All about Competition Act, 2002 – Part I

CS Deepak Pratap Singh

Every law promulgated by any legislature is based on certain reason, belief and welfare of the society. The laws will provide us social security from exploitations, whether it will be physical or social. For development of a society and economy it is essential that there should be free competition among players. Every player in the market will get adequate space and time to participate and put their products or services before the people.

The economic environment in the world has been changed in last decade and continuously changing. There emerged large players and MNCs in the local market. The liberalization of Indian economy open door for many large MNCs to cater emerging markets in India. The Indian companies are also allowed to explore foreign markets for their products and services.

The Government of Indian to check various types of Restrictive and Unfair Trade Practices introduces Monopolies and Restrictive Trader Practices Act, 1969, which regulates and prohibits Restrictive and Unfair Trade practices. But in the course of time and due to changing business and economic environment in the world the MRTP Act, 1969 loses its significance. The government is now thinking to check and promote free play of competition instead of prohibiting it.

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 law and there is a need to shift our focus from curbing monopolies to promoting competition. The Act seeks to provide for;

The establishment of Competition Commission of India;
To prevent practices having adverse affect on the competition;
To promote and sustain competition in the market;
To protect interest of consumers and
To ensure free trade in the market.
The Competition Act, 2002 received accent of the president on 13th January, 2003. It extends to whole of India, except the state of Jammu and Kashmir.

Concept of Competition;

The Act does not provide any definition of Competition, it is generally understood that it is a process whereby the economic enterprises compete with each other to secure customers for their products and services. In this process the enterprises compete to outsmart their competitors and eliminate them from the market.

Competition is basically an economic rivalry amongst economic enterprises to control greater market powers. The Competition is a situation where market is always open to potential new enterprises and that enterprises operate under pressure of the Competition.

The Competition is necessary in the market to secure welfare of the customers and public.

The Competition Act, 2002 contains various provisions for regulation of fair competition in the market and for curbing monopolies and dominant position or any act to eliminate any enterprise by other in the market.

Applicability of the Act;

The act applies to all goods and services including goods imported into India. It applies to all enterprises whether they belong to private sector or government. However any act of government relatable to sovereign functions including the activities carried on by departments of the Central Government dealing with Security, Atomic Energy, Currency, Defence and Space are outside the scope of the act.

Any dispute relating to consumers, which has no affected on the Competition will not be considered under provisions of this act.

Section 3; is the charging section of the act, Section 3(1) provides that No enterprise and association of enterprises or person or association of persons shall enter into any agreement in respect of production, distribution, storage, acquisition or control of goods or provisions of services , which causes or likely to casue an appreciable adverse effect on the competition in India.

The anti-competitive agreements are of two types;

Horizontal Agreements;- this agreement emanating from the collective action of a group of persons engaged in the same line of business activity. These are in the nature of cartels or concerted actions which envisage uniformity or harmonisation of the market behaviour of a group of comprtiting producers or suppliers. The agreement will be achieved through instrumentality of association of enterprises or persons. The common forms of such agreements are ; price fixing, to limit production, bid rigging or collusive bidding.

Verticle Agreements; this types of agreement emanating from actions between enterpsies or persons at different stages or levels ( such as producers and distributers). The common form of this agreements are ; tie up agreements, exclusive supply, exclusive distribution, refusal to deal and resale price maintenance agreements.

Any agreement which has adverse effect on competition , shall be void.

The Provisions of Competition Act, 2002 provides some relief in the following cases , Section 3(5) ;Nothing contained in this section shall restrict-

(i) The right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under;

(a) The Copyright Act, 1957

(b) The Patent Act, 1970

(c) The Trade and Merchandise Marks Act, 1958

(d) The Geographical Indications of Goods ( Registration and Protection) Act, 1999

(e) The Designs Act, 2000

(f) The Semi-conductor Integrated Circuits Layout-Design Act 2000.

(ii) The right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.

Since all types of intellectual properties are prone to develop competition. The intellectual property provides its holder an exclusive right to perform productive and commercial activities related to property. But it does not mean that it also provides a right to dominate in the market.

The Competition Commission is empowered to inquire into any unreasonable conditions attached to the IPR agreements and can impose penalty on each of the parties to the agreement.

Note: We shall discuss other provisions of The Competition Act, 2002 in my next article.