Basic Primer on the Indian Competition Act

Table of Contents

1. MRTP Act replaced by Competition Act, 2002
2. Role and purpose of Competition Act, 2002
3. Overall scheme of Competition Act, 2002
4. Competition Commission of India

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1. MRTP Act replaced by Competition Act, 2002

Monopolies and Restrictive Trade Practices Act (MRTP) was passed in 1969 to ensure that operation of economic system does not result in the concentration of economic power to common detriment. The Act also provided for control of monopolies and prohibition of monopolistic and restrictive trade practices. Subsequently, provisions in respect of Unfair Trade Practices were inserted w.e.f. 1-8-1984. After the Government of India decided to liberalise economic policy, provisions in respect of concentration of economic power were deleted by omitting Part A of Chapter III of MRTP Act w.e.f. 27-9-1991. Only powers to order division of undertaking or to direct severance of inter-connection of undertakings were retained, but these powers were never used.

After omission of these powers, MRTP Commission became a toothless tiger and was looking after cases relating to unfair trade practices and restrictive trade practices.

Finally, MRTP Act was repealed on 1-9-2009 and MRTP Commission was abolished on 14-10-2009.

1.1 Distinction between MRTP Act and Competition Act

There is not much fundamental distinction between basic principles of MRTP Act and Competition Act. It was perfectly possible to incorporate the provisions of Competition Act into MRTP Act.

However, the basic change is not in the contents of the provisions but the outlook of the Act. The MRTP Act was considering the problem of monopoly and anti-competitive practices as a legal issue to be considered from legal angle, while Competition Act considers these issues as economic issues to be considered from economic point of view.

MRTP Commission was conceived as a quasi-judicial body with judicial as well as non-judicial members. It was headed by a person who is or was Judge of Supreme Court or High Court. The Commission was sitting as ‘benches’. It was hearing the deciding the case as if it is a regular civil suit.

Thus, legal aspects got predominance over the business aspects. In fact, same thing happened in SICA which was a major reason for its failure.

This is also a major reason why winding up of a company continued for 20-30 years since the issue was considered as a legal issue and not economic issue. Insolvency Code is a vast improvement over earlier provision.

Competition Commission is conceived as a regulatory body of experts in economic affairs looking at the issue from economic impact of a business action. There will be no ‘benches’ of Commission. There will be no ‘complaint’, but only ‘information’ or ‘reference’. There will be no ‘hearing’, but only ‘meeting’.

The Competition Commission can be compared with SEBI or TRAI which consists of persons having expertise in the relevant field.

Of course, a judge cannot ignore economic aspects and an economist cannot ignore legal aspects, but point is of emphasis and basic outlook towards an economic activity.

To ensure that legal issues are not side tracked, appeal to NCLAT and further appeal to Supreme Court has been provided.

All in all, Competition Act is an improvement over MRTP Act from this point of view. Let us hope that the Act helps in growth of economy and does not prove to be an hindrance.

1.2 Consumer Protection Act, 2019

Consumer Protection Act, 2019 has provisions relating to ‘Unfair contracts and Restrictive and Unfair trade practices’. However, in that case, the focus is on individual customer or small group of customers.

Technically, National Consumer Disputes Redressal Commission (National Commission) can be approached in some cases, but surely, Competition Commission of India (CCI) is most appropriate forum in case of agreements or actions covered under Competition Act.

2. Role and purpose of Competition Act, 2002

Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers. A fair competition in market is essential to achieve this objective. The goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.

The Competition Act, 2002 follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

The objectives of the Act are sought to be achieved through the Competition Commission of India (CCI). The CCI consists of a Chairperson and Members appointed by the Central Government.

It is the duty of the Commission to eliminate practices having 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 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.

Control over abuse of dominant position in market – All over the world, it has been found that private monopolies can be detrimental to national economy and it is necessary to control them. It is felt that fair and free competition is required for growth of healthy economy.

Hence, need was felt to make provisions to ensure that there is free and fair competition and there is no abuse of dominant position. Competition Act was passed in 2002 with this view.

Provision in USA – In USA, Sherman Act, 1980 provides that every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

Sherman Act seeks to promote fair competition and protects consumers and businesses from anti-competitive business policies.

European Community Competition Law – In EU, European Community Competition Law is designed to ensure competition of internal market i.e. free flow of working people, goods, services and capital in a borderless Europe. The provisions control cartels, monopolies and mergers.

2.1 Objects of the Competition Act

As per Preamble to the Competition Act, the Act is to provide, keeping in view of the economic development of the country, for the establishment of a Competition Commission –

(a) to prevent practices having adverse effect on competition.

(b) to promote and sustain competition in markets.

(c) to protect the interests of consumers.

(d) to ensure freedom of trade carried on by other participants in markets in India, and

(e) for matters connected therewith or incidental thereto.

Thus, main purpose of Competition Act is to ensure free and fair competition in market by prohibiting anti-competitive agreements, abuse of dominant position and by regulating competition.

Anti-trust – IN USA, anti-competitive practices are termed as ‘anti-trust’.

2.2 Statement of Objects and Reasons for Competition Act, 2002

The ‘Statement of Objects and Reasons appended to the Competition Bill, 2001 states as follows –

“1. In the pursuit of globalisation, India has responded by opening up its economy, removing controls and resorting to liberalisation. The natural corollary of this is that the Indian market should be geared to face competition from within the country and outside. The Monopolies and Restrictive Trade Practices Act, 1969 has become obsolete in certain respects in the light of International Economic Developments relating more particularly to competition laws and there is a need to shift our focus from curbing monopolies to promoting competition.

2. The Central Government constituted a High Level Committee on Competition Policy and Law. The Committee submitted its report on the 22nd May, 2000 to the Central Government. The Central Government consulted all concerned including the trade and industry associations and the general public. The Central Government after considering the suggestions of the trade and industry and the general public decided to enact a law on Competition.

3. The Competition Bill, 2001 seeks to ensure fair competition in India by prohibiting trade practices which cause appreciable adverse effect on competition in markets within India and, for this purpose, provides for the establishment of a quasi-judicial body to be called the Competition Commission of India (hereinafter referred to as CCI) which shall also undertake competition advocacy for creating awareness and imparting training on compe­tition issues.

4. The Bill also aims at curbing negative aspects of competition through the medium of CCI”.

[Note – After amendments to Competition Act made in 2007, the CCI does not have judicial member as was originally envisaged at the time of passing the Competition Act in 2002. However, it is a ‘quasi judicial authority’.

2.3 Objects and reasons of 2007 amendments

The Statement if Objects and Reasons of 2007 Amendment Bill states as follows –

1. 1. The Competition Act was enacted in 2002 keeping in view the economic developments that resulted in opening up of the Indian economy, removals of controls and consequent liberalisation which required that the Indian economy be enabled to allow competition in the market from within the country and outside. The Competition Act, 2002 (hereinafter referred to as the Act) provided for establishment of a Competition Commission (the 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.
   2. The Competition Commission of India was established on 14^thOctober, 2003 but could not be made functional due to filing of a writ petition before the Hon’ble Supreme Court. While disposing of the writ petition on the 20^thJanuary, 2005, the Hon’ble Supreme Court held that of an expert body is to be created by the Union Government, it might be appropriate for the Government to consider the creation of two separate bodies, one with expertise for advisory and regulatory functions and the other for adjudicatory functions based on the doctrine of separation of powers recognised by the Constitution. Keeping in view the judgment of Hon’ble Supreme Court, the Competition (Amendment) Bill, 2006 was introduced in Lok Sabha on 9^th March, 2006 and the same was referred for consideration and report to the Parliamentary Standing Committee. Taking into account the recommendations of the Committee, the Competition (Amendment) Bill, 2007 is being introduced.
   3. The Competition (Amendment) Bill, 2007, inter alia, provides for the following – (a) the Commission shall be an expert body which would function as a market regulator for preventing and regulating anti-competitive practices in the country in accordance with the Act and it would also have advisory and advocacy functions in its role as a regulator.

(Other clauses only give highlights of the provisions of Amendment Bill and hence not reproduced here).

3. Overall scheme of Competition Act, 2002

The Act is designed for following purposes –

• • Prohibition of anti-competitive agreements [section 3 of Competition Act].
  • Prohibition of abuse of dominant position [section 4 of Competition Act].
  • Regulation of combinations [sections 5 and 6 of Competition Act].
  • Competition advocacy – opinion to Central/State Government on effect on competition while Government is forming a policy [section 49 of Competition Act]

3.1 Arrangement of chapters and sections of Competition Act, 2002

3.2 Implementation of Competition Act in stages

Competition Act, 2002 was passed in 2002 but there was delay in its implementation.

Competition Act was passed in 2002 to replace MRTP Act. Only some sections of the Act were made effective w.e.f. 31-3-2003 and 19-6-2003. Competition Commission of India (CCI) was established with head office at New Delhi, vide Notification No. 1198(E) dated 14-10-2003.

However, the Chairman of CCI could not assume office due to objection raised at the time of hearing before SC in a Public Interest Litigation (PIL).

Supreme Court had expressed displeasure over these provisions. Government filed reply and agreed to make certain changes in law. Hence, in Brahm Dutt v. UOI AIR 2005 SC 730 = 57 SCL 429 (SC 3 member bench), it was held that Government can go ahead with formation of Competition Commission (after making changes as agreed).

Later, Competition (Amendment) Bill, 2006 was introduced in Lok Sabha for amending various provisions of Competition Act. The Bill was referred to Parliamentary Standing Committee. After considering the recommendations of Committee, Competition (Amendment) Bill, 2007 was introduced in Parliament. The Bill was passed by both houses of Parliament in September, 2007. Some of the provisions were brought into effect on 12-10-2007.

Finally, Competition Act was made effective from 20-5-2009. Most of the provisions of Competition Act, 2002 were brought into force, except the provisions relating to Combination [sections 5, 6, 20, 29, 30, 31, 43A and 44 of Competition Act].

Provisions relating to prohibition of anti-competitive agreements, prohibition of abuse of dominant position, enquiry into agreements or abuse of dominant position, competition advocacy and reference to and by statutory authority were brought into effect from 20-5-2009.

Provision relating to repeal of MRTP Act was brought into effect on 1-9-2009.

Provisions relating to Combination sections 5, 6, 20, 29, 30 and 31 of the Competition Act were brought into effect w.e.f. 1-6-2011 [Notification No. S.O. 479(E) dated 4-3-2011].

Sections 43A and 44 of the Competition Act were also brought into effect w.e.f. 1-6-2011.

Sections 53C to 53M of the Competition Act which relate to formation of CAT (Competition Appellate Tribunal) were brought into effect w.e.f. 20-12-2007. Now, CAT has been replaced by NCLAT w.e.f. 26-5-2017. Hence, sections 53C to 53M have been omitted w.e.f. 26-5-2017.

Thus, now all provisions of Competition Act have been brought into effect.

4. Competition Commission of India

An authority named ‘Competition Commission of India’ (CCI) has been constituted under section 7 of Competition Act, consisting of Chairperson and members. The Chairperson and members of CCI are persons having experience in economic affairs. Thus, they will not be from judicial field.

Presently, Ms Sangeeta Gupta is Acting Chairperson, Mail – Sangeeta.v@nic.in

Earlier, Mr Ashok Chwla was appointed as Chairperson of CCI w.e.f. 20-10-2011 for a period of five years [Notification No. S.O. 2725(E) dated 1-12-2011] [Earlier Mr Dhanendra Kumar was appointed as Chairperson of CCI vide Notification No. SO 870(E) dated 27-3-2009].

CCI will appoint Secretary and other officers for administration work.

Presently, Jyoti Jindgar Bhanot in Secretary I/c.

Earlier, Mr S L Bunker was Secretary, CCI.

Regional Offices – CCI has regional offices at Chennai, Kolkata and Navi Mumbai.

4.1 CCI is independent authority to consider violations of Competition Act

CCI is independent authority to consider violations of Competition Act and has jurisdiction to consider the matters relating to Competition Act, even if matter is sub judice before High Court and Supreme Court. There is no overlapping of jurisdiction of CCI and Constitutional Courts – Meta Platforms Inc. v. Competition Commission of India (2023) 175 SCL 176 = 143 taxmann.com 391 (SC).

4.2 Enquiry by DGCC

On receipt of any information or reference or even on its own, CCI can make enquiry [section 19 of Competition Act].

If CCI finds a prima facie case, it shall direct Director General of Competition Commission (DGCC) to investigate [section 26 of Competition Act].

Dr Atul Verma, IPS, is presently Director General/Mail dg@cci.gov.in.

His report will then be considered by CCI. The CCI will hear the concerned parties and then pass necessary orders [section 27 of Competition Act].

4.3 Other provisions relating to CCI

Other provisions relating to Competition Commission of India (CCI) are summarized below.

Decisions by CCI at meeting by majority – Decisions of CCI will be taken at the ‘meetings’ [section 22 of Competition Act]. There will be no ‘benches’.

Powers of CCI – CCI is empowered to order division of dominant enterprises [section 28 of Competition Act]. It can order that a combination (acquisition, amalgamation, merger etc.) will not be effective [section 31(2) of Competition Act]. CCI can order discontinuance of anti-competitive agreement or discontinue abuse of dominant position [section 27 of Competition Act].

CCI cannot award compensation [section 53N of Competition Act].

CCI can impose penalties and fine under sections 27(b), 42(2), 43, 43A and 45 of Competition Act.