Unit III: The Competition Act, 2002

An Act 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 ensure freedom of trade carried on by
other participants in markets, in India, and for matters connected therewith or
incidental thereto.

Definitions under the Competition Act

The following are the definitions cited under the Competition Act
1. Acquisition: Acquisition is defined as the direct or indirect agreement to
acquire shares, voting rights or control of assets over any enterprise.
2. Cartel: A cartel is defined as an association of producers, sellers who limit
control distribution, sale or promotions on goods through an arrangement
previously made.
3. Position: A dominant position means a position of power held by an
enterprise in the related market. It enables the enterprise to function freely and
influence the market to its directions.
4. Predatory pricing: Predatory pricing is where the price of goods and
services is reduced to well below the cost of production in order to eliminate
competition.
5. Rule of reason: The interpretation of activity on the basis of business
justification, market impact on competition and on the consumer.
AAEC - Appreciable adverse effect on competition PSU – Public Sector
Undertaking
CCI – Competition Commission of India CAT- Competition Appellate Tribunal

Objective of the Act

• Facilitate & Foster Competition

• Establish a Commission to prevent practices having adverse effect on

competition

• Promote and sustain competition in markets

• Protect the interests of consumers

• Ensure freedom of trade in the Indian markets

Scope or Focus of the Act

1. Enquire into Anti Competitive Agreements [Section - 3]

2. Enquire Abuse of Dominant Position [Section – 4]

3. Regulation of Combination & Mergers [Section – 5 to 6]

4. Undertake Competition Advocacy [Section – 49]

Salient Features
The following are the features of the Competition Act:
1. Anti Agreements: Any individual or enterprises shall not deal in production
supply or distribution that may cause a negative impact regarding competition
in India. Any existence of such agreements is considered illegal.
2. Abuse of dominant position: In the event, an enterprise or an associated
individual, it is found to indulge in practices that are unfair or discriminatory in
nature shall be considered an abuse of dominant position. If a party is found to
be in abuse of its position, then they will be subjected to an investigation from
the concerned authorities.
3. Combinations: As per the act a combination is defined as terms which lead
to acquisitions or mergers. But should such combinations cross the limits as put
forth by the Act, then the parties involved would be under the scrutiny of the
Competition Commission of India.
4. Competition Commission of India: The Competition Commission of
India is an independent body with the powers to enter into contracts and should
the contracts be broken they can sue the parties involved. The Commission
consists of a maximum of six members who are tasked with sustaining and
promoting the interests of consumers in order to foster an ideal environment for
economic competition.
The other function of the Commission is to advise the Government of India
regarding competition in the economy and create public awareness on the same
issue.

REGULATORY STRUCTURE:

COMPETITION COMMISSION OF INDIA (CCI):

  An authority called the ‘Competition Commission of India’ (CCI) has
been constituted by the Central Government to enforce the provisions of
the Competition Act.
 The CCI will be a body corporate having perpetual succession and a
common seal with power to acquire, hold and dispose of property, both
movable and immovable and can contract in its own name.
 In the discharge of its functions, the CCI shall be guided by the principles
of natural justice, and has the power to regulate its own procedures.
 The Commission shall consist of a Chairperson and not less than two and
not more than ten other Members to be appointed by the Central
Government from a panel of names recommended by a Selection
Committee.
 All meetings of the CCI require a quorum of a minimum of three
members.
 The Chairperson and members will be in office for a term of 5 years from
the day of their entering such office in the said capacity and will be
eligible for reappointment.
 The CCI will appoint a Secretary and other officers for administration
work.

DIRECTOR GENERAL:
The CCI will be assisted by an investigative arm led by a Director General
(DG).
The DG holds powers to:

• summon and examine persons on oath;

• require production of documents and receive evidence; and
• obtain warrants / authorization for search and seizure at offices and
residences.

COMPETITION APPELLATE TRIBUNAL (CAT):

An Appellate Tribunal known as the Competition Appellate Tribunal has been
established by the Central Government:
• to hear and dispose of appeals against any direction issued or decision
made or order passed by the CCI;
• to adjudicate on claim for compensation that may arise from the findings
of the CCI.

The Competition Appellate Tribunal (CAT) shall consist of a chairperson and

not more than two other members. The chairperson shall be a person, who is or
has been a judge of the Supreme Court or the Chief Justice of a High Court.
The Competition Act excludes the jurisdiction of civil courts in respect of
matters
which the CCI or the CAT is empowered to determine under the Competition
Act.

OFFENCES AND PENALTIES UNDER THE ACT, COMPETITION

COMMISSION OF INDIA

OFFENCES

ANTI-COMPETITIVE AGREEMENTS

Anti-competitive agreements are those between the parties to a business

transaction that have the potential to undermine competition in a specific market
or that favour one person or group unreasonably above the interests of others.
The Competition Act of 2002 forbids such anti-competitive agreements.
According to the definition of “agreement” under Section 2(b) of the Act, the
agreement need not take the form of a formal document that the parties have
signed. It may or may not be written. It is obvious that the definition given is
broad, inclusive, and not exhaustive.

Because those participating in anti-competitive acts are not permitted to enter

into formal written agreements to keep them secret, the term “agreement” has
taken on a broad meaning under competition law. Cartels, for instance, are
typically shrouded in secrecy. Any arrangement regarding the production,
supply, distribution, storage, purchase, or control of commodities or the
provision of services that substantially lessens competition within India is
prohibited by Section 3 of the Act. Any agreement that violates this clause will
be void, according to Section 3(2).

ABUSE OF DOMINANT POSITION

A person or business is said to be in a dominating position when it is in a strong

position that allows it to function independently of the competitive dynamics
present in the relevant market or has a favourable impact on its rivals,
customers, or the relevant market. In the competition legislation of numerous
other jurisdictions, the dominant position has been described in broadly
comparable terms. The European Commission’s glossary explains that “a
corporation is in a dominant position if it has the power to function
independently of its competitors, customers, suppliers, and finally, the final
consumer.”
The meaning of “dominant position” for the purposes of the Competition Act of
2002 rests on the definitions of “relevant market” that were previously
discussed. Therefore, in order to establish an abuse of dominance, it is first
essential to establish that the firm in question held a dominant position in terms
of the market for a certain product and the geographic market for that product.

Control of such abuse is provided for under Section 4 of the Act. It states that
no enterprise or organisation abuses its dominant position. It also outlines
specific instances of behaviour that constitutes an abuse of a dominant position.
The following behaviours are defined as “abuse of dominant position”:

1. Imposition of unfair or discriminatory terms or pricing (including

predatory prices) in connection with the purchase or sale of goods or
services may be done directly or indirectly.
A “predatory price” is when a product is sold below what it costs to produce it
or to provide the service in an effort to drive out or lessen competition. For the
purpose of calculating the cost of predatory pricing, the Competition
Commission of India (Determination of Cost of Production) Regulations,
2009 have been introduced. Average variable cost will typically be used as a
stand-in for marginal cost, as per Regulation 3(1).

2. To the detriment of customers, limiting or restricting the production of

products or services or placing restrictions on technical or scientific
progress related to such goods or services.
3. Engaging in actions that in any way prevent access to the market.
4. Using one relevant market’s dominant position to defend or penetrate
another relevant market.

COMBINATIONS AND THEIR REGULATION

The third area of competition law’s concentration is the regulation of

combinations. The three types of combinations regulated by the Competition
Act, 2002 are as follows:

1. A person or business buying the stock, voting rights, or assets of

another entity.
2. Individuals gaining control over an enterprise.
3. Combinations or mergers between or among businesses.
Combinations are defined in Section 5 of the Act by a set of cutoff points below
which they are not subject to the Competition Act’s scrutiny. The fundamental
reasoning for imposing such restrictions is that joining forces between tiny
businesses or entities may not significantly harm competition in Indian
marketplaces. However, an exception has been made in the case of any
covenant in a loan agreement or an investment agreement in favour of
governmental financial institutions, foreign institutional investors, banks, or
venture capital funds.

Additionally, the provisions of the regulations for combinations are covered

under Section 6 of the Act. It stipulates that within 30 days of the execution of
any acquisition instrument or the board of directors’ acceptance of the request
for amalgamation or merger, the Commission must be notified in writing of the
specifics of the proposed combination, together with the required costs. 210
days after giving notice to the commission or the date on which the commission
has rendered any order with respect to that notice, whichever comes first, are
required for the combination to go into force.

PENALTIES UNDER THE COMPETITION ACT 2002 ARE:

1. Penalty for failure to comply with the directions of commission and

Director General-

In any case, if a person or entity fails to comply with the direction given by the
Commission under the sub-section 2) and 4) of section 36 or the directions
given by the Director General while exercising the powers referred to in sub
section 2) of section 41, and that too without any reasonable cause, then such a
person will be punishable and shall have to fulfill a fine which could extend up
to the sum of one lakh rupees for each day of non-compliance. However, this
sum of penalty could not exceed one crore rupees.

2. Penalty for non-furnishing of Information on Combinations-

In case any person or entity fails to give notice to the Commission under sub-
section (2) of section 6, then such a Commission shall be imposed by a penalty
which may extend up to one percent of the total turnover of the assets of such a
combination.

3. Penalty for making false statement or omission to furnish the material

Information-

In case a person or a party makes a statement which is false in any material or

they know that they are furnishing a false material and/or omits to submit the
material towards compliance of the Competition Act 2002, then such a person is
liable to a penalty of not less than fifty lakh rupees and it may extend maximum
to one crore rupees as may be determined by the Commission.

4. Penalty for the Offences in relation to furnishing the Information-

In case a person who is required to furnish information under the Competition

Act 2002 in form of any or documents or any other kind and makes a statement
which he knows is falls and/or omits some of the material information, or
willfully alter them or try to suppress or destroy any such document then such a
person is liable to be punished with a monetary fine which may extend up to
one crore rupees.

Consumer Protection Act, 1986

The Consumer Protection Act was implemented in order to provide better
protection to the rights of the consumers. Prior to the implementation of this
Act, there was no special act for protecting the consumers and the only remedy
available to the consumers was under the Law of Torts i.e filing a civil suit for
damages against the shopkeeper or the service provider. This act is based on
the doctrine of Caveat Emptor which means that it is the responsibility of the
buyer to identify the defects in the good.

Definitions

1. Consumer A consumer is an individual or group of individuals who

purchase goods and services for their own personal use and not for the
purpose of manufacturing or resale. Section 2(7) of the Consumer
Protection Act, 2019 defines a consumer as any person who buys goods
or services in exchange for consideration and utilises such goods and
services for personal use and for the purpose of resale or commercial use.
In the explanation of the definition of consumer, it has been distinctly
stated that the term ‘buys any goods’ and ‘hires or avails any services’
also includes all online transactions conducted through electronic means
or direct selling or teleshopping or multi-level marketing.
2. "consumer dispute" means a dispute where the person against whom a
complaint has been made, denies or disputes the allegations contained in
the complaint.
3. "defect" means any fault, imperfection or shortcoming in the quality,
quantity, potency, purity or standard which is required to be maintained
by or under any law for the time being in force under any contract,
express or implied or as is claimed by the trader in any manner
whatsoever in relation to any goods;
4. "deficiency" means any fault, imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance which is required to be
maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service;
5. “unfair trade practice” means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or for the provision of any
service, adopts any unfair method or unfair or deceptive practice
including any of the following practices, namely:—
(1) the practice of making any statement, whether orally or in writing or
by visible representation which,—
(i) falsely represents that the goods are of a particular standard, quality,
quantity, grade, composition, style or model;
(ii) falsely represents that the services are of a particular standard, quality
or grade;
(iii) falsely represents any re-built, second-hand, renovated, reconditioned
or old goods as new goods;
(iv) represents that the goods or services have sponsorship, approval,
performance, characteristics, accessories, uses or benefits which such
goods or services do not have;
(v) represents that the seller or the supplier has a sponsorship or approval
or affiliation which such seller or supplier does not have;
(vi) makes a false or misleading representation concerning the need for,
or the usefulness of, any goods or services;
(vii) gives to the public any warranty or guarantee of the performance,
efficacy or length of life of a product or of any goods that is not based on
an adequate or proper test thereof:
6. "service" means service of any description which is made available to
potential users and includes, but not limited to, the provision of
facilities in connection with banking, financing insurance, transport,
processing, supply of electrical or other energy, board or lodging or both,
housing construction, entertainment, amusement or the purveying of news
 or other information, but does not include the rendering of any service
free of charge or under a contract of personal service.

Consumer Rights and Responsibilities:

The Rights of the Consumer

 Right to Safety- Before buying, a consumer can insist on the quality and
guarantee of the goods. They should ideally purchase a certified product
like ISI (Indian Standards Institute )or AGMARK.( Agricultural Mark)
 Right to Choose- Consumer should have the right to choose from a
variety of goods and in a competitive price.
 Right to be informed- The buyers should be informed with all the
necessary details of the product, make her/him act wise, and change the
buying decision.
 Right to Consumer Education- Consumer should be aware of his/her
rights and avoid exploitation. Ignorance can cost them more.
 Right to be heard- This means the consumer will get due attention to
express their grievances at a suitable forum.
 Right to seek compensation- The defines that the consumer has the right
to seek redress against unfair and inhumane practices or exploitation of
the consumer.
The Responsibilities of the Consumer

 Responsibility to be aware – A consumer has to be mindful of the safety

and quality of products and services before purchasing.
 Responsibility to think independently– Consumer should be well
concerned about what they want and need and therefore make
independent choices.
 Responsibility to speak out- Buyer should be fearless to speak out their
grievances and tell traders what they exactly want
 Responsibility to complain- It is the consumer’s responsibility to
express and file a complaint about their dissatisfaction with goods or
services in a sincere and fair manner.
 Responsibility to be an Ethical Consumer- They should be fair and not
engage themselves with any deceptive practice.

Redressal Agencies or Three-Tier Grievances Machinery under the

Consumer Protection Act
The three redressal agencies under the Consumer Protection Act, 2019 are
District Commission, State Commission, and National Commission.
1. District Commission

A district commission includes a president (who can be a working or retired

judge of the District Court) and two other members. They are appointed by the
state government. One can file a complaint for goods and services of ₹1 crore
or less in this agency. For the complaints filed, if the district commission feels
a requirement, it sends the goods to the laboratory for testing and gives its
decision based on the laboratory report and facts.
If the aggrieved party is not happy with the jurisdiction of the district
commission, then they can appeal against the judgment of this agency in the
State Commission within 45 days.

2. State Commission

A state commission includes a president (who must be a working or retired

judge of the High Court) and at least two other members. They are appointed
by the state government. One can file a complaint of goods and services worth
less than ₹10 crores and more than ₹1 crore in this agency. After receiving a
complaint from the aggrieved party, the state commission contacts the party
against whom the complaint has been filed. Also, for the complaints filed, if
the state commission feels a requirement, it sends the goods to the laboratory
for testing.
If the aggrieved party is not happy with the jurisdiction of the state
commission, then they can appeal against the judgment of this agency in the
National Commission within 30 days by depositing 50% of the fine money.

3. National Commission

A national commission includes a president and four other members one of

whom shall be a woman, and Central Government appoints them. One can file
a complaint of goods and services worth more than ₹10 crores in this agency.
After receiving a complaint from the aggrieved party, the national commission
informs the party against whom the complaint has been filed. Also, for the
complaints filed, if the state commission feels a requirement, it sends the
goods to the laboratory for testing, and then gives judgement based on the
reports.
If the aggrieved party is not happy with the jurisdiction of the national
commission, then they can appeal against the judgment of this agency in the
Supreme Court within 30 days by depositing 50% of the fine money.
District Commission v/s State Commission v/s National Commission

District State National

Basis Commission Commission Commission

A state
A district
commission A national
commission
includes a commission
includes a
president and at includes a
president and two
Composition least two other president and four
other members,
members, and other members
and one of the
one of the one of whom shall
members has to be
members has to be a woman.
a woman.
be a woman.

A working or A working or
A working or
retired judge of retired judge of
retired judge of the
the High Court the Supreme
Who can be District Court can
can be a Court can be a
a President be a president of
president of the president of the
the District
State National
Commission.
Commission. Commission.

By taking the After consulting After consulting

recommendation with the Chief with the Chief
of the selection Justice of the Justice of India,
committee, the High Court, the the central
Appointment
state government state government government
of President
appoints the appoints the appoints the
president of the president of the president of the
District State National
Commission. Commission. Commission.

Jurisdiction One can file a One can file a One can file a
complaint for complaint of complaint of
goods and services goods and goods and
 District State National
Basis Commission Commission Commission

services worth
services worth
less than ₹10
of ₹1 crore or less. more than ₹10
crores and more
crores.
than ₹1 crore.

If the aggrieved
party is not happy
with the
If the aggrieved
jurisdiction of the
party is not
national
If the aggrieved happy with the
commission, then
party is not happy jurisdiction of
they can appeal
with the the state
against its
jurisdiction of the commission,
judgment in the
Appeal district then they can
Supreme Court
against commission, then appeal against its
within 30 days by
orders they can appeal judgment in the
depositing 50% of
against its National
the fine money.
judgment in the Commission
However, one can
State Commission within 30 days
file the complaint
within 45 days. by depositing
only when the
50% of the fine
value of goods
money.
and services
exceeds ₹10
crores.