Competition Act, 2002 Competition Act, 2002 has finally been made effective from 20-5-2009.

Most of the provisions of Competition Act, 2002 (as amended by 2007 Amendment Act) have been brought into force, except provisions relating to Combination [sections 5, 6, 20, 29, 30, 31, 43A and 44 of Competition Act]. MRTP Act has been abolished w.e.f. 1-9-2009. 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 have been brought into effect from 20-5-2009. 1-1 Objectives of 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 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. 1-2 Overall scheme of Competition Act The Act is designed for following purposes Prohibition of anti-competitive agreements [section 3 - provision made effective from 20-5-2009]. Prohibition of abuse of dominant position [section 4 - provision made effective from 20-5-2009]. Regulation of combinations [sections 5 and 6 - provision not made effective till May, 2010]. Competition advocacy opinion to Central/State Government on effect on competition while Government is forming a policy [section 49]

Competition Commission of India - An authority named Competition Commission of India (CCI) has been constituted under section 7 of Act, consisting of Chairperson and members. The Chairperson and members of CCI will be persons having experience in economic affairs. Thus, they will not be from judicial field. CCI will appoint Secretary and other officers for administration work. Enquiry by DGCC - On receipt of any information or reference or even on its own, CCI can make enquiry [section 19]. If CCI finds a prima facie case, it shall direct Director General of Competition Commission (DGCC) to investigate [section 26]. His report will then be considered by CCI. The CCI will hear the concerned parties and then pass necessary orders [section 27]. Decisions by CCI - Decisions of CCI will be taken at the meetings [section 22]. There will be no benches. Powers of CCI - CCI is empowered to order division of dominant enterprises [section 28]. It can order that a combination (acquisition, amalgamation, merger etc.) will not be effective [section 31(2)]. CCI can order discontinuance of anti-competitive agreement or discontinue abuse of dominant position [section 27] [Sections 27 and 28 are effective from 20-52009]. CCI can award compensation [section 53N]. CCI can impose penalties and fine under sections 27(b), 42(2), 43, 43A and 45 of Competition Act [These provisions (except section 43A which relates to combinations) have been made effective from 20-5-2009] Suitable powers are given to Commission and penalties are prescribed to ensure that orders of Commission are obeyed. Jurisdiction of Civil Court is barred. Appeal against order of CCI - Appeal to Competition Appellate Tribunal (CAT) has been provided [section 53B]. Appeal to Supreme Court can be made against order of CAT [section 53T]. 1-3 About CCI Competition Commission of India has office at following address Competition Commission of India, B wing, HUDCO Vishala; 14, Bhikaji

Cama Place; New Delhi 110 066. Tel 26701618/19 Website www.cci.gov.in Mr. Dhanendra Kumar has been appointed as Chairperson of CCI vide Notification No. SO 870(E) dated 27-3-2009. Other members of Competition Commission of India have also been appointed. Mr. S L Bunker is Secretary, CCI e-mail cci-bunker@nic.in 2 Prohibition of Anti-Competitive Agreements No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. [section 3(1)]. Any agreement entered into in contravention of the provisions contained in section 3(1) shall be void. [section 3(2)] (These provisions have been made effective from 20-5-2009). Anti-competitive agreements are specified in the Act in two categories (a) Presumed anti-competitive agreements - here burden is on defendant to prove that the practice is not anti-competitive and (b) Anti competitive if agreement affects competition - here the burden is on appellant (who is alleging anti-competitive practice) to prove that the practice is anti-competitive. 2-1 Presumed anti-competitive practices Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which (a) directly or indirectly determines purchase or sale prices (b) limits or controls production, supply, markets, technical development, investment or provision of services (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way

(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition. Nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. [section 3(3)]. In my opinion directly or indirectly determining purchase or sale price will include Resale Price Maintenance also and hence it will be a presumed anti-competitive price, though resale price maintenance is covered u/s 3(4). 2-2 Anti competitive if agreement affects competition Agreement where the appellant has to prove that the practice is anticompetitive are (a) tie-in arrangement (b) exclusive supply agreement (c) exclusive distribution agreement (d) refusal to deal (e) re-sale price maintenance. [section 3(4)]. These are discussed in later paragraphs (These provisions have been made effective from 20-5-2009). 2-3 Enterprises to whom the Provisions applies The provisions relating to anti-competitive agreement apply to all enterprises. Enterprise - Enterprise means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the

Central Government dealing with atomic energy, currency, defence and space. [section 2(g)]. Government and PSU covered - It can be seen that excluding sovereign functions of State, all activities of Government will be subject to control of CCI (Competition Commission of India). There is no exemption to Public Sector Undertakings (PSU) or enterprises controlled by Government. 2-4 Prohibition if the agreement affects competition Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including (a) tie-in arrangement (b) exclusive supply agreement (c) exclusive distribution agreement (d) refusal to deal (e) re-sale price maintenance - - shall be an agreement in contravention of section 3(1), if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. [section 3(4)] (This section has been made effective w.e.f. 20-5-2009). Thus, there is no presumption that the agreement is adversely affecting competition. In other words, burden is on complainant to prove that the agreement is adversely affecting competition. However, practices enumerated in section 3(3) are presumed (but not deemed) anti-competitive practices. 3 Prohibition of abuse of dominant position No enterprise or group shall abuse its dominant position. [section 4(1)]. (This section has been made effective from 20-5-2009). Note that dominant position itself is not prohibited. What is prohibited is its misuse. The abuse cam be by an enterprise or group. Group - Group means two or more enterprises which, directly or indirectly, are in a position to - (i) exercise twenty-six per cent or more of the voting rights in the other enterprise; or (ii) appoint more than fifty per cent of

the members of the board of directors in the other enterprise; or (iii) control the management or affairs of the other enterprise. [Explanation (b) to section 5]. Dominant Position - Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to - (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. [Explanation (a) to section 4(2)]. Purchase for commercial purposes covered - Note that for purpose of Consumer Protection Act, person purchasing goods/availing of services for commercial purposes will not be consumer, but he will be consumer under Competition Act. Relevant Market - Relevant market means the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets. [section 2(q)]. 3-1 What is abuse of dominant position Section 4(2) states that there shall be an abuse of dominant position under section 4(1), if an enterprise or group follows any of the following practices. Note that these are defined as abuse, i.e. these are prohibited. If any of the following practice is followed, it is abuse, and no further proof of any damage or loss is required. Unfair or discretionary conditions in purchase/sale - Directly or indirectly, imposing unfair or discriminatory (i) condition in purchase or sale of goods or services; or (ii) price in purchase or sale (including predatory price) of goods or service is abuse of dominant position. [section 4(2)(a)]. As per Explanation to this sub-section, the unfair or discriminatory condition in purchase or sale of goods or services and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service shall not include such discriminatory conditions or prices which may be adopted to meet the competition [section 4(2)(a)]. Thus, if such practices are adopted to meet competition, it will not be abuse of dominant power. Predatory price means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production

of the goods or provision of services, with a view to reduce competition or eliminate the competitors. [Explanation (b) to section 4(2)]. Limiting or restricting production or development - Limiting or restricting (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers, is abuse of dominant position [section 4(2)(b)]. Denial of market access - Indulging in practice or practices resulting in denial or market access in any manner, is abuse of dominant position [section 4(2)(c)] Supplementary obligations unconnected to main contract - Making conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject to such contracts, is abuse of dominant position. [section 4(2)(d)]. Using dominant position to enter another market - Using dominant position in one relevant market to enter into, or protect, other relevant market is abuse of dominant power. [section 4(2)(e)]. For example, Microsoft used its dominant position in Disk Operating System to dominate browser market and ruined Netscape. Division of enterprise enjoying dominant position - The Competition Commission may direct division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its dominant position. [section 28(1)] (Section 28 has been brought into force from 20-5-2009). 4 Inquiry into agreements or abuse of dominant position The Competition Commission may inquire into any alleged contravention of the provisions contained in section 3(1) or section 4(1) either on its own motion or (a) on receipt of any information, in such manner and accompanied by such fee as may be determined by regulations from any person, consumer or their association or trade association; or (b) on a reference made to it by the Central Government or a State Government or a statutory authority [section 19(1)] (This section has been brought into effect from 20-5-2009). Thus, Director General has no powers to make inquiry on his own [This power is available to Director General under MRTP Act].

5 Regulation of Combinations Take over, amalgamation, merger etc. are some of the ways of increasing market dominance. Competition Act intends to exercise control over such mergers and amalgamations, with a view to ensure that such amalgamations and mergers are not anti-competitive. The provisions are contained in sections 5 and 6. These sections have not been made effective till July, 2009. Hence, presently, the following discussions are of only academic interest. Summary of combinations - Broadly, combination can be either by acquisition or merger in one enterprise or an enterprise which belongs to a group. Various limits of assets/turnover have been fixed, depending on whether the enterprise being acquired/merged has similar product/services or dissimilar product/services. Summary of combinations are as follows

Type of combination Acquisition by a single acquirer but different goods/services [section 5(a)(i)]

Assets/turnover in India Joint Assets over Rs 1,000 crores or turnover over Rs 3,000 crores

Acquisition by a group but dissimilar goods/services [section 5(a)(ii)]

Group Assets over Rs 4,000 crores or turnover over Rs 12,000 crores

Acquisition by a single acquirer with similar or identical or substitutable goods/services [section 5(b)(i)] Acquisition by a group with similar or identical or

Joint Assets over Rs 1,000 crores or turnover over Rs 3,000 crores Group Assets over Rs 4,000 crores or

Assets/turnover in or outside India Joint Assets over US $ 500 million, including at least Rs 500 crores in India or turnover over US $ 1,500 million including at least Rs 1,500 crores in India Group Assets over US $ 2 billion including at least Rs 500 crores in India or turnover over US $ 6 billion including at least Rs 1,500 crores in India Joint Assets over US $ 500 million or turnover over US $ 1,500 million Group Assets over US $ 2 billion or

substitutable goods/services [section 5(b)(ii)] Merger or amalgamation of two enterprises [goods/services may be similar or different] [section 5(c)(i)] Merger or amalgamation in a group [goods/services may be similar or different] [section 5(c)(ii)]

turnover over Rs 12,000 crores Combined Assets over Rs 1,000 crores or turnover over Rs 3,000 crores Combined Assets over Rs 4,000 crores or turnover over Rs 12,000 crores

turnover over US $ 6 billion Combined Assets over US $ 500 million or turnover over US $ 1,500 million Combined Assets over US $ 2 billion or turnover over US $ 6 billion

Mandatory notice to Commission - Any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission, in the form as may be specified, and the fee as prescribed by regulations, disclosing the details of the proposed combination, within thirty days of (a) approval of the proposal relating to merger or amalgamation, referred to in section 5(c) by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be or (b) execution of any agreement or other document for acquisition referred to in section 5(a) or acquiring of control referred to in section 5(b). [section 6(2)]. Thus, notice within 30 days is mandatory. Cooling period of 210 days There is cooling period of 210 days after such notice is given. Combination cannot become effective during the cooling period. Procedure at Commission after receiving notice - The Commission shall, after receipt of notice u/s 6(2), Commission shall examine the notice and form prima facie opinion as provided in section 29(1) and then proceed as per provisions of section 29, 30 and 31 [section 6(3) read with section 30] (These provisions have not been made effective till May 2009). As per section 29(1), the Commission has to form a prima facie opinion whether a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India. If it forms such an opinion, it shall issue a notice to show cause to the parties. Thus, if Commission forms prima facie opinion that the combination will not adversely affect competition, it need not proceed further. Otherwise, it will issue show cause notice to parties to combination and commence further proceedings.

Deemed approval if Commission does not issue orders in 210 days - If the Commission does not, on the expiry of a period of 210 days from the date of notice given to Competition Commission u/s 6(2), the combination shall be deemed to have been approved by the Commission [section 31(11)]. 6 CCI and DGCI Competition Commission of India has been established with head office at New Delhi, vide notification No. 1198(E) dated 14-10-2003. The Commission shall consist of a Chairperson and not less than two and not more than six other Members to be appointed by the Central Government [section 8(1)]. The Chairperson and every other Member shall be a person of ability, integrity and standing and who has special knowledge of, and professional experience of not less than fifteen years in international trade, economics, business, commerce, law, finance accountancy, management, industry, public affairs, which, in the opinion of the Central Government, may be useful to the Commission [section 8(2)]. The Chairperson and other Members shall be whole-time Members. [section 8(3)]. Thus, Chairman of Commission will not be persons from judiciary. The chairperson or member shall not hold office after he attains age of 65 years [proviso to section 10(1)]. Director General, Secretary and Officers - Function of Director General (DG) is to assist Competition Commission in conducting enquiry into contravention of any provisions of the Act and for performing other functions as provided under Competition Act [section 16(1)]. Secretary will be in charge of administration side of Commission. He and his staff will be appointed by Commission, i.e. CCI [section 17(1)]. These provisions have been made effective w.e.f. 12-10-2007. The Central Government will, by notification appoint a Director General for assisting CCI in conducting inquiry into contravention of any of provisions of the Act or to perform other functions as provided by or under the in the Act [section 16(1)]. Additional, Joint, Deputy or Assistant Directors General or officers and other

employees in office of Director General shall be appointed in the prescribed manner [section 16(1A)]. Director General to investigate contraventions - The Director General shall, when so directed by the Commission, assist the Commission in investigating into any contravention of the provisions of this Act or any rules or regulations made thereunder. [section 41(1)]. The Director-General shall have all the powers as are conferred upon the Commission under section 36(2). [section 41(3)]. Secretary and officers and other employees of Commission - The Commission may appoint a Secretary and such officers and other employees, as it considers necessary for the efficient performance of its functions under this Act [section 17(1)]. The salaries and allowances payable to and other terms and conditions of service of the Secretary and officers and other employees of the Commission and the number of such officers and employees shall be such as may be prescribed. [section 17(2)]. 7 Procedures before CCI As per Statement of Objects to the 2007 Amendment Bill, the CCI will be an expert body which will function as regulator for preventing anti-competitive practices in the country. It would also have advisory and advocacy functions in its role as a regulator (Actually, CCI has many adjudication powers). CCI will work as a collegium. Its decisions will be based on majority. Meetings of Commission - The Competition Commission shall meet at such places and times and shall observe rules of procedure in regard to transaction of business at its meetings as may be provided by regulations [section 22(1)]. Meetings of CCI will be ordinary and special. Ordinary meetings shall be relating to a statutory inquiry or investigation, or other proceeding, to be conducted by the Commission, as per provisions of the Act, or the rules or regulations made thereunder. Special meetings re relating to all other functions not covered by the ordinary meeting [Regulation 3(3)]. Ordinary meetings relate to inquiry or investigation, where parties can present their case. Special meeting will be only amongst members of Commission where outsiders are not involved. Ordinary meeting shall be held at least once a month to review compliance of its orders. Secretary shall inform matters of non-compliance for information and further orders [Regulation 3(5)(f)]. Presentation of case by parties - At each ordinary meeting, each party to

proceedings may be granted opportunity to present its case as deemed appropriate by Chairperson. Commission may direct any party to file written submissions which will be considered alongwith reply of other parties to the proceedings. Commission may grant oral hearing to any party. Commission can adjourn the meeting [Regulation 3(5)(c) and (d)]. Appearance before Commission - A person or an enterprise or the Director General may either appear in person or authorise one or more practicing chartered accountants, practicing company secretaries, practicing cost accountants, legal practitioners or any of his or its officers to present his or its case before the Commission. [section 35] (Section 35 has been made effective from 20-5-2009). Interestingly, provision of appearance is there, though there are no benches of CCI. Competition Appellate Tribunal 8 Appeal against order of Competition Commission can be filed with Competition Appellate Tribunal (CAT). Provisions in respect of Competition Appellate Tribunal (CAT) are contained in sections 53A to 53U. Section 53A was made effective from 12-10-2007. Sections 53C to 53M of the Competition Act were brought into effect w.e.f. 20-12-2007. Section 53B and sections 53N to 53U have been made effective from 20-5-2009. CAT has been constituted vide order NO. SO 1240(E) dated 15-5-2009. CAT will have headquarters at Delhi. Who can file appeal - Appeal can be filed with CAT by Central Government, State Government or enterprise or any person who is aggrieved by decision, direction or order of CCI [section 53B(1)]. Time limit for filing appeal - Appeal should be filed within 60 days in prescribed form. Delay in filing appeal can be condoned by CAT if sufficient cause is shown [section 53B(2)]. Orders against which appeal can be filed Appeal can be filed against any direction, decision or order of Competition Commission under sections 26(2), 26(6), 27, 28, 31, 32, 33, 38, 39, 43, 44, 45 or 46 [section 42(2) is missing]. Hearing and order by Tribunal The Tribunal shall give opportunity of hearing to parties and pass such orders thereon as it thinks fit, confirming, modifying or setting aside the direction, decision or order appealed against [section 53B(3)]. Copy of order shall be sent to parties to appeal and also to CCI [section 53B(4)].

Time limit to decide appeal CAT will endeavour to dispose of the appeal within six months from receipt of appeal [section 53B(5)]. Thus, the time limit of six months is not mandatory. 9 MRTP Commission and transitory Provisions MRTP Act has been repealed w.e.f. 1-9-2009. and MRTP Commission has been abolished on 14-10-2009. After 14-10-2009, cases pending in respect of Monopolistic Trade Practices or Restrictive Trade Practices (including such cases where Unfair Trade Practice has been alleged) will be transferred to Competition Appellate Tribunal constituted under Competition Act [section 66(3)]. All cases of Unfair Trade Practices (except those relating to disparaging of goods) pending before MRTP Commission 1-9-2009, will be transferred to National Commission constituted under Consumer Protection Act. All these cases stand transferred to Competition Commission of India (CCI) on 14-102009[section 66(4) and its second proviso] (reason given in Statement of Objects and reasons is that National Commission has expressed its inability to accept the transfer of cases as many cases were not covered by definition of consumer). Cases in respect of disparaging of goods [section 36A(1)(x) of MRTP Act] pending with MRTP Commission as on 14-10-2009 will be transferred to Competition Appellate Tribunal [section 66(5)]. Investigation pending with Director General of Investigation and Registration [DGIR] will be transferred to Competition Commission/National Commission under Consumer Protection Act, as applicable. Other cases, if pending, will abate. [section 66(9)].