Competition Act Overview

COMPETITION ACT, 2002
AN OVERVIEW
Dr. Sushila
Assistant-Professor (Law)
&
Director
Centre for Study of Consumer Law and
Policy
National Law University Delhi

New Delhi
NATIONAL LAW UNIVERSITY DELHI 1
Brief History and Present Status
 The Monopolies and Restrictive Trade Practices Act, 1969.
 Comprehensive economic reforms since 1991 carried the economy to a

new trajectory.
 Policy approach shifted from controlling monopolies to promoting

competition.
 Raghavan Committee recommended repeal of MRTP Act and enactment of

a modern Competition Act in sync with post-1991 economic philosophy.

Brief History and Present Status contd.
 The Competition Act, 2002 was passed by Parliament in December, 2002

and received the assent of the President of India on January 13, 2003,
thereby becoming law of the land from that date
 The Act establishes the Competition Commission to prevent practices

having adverse effect on competition.
 Due to challenge to the validity of the Act, the substantive provisions of the
Act were notified w.e.f 20.05.2009 (relating to prohibition of anti-competitive
agreements and abuse of dominant position) and w.e.f 01.6.2011 (relating
to regulation of combinations). Amended in 2007, 2009 and 2017.

COMPETITION ACT V. MRTP ACT
Competition Act, 2002 MRTP Act, 1969
Based on liberalized regime Based on command & control regime
Competition concepts expressly defined, Competition concepts not expressly

major role for economic analysis defined
Provides for regulation of combinations No regulation of combinations

(M&As)
Provides for advocacy Had no advocacy role
Power to impose penalty No power to impose penalty, only cease

and desist order could be issued
Statutory authority can seek CCI’s No provisions for statutory authorities

opinion to seek opinion
Extra - territorial jurisdiction

Objectives of the Competition Act, 2002
 To prevent practices having adverse effect on

competition;
 To promote and sustain competition in markets;
 To protect the interests of consumers; and
 To ensure freedom of trade

Functions of CCI
◊ Enforcement functions [Sections 3,4,5 & 6]
• Prohibition of Anti - Competitive Agreements (Section 3)

• Prohibition of Abuse of Dominant Position (Sec 4)
• Regulation of Combinations (Sections 5 & 6)
◊ Advisory functions [Sections 49(1), 21]
◊ Advocacy functions [Section 49(3)]


Structure of CCI

WHO CAN APPROACH CCI?
 Any person, consumer or their association or trade association
 Reference by Central/ State Governments or statutory

authority
 Suo moto
 In case of combinations - mandatory notification by person/

enterprise proposing to enter the combination

Enforcement functions
◊ Enforcement functions [Sections 3,4,5 & 6]
• Prohibition of Anti - Competitive Agreements (Section 3)
• Prohibition of Abuse of Dominant Position (Section 4)
• Regulation of Combinations (Sections 5 and 6)

Anti-competitive Agreements
Cartels
 Enterprises/ persons agree to cooperate to limit/ control price, distribution,

production, sale etc. (e.g. price agreements, limiting production)
Bid rigging
 Bidders agree to manipulate the process of bidding or reduce/ eliminate
competition for bids (bid for agreed prices/ quantities in procurement of
goods/ services)
Practices
 Enterprises/ persons follow practices impacting competition adversely
Vertical agreements
 Exclusive supply/ distribution agreements, Tie-in arrangements, Refusal to
deal etc.

Abuse of Dominance (AoD)
 What is Dominance?
 Ability of an enterprise to behave independently of the market forces
OR
 Strength of an enterprise to affect its competitors or consumers in its

favor
 What is abuse of dominance?

 When an enterprise uses its dominant position in the market in an
exploitative or exclusionary manner
Not dominance, but its abuse is prohibited

Regulations of Combinations (Ms & As)
• Combination includes: merger and amalgamation and

acquisition of control, shares, voting rights or assets
• High thresholds
• Mandatory pre-notification before combination
• CCI must decide in 210 days, else combination deemed approved

Advisory Functions
• The Central Government/ State Government may, in formulating a

policy on competition including review of laws related to competition
or any other matter, make a reference to CCI for its opinion on
possible effects of such policy on competition [Section 49(1)]
• CCI to give its opinion within sixty days of such reference
• The opinion of CCI not binding upon the Government
• The Commission shall give its opinion on a reference made by

statutory authority [section 21]

Advocacy Functions
• CCI is mandated to take suitable measures:
– to promote competition advocacy
– to create public awareness
– to impart training about competition issues
• Awareness amongst stakeholders will promote compliance, less

intervention
• Evolving complex economic law
• Focus on Advocacy with Central/State Governments, regulators and

statutory authorities to promote pro-competition laws, polices, practices.

Powers of CCI
For contraventions, CCI may pass following orders:

• Cease and desist order
• Penalty upto 10% of average turnover for last three preceding financial
years
• In case of cartels, penalty upto 10% of turnover or three times of profit,
whichever is higher.
• Agreements having AAEC void
• Modification of agreements
• In case of dominance position-order for division of enterprise
• Power to issue interim orders
• In case of combination-can be approved, approved with modification or
refused approval.

Hierarchy of Appellate Process
 Specified orders of CCI are appealable before National Company Law Appellate
Tribunal (NCLAT)
 Further appeal is provided to the Supreme Court against the decision or orders of
NCLAT.
 Hierarchy of appeals
• Supreme Court
• NCLAT
• CCI
 Exclusion of jurisdiction of civil courts
 Judicial Review
• Article 226 of the Constitution of India
• Article 32 for the Constitution of India

CASE STUDIES

CCI’s intervention in various sectors: Overview and impact
Real Estate
Belaire Owner’s Association v. DLF Limited Case No. 19 of 2010 and other such cases
The Commission found the various clauses in the Flat Buyers Agreement executed by M/s
DLF to be unfair and in abuse of dominant position. The following clauses were found to be
in contravention of the Act:
 Unilateral changes in agreement and supersession of terms by builder without any right to
the allottees
 Builder’s right to change the layout plan without consent of allottees.
 Discretion of builder to change inter se areas for different uses like residential, commercial
etc. without even informing allottees.
 Preferential location charges paid up-front, but when the allottee does not get the location,
he only gets the refund/adjustment of amount at the time of last instalment, that too
without any interest etc.
• Accordingly, the Commission issued cease and desist order, directed modification of terms
of agreement and imposed a penalty of Rs. 630 crores upon DLF.

Pharmaceuticals
Varca Druggist & Chemist & Ors. v. Chemists and Druggists Association, Goa, MRTP C-
127/2009/DGIR4/28 and other such cases
The Commission directed the drug associations to file undertaking to the effect that guidelines and
MoU with respect to:
• Non-appointment of a stockist or wholesaler from amongst the non-members of the
associations;
• Requirement of No Objection Certificate from the associations for appointment of stockist or
wholesaler;
• Limit on number of stockists of pharmaceutical companies;
• The clauses mandating compulsory PIS approval from the associations for introduction of
drugs in the territory of Goa; and
• Requiring routing of bids for supply of drugs to the Government and Hospitals through
authorized stocksit only
Have been done away with.
The Commission apart from issuing a cease and desist order imposed penalty upon the drug
associations for indulging in such anti-competitive conduct.

Infrastructure
Builders Association of India v. Cement Manufacturers' Association & Ors., Case

No. 29 of 2010 (the Cement Cartel case) (20.06.2012)
• The Commission found cement manufacturers in violation of the provisions of the

Competition Act, 2002 which deals with anti-competitive agreements including
cartels. The order was passed pursuant to investigation carried out by the Director
General upon information filed by Builders Association of India. The Commission
imposed penalty on 11 cement manufacturers named in the information @0.5
times of their profit for the year 2009-10 and 2010-11. The penalty amount so
worked out amounted to more than Rs. Six thousand crores. The Commission also
imposed penalty on the Cement Manufacturers Association.

• While imposing penalty, the Commission considered the parallel and

coordinated behaviour of cement companies on price, dispatch and
supplies in the market. The Commission found that the cement
companies have not utilised the available capacity so as to reduce
supplies and raise prices in times of higher demand. The Commission
also observed that the act of these cement companies in limiting and
controlling supplies in the market and determining prices through an
anti-competitive agreement was not only detrimental to the cause of the
consumers but also to the whole economy since cement is a crucial input
in construction and infrastructure industry vital for economic
development of the country.

Film Industry
FICCI – Multiplex Association of India v. United Producers/ Distributors Forum,

Case No. 01 of 2009, (25.05.2011)
• United Producers/Distributors Forum (UPDF), the Association of Motion Pictures
and TV Programme Producers and the Film and Television Producers Gild of India
Ltd. were behaving like cartel. UPDF vide its notices instructed all producers and
distributors including those who are not its members, not to release any new film
to the members of FICCI – Multiplex Association of India.
• The Commission, apart from issuing cease and desist order, imposed penalty on
each of the opposite parties

Film Industry Contd.
Film Matters
In these matters, CCI examined the conduct of film associations. Apart from issuing
cease and desist order and imposing penalties upon the associations, CCI issued the
following directions for modification of articles/ rules/ regulations of the associations
as the same were found to be anti-competitive
 The associations should not compel any producer, distributor or exhibitor to

become its members as a pre-condition for exhibition of their films in the
territories under their control and modify their rules accordingly.
 The associations should not keep any clause in rules and regulations which makes
any discrimination between regional and non-regional films and impose conditions
which are discriminatory against non-regional films.
 The rules of restrictions on the number of screens on the basis of

language or the manner in which a particular film is to be exhibited
should be done away with.
 Associations should not put any condition regarding hold back period for
release of films through other media like, CD, Satellite etc. These
decisions should be left to the concerned parties.
 The condition of compulsory registration of films as pre-condition for

release of any film and existing rules of association as discussed in the
preceding paras of this order on the issue should be dispensed with.

THANK YOU

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COMPETITION ACT, 2002

National Law University Delhi

 The Monopolies and Restrictive Trade Practices Act, 1969.

 Comprehensive economic reforms since 1991 carried the economy to a

 Policy approach shifted from controlling monopolies to promoting

 Raghavan Committee recommended repeal of MRTP Act and enactment of

NATIONAL LAW UNIVERSITY DELHI 2

 The Competition Act, 2002 was passed by Parliament in December, 2002

 The Act establishes the Competition Commission to prevent practices

NATIONAL LAW UNIVERSITY DELHI 3

Based on liberalized regime Based on command & control regime

Competition concepts expressly defined, Competition concepts not expressly

Provides for regulation of combinations No regulation of combinations

Provides for advocacy Had no advocacy role

Power to impose penalty No power to impose penalty, only cease

Statutory authority can seek CCI’s No provisions for statutory authorities

NATIONAL LAW UNIVERSITY DELHI 4

 To prevent practices having adverse effect on

 To promote and sustain competition in markets;

 To protect the interests of consumers; and

 To ensure freedom of trade

◊ Enforcement functions [Sections 3,4,5 & 6]

• Prohibition of Anti - Competitive Agreements (Section 3)

◊ Advisory functions [Sections 49(1), 21]

◊ Advocacy functions [Section 49(3)]

NATIONAL LAW UNIVERSITY DELHI 6

NATIONAL LAW UNIVERSITY DELHI 7

 Any person, consumer or their association or trade association

 Reference by Central/ State Governments or statutory

 In case of combinations - mandatory notification by person/

NATIONAL LAW UNIVERSITY DELHI 8

◊ Enforcement functions [Sections 3,4,5 & 6]

• Prohibition of Anti - Competitive Agreements (Section 3)

• Prohibition of Abuse of Dominant Position (Section 4)

• Regulation of Combinations (Sections 5 and 6)

NATIONAL LAW UNIVERSITY DELHI 9

 Enterprises/ persons agree to cooperate to limit/ control price, distribution,

 Enterprises/ persons follow practices impacting competition adversely

NATIONAL LAW UNIVERSITY DELHI 10

 Strength of an enterprise to affect its competitors or consumers in its

 What is abuse of dominance?

Not dominance, but its abuse is prohibited

NATIONAL LAW UNIVERSITY DELHI 11

• Combination includes: merger and amalgamation and

• Mandatory pre-notification before combination

• CCI must decide in 210 days, else combination deemed approved

NATIONAL LAW UNIVERSITY DELHI 12

• The Central Government/ State Government may, in formulating a

• CCI to give its opinion within sixty days of such reference

• The opinion of CCI not binding upon the Government

• The Commission shall give its opinion on a reference made by

NATIONAL LAW UNIVERSITY DELHI 13

• Awareness amongst stakeholders will promote compliance, less

• Evolving complex economic law

• Focus on Advocacy with Central/State Governments, regulators and

NATIONAL LAW UNIVERSITY DELHI 14

For contraventions, CCI may pass following orders:

NATIONAL LAW UNIVERSITY DELHI 15

 Exclusion of jurisdiction of civil courts

NATIONAL LAW UNIVERSITY DELHI 16

NATIONAL LAW UNIVERSITY DELHI 17

NATIONAL LAW UNIVERSITY DELHI 18