INSTITUTE: USB

DEPARTMENT: BBA
Bachelor of Business Administration
Business Environment 20BAT-158
Dr. Chitvan Khosla
UNIT 2 : Chapter 2.1
Competition Act , 2002 DISCOVER . LEARN . EMPOWER
 • Space for visual (size 24)

COMPETITION
ACT
Course Outcome Will be covered in
CO Title Level thislecture
Number

CO1 It will help the students to understand and analyze Remember

various environmental factors and their impact on  
business

CO2 It will help the students to understand the Understan

Economic Environment and different Economic d
Systems
 
CO3 Students comprehend the impact of the global Understand
factors on the environment.

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Meaning

WHAT?
Main Focus areas of the Act :
• Prohibition of Anti Competitive Agreements
• Prohibition of Abuse of Dominance
• Regulation of Combinations
• Competition Advocacy

HOW?
Through establishment of a Competition Commission of India (CCI) and
Competition Appellate Tribunal (CAT)
 OBJECTIVES :

• To prevent the practice that can have adverse effect on competition.

• To promote a healthy competition in the economy.
• To protect consumers’ interests.
• To create situation of fair play in the market.

Competition Act was introduced to create an environment of free trade, ensure

healthy competition in the market, and protect the interests of consumers. The Act
prohibits anti-competitive agreements, abuse of dominant position by the enterprises,
and regulates mergers and acquisitions which can have adverse effects on
competition within India. It was necessary to establish a Commission to curb the
adverse effects of competition and economic development.
A. PROHIBITION OF ANTI-
COMPETITIVE AGREEMENTS

• All Anti-competitive agreements are void, i.e., agreements which could restrict
competition, vertical or horizontal

• Rule of Reason to be applied for determining legality of an agreement

• Certain agreements between same or similar enterprises regarding prices or

quantities, on bidding, or to share or divide markets are per se illegal

• Leniency provision – for whistleblowers in a cartel

Horizontal and Vertical Agreements

• A company can enter into two types of agreements: Horizontal and Vertical Agreements.
• The agreement among the competitors i.e. to fix the price, market sharing, control the supply, and so
on, can be termed as Horizontal agreements,
• whereas the agreement between the manufacturers and distributors, for exclusive supply,
distribution, resale price maintenance, refusal to deal etc., are called Vertical agreements.
• Section 3 of Competition Act prohibits the agreement that can result into monopoly.
• For example, suppose a firm enters into an agreement with some other competing firm, to fix
the price of a commodity, to eliminate other competitors from the market. This kind of
agreement is illegal as it may create monopoly in the market. The commission can take
appropriate action against both the firms and punish them.
Example - DISCUSS ABOUT PRICE
INCREASE, TIMING OF PRICE
INCREASE WITH COMPETITORS
Retail
Retail price
price is
is too
too
cheap.
cheap. Why
Why don’t
don’t I agree. Let’s
we
we increase
increase the
the implement the
wholesale
wholesale price
price by
by price increase
5%?
5%? next month.

Competitors Sales Person

ABC Sales Person
B. PROHIBITION OF ABUSE OF
DOMINANT POSITION:
• Mere dominance is not an offence, abuse of dominance is prohibited
• Important shift from ‘size’ / ‘structure’ to ‘behavior’ / ‘conduct’
• Instances of unfair, discriminatory or predatory pricing; restricting quantities

A firm that controls large proportion of supply of a product in the

market is called dominant firm. But abuse of dominance means
discriminatory pricing, restricting production or technology, using
dominant position in one market to enter into the other market.
Competition Act does not prohibit dominance but Section 4 of the act
prohibits the abuse of dominance. For example, If a firm sells its
product at a price, less than its cost, to eliminate the competitors
from the market and create monopoly, then it refers to the abuse
of dominance.
C. REGULATION OF
COMBINATIONS:
• Includes M&A’s, Amalgamations, Acquisitions of control - all above a certain high
level threshold (Rs.1000 crore aggregate value of assets or Rs.3000 crore turnover of
combining parties)
• Thresholds deliberately high to allow small Indian companies to combine to become
active international players
• Combinations that cause or are likely to cause an adverse effect on competition are
under focus
• Pre-notification voluntary

Combination means the merger, acquisition, acquiring of shares, assets, or voting

rights of some other firm/company. It is mandatory to give pre-notification, regarding
combination, to the commission. Section 5 & 6 of the act regulates all the mergers and
acquisitions. It is necessary for the commission to take decision within 210 days
otherwise combination is considered as approved. Commission also has a power to
take suo moto action within one year of any combination.
D. COMPETITION ADVOCACY:

• CCI to create “culture of competition”

• Empowered to participate in formulation of country’s economic policies
• Create awareness and training on competition issues
• Establishment of “Competition Fund” for above
• Recently asked to develop Consultation Paper on National Competition Policy (to
harmonize various government policies)

As per Section 49 of the Competition Act, Competition Commission of India is

required to take measures to create public awareness, promote healthy competition and
impart training on issues related to competition. The commission also advises the
Central Government on the issues, related to the policy or law of competition.
 REFERENCES

• Reference Books-
• K. Aswathappa, Essentials of Business environment.
• Francis Cherrunilam, International Trade and Export Management, Himalaya Publications.

• References of websites-
• google.com
• https://www.toppr.com/guides/business-studies/business-environment/indian-industrial-policies/,
https://study.com/academy/lesson/what-is-business-environment-definition-factors-quiz.html

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THANK YOU

For queries
Email:Chitvan.e8637@cumail.in