IIntroduction To Competition Act, 2002

Since attaining Independence in 1947,India, for the better part of half a century thereafter, adopted and followed policies comprising what are
known as Command-and-Control laws, rules, regulations and executive orders. The competition law of India, namely, the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act, for brief) was one such. It was in 1991 that widespread economic reforms were
undertaken and consequently the march from Command-and-Control economy to an economy based more on free market principles
commenced its stride. As is true of many countries, economic liberalisation has taken root in India and the need for an effective competition
regime has also been recognised.

In the context of the new economic policy paradigm, India has chosen to enact a new competition law called the Competition Act, 2002. The
MRTP Act has metamorphosed into the new law, Competition Act, 2002. The new law is designed to repeal the extant MRTP Act. As of
now, only a few provisions of the new law have been brought into force and the process of constituting the regulatory authority, namely, the
Competition Commission of India under the new Act, is on. The remaining provisions of the new law will be brought into force in a phased
manner. For the present, the outgoing law, MRTP Act, 1969 and the new law, Competition Act, 2002 are concurrently in force, though as
mentioned above, only some provisions of the new law have been brought into force.

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. Pegging on the Directive Principles, the first Indian competition law was enacted in 1969 and was christened
the Monopolies And Restrictive Trade Practices, 1969 (MRTP Act). Articles 38 and 39 of the Constitution of India mandate, inter alia,
that the State shall strive 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.

1. That the ownership and control of material resources of the community are so distributed as best to subserve the common good; and
2. That the operation of the economic system does not result in the concentration of wealth and means of production to the common
detriment.

In October 1999, the Government of India appointed a High Level Committee on Competition Policy and Competition Law to advise a
modern competition law for the country in line with international developments and to suggest a legislative framework, which may entail a
new law or appropriate amendments to the MRTP Act. The Committee presented its Competition Policy report to the Government in May
2000 [the report will be referred to hereinafter as High Level Committee (2000)]. The draft competition law was drafted and presented to the
Government in November 2000. After some refinements, following extensive consultations and discussions with all interested parties, the
Parliament passed in December 2002 the new law, namely, the Competition Act, 2002.

Salient Features Of New Competition Policy

# The Industries (Development and Regulation) Act, 1951 may no longer be necessary except for location (avoidance of urban-centric
location), for environmental protection and for monuments and national heritage protection considerations, etc.

# The Industrial Disputes Act, 1947 and the connected statutes need to be amended to provide for an easy exit to the non-viable, ill-managed
and inefficient units subject to their legal obligations in respect of their liabilities.

# The Board for Industrial Finance & Restructuring (BIFR) formulated under the provisions of Sick Industrial Companies (Special
Provisions) Act, 1985 should be abolished.

# World Trade Organistions (WTO)

There should be necessary provision and teeth to examine and adjudicate upon anti-competition practices that may accompany or follow
developments arising out of the implementation of WTO Agreements. Particularly, agreements relating to foreign investment, intellectual
property rights, subsidies, countervailing duties, anti-dumping measures, sanitary and psytosanitary measures, technical barriers to trade and
Government procurement need to be reckoned in the Competition Policy/Law with a view to dealing with anti-competition practices. The
competition law should be made extra territorial.

# MRTP Act
It is suggested that:
* The MRTP Act 1969 may be repealed and the MRTP Commission wound up. The provisions relating to unfair trade practices need not
figure in the Indian Competition Act as they are presently covered by the Consumer Protection Act, 1986.
* The pending UTP cases in the MRTP Commission may be transferred to the concerned consumer Courts under the Consumer Protection
Act, 1986. The pending MTP and RTP Cases in MRTP Commission may be taken up for adjudication by the CCI from the stages they are in.

Components Of Competition Act

The rubric of the new law, Competition Act, 2002 (Act, for brief) has essentially four compartments: 
#  Anti - Competition Agreements 
#  Abuse of Dominance 
#  Combinations Regulation 
#  Competition Advocacy

Anti Competition Agreements

Firms enter into agreements, which may have the potential of restricting competition. A scan of the competition laws in the world will show
that they make a distinction between horizontal and vertical agreements between firms. The former, namely the horizontal agreements are
those among competitors and the latter, namely the vertical agreements are those relating to an actual or potential relationship of purchasing
or selling to each other. A particularly pernicious type of horizontal agreements is the cartel. Vertical agreements are pernicious, if they are
between firms in a position of dominance. Most competition laws view vertical agreements generally more leniently than horizontal
agreements, as, prima facie, horizontal agreements are more likely to reduce competition than agreements between firms in a purchaser -
seller relationship. An obvious example that comes to mind is an agreement between enterprises dealing in the same product or products.
Such horizontal agreements, which include membership of cartels, are presumed to lead to unreasonable restrictions of competition and are
therefore presumed to have an appreciable adverse effect on competition. In other words, they are per se illegal. The underlying principle in
such presumption of illegality is that the agreements in question have an appreciable anti-competitive effect. Barring the aforesaid four types
of agreements, all the others will be subject to the rule of reaso test in the Act.

Abuse Of Dominance 
Dominant Position has been appropriately defined in the Act in terms of the position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its
competitors or consumers or the relevant market, in its favour.

Section 4 enjoins, No enterprise shall abuse its dominant position. Dominant position is the position of strength enjoyed by an enterprise in
the relevant market which enables it to operate independently of competitive forces prevailing in the market or affects its competitors or
consumers or the relevant market in its favour. Dominant position is abused when an enterprise imposes unfair or discriminatory conditions
in purchase or sale of goods or services or in the price in purchase or sale of goods or services. Again, the philosophy of the Competition Act
is reflected in this provision, where it is clarified that a situation of monopoly per se is not against public policy but, rather, the use of the
monopoly status such that it operates to the detriment of potential and actual competitors.

At this point it is worth mentioning that the Act does not prohibit or restrict enterprises from coming into dominance. There is no control
whatsoever to prevent enterprises from coming into or acquiring position of dominance. All that the Act prohibits is the abuse of that
dominant position. The Act therefore targets the abuse of dominance and not dominance per se. This is indeed a welcome step, a step towards
a truly global and liberal economy.

The Act on Combinations Regulation 

The Competition Act also is designed to regulate the operation and activities of combinations, a term, which contemplates acquisitions,
mergers or amalgamations. Thus, the operation of the Competition Act is not confined to transactions strictly within the boundaries of India
but also such transactions involving entities existing and/or established overseas.

Herein again lies the key to understanding the Competition Act. The intent of the legislation is not to prevent the existence of a monopoly
across the board. There is a realisation in policy-making circles that in certain industries, the nature of their operations and economies of
scale indeed dictate the creation of a monopoly in order to be able to operate and remain viable and profitable. This is in significant contrast
to the philosophy, which propelled the operation and application of the MRTP Act, the trigger for which was the existence or impending
creation of a monopoly situation in a sector of industry.

The Act has made the pre-notification of combinations voluntary for the parties concerned. However, if the parties to the combination choose
not to notify the CCI, as it is not mandatory to notify, they run the risk of a post-combination action by the CCI, if it is discovered
subsequently, that the combination has an appreciable adverse effect on competition. There is a rider that the CCI shall not initiate an inquiry
into a combination after the expiry of one year from the date on which the combination has taken effect.

Competition Advocacy 
In line with the High Level Committee's recommendation, the Act extends the mandate of the Competition Commission of India beyond
merely enforcing the law (High Level Committee, 2000). Competition advocacy creates a culture of competition. There are many possible
valuable roles for competition advocacy, depending on a country's legal and economic circumstances. 
The Regulatory Authority under the Act, namely, Competition Commission of India (CCI), in terms of the advocacy provisions in the Act, is
enabled to participate in the formulation of the country's economic policies and to participate in the reviewing of laws related to competition
at the instance of the Central Government. The Central Government can make a reference to the CCI for its opinion on the possible effect of
a policy under formulation or of an existing law related to competition. The Commission will therefore be assuming the role of competition
advocate, acting pro-actively to bring about Government policies that lower barriers to entry, that promote deregulation and trade
liberalisation and that promote competition in the market place. 
Perhaps one of the most crucial components of the Competition Act is contained in a single section under the chapter entitledcompetition
advocacy.

Competition Policy In The International Context

The international dimension of competition policy, in particular the case for a multilateral agreement on competition (MAC). The
relationship between trade and competition policy was one of the four Singapore Issues, which were given that label because they were put
on the WTO agenda for study and discussion (not negotiations) at the 1996 Singapore Ministerial Conference. But the issue of international
competition policy is actually much older. It figured prominently at an international forum for the first time as early as 1946 in the Havana
Charter, which laid the groundwork for an International Trade Organization (ITO).

The 1996 Singapore Ministerial resolved to set up working groups on each of the Singapore issues. The mandate of the Working Group on
the Interaction between Trade and Competition Policy (WGTCP) was to study issues raised by Members relating to the interaction between
trade and competition policy, including anticompetitive practices in order to identify any areas that may merit further consideration in the
WTO framework. Consequently, the relevant paragraphs of the 2001 Doha Ministerial Declaration tried to give a development-friendly slant
to the issue. WGTCP discussions during the first few years of its existence were diffused and non-converging. Faced with a lack of consensus
on so many issues, the Doha Declaration of the 2001 Ministerial Conference of the WTO limited further discussion at the WGTCP to the
issue of hard-core cartels; application of the fundamental WTO principles of non- discrimination, transparency and procedural fairness in
competition policy; capacity building in developing countries; and voluntary cooperation between Members.

Can Competition Act Replace MRTP ACT

In view of the policy shift from curbing monopolies to promoting competition, there was a need to repeal the Monopolies and Restrictive
Trade Practices Act. Hence, the Competition Law aims at doing away with the rigidly structured MRTP Act. The Competition Law proposed
is flexible and behaviour oriented.

After the Act was placed on the web-site and came into the public domain, a question often asked is whether it is not still the old law in
substance although not in form. A clear answer to this question is in the title of this section. The Act is a new wine in a new bottle. The
differences between the old law (namely the MRTP Act, 1969) and the new law (the Competition Act, 2002) may perhaps be best captured in
the form of a table displayed below:
S.No MRTP Act, 1969 Competition Act, 2002
1 Based on the pre-reforms scenario Based on the post-reforms scenario
2 Based on size as a factor Based on structure as a factor
3 Competition offences implicit or not defined Competition offences explicit and defined
4 Complex in arrangement and language Simple in arrangement and language and easily
comprehensible
5 14 per se offences negating the principles of natural 4 per se offences and all the rest subjected to rule of reason.
justice
6 Frowns upon dominance Frowns upon abuse of dominance
7 Registration of agreements compulsory No requirement of registration of agreements
8 No combinations regulation Combinations regulated beyond a high threshold limit.
9 Competition Commission appointed by the Competition Commission selected by a Collegium (search
Government committee)
10 Very little administrative and financial autonomy for Relatively more autonomy for the Competition Commission
the Competition Commission
11 No competition advocacy role for the Competition Competition Commission has competition advocacy role
Commission
12 No penalties for offences Penalties for offences
13 Reactive and rigid Proactive and flexible
14 Unfair trade practices covered Unfair trade practices omitted (consumer fora will deal with
them)
15 Does not vest MRTP Commission to inquire into Competition Law seeks to regulate them.
cartels of foreign origin in a direct manner.
16 Concept of ‘Group’ Act had wider import and was Concept has been simplified
unworkable
 

The Act is therefore a new wine in a new bottle. Wine gets better as it ages. The proposed Law provides for a Competition fund, which shall
be utilised for promotion of competition advocacy, creating awareness about competition issues and training in accordance with the rules that
may be prescribed. The extent MRTP Act 1969 has aged for more than three decades and has given birth to the new law (the Act) in line with
the changed and changing economic scenario in India and rest of the world and in line with the current economic thinking comprising
liberalisation, privatisation and globalisation.

Conclusion
The message is loud yet clear that a well planned exhaustive competition compliance programme can be of great benefit to all enterprises
irrespective of their size, area of operation, jurisdiction involved, nature of products supplied or services rendered and the same is essential
for companies, its directors and the delegatee key corporate executives to avoid insurmountable hardships of monetary fines, civil
imprisonment, beside loss of hard-earned reputation when the Competition Authorities, the media and others reveal the misdeeds in public.

In the changed scenario, India do needs a fresh law for competition and a new regulatory authority, which under this policy is the
`Competition Commission of India’. The law will serve the purpose only if it is made independently, runs independently and is less
expensive.

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The  author can be reached at : [email protected]

v4.1 India enacted its first anti-competitive legislation in 1969 known as

the Monopolies and Restrictive Trade Practices Act, 1969 to provide that
the operation of the economic system does not result in the concentration
of economic power to the common detriment, for the control of
monopolies, for the prohibition of monopolistic and restrictive trade
practices and for matters connected therewith or incidental thereto. The
scope of MRTP was found to be inadequate considering the changing
world trade scenario. Considering the fact, the Indian Government formed
a Committee on Competition Policy and Law (the Raghavan Committee)
to advice on competition law.  Based on the recommendations of
the Raghavan Committee the Government enacted the Competition Act,
2002 which came into effect from 13th January,2003.The Competition
Act was enacted to provide ,keeping in view of the economic
development of the country, for the establishment of a Commission to
prevent practices having adverse effect on competition, to promote and
sustain competition in markets, to protect the interests of consumers and
to ensue freedom of trade carried on by other participants in markets, in
India, and for matters connected therewith or incidental thereto. The Act
was implemented in stages on 31st March,2003, 19th June,2003,
14th October,2003 and 28th August,2009. The Act was amended by the
Competition (Amendment) Act, 2007 with effect from 25 th September,
2007.
4.2 The Competition Act defines dominance or dominant position in terms
of a position of strength enjoyed by an enterprise, in relevant market in
India, which enables it to: (i) operate independently of the competitive
forces prevailing in the relevant market; or (ii) affect its competitors or
consumers or the relevant market in its favour. It is the ability of
the enterprise to behave/act independently of the market forces that
determines dominant position. In a perfectly competitive market no
enterprise has control over the market, especially in the determination of
price of the product. Each enterprise is a price taker. However, perfect
market conditions do not obtain reality. Keeping this in view the Act
specifies a number of factors that should be taken into account while
determining whether an enterprise is dominant.
4.3  MRTP Act did not address all the abuse of intellectual property
rights which are monopoly rights for limited period of time. Competition
Act has exempted intellectual property rights(IPRs) from the coverage of
the rigors of S 3 related to anti-competitive agreements, no such
derogation is available in case of abuse of  IPRs by right holders, in
respect of specific abusive acts.(S 4).
S 28 empowers CCI to direct division of an enterprise enjoying dominant
position to ensure that such enterprise does not abuse its dominant
position.
6.  Agreements and Anti-Competitive Agreements under the Act.
An agreement for the purpose of the Act includes any arrangement,
understanding or concerted action entered into between parties. It need
not be in writing or formal or intended to be enforceable in law.
4.4 The Act prohibits anti-competitive agreements including cartels, abuse
of dominant position, regulates combinations which includes mergers,
amalgamations and acquisitions. An anti-competitive agreement is an
agreement having appreciable adverse effect on competition.  Anti-
competitive agreements may include, but not limited to:(i) Horizontal
Agreements to : (i) fix prices; (ii) limit production and/or supply;(iii)
allocate markets; and (iv) bid rigging or collusive bidding.(ii) Vertical
Agreements including: (i) conditional purchase/sale (tie-up arrangement);
(ii) exclusive supply arrangement ;(iii) exclusive distribution
arrangement; (iv) refusal to deal; and (v) re-sale price maintenance.
Read more: http://www.taxguru.in/competition-act/competition-act-
2002-impact-on-industry-in-the-years-ahead.html#ixzz0tUBJM0Pd