COMPETITION LAWS - A BASIC UNDERSTANDING
COMPETITION AND COMPETITION LAWS IN INDIA
In common parlance, competition in the market means sellers striving independently for buyers’ patronage to maximize profit (or other business objectives). A buyer prefers to buy a product at a price that maximizes his benefits whereas the seller prefers to sell the product at a price that maximizes his profit.
Competition is now universally acknowledged as the best means of ensuring that consumers have access to the broadest range of services at the most competitive prices. Producers will have maximum incentive to innovate, reduce their costs and meet consumer demand. Competition thus promotes allocative and productive efficiency. But all this requires healthy market conditions and governments across the globe are increasingly trying to remove market imperfections through appropriate regulations to promote competition.
Unfair competition means adoption of practices such as collusive price fixing, deliberate reduction in output in order to increase prices, creation of barriers to entry, allocation of markets, tie-in sales, predatory pricing, discriminatory pricing, etc.
COMPETITION LAW AND POLICY
Competition Law and policy is defined as those Government measures that affect the behaviour of enterprises and structure of the industry with a view to promote efficiency and maximize welfare.
COMPETITION ACT 2002 AND IT’S FEATURES:
There are two elements of such Government measures:-
1. Competition Policy: Set of policies, such as liberalized trade policy, relaxed FDI policy, de-regulation, etc., that enhances competition in the markets.
2. Competition Law: To prevent anti-competitive practices with minimal intervention.
OBJECTIVES OF THE COMPETITION ACT
The Preamble states that this is an Act to establish a Commission to prevent anti- competitive practices, promote and sustain competition, protect the interests of the consumers and ensure freedom of trade in markets in India. The objectives of the Act are sought to be achieved through the instrumentality of the Competition Commission of India (CCI) which has been established by the Central Government with effect from 14th October 2003.
COMPETITON COMMISSION OF INDIA (CCI) AND ITS FUNCTIONS
CCI shall prohibit anti-competitive agreements and abuse of dominance, and also regulate combinations (mergers or amalgamations or acquisitions) through a process of inquiry/investigation. It shall give opinion on competition issues on a reference received from an authority established under any law (statutory authority) /Central Government/ a State Government. CCI is also mandated to undertake competition advocacy, create public awareness and impart training on competition issues.
An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anti-competitive agreements include, but are not limited to:-
1. agreement to limit production and/or supply;
2. agreement to allocate markets;
3. agreement to fix price;
4. bid rigging or collusive bidding;
5. conditional purchase/ sale (tie-in arrangement);
6. exclusive supply / distribution arrangement;
7. resale price maintenance; and
8. refusal to deal.
ABUSE OF DOMINANCE
Dominance refers to a position of strength which enables an enterprise to operate independently of competitive forces or to affect its competitors or consumers or the market in its favour. Abuse of dominant position impedes fair competition between firms, exploits consumers and makes it difficult for the other players to compete with the dominant undertaking on merit. Abuse of dominant position includes:
1. imposing unfair conditions or price,
2. predatory pricing,
3. limiting production/market or technical development ,
4. creating barriers to entry,
5. applying dissimilar conditions to similar transactions,
6. denying market access, and
7. using dominant position in one market to gain advantages in another market.
INQUIRY INTO ANTICOMPETITION BY CCI
In the following given conditions the CCI can initiate inquiry into anticompetition:
1. On its own on the basis of information and knowledge in its possession, or
2. On receipt of an information, or
3. On receipt of a reference from the Central Government or a State Government or a statutory authority.
COMBINATION UNDER THE ACT
The provisions relating to combinations have not yet been notified. Broadly, combination includes acquisition of control, shares, voting rights or assets, acquisition of control by a person over an enterprise where such person has control over another enterprise engaged in competing businesses, and mergers and amalgamations between or amongst enterprises where these exceed the thresholds specified in the Act in terms of assets or turnover. If a combination causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India, it is prohibited and can be scrutinized by the Commission.