An Overview of the Anti Unfair Competition Law in India

  “An Overview of the Anti Unfair Competition Law in India”

Competition is a procedure of monetary contention between business sector players to draw in clients. Competiton additionally alludes to a circumstance in a business domain where organizations autonomously take a stab at the support of clients keeping in mind the end goal to accomplish their business objective. Free and reasonable competition is one of the mainstays of a productive business environment.

Lately, the Indian economy has been one of the best performers and is on high development way. A mixture of a more noteworthy level of competition can play a reactant part in opening up those areas of the economy where there is a potential of development. In light of a legitimate concern for customers, and the economy as entire, it is important to advance a situation that encourages reasonable and fair competition outcomes in the business sector, limit against anti-competitive conduct and discourage market players from embracing unjustifiable trade practices. Along these lines, competition has turned into a main thrust in the worldwide economy.

During the early nineties when liberalization and privatization were triggered there was a moment of realization that the existing Monopolistic and Restrictive Trade Practices Act, 1969 was not competent enough to tackle the competition aspect of India. Due to the rapid globalization process, enterprises in the Indian market started to feel the heat of the competition from domestic as well as international players. This was the main reason because of which the need arose for properly structured competition laws which would focus more on encouraging companies to invest and grow by promoting competition and to make sure there is no abuse of market power.

Abuse of market and need for new law:

In an open market economy of our India, many undertakings take up anti-competitive means for obtaining short-term gains. Practices like these degrade the market and invalidate the benefits of competition. It is for this reason that many of the countries are reinforcing their economies through competition laws.

To catch up with the fast changing realities of the market India had enacted The Competition Act, 2002. This Act was made in such a way so that it could not only deal with existing regulations of monopolies and competition but also replace the MRTP Act. It is a procedure based piece of legislation which is framed in an uncomplicated manner so that it is more flexible and compliance oriented and consistent with the other laws.

Three stage transition

This Act provided for a three staged transition, over the first three years from the date of notification of the Act wherein the Competiton Commission of India would replace the MRTP commission.

First year

At the start of the first year, the MRTP Commission would cease to exist and CCI would take up the role of an advisory body. The unfinished and pending cases at the MRTP commission were transferred to the respective consumer courts under the Consumer Protection Act, 1986. The pending cases subjecting monopolistic and restrictive trade will be adjudicated by the CCI

Second year

CCI has scrutinized the anti-competitive practices during the second year.

Third year

The CCI started regulating the mergers and acquisitions that has an adverse impact on competition.

On the recommendations of the Raghavan Committee, a draft competition law was prepared and presented in November 2000 to the Government and the Competition Bill was introduced in the Parliament, which referred the Bill to its Standing Committee. After considering the recommendations of the Standing Committee, the Parliament passed December 2002 the Competition Act, 2002. The Competiton Act of 2002 had replaced The Monopolies and Restrictive Trade Practices Act effectively from 1st September 2009.

The Competition Act, 2002 was authorized to accommodate the foundation of a Commission to anticipate works and prevent practices  having antagonistic impact on competition, and to advance and support healthy competition in the business environment and to secure the enthusiasm of consumers furthermore to guarantee flexibility of trade carried on by different members in business sectors in India and for matters associated therewith. This Act came into existence in January 2003 and the Competition Commission of India was set up and has been in existence since January 2003. The Competition Commission consists of a chairperson and 6 members which are appointed by the central government. A Competition Appellate Tribunal was also established, which is a quasi-judicial body established to hear and dispose of appeals against any direction issued, or decision made by the CCI.

The Act was later amended in the year 2007 and 2009 as well. This was a key step towards facing competition. The Competition Act, 2002 is not intended to prohibit competition in the market. The legislation prohibits anti-competitive agreements, abuse of dominant position and regulates mergers, amalgamations and acquisitions.

Elements of Competition Law

There are three major elements of a competition law; i) Anti – competitive agreements; ii) Abuse of dominance; and iii) Merger, amalgamations and acquisitions control.

Anti- Competitive Agreements

Anti-competitive agreements are those agreements that restrict competition. Section 3 of the Competition Act, 2002 prohibits any agreement with respect to production, supply, distribution, storage, and acquisition or control of goods or services which causes or is likely to cause an appreciable adverse effect on competition in India. The term ‘Agreement’ is broadly defined in section 2(b) of the Competition Act, 2002 and includes any arrangement or understanding or concerted action, whether or not it is formal, in writing or intended to be enforceable by legal proceedings. The agreements does not necessarily have to be a formal one and in writing or justifiable in a court of law and an informal agreement to fix prices will be hit by the provisions of the Competition Act, 2002.

The species of agreement which would be considered to have an ‘appreciable adverse impact” would be those agreements under Section3 (3) which:

• Directly or indirectly determine sale or purchase prices;
• Limit or control production, supply, markets, technical development, investment or provision of services;
• Share the market or source of production or provision of services by allocation of inter alia geographical area of market, nature of goods or number of customers or any other similar way
• Directly or indirectly result in bid rigging or collusive bidding.

Further, the agreements, which are entered into in respect of various intellectual property rights and which recognize the proprietary rights of one party over the other in respect of trademarks, patents, copyrights, geographical indicators, industrial designs and semi conductors have been withdrawn from the purview of “anti competitive agreements”. The inherently monopolistic rights created in favour of bona fide holders of various forms of intellectual property have been treated as sacrosanct.

 

Abuse of Dominant Position

Section 4 of the Act 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 market, or affect it’s competitors or consumers or the relevant market in it’s favour. There shall be an abuse of dominant position if an enterprise indulges into the below mentioned activities:

• Directly or indirectly imposing discriminatory conditions in the purchase or sale of goods or service, or setting prices in the purchase or sale (including predatory pricing) of goods or services;
• Limiting or restricting the production of goods or provision of services or market therefore; or limiting technical or scientific development relating to goods or services to the prejudice of customers;
• Indulging in practice or practices resulting in the denial of market access
• Making conclusion of contracts subject to acceptance by other parties of supplementary obligations, which has no connection with the subject of such contract;
• Utilization of the dominant position in one relevant market to enter into, or protect, another relevant market.

Section 19(4) of the Act empowers the Competition Commission of India to determine whether any enterprise or group enjoys a dominant position or not, in the relevant market and also to decide whether or not there has been an abuse of dominant position. Further mere existence of dominance is not to be frowned upon unless the dominance is abused

Merger, Amalgamations and Acquisitions Control

The Competition Act, 2002 uses the word combinations to cover acquisition of control, shares, voting rights and assets, and mergers and amalgamations.

Section 6 of the Competition Act, 2002 prohibits any person or enterprise from entering into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and if such a combination is formed, it shall be void.

Further Section 6(2) provides that any person or enterprise, who or which proposes to enter into any combination, shall give a notice to the Competition Commission of India, disclosing details of the proposed combination, in the form, prescribed and submit the form together with the prescribed fee within 30 days of –

– Approval of the proposal relating to merger or amalgamation, by the Board of Directors of the enterprise concerned with such merger or amalgamation, as the case may be;

– Execution of any agreement or other document for acquisition, acquiring of control.

The Competition Act, 2002 also sets a threshold below which a merger, acquisition or acquiring of control is not regarded as a combination.Section 30 of the Competition Act, 2002 empowers the Competition Commission of India to determine whether the disclosure made to it under section 6(2) of the Act is correct and whether the combination has, or is likely to have, an appreciable adverse effect on competition in India. Upon receipt of notice for a proposed combination, the Commission must review the combination within tight time limits or else the combination is deemed to have been approved.

According to Section 31 of the Act, the Competition Commission of India may allow the combination if it will not have any appreciable adverse effect on competition in India or pass an order that the combination shall not take effect, if in its opinion, such combination has or is likely to have an appreciable adverse effect on competition.

The provisions of Section 6 do not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.

Remedies under the Competition Act, 2002:

Any kind of unfair competition can be reported to the CCI. CCI also has the authority to act suo-moto or on the reference.

Jurisdiction

Section 32 of the Competition Act, 2002 empowers the CCI to take action with respect to conduct that has occurred outside India and with respect to the parties located outside India provided that the conduct had an appreciable adverse effect on competition in the relevant market in India. In support of this provision, Section 18 the Act empowers the CCI to enter into a memorandum or arrangement with any agency of any foreign country with the prior approval of the Central Govt.

An enquiry or compliant could be initiated or filed before the Bench of CCI if within the local limits of its jurisdiction the respondents actually or voluntarily resides, carries on business or works for personal gain, or where the cause of action wholly or in part arises.

Competition Advocacy

Competition Advocacy is most crucial component of Competition Law. Central Government/State Government may seek the opinion of CCI on the possible effects of the policy on competition or any other matter. In this context, Section 49 of the Act envisages that while formulating a policy on the competition, the Government may make a reference to the CCI for its opinion on possible effect of such a policy on the competition, or any other matter. On receipt of such a reference, the CCI shall, give its opinion on it to the Central Government/State Government, within sixty days of making of such a reference and the Government may formulate policy as it deems fit. The role of CCI is advisory and the opinion given by the CCI shall not be binding upon the Central Government/State Government in formulating such a policy. Further the Act provides that the CCI shall take suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues.

Confidentiality

The Competition Act, 2002 recognizes that information received by the CCI could be commercially sensitive and its disclosure could result in harm to the business.

Section 57 of the Act provides that no information relating to any enterprise shall be disclosed without the prior written permission of the enterprise, except in compliance with or for the purposed of this Act or for any other law for the time being in force. Thus it provides to enterprises the protection of confidentiality.

Conclusion:

The Indian Competition Act, 2002 is comprehensive in nature so that it can meet the requirements of the economic growth and international economic developments which are directly or indirectly related to the competition laws. This legislation makes sure that there is uniformity and makes sure if there is a synchronization with other policies such as trade policies, FDI norms, FEMA etc. CCI has become functional over a period of years and it is helping match the Indian economy to the global economy.The Act truly reflects the changing economy of our country and promotes fair competition to take care of unfair market practices. This Act safeguards the interest of the consumers and ensures  stability in the Indian Market.

– By Ekant Hiranandani