Competition is the precursor to success. When markets work hard there is sustainability, profits, efficiency, innovation and long lasting benefits to the economy. The Competition Act,2002 is one such legislation which aims to weed out anticompetitive practices through mainly preventing anti-competitive agreements and abuse of dominance situations in the market. This article aims to study the main aspects of the Competition Act and present to its readers these main concepts in a precise manner. Consumer awareness in the field on Competition Law is a must as many times consumers are not aware of the harmful effects of such practices and fail to realize that it is these practices which are keeping markets away. If markets are not competitive then this gives rise to monopolies and oligopolies which have harmful effects in the long run.
HISTORICAL BACKGROUND TO THE LEGISLATION:
The Monopolies and Restrictive Trade Practices Act, 1969
Government of India in April appointed a Commission under the chairmanship of Justice K. C.Das Gupta to determine the extent and effects of monopolies in the Indian Market. The Commission submitted its report on 31st October, 1965. On 27th December 1969, the MRTP Bill received the assent from the president. The MRTP Act was intended to curb the rise of monopolies practices.
Issues in MRTP Act, 1969
Post 1991 reforms did not prohibit merger, amalgamation and takeovers in MRTP Act. Many private and public sector companies were brought under the ambit of MRTP Act.
The MRTP Act didn’t even include certain offending trade practices, which are restrictive in nature like Abuse of Dominance, Cartels, Collisions and Price Fixing, Bid Rigging, Predatory practices. Considering all the issues of MRTP Act 1969, a need for change in the act arises.
ESTABLISHMENT OF COMPETITION ACT, 2002
In October 1999 GOI appointed a committee under Mr. S V S. Raghavan. Committee submitted the report in May 2000 and parliament passed the new law in December 2002 named “THE COMPETITION ACT, 2002”.
The Competition Act,2002 replaced ‘The Monopolies and Restrictive Trade Practices Act,1969’. Extends to whole of India except Jammu and Kashmir. The provisions of the Competition Act relating to anti competition agreements and abuse of dominance position were notified on May 20, 2009.Competition Commission of India (CCI) was established to prevent activities that has adverse effect of competition in India.
OBJECTIVES OF THE COMPETITION ACT,2002:
- To prevent practices having adverse effects on competition.
- To promote and sustain competition in markets.
- To protect the interests of consumers.
- To ensure freedom of trade carried on by other participants in markets in india.
- For matters connected therewith or incidental thereto.
MAIN PROVISIONS OF COMPETITION ACT,2002:
- PROHIBITION OF CERTAIN AGREEMENTS
- PROHIBIT ABUSE OF DOMINANCE POSITION
- REGULATION OF COMBINATION
- COMPETITION ADVOCACY
I’ll like to deeply explain the four main provision of Competition Act,2002
PROHIBITION OF CERTAIN AGREEMENTS:
As per section 3 of the Act, enterprises, persons or association of enterprises, persons or associations of enterprises or persons, including cartels, shall not enter into agreement in respect of production, supply, distribution, storage, acquisition or control, of goods or provision of services, which cause or are likely to cause an “appreciable adverse impact” on competition in India.
Any agreement entered into between enterprise or association of enterprise shall be presumed to have an appreciable adverse effect on competition (AAEC) which-
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development,
investment or provision of services;
(c) shares the market or source of production or provision of services by way
of allocation of geographical area of market, or type of goods or services, or
number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding.
Such agreement would consequently be considered void.
And also the practices performed by an entity or a person which are unfair or which exploit the market then those practices will be banned or considered as void.
PROHIBIT ABUSE OF DOMINANCE POSITION
Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market in India.
- Directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods and services;
- Restricting the technical or scientific development relating to goods or services to the prejudice (harm) of consumers;
- Encouraging in practices resulting in denial of market access;
- Using dominant position in one relevant market in order to enter into another market.
REGULATION OF COMBINATION
Section 5 deals with combination of enterprises and persons. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises.
The combination Act prohibits any combination that has an appreciable adverse effect on the competition.
- Prior approval from CCI
- Monetary Thresholds
- Intimation to CCI 30 days after board approval, or execution of any document/ agreement for proposed combination
CCI’s role in pro actively bringing government policies for-
- Reducing barriers to trade
- Trade Liberalization
- Promote Competition
COMPETITION COMMISSION OF INDIA
Competition commission of India was established on 14th Oct 2003. It is created under Section 7 of the Act and the Head office is situated in New Delhi.
DUTIES OF THE COMMISSION:
- To eliminate practices having adverse effect on competition;
- To promote and sustain competition;
- To protect interest of consumers and
- To ensure freedom of trade carried on by other participants, in markets in India.
- Extra territorial reach
AMENDMENT TO THE LEGISLATION:
The Competition Act, 2002 was passed by the Parliament in the year 2002, to which the President accorded assent in January, 2003. It was subsequently amended by the Competition (Amendment) Act, 2007. In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established. The Competition Commission of India is now fully functional with a Chairperson and six members. The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20, 2009
It can now be concluded that the competition Act, 2002 is landmark legislation. The main aim of this Act is to promote competition and curb all anti-competitive agreements. This Act restricts the abuses of dominant enterprises. It can also regulate any kind of combinations beyond a particular size. Thus this Act does not curb monopolies rather it curbs abuses of monopolies.
Thus, the competition Act is expected to play a responsible role in changing the control mechanism related to monopoly and restrictive trade practices and is also expected to protect the interest of the small and medium industries in the country besides giving consumers more powers to redress their grievances.
The competition act 2002 is more liberal and flexible version of the earlier MRTP act which had gradually become irrelevant and anti-growth with the passage of time the new act recognizes anti-competitive practices in a wider context and institutes a flexible but effective mechanism to product and promote competition.
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