass the
following orders:

1. Direct any enterprise or person to engage in such agreement to discontinue

such agreement;
2. Impose penalty not more than 10% of the average turnover of the last 3 financial years;
3. Modified the agreement to such extent and manner specified by CCI;
4. Order for payment of the cost;
5. Any other orders as the CCI may deem fit.

If the commission finds any Division of Enterprise enjoying dominant position (Section
28)

Then the CCI can direct the Enterprise to divide in such manner that the Enterprise does
not Abuse its dominant position for this purpose the CCI Can Provide for:

1. Transfer of any existing liability or property;

2. Adjustment or discharge of any Contract;
3. Any other orders as the CCI may deem fit.

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Notes on Competition Act, 2002

7. Regulation of Combination (Section 5 to 6)

What is Combination?

The Acquisition of one or more enterprises by way of merger or amalgamation or control

over enterprise is regarded as a combination.

A Combination is an acquisition of one or more enterprises by one or more persons,

merger or amalgamation of enterprises, if it meets the prescribed monetary thresholds
and involves:

a. Any acquisition of control, shares, voting rights or assets of any enterprise;

b. Any acquisition of control by a person over an enterprise, where such a
person already has direct/indirect control over another enterprise in a
similar business;
c. Any merger or amalgamation of enterprises.

Combinations as per the defined monetary thresholds require filing and prior approval of
the CCI before they can be made effective. CCI has powers to investigate combinations
and modify/reject them.

Separate provisions exist in case of acquisitions pursuant to loan/ investment

agreements of public financial institutions, FII, banks or VC funds.

The CCI must be notified within 30 days of the ‘trigger event’ of such combinations.
Entering into a combination which causes or is likely to cause an appreciable adverse effect on
competition within the relevant market in India is prohibited and such combination shall be
void.

Trigger Event
d. Board approval of the enterprises in case of a proposed merger/ amalgamation; or
e. Execution of any agreement or ‘other document’ in case of a proposed acquisition.

Exemption of Notification to CCI [Sec 54 (a)]

Under the Combination Regulations 2009, decision was taken for the amalgamation,
mergers, acquisition prior to 1st June, 2011, have been exempted from notifying to CCI.

The exemption are as follows:

• an enterprise, whose control, shares, voting rights or assets are being acquired has

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Notes on Competition Act, 2002

either assets of the value of not more than INR 250 crore in India or turnover of not
more than INR 750 crore in India from the provisions of Section 5 of the said Act
for a period of five years as per the notification of Ministry of Corporate Affairs
(notification S.0.48 (E) dated 4th March 2011).
• a banking company in respect of which the Central Government has issued a
notification ( Ministry of Corporate Affairs notification S.0.93 (E) dated 8th
January, 2013 ) under Section 45 of the Banking Regulation Act, 1949, from the
application of the provisions of Sections 5 and 6 of the Act for a period of five
years.

When acquisition, mergers or amalgamation would constitute a combination:

When in individual

f. Either the combined assets of the enterprises would value more than (INR)
1,500 crores in India or the combined turnover of the enterprise is more than
(INR) 4,500 crores in India; or
g. In case either or both of the enterprises have assets/turnover outside India also,
then the combined assets of the enterprises value more than US$ 750 millions,
including at least (INR) 750 crores in India, or turnover is more than US$ 2250
millions, including at least (INR) 2,250 crores in India.

The Value of Asset & Turnover is based on Book Value

When in Group
• The group to which the enterprise whose control, shares, assets or voting rights are
being acquired would belong after the acquisition or the group to which the
enterprise remaining the merger or amalgamation would belong has either assets of
value of more than (INR) 6000 crores in India or turnover more than (INR) 18000
crores in India.
• Where the group has presence in India as well as outside India then the group has
assets more than US$ 3 billion including at least INR 750 crores in India or
turnover more than US$ 9 billion including at least INR 2250 crores in India.
The term Group is as explained in the Act. Two enterprises belong to a “Group” if one is in
position to exercise at least 26 per cent voting rights or appoint at least 50 per cent of the

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directors or controls the management or affairs in the other.

For better understanding the following table is provided:

APPLICABLE ASSETS TURNOVER

TO
In India Individual Rs.1,500 cr Rs.4,500 cr.
Group Rs.6,000 cr. Rs.18,000 cr.
In India and ASSETS TURNOVER
outside
Total Minimum Total
Indian Minimum
Component
Indian

Component
Individual $ 750 m Rs.750 cr $ 2,250 m
parties Rs.2,250 cr
Group $ 3 bn. Rs.750 cr. $ 9 bn.
Rs.2,250 cr

8. Regulation of Combination (Section 6)

Any combination which has an adverse effect on the competition can be declared void by the
CCI.

8.1 Procedure to be followed for the combination

Any person or enterprise proposes to enter into combination shall give notice to
Competition Commission in prescribed form within 30 days to (Sec 6) :

• Approval of the Board of Directors of proposal relating to merger or amalgamation;

• Execution of any agreement relating to the acquisition or acquiring control.

No combination shall come into effect until 210 days from the day on which notice has
been given to Commission or order has been passed.

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8.2 Procedure for Investigation into Combination by CCI

Step 1

• The CCI will issue a notice to the parties to the combination to reply within
30days of such combination for not declaring it as void.
• The CCI will direct the Director-General to submit a report on combination, on
receipt of such report.
• If the CCI is satisfied that the combination has an adverse effect on competition,
it can pass the following order.

Step 2 (Section 31)

• It can direct the combination shall not be in effect.

• If the adverse effect can be rectified by suitable modification the CCI will order
such modification should be performed by the parties. (In this case the parties shall
submit the modified combination within 30 Working days if the CCI agrees with
the modification, it can accept the combination).

Step 3

If the CCI is not satisfied by the modification effected by the parties, it can grant 30 Days
further to the party to accept that modification proposed by the Commission.

Step 4

If the part still falls to accept the modification the Commission can declare the
combination as void as well as it can impose such penalties mentioned in the Act (1 %
of Turnover).

9. Competition Commission of India

The Competition Commission of India (CCI) is a statutory body of the Government of India
responsible for enforcing the Competition Act, 2002 throughout India and to prevent activities
that have an appreciable adverse effect on competition in India.

It was established on 14th October 2003. The main aim of the CCI is to implement the modern
competition laws and philosophy of the Competition Act, 2002. It ensures that have a negative
impact on healthy competition. This is because healthy competition is good for the consumer of a
market.

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Notes on Competition Act, 2002

Monopolistic competition or other unfair practices have an adverse effect on economic growth.
CCI consist of a Chairperson and 6 Member appointed by Central Government. It is a quasi-
judicial body to hear and dispose of matter.

The headquarters of the CCI is in the Delhi.

The Website of CCI is cci.gov.in.
The Chapter III of the Competition Act, 2002 states about Competition Commission of India.

Objectives of the CCI

The following are the Objective of the Competition Commission of India (CCI):

Prevent the policies & practices which have an adverse effect.

Promote and help sustain healthy competition in market.

Look after the interest of consumer,

Create Awareness and advocate for Competition Practices.

Ensure freedom of trade in the market.

Composition of CCI
The CCI shall composite of maximum 7 members including chairperson.

The various division in CCI :

Ecomomic Division

Combination Division

Anti-Trust Division

Legal Division

Investigation Division

Capacity Building Division

Secretariat

DG Office

Powers of CCI

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Notes on Competition Act, 2002

The CCI can exercise power subject to the Act and the Rules. It should be guided
by the principles of natural justice and provisions of the Act.

1. The Commission shall have the powers to regulate its own procedure. [Section 36 (1)]
2. Commission has a power of Civil Court [Section 36 (2)]
a) Summoning & enforcing the attendance of any person on oath;
b) Requiring the discovery and production of documents;
c) Receiving evidence on affidavit;
d) Issuing commissions for the examination of witnesses or documents;
e) Requisitioning any public record or document or copy of such record or
document form any office;
f) Power to conduct inquiry.
3. The commission may call the experts on respective field i.e. economics,
commerce, accountancy which may be necessary [ Section 36 (3)]
4. Direct any person [ Section 36 (4)]
i. To produce such books, accounts or other documents as required for the
purpose of this Act.
ii. To furnish information about the trade or such other information in procession
of such person as required for the purpose of this Act.
5. Issue cease and desist orders.
6. Impose fines and penalties (Section 27).
7. Declare agreement having Appreciable adverse effect on competition (AAEC) as void.
8. Pass orders for modifying the agreement.

In case of abuse of dominance

9. Order for division of dominant enterprise (Section 28).

In the case of combinations: (Section 31)

10. Approve Combination.

11. Approve with modifications.
12. Direct that combinations shall not take effect.
13. To order demerger.

Other Powers

14. In the case of companies, individuals may also be held liable if consent,
connivance or neglect is proved.
15. CCI has extra-territorial reach.
16. To order the cost for frivolous complaint.

Functions of CCI

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Notes on Competition Act, 2002

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 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 sectorial regulators to
ensure smooth alignment of sectorial regulatory laws in tandem with the
competition law.
5. Effectively carry out competition advocacy and spread the information on the
benefits of competition among all stakeholders to establish and nurture competition
culture in theIndian economy.

10. Competition Advocacy (Section 49)

• The Central Government may obtain opinion of the CCI on the possible effect
of the policy on the competition while formulating competition policy.
• On receipt of deference, the Commission is required to give its
opinion to theCentral Government within 60days.
• The role of the Commission is advisory.
• Opinion given by Commission is not binding upon the Central Government.
• The Commission has also been assigned the role to take following suitable
measured for:
o Promotion of competition advocacy.
o Creating awareness about the fair competition.
o Imparting Training about competition issue.

11. Appellate Tribunal (Section- 53A & Section 53B)

• The Central Government by notification can establish an Appellate Tribunal for the
purpose of this Act.
• National Company Law Appellate Tribunal shall be the Appellate Tribunal.
• Any person aggrieved by the order of the Commission may appeal to Appellate
Tribunal within 60days.
• The Appellate Tribunal may accept the petition after 60days if it is satisfied that
there was sufficient cause for not filing an appeal within the specified time.
• Appellate Tribunal may confirm/modify/setting aside the direction, decision or

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Notes on Competition Act, 2002

order of the Commission after giving an opportunity of being heard to both the
parties.
• Appellate Tribunal shall send a copy of the order to the parties to the appeal.
• Appellate Tribunal shall dispose of the appeal within six months.

12. Appeal to Supreme Court (Section- 53T)

• The Central Government or any State Government or the Commission or any

statutory authority or any local authority or any enterprise or any person
aggrieved by any decision or order of the Appellate Tribunal may file an appeal
to the Supreme Court within sixty days from the date of communication of the
decision or order of the Appellate Tribunal to them;
• The Supreme Court may if it is satisfied that the applicant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed
after the expiry of the said period of sixty days.

13. Major changes made by the Competition (Amendment) Act, 2007

The Competition (Amendment) Act, 2007 was passed by the Parliament in September 2007
and received Presidential assent on 24th September, 2007. The amendment brought
significant changes in the then existing regulatory infrastructure established under the
Competition Act.
The major changes are:

1. Notification of all “combinations” i.e. mergers, acquisitions and amalgamations to

CCI made compulsory.

2. CCI to be an expert body which will function as a market regulator for preventing
anti-competitive practices in the country and would also have advisory role and
advocacy functions.

3. CCI to function as a collegium and its decisions would be based on a simple

majority. Omits power of CCI to award compensation to parties against proven
anti-competitive practices indulged in by enterprises.

4. Establishment of a Competition Appellate Tribunal with a three-member quasi-

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Notes on Competition Act, 2002

judicial body to be headed by a retired or serving Judge of the Supreme Court or

Chief Justice of a High Court to hear and dispose of appeals against any direction
issued or decision made or order passed by the CCI. (Omitted vide Finance Act,
2017)

5. Competition Appellate Tribunal to also adjudicate upon claims of compensation and

to pass orders for the recovery of compensation from any enterprise for any loss or
damage suffered as a result of any contravention of the provisions of the
Competition Act, 2002. (vide Finance Act, 2017, the Competition Appellate
Tribunal is now replaced by National Company Law Appellate Tribunal)

6. Orders of Appellate Tribunal can be executed as a decree of a Civil Court.

7. The appeal against the orders of the Competition Appellate Tribunal to the
Supreme Court (vide Finance Act, 2017, the Competition Appellate Tribunal is
now replaced by National Company Law Appellate Tribunal)

8. New Powers upon sectoral regulators to make Suo moto reference to CCI on
competition issues in addition to the earlier provision of making a reference on a
request made by any party in a dispute before it. Also, similar powers conferred
upon CCI.

9. Allows continuation of the MRTPC till two years after the constitution of CCI for
trying pending cases under the MRTP Act and to dissolve the same thereafter. With
the enforcement of sections 3 and 4 of Competition Act, w.e.f. 20th May 2009, there
appeared no valid reason to keep MRTPC functional any more. More so, in terms
of Section 66 of the Competition Act, MRTPC has to be dissolved within a period
of two years of the constitution of the CCI and the MRTP Act repealed.

The Government has now decided to remove this anomaly and section 66 has been notified
from 1st September 2009. Consequently, the MRTPC will cease to exist after a “sunset
period of two years i.e. on 31st August 2011.

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Notes on Competition Act, 2002

14. Frequently Asked Questions

1. WHAT IS MEANT BY UNFAIR COMPETITION?

Unfair competition means the adoption of practices such as collusive price-

fixing, deliberate reduction in output in order to increase prices, creation of
barriers to entry, allocation of markets, tie-in sales, predatory pricing,
discriminatory pricing, etc.

2. WHAT ARE THE FUNCTIONS OF CCI?

CCI shall prohibit anti-competitive agreements and abuse of dominance,

and also regulate combinations (mergers or amalgamations or acquisitions)
through a process of inquiry/investigation.

It shall give an opinion on competition issues on a reference received from an

authority established under any law (statutory authority)/ Central
Government/ a State Government. CCI is also mandated to undertake
competition advocacy, create public awareness and impart training on
competition issues.

3. WHO CAN MAKE A REFERENCE FOR AN INQUIRY?

The Central Government or a State Government or an authority established

under any law may make a reference for an inquiry.

4. WHAT WILL THE COMMISSION DO AFTER INVESTIGATION?

After receipt of the investigation report from the Director-General, the

Commission may forward it to the concerned parties. If the investigation is on
a reference from a statutory authority, the forwarding of the report to the
concerned authority is mandatory.

If the report of the DG does not find any contravention of the Act, the
Commission shall seek objections from the concerned parties. After
considering the objections received, if any, the Commission may accept the
report of the DG, or require further investigation to be made by the DG or
make inquiries itself. In the conclusion of the above broad processes, the
Commission shall determine whether it is a case of an anti-competitive
agreement or abuse of dominant position or both and after hearing the
concerned parties and pass appropriate orders.

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