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Competition Act 2002 and Competition Act Review Committee 2018

Reference

Meaning of Competition law

Types of conducts violates competition law

History of competition laws in India

MRTP Act, 1969

Competition Act, 2002

Difference between MRTP ACT 1969 and competition Act 2002

Objectives of the Competition Act 2002

Features of Competition Act 2002

Competition Act review committee, 2018

Reference

Competition is considered beneficial because it saves consumers money and encourages businesses to make better products. In a competitive market, companies must charge lower prices or offer higher quality products in order to be successful in gaining consumers’ business. But this may result in lesser profits for the company so, to gain maximum profit companies try to avoid any type of competitions. For this, they become ready for the mutual agreement with the competitor company. This is not fair for the open market economy.

What is Competition Law

Competition laws are designed to keep free competition in the marketplace. Antitrust laws, also referred to as “Antitrust laws,”. These laws are imposed by Government to protect consumers by ensuring that fair competition exists in an open-market economy.

Types of conducts violates Competition law

The steps taken by the vendors to reduce competition are called competition laws violation.

Common examples of these violations include:

  • Price fixing: It includes any agreement by competing vendors that establishes

boundaries for pricing, such as setting a minimum or maximum price.

  • Bid rigging: It includes any agreement by independent competitors to not fully compete against each other in responding to a request for bid, including:
  1. an agreement to not bid
  2. an agreement to bid “under” a certain amount.
  3. an agreement to take turns bidding for certain jobs.
  • Market Division or Allocation: An agreement between competitors that they will not compete with respect to
  1. certain products
  2. certain customers or
  3. in certain geographical areas.
  • Boycotts: An agreement among competitors to not make sales to a particular customer or a market.
  • TYING: An agreement between two sellers of different products (first is holding market and second is not). Tying is occurred when the first will only sell that product to buyers who agree to also buy a second product from the seller.
  • Monopolization: It can occur when a dominant seller seeks to maintain or increase its market power by removing competitors from the market by following illegal or anti-competitive policies.

MRTP ACT, 1969

Post-independence many big firms entered the Indian market to monopolize the market. To safeguard the consumers the Government of India passed the MRTP Act 1969. Through this law the MRTP commission has the power to stop all business that create barrier for the scope of competition in Indian Economy.

The Competition Act, 2002

India’s antitrust law, The Competition Act, 2002 was passed in 2002 but was fully constituted on March 1, 2009 – replacing the Monopolistic and Restrictive Trade Practices Act (MRTP Act) of 1969. The Competition Act monitors any economic activity that monopolizes competition within the market; it aims to protect consumers and small enterprises and ensures the freedom of trade.

It extends to the whole of India except Jammu and Kashmir.

Difference between MRTP Act, 1969 and competition law 2002

Objectives of the competition Act 2002

  • To ensure that the operation of the economic system does not result in the concentration of economic powers in the hands of few.
  • To control the monopolies
  • To prohibit monopolistic and restrictive trade practices
  • Regulation of unfair trade practices

Features of competition act 2002

 (1) Prohibition of certain agreements between enterprises – section 3:

Agreements between enterprises at any stage (production, supply, distribution, storage, acquisition or control of goods or provision of services) shall be presumed as anti-competitive if they cause an adverse effect on competition within India.

 Competition law identifies the two types of agreements-

(i) Horizontal agreement – Agreement among the enterprises dealing with the same business.

(ii) Vertical Agreement- Agreement among the enterprises dealing with the different business.

 Under the competition law ‘horizontal agreement is presumed to be illegal agreement but ‘vertical agreement’ is decided illegal according to ‘rule of Reason’.

*Rule of reason– It is a legal approach by competition authorities to decide whether the agreement is illegal or not. It the agreement causes adverse impact on the competition, it is declared as illegal and is prohibited.

 (2) Prohibition of abuse of Dominant position- section 4:

            *Dominant position – as being created when one or more undertakings in a particular market use their position in that market to determine economic parameters such as price, supply, the amount of production and distribution, by acting independently.

There shall be an abuse of Dominant position if any enterprise:

  • Imposes unfair or discriminatory conditions in purchase/sale of goods/services.
  • Limiting and restricting production of goods and services
  • Create hindrance in entry of new operators in the market
  • Indulging in practices resulting in denial of market.

Any type of these practices is prohibited under the competition Act 2002. 

 (3) Regulation of combination:

            * Combination- Combination means acquisition of control, shares, voting rights or assets by a person/enterprise over any other enterprise.

The act is designed to regulate the operation and activities of combination. If any combination causes adverse impact on competition within the relevant market in India, can be restricted by the Commission.  

 (4) Competition advocacy:

Competition advocacy is one of the most significant features of the Act. It is the obligation of the commission to create awareness about the competition laws through non-enforcement measures. It also includes training programs, seminars, educational workshops about completion issues. 

Competition Act Review committee, 2018

 To review the competition act 2002 and to strengthen it according to the need of current scenario and need, the government has constituted Competition Law Review Committee in Sep 2018. It is a nine-member committee.

 The terms of reference of the committee:

  • To review the Competition Act/ Rules/ Regulations, in view of changing business environment and bring necessary changes, if required.
  • To look into international best practices in the competition fields, especially anti-trust laws, merger guidelines and handling cross border competition issues.
  • To study other regulatory regimes/ institutional mechanisms/ government policies which overlap with the Competition Act.
  • Any other matters related to competition issue and considered necessary by the Committee.

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