An Explanatory Study of the Competition Law in India with reference to the Competition Act, 2002 – by Mayank Vats *

In accordance with the provisions of the Competition Act 2002, it is prohibited and declared that any agreement between undertakings concerning the production, supply, distribution, storage, acquisition or control of goods or the rendering of services causing or likely to cause harm which could portrays significant negative effect on competition in India. There are no legislative illustrations of anti-competitive practices or behavior. This provision is very general and broad in scope. The Act also goes on to specify certain anti-competitive agreements that may be concluded or practices that may be entered into by companies providing similar or identical goods or services or cartels. According to this provision, the agreements or practices implemented by this category of companies are presumed to have a significant adverse effect on competition. They are in themselves violations of the law. Furthermore, the Competition Act, 2002 also deals with what are called vertical restraints. These are restrictions among companies at different stages of the production chain in different markets. This would cover the supply of goods as well as the services. Vertical restraints must be examined under the rule of reason. The appreciable negative effect on competition must be established in each case. The legislation also provides for certain exceptions which are really very significant. The first set of exceptions protects the right of the owner of one of the intellectual property rights under the provisions listed in the Act, to restrict any infringement of any of its rights or to impose reasonable restrictions necessary to protect any of these rights. The provisions of the Act also excludes the terms of an agreement relating exclusively to the export of goods or the provision of services abroad. As specified by the Competition Act, 2002, it also extends to the prohibition of certain practices considered as abuse of a dominant position by a company. Some of them are:

  • discriminatory pricing or commercial conditions or predatory pricing,
  • limiting the supply of goods or services,
  • denial of market access,
  • Using a dominant position in a relevant market to enter, protect, other relevant market.

A dominant position in substance is the ability of a company to act independently of competitive forces prevailing in the market or to affect the relevant market in its favour. A dominant position is generally acquired by a firm over a period of time and factors such as the state of technology, barriers to entry, scale of operations, etc., influence the obtaining of a position (dominant position). The market share of an enterprise does not determine, as in the MRTP Act of 1969, the dominant position of a firm, although it is one of the factors to be taken into account, as well as other factors, including the market shares of its competitors. The basic position is that there is no breach of the law by an enterprise simply because it enjoys a dominant position. It is only the abuse of this position by any of the anti-competitive practices set out in this law that is prohibited. The “combination” within the meaning of the Competition Act, 2002 includes mergers and acquisitions. The acquisition of shares, voting rights, assets of another enterprise beyond certain prescribed thresholds of value or control over another enterprise and merger of companies where the assets concerned exceed the prescribed value is covered in a very specific way in the legislation. Additionally, the Competition Act, 2002 also prohibits or is likely to cause a significant adverse effect on competition in the relevant market in India. It states that such a combination would be nil. It also defines the procedures for regulating combinations. In a given case, a merger might be some way of eliminating a competitor. It should be noted that prior to the introduction of this law, there was no specific provision under the Companies Act 1956 prohibiting anti-competitive mergers or acquisitions.

Reference

*Mayank Vats – Symbiosis Law School, Hyderabad.

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