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Overview of Competition Law

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Overview of Competition Law

Competition Law in India is a serious business now. Ignorance of this law and its implications on businesses can be very costly, and damage reputations apart from attracting personal liabilities for the staff, even the directors on board.The Competition Act, 2002 was enacted with the purpose to ‘prevent practices having adverse effects on competition, promote competition in the markets, and protect the interests of consumers in India’. The Act eventually came into enforcement in 2009 when the constitutionality of the law was established by the Hon’ble Supreme Court in the case of Brahm Dutt v. Union of India. As a result, provisions on enforcement of competition law dealing with the anti-competitive agreement and abuse of dominant position were enforced in 2009, and merger control provision been enforced from 2011.

The idea of Competition law first originated in the United States and was developed in the 1900 century to control monopolies. The Indian Competition legislation, being newly developed, is inspired by the mix of competition laws models of the United States and European Union. As India draws its inspiration from the mix of US and EU model competition laws which can be seen from the structure of the Indian Act, therefore there has always been a tendency to draw straightforward comparisons amongst these anti-trust regimes.

The Competition Act established the Competition Commission of India (hereinafter referred to as the CCI) in 2009, as the principal enforcement authority governing competition law legislation in India. The CCI follows an inquisitorial system of adjudication, where the CCI is actively involved in the inquiry and investigation of any case. The CCI can take up anti-trust cases either in three ways –

  1. Suo-moto (on its own motion/knowledge/information), or
  2. On getting information from any private person (whether or not aggrieved by the conduct of any enterprise), or
  3. On a reference from Central/State Government/statutory authority/public group etc.

The office of the Director-General (hereinafter referred to as DG office/DG) under the Ministry of Corporate Affairs works as the investigation wing of the CCI and is tasked with collecting evidence by way of dawn raids, affidavits, examination on oath, placed before the CCI as DG report. Currently, the CCI and the DG office has been functioning in New Delhi; and the regional offices of the CCI have been opened recently in Chennai, another expected soon at Mumbai. Further, National Company Law Appellate Tribunal (hereinafter referred to as the NCLAT) acts as an appellate authority for hearing appeals from the order/directions of the CCI, and then the Supreme Court acts as the last resort court.

The Competition law ensures creating a level playing field for all market participants and prohibits business activities/practices that decrease or are even likely to decrease fair competition in the Indian market. Dimensions of competition law are multifaceted, however, broadly the framework of competition law in India can be classified into 3 categories –

  1. Constitute an Agreement Anti-Competitive in nature
  2. Abuse Dominance in the market
  3. Prior Approvals for certain combinations/Merger Control

Harm to competition is measured in form of having or not having an Appreciable Adverse Effect on the Competition (AAEC) in the relevant market, which is an analysis of the impact of any business activity in the relevant market. The CCI is not always required to delineate relevant markets before proceeding with anti-competitive agreements cases under Section 3 of the Competition Act, 2002, however, for an abuse of dominance case under Section 4 of the Competition Act, 2002, the CCI needs to delineate the relevant market.

This relevant market comprises a relevant product market and relevant geographic market.

  • Relevant product market comprises all interchangeable or substitutable products/services as regarded by the consumer, because of their characteristics/prices /intended use, and is determined by seeing factors like – physical characteristics/end-use of goods, price of goods/service, consumer preferences, exclusion of in-house production, the existence of any specialized producers, classification of industrial products.
  • The relevant geographic market comprises of a distinctly homogenous area in which the conditions of competition for the supply of goods/services or demand of goods/services can be distinguished from the conditions prevailing in the neighbouring areas, and is determined by seeing factors like – regulatory trade barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport costs, language, consumer preferences, need for secure or regular supplies or rapid after-sales services.

Within this short period, the CCI has reviewed more than 1100 cases of anti-competitive practices in diverse sectors of the economy such as airlines, banking, capital markets, e-commerce & digital markets, infrastructure, travel, automobile, real estate, pharmaceuticals, financial sector, publishing, manufacturing, mining, entertainment, Google, DLF, Cement companies (ACC, Ambuja, Binani, Lafarge, UltraTech, etc), JCB, Car Manufacturers (Maruti Suzuki, M&M, Tata Motors, Toyota, Honda, Volkswagen, Fiat, Ford, Mercedes, Skoda, etc), Coal India Ltd, Druggist & Pharmaceuticals Associations, Lupin etc.

-Ketan Mukhija

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