The Competition Act 2002: Features & Importance

Competition Act 2002 provided an official antimonopoly body to the nation. This act was established to provide the idea and features for the establishment of the Competition Commission, to prevent monopoly ( single control over market) and to promote fair competition in the market,  to protect the freedom of trade for the participating individuals in the market. Hence a body that prevents monopoly called the Competition Commission of India started operating on 20 May 2009. Competition Act 2002 replaced the Monopolies and Restrictive Trade Practices Commission (MRTP Act), 1969. It was introduced by Arun Jaitley who was the Minister of Commerce and Industry from 29 January 2003 to 22 May 2004. The Competition Act established a commission called the Competition Commission of India that regulates the operations and activities of the Indian market to ensure fair competition. 

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Features of Competition Act 2002

The salient features of Competition Act 2002 are as follows.

• Anti Competitive Agreements

Enterprises, committees of enterprises, individual persons would not enter into agreements related to production, supply of goods, distribution, storage, acquisition, These are not good for the competition in India. These agreements would be considered void. 

• Types of Agreement

There are major two types of agreements.; vertical agreements and horizontal agreements. An agreement that cooperates between two or more competing industries or businesses that operate at the same level in the market is called a horizontal agreement. An agreement between firms at different levels of the supply chain is called a vertical agreement. 

• Combinations

The term combination is related to the acquisition and merges. The regulation of combinations is mentioned in Section 6 of the Act. The Competition Act 2002 was developed to maintain activities and operations of combinations. The threshold limit of the combination is mentioned in the Act in terms of assets. The limit that can lead to an adverse effect on the competition in the market of India can be scrutinized by the Commission.

• Abuse of dominant position

If an enterprise or associate is found indulging in indulge activities that are discriminatory in nature can be considered an abuse of the dominant position. The provisions relating to abuse of dominant position in the Competition Act 2020 need the determination of dominance in the relevant market. The dominant position enables an enterprise to operate independently.

• Competition Commission of India

Competition Commission of India is a government body that independently possesses a common seal with the power to enter into contracts and to sue in its name.  It is a maximum six-member commission consisting of a Chairperson.

• Review of orders of Commission.

If any person is not satisfied with the decision or order of the Commission. That person can apply to review the order of Commission in the Competition Commission of India within sixty days from the date of order. The Commission can review the application before the expiry date and may modify the order if found necessary.

• Appeal

Any person not satisfied with the order of commission can file an appeal in the Supreme Court of India within sixty days from the date of the order was issued.

• Penalty

If the Commission found that any person fails to comply with the orders then the Commission can charge punishable fines. If the person fails to pay a penalty he may get imprisonment.

Objectives of the Competition Act 2002:

The objectives of the Competition Act 2002 are given below.

1. The first objective of this Act was to provide protection to the interests of the consumers and also provide them with good products and services at reasonable prices.

2.  To give equal opportunity to all competition in the Indian market.

3. It prevents very high interests of the smaller companies and also punishes the person who misuses his dominant position in the market.

4. To prevent those illegal practices which have an adverse impact on competition in the Indian markets.

5. It targets to ensure liabilities of trades and businesses in Indian markets.

6.  To regulate the operation and activities such as acquisitions, mergers and amalgamation.

7. The main aim of the act was to promote competition in the Indian market that can ensure the customers that their interests will be protected and to ensure freedom of trade carried on by participants in the Indian market.

8. The Act has identified the ways that can have adverse effects on the market such as Anti-competitive agreement, reduction of competitors in the market achieved through  acquisition, mergers, and amalgamation and Abuse of dominant position.

Importance of Competition Act 2002:

The Competition Act, 2002 has importance in the field of business, trades and marketing etc. It is a storage of different theories, provisions and suggestions which is very useful for developing healthy competition in the Indian market. Its main importance lies in preventing anti-corruption practices involved in the Indian markets such as acquisition and mergers. The Competition Act is drafted in a legal way that provides specific tools and legal rights to the government in order to make sure that the competition policies are being followed efficiently by the enterprises, associates, sellers etc. It helps to prevent anti-competitive practices and if any of such practices are followed illegally, the Act provides punishment for that. The Act works for protecting fair and healthy competition in the market. Monopolies and Restrictive Trade Practices  (MRTP) Act of 1969 was The Competition Act 2002. The Act has been amended twice to make it more familiar according to the current market. The first amendment took place in 2007 by virtue of The Competition (Amendment) Act, 2007 and then in 2009 by virtue of The Competition (Amendment) Act, 2009. There are two main objectives behind the establishment of the Competition Act of 2002. These principles are to establish a commission called the establishment of the Competition Commission of India and the second principle is to promote the competition that would be healthy and positive in nature but also to make efforts to prevent all the anti-competitive practices in the Indian market.

Important basic terms of the Act

Some important basic terminology mentioned in the act is given below.

• Acquisition: It is a corrupt act of acquiring the property, voting right, shares or assets of any enterprise, seller, shareholder etc. directly or indirectly. The Competition Commission of India deals with such matters.

• Cartel: Cartel is an association of distributors, traders, sellers, service providers, and producers who decide the limit of the production, selling, distribution, price of goods by an agreement. The Competition Commission of India filed penalties against some airlines for forming cartels to decide fare charges.

• Dominant Position: It is an enterprise or an individual who has gained control over the market and can prevent a business or do a favour on other small traders, sellers, distributors etc. Acquiring a dominant position in the market is not a crime but using his position for abusing small trades is a crime. 

• Predatory Pricing: The price of a good which is below the cost production price in order to reduce competition or eliminate the competitors of the market.

• Rule of Season: Rule of Season is the analysis of some activities under the challenge on the basis of competitive intent, market impact, impact on competition and on the consumer. 

Did You Know?

• The Competition Act 2002 is amended two times. The first amendment was done by the Competition (Amendment) Act, 2007 and the second was the Competition (Amendment) Act, 2009.