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Competition Laws in India
In common parlance, competition in the market means sellers striving and striking with each other independently for buyer’s patronage to maximize profit or other business objectives. The first-ever competition law was enacted in the year 1969 and was known as The Monopolies and Restrictive Trade Practices Act, 1969. Now the said Act is replaced with some changes by Competition Act, 2002. The objectives of the competition law have been kept in such a way that it not only promotes but also provides a fair and reasonable chance to all the enterprises in the market to have a healthy and fair competition so that the interests of the consumers can be protected. The Competition Act of 2002 regulates or prohibits Anti-competitive agreements (Sec 3), Abuse of dominant position (Sec 4) and Combinations (Sec 5 and 6)
Competition Act, 2002 restricts anti-competitive agreements under Section 3(1) which says, “No enterprise or association of enterprises or person or association of persons shall enter into an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services which is likely to cause an appreciable adverse effect on competition within India.”
For the said Act the definition of Agreement is inclusive which says “any agreement or understanding or action in concert whether or not such agreement or understanding or action is formal; or in writing; or intended to be enforceable by legal proceedings.” Here direct proof of agreement is not required, because it can also be entered into in an informal way. It can be evident from the circumstances and facts of the case and the conduct of the parties.
Now there are 2 types of anti-competitive agreements:-
Horizontal Agreements [Sec 3(3)] - These are the agreements between two businesses or enterprises operating at the same level of the production supply chain. Horizontal agreements such as Price Fixing, Limiting the production/ supply, bid-rigging, and allocation of market share are void.
Vertical Agreements [Sec3(4)] - Vertical restraints are agreements entered into between two businesses or enterprises operating at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services. Verticals agreements such as Tie in arrangements, exclusive supply agreement, exclusive distribution agreement, refusal to deal, resale price maintenance are void.
Abuse of Dominant Position- The act does not restrict the dominant position but the abuse of a dominant position. The Act defines dominance position in terms of a position of strength enjoyed by an enterprise, in the 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 favor.
Combination – Combination under the Act means the acquisition of control by a person over an enterprise where such person has direct or indirect control over another enterprise engaged in competing businesses and mergers and amalgamations between or amongst enterprises when the combining parties exceed the thresholds set in the Act. Entering into a combination that 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.
The Competition Commission of India (CCI) is a quasi-judicial body established under the Competition Act, 2002 bound for enforcing the Competition Act, 2002, and the objectives of the Act are sought to be achieved through this commission established by the Government of India. The duty of the Commission is to eliminate practices having an adverse effect on competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade in the markets of India. The Commission is also required to give an opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.
The penalty for violation of Section 3 and 4 of the Act has been defined in Section 27. The CCI has been empowered to issue an order of ‘cease and desist’ or to impose a penalty that does not exceed 10% of the average turnover for the past three years from the date on which the order was pronounced. Further in the matters relating to the horizontal agreements, the CCI can impose a penalty that is three times the amount of profit that is to be derived from the cartel agreement or 10% of the turnover, whichever is higher. Further, if any person or enterprise fails to give notice to the commission regarding the information on the combination, he shall be imposed with a fine which may extend to Rs.1 lakh each day up to Rs.1 crore. The Competition Act had given a lot of power to the CCI which empowered it to bridge the gap left by the MRTP Act and to regulate the market so that it can experience healthy competition.
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