Competition Act, 2002 PDF

CS EXECUTIVE BY CS GD SALUJA Competition Act, 2002 What is competition in the market? Competition can be defined as a situation in the market in which manufacturers or sellers independently fight for selling their goods or services to the buyers, to achieve a particular business objective (for example - profits, sales or market share). Competition can also be defined as a process of economic rivalry between market players to attract customers. These market players can be multinational or domestic companies, wholesalers, retailers or even the neighborhood shopkeeper. In order to gain lead ahead of rival enterprises, market players either – a) adopt fair means (producing quality goods, being cost efficient, adopting appropriate technologies, etc.), or b) indulge in unfair measures (carrying out restrictive business practices- such as predatory pricing exclusive dealing, collusion, cartelization, abuse of dominant position etc.) However, in the interest of consumers and the economy as a whole, it is necessary to promote an environment that facilities fair competitive outcomes in the market, curb anti-competitive behavior and discourage market players from adopting unfair measures. The Competition Act, 2002 has been enacted to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interest of consumers and to ensure freedom of trade carried on by other participant in the markets in India and for matters connected therewith or incidental thereto. Competition Law & Policy The objective of competition policy is to preserve and promote competition as a means of ensuring efficient allocation of resources. Competition policy has two components. The first component is a set of policies that enhance competition in local and national markets. The second component is a set of legislations designed to prevent anti-competitive business practices with minimal government intervention. A competition law by itself cannot produce or ensure competition in the market unless this is facilitated by appropriate government policies. On the other hand, government policies would also be incomplete without a law to enforce such policies and prevent competition malpractices. Competition policy is about ensuring that markets are, and remain, competitive. This brings benefits to consumers eventually in all ways. However, eliminating anti-competitive practices and dismantling monopoly positions that lead to abuses also benefits those firms whose business suffers from these practices and abuses. Competition polices cover a much broader set of instruments than competition law, and typically include all polices aimed at increasing the intensity of competition or rivalry in local and national markets by lowering entry barriers to ensure that markets work effectively and serve interests of all citizens. Competition law is only a sub-set of a nation's competition policies. The basic purpose of Competition Policy and law is to preserve and promote competition as a means of ensuring efficient allocation of resources in an economy. Competition policy typically has two elements: 1|Page CS EXECUTIVE BY CS GD SALUJA - one is a set of policies that enhance competition in local and national markets. - second element is legislation designed to prevent anti-competitive business practices with minimal Government intervention, i.e., a competition law. Competition law by itself cannot produce or ensure competition in the market unless this is facilitated by appropriate Government policies. On the other hand, Government policies without a law to enforce such policies and prevent competition malpractices would also be incomplete. Competition policies cover a much broader set of instruments than competition law, and typically include all policies aimed at increasing the intensity of competition or rivalry in local and national markets by lowering entry barriers and opportunities for harmful coordination, to ensure that markets work effectively and serve the interests of all citizens. Competition law is only a subset of a nation's competition policies. Competition policies typically include pro-competition approaches to trade, investment, sectoral regulation, and consumer protection. The barriers to international or interregional trade, restrictions on Foreign Direct Investment (FDI) and technology transfers, restrictions on entry in regulated network utility industries, regulations affecting the registration of new enterprises and the taxation and corporate governance of existing enterprises, and rules on marketing practices all influence the extent of competitive pressures in markets and so are appropriate concerns of competition policies. In many countries, competition authorities have become the focal point for consultations and putting forward pro-competition viewpoints across a broad range of policy areas. The principal objectives of the Act, as spelt out in the preamble were: i prevention of concentration of economic power to the common detriment; ii control of monopolies; iii prohibition of monopolistic trade practice; iv prohibition of restrictive trade practices. Why do we need competition in the market? Competition is now universally acknowledged as the best means of ensuring that consumers have access to the broadest range of services at the most competitive prices. Producers will have maximum incentive to innovate, reduce their costs and meet consumer demand. Competition thus promotes allocative and productive efficiency. But all this requires healthy market conditions and governments across the globe are increasingly trying to remove market imperfections through appropriate regulations to promote competition. Salient Features of the Act With the enforcement of the Competition Act, 2002 the MRTP Act, 1969 shall stand repealed and the MRTP Commission shall be dissolved. 1. The Competition Act, 2002 has been enacted to: - Prevent practices having an appreciable adverse effect on competition, - To promote and sustain competition in the market and - To protect the interests of consumers and to ensure freedom of trade. 2. The competition Act, 2002 seeks to achieve its objectives by: - Prohibiting anti-competitive policy on competition, - Creating awareness by imparting training on competition issues. 3. The Competition Act, 2002 provides for the establishment of Competition Commission of India. 2|Page CS EXECUTIVE BY CS GD SALUJA ASEAN REGIONAL GUIDELINES ON COMPETITION POLICY In the case of Excel Crop Care Limited v. Competition Commission of India and Another the Hon'ble Supreme Court of India observed that the Act, which prohibits anti-competitive agreements, has a laudable purpose behind it. The benefits of which are explained in ASEAN Regional Guidelines on Competition Policy and are as follows: “Main Objectives and Benefits of Competition Policy” Economic efficiency: Economic efficiency refers to the effective use and allocation of the economy's resources. Competition tends to bring about enhanced efficiency, in both a static and a dynamic sense, by disciplining firms to produce at the lowest possible cost and pass these cost savings on to consumers, and motivating firms to undertake research and development to meet customer needs. Economic growth and development: Economic growth–the increase in the value of goods and services produced by an economy – is a key indicator of economic development. Economic development refers to a broader definition of an economy's well-being, including employment growth, literacy and mortality rates and other measures of quality of life. Competition may bring about greater economic growth and development through improvements in economic efficiency and the reduction of wastage in the production of goods and services. The market is therefore able to more rapidly reallocate resources, improve productivity and attain a higher level of economic growth. Over time, sustained economic growth tends to lead to an enhanced quality of life and greater economic development. Consumer Welfare: Competition policy contributes to economic growth to the ultimate benefit of consumers, in terms of better choice (new products), better quality and lower prices. Consumer welfare protection may be required in order to redress a perceived imbalance between the market power of consumers and producers. The imbalance between consumers and producers may stem from market failures such as information asymmetries, the lack of bargaining position towards producers and high transaction costs. Competition policy may serve as a complement to consumer protection policies to address such market failures.” The aforesaid guidelines also spell out few more benefits of such laws incorporating competition policies by highlighting the following advantages: 1. In addition, competition policy is also beneficial to developing countries. Due to worldwide deregulation, privatisation and liberalisation of markets, developing countries need a competition policy, in order to monitor and control the growing role of the private sector in the economy so as to ensure that public monopolies are not simply replaced by private monopolies. 2. Besides contributing to trade and investment policies, competition policy can accommodate other policy objectives (both economic and social) such as the integration of national markets and promotion of regional integration, the promotion or protection of small businesses, the promotion of technological advancement, the promotion of product and process innovation, the promotion of industrial diversification, environment protection, fighting inflation, job creation, equal treatment of workers according to race and gender or the promotion of welfare of particular consumer groups. 3|Page CS EXECUTIVE BY CS GD SALUJA In particular, competition policy may have a positive impact on employment policies, reducing redundant employment (which often results from inefficiencies generated by large incumbents and from the fact that more dynamic enterprises are prevented from entering the market) and favoring jobs creation by new efficient competitors. 3. Competition policy complements trade policy, industrial policy and regulatory reform. Competition policy targets business conduct that limits market access and which reduces actual and potential competition, while trade and industrial policies encourage adjustment to the trade and industrial structures in order to promote productivity-based growth and regulatory reform eliminates domestic regulation that restricts entry and exit in the markets. Effective competition policy can also increase investor confidence and prevent the benefits of trade from being lost through anticompetitive practices. In this way, competition policy can be an important factor in enhancing the attractiveness of an economy to foreign direct investment, and in maximizing the benefits of foreign investment.” Further, the Apex Court inter alia observed that in fact, there is broad empirical evidence supporting the proposition that competition is beneficial for the economy. Economists agree that it has an important role to play in improving productivity and, therefore, the growth prospects of an economy. It is achieved in the following manner: “International Competition Network - Economic Growth and Productivity: Competition contributes to increased productivity through: Pressure on firms to control costs: In a competitive environment, firms must constantly strive to lower their production costs so that they can charge competitive prices, and they must also improve their goods and services so that they correspond to consumer demands. Easy market entry and exit: Entry and exit of firms reallocates resources from less to more efficient firms. Overall productivity increases when an entrant is more efficient than the average incumbent and when an existing firm is less efficient than the average incumbent. Entry – and the threat of entry –incentivizes firms to continuously improve in order not to lose market share to or be forced out of the market by new entrants. Encouraging innovation: Innovation acts as a strong driver of economic growth through the introduction of new or substantially improved products or services and the development of new and improved processes that lower the cost and increase the efficiency of production. Incentives to innovate are affected by the degree and type of competition in a market. Pressure to Improve Infrastructure: Competition puts pressure on communities to keep local producers competitive by improving roads, bridges, docks, airports, and communications, as well as improving educational opportunities. Benchmarking: Competition also can contribute to increased productivity by creating the possibility of benchmarking. The productivity of a monopolist cannot be measured against rivals in the same geographic market, but a dose of competition quickly will expose inferior performance. A monopolist may be content with mediocre productivity but a firm battling in a competitive market cannot afford to fall behind, especially if the investment community is benchmarking it against its rivals.” Productivity is increased through competition by putting pressure on firms to control costs as the producers strive to lower their production costs so that they can charge competitive prices. It also improves the quality of their goods and services so that they correspond to consumers’ demands. Competition law enforcement deals with anti-competitive practices arising from the acquisition or exercise of undue market power by firms that result in consumer harm in the forms of higher prices, lower quality, limited choices and lack of innovation. Enforcement provides remedies to avoid 4|Page CS EXECUTIVE BY CS GD SALUJA situations that will lead to decreased competition in markets. Effective enforcement is important not only to sanction anti-competitive conduct but also to deter future anti-competitive practices. Keeping in view the aforesaid objectives that need to be achieved, Indian Parliament enacted Competition Act, 2002. Need to have such a law became all the more important in the wake of liberalisation and privatisation as it was found that the law prevailing at that time, namely, Monopolistic Restrictive Trade Practices Act, 1969 was not equipped adequately enough to tackle the competition aspects of the Indian economy. The law enforcement agencies, which include CCI and COMPAT, have to ensure that these objectives are fulfilled by curbing anti-competitive agreements. COMPETITION REGIME IN INDIA Recommendations of Sachar Committee The Government of India appointed a Committee in August, 1977 under the Chairmanship of Justice Rajinder Sachar to look into the simplification of the working of the companies and the MRTP Act. The Committee submitted its report in the year 1978 and as far as recommendations pertaining to the MRTP Act are concerned, far reaching changes were suggested by the Committee. For the first time, the Committee highlighted the need for introduction of suitable provisions to curb unfair trade practices. In its view, the assumption that curbing monopolistic and restrictive trade practices and thereby preventing distortion of competition automatically results in the consumers getting a fair deal was only partly true. It was felt necessary to protect the consumers from practices adopted by trade and industry to mislead or dupe them. The Committee pointed out that advertisements and sales promotion having become well established modes of modern business techniques, representations through such advertisements to the consumer should not become deceptive. If a consumer was falsely induced to enter into buying goods which do not possess the quality and did not have the cure for the ailment advertised, it was apparent that the consumer was being made to pay for quality of things on false representation. Such a situation could not be accepted. Therefore, an obligation is to be cast on the seller to speak the truth when he advertises and also to avoid halftruths, the purpose being preventing false or misleading advertisements. The Committee also noted that fictitious bargain was another common form of deception and many devices were used to lure buyers into believing that they were getting something for nothing or at a nominal value for their money. The Committee observed: Prices may be advertised as greatly reduced and cut when in reality the goods may be sold at sellers regular prices. Advertised statements that could have two meanings, one of which is false, are also considered misleading. In America, it was held that statement that a tooth paste fights decay could be interpreted as a promise of complete protection and was thus deceptive. Mock-ups on television put up by companies including Colgate Palmolive had also received the attention of the Enforcement Agencies in America and have been held to be deceptive. We cannot say that the type of misleading and deceptive practices which are to be found in other countries are not being practised in our country. Unfortunately our Act is totally silent on this aspect. The result is that the consumer has no protection against false or deceptive advertisements. Any misrepresentation about the quality of a commodity or the potency of a drug or medicine can be projected without much risk. This has created a situation of a very safe haven for the suppliers and a position of frustration and uncertainty for the consumers. 5|Page CS EXECUTIVE BY CS GD SALUJA It should be the function of any consumer’s legislation to meet this challenge specifically. Consumer protection must have a positive and active role. Accordingly, the Committee specified certain unfair trade practices which were notorious and suggested prohibition of such practices. The main category of unfair trade practices recommended for prohibition by the Sachar Committee were: (a) misleading advertisements and false representations (b) bargain sale, bait and switch selling; (c) offering gifts or prizes with the intention of not providing them and conducting promotional contests; (d) supplying goods not conforming to safety standards; and (e) hoarding and destruction of goods. In India, by an amendment to the MRTP Act in the year 1984 Part B Unfair Trade Practices was added to Chapter V. It may be recalled that Part A of Chapter V deals with registration of agreements relating to restrictive trade practices. Section 36A, 36B, 36C, 36D and 36E are relevant for the purposes of understanding the main provisions relating to unfair trade practices. Recommendations of Raghavan Committee As India moved steadily on the path of reforms comprising of Liberalisation, Privatisation and Globalisation, it did away with the MRTP Act, 1969 as it was realised that the Act had outlived its utility and control of monopoly was not appropriate to support the growth aspirations of more than 1 billion Indians. Indeed, need was felt to promote and sustain competition in the market place. The then Finance Minister (Shri.Yashwant Sinha) in the budget speech in 1999 had announced: “The Monopolies and Restrictive Trade Practices Act has become obsolete in certain areas in the light of international economic developments relating to competition laws. We need to shift our focus from curbing monopolies to promoting competition. Government has decided to appoint a Committee to examine this range of issues and propose a modern Competition Law suitable for our conditions.” Accordingly, a High Level Committee on Competition Policy and Law was constituted under Chairmanship of Mr. S.V.S Raghavan. The Committee submitted its report on 22nd May 2000 recommending replacement of the MRTP Act with a modern competition law for fostering competition and for eliminating anticompetitive practices in the economy. After consulting the stakeholders, Competition Bill, 2001 was introduced in the Parliament which eventually became the Competition Act, 2002. The purpose of the Competition Act, as stated in its preamble is: “An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.” Why do we need competition in the market? Competition is now universally acknowledged as the best means of ensuring that consumers have access to the broadest range of services at the most competitive prices. Producers will have maximum incentive to innovate, reduce their costs and meet consumer demand. Competition thus promotes allocative and productive efficiency. But all this requires healthy market conditions and governments across the globe are increasingly trying to remove market imperfections through appropriate regulations to promote competition. IMPORTANT DEFINITIONS “Acquisition” means, directly or indirectly, acquiring or agreeing to acquire— i. shares, voting rights or assets of any enterprise; or ii. control over management or control over assets of any enterprise. [Section 2(a)] 6|Page CS EXECUTIVE BY CS GD SALUJA “Agreement” includes any arrangement or understanding or action in concert, — i. whether or not, such arrangement, understanding or action is formal or in writing; or ii. whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings. [Section 2(b)] “Appellate Tribunal” means the National Company Law Appellate Tribunal. “Cartel” includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services. [Section 2(c)] The nature of a cartel is to raise price above competitive levels, resulting in injury to consumers and to the economy. For the consumers, cartelisation results in higher prices, poor quality and less or no choice for goods or/and services. An international cartel is said to exist, when not all of the enterprises in a cartel are based in the same country or when the cartel affects markets of more than one country. An import cartel comprises enterprises (including an association of enterprises) that get together for the purpose of imports into the country. An export cartel is made up of enterprises based in one country with an agreement to cartelize markets in other countries. In the Competition Act, cartels meant exclusively for exports have been excluded from the provisions relating to anti-competitive agreements. This is because such cartels do not adversely affect markets in India and are hence outside the purview of the Competition Act. If there is effective competition in the market, cartels would find it difficult to be formed and sustained. Some of the conditions that are conducive to cartelization are: - high concentration - few competitors - high entry and exit barriers - homogeneity of the products (similar products) - similar production costs - excess capacity - high dependence of the consumers on the product - history of collusion “Consumer” means any person who— i. buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, whether such purchase of goods is for resale or for any commercial purpose or for personal use; ii. hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person whether such hiring or availing of services is for any commercial purpose or for personal use. [Section 2(f)] 7|Page CS EXECUTIVE BY CS GD SALUJA “Director General” means the Director General appointed under sub-section (1) of section 16 and includes any Additional, Joint, Deputy or Assistant Directors General appointed under that section. [Section 2(g)] “Enterprise” means a person or a department of the Government, including units, divisions, subsidiaries, who or which is, or has been, engaged in any economic 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, 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. “Goods” means goods as defined in the Sale of Goods Act, 1930 and includes— a) products manufactured, processed or mined; b) debentures, stocks and shares after allotment; c) in relation to goods supplied, distributed or controlled in India, goods imported into India. Section 2(i)] “Party” includes: - a consumer or - an enterprise or - a person or - an information provider, or - a consumer association or - a trade association, or - the Central Government or - any State Government or - any statutory authority, as the case may be, - and shall include an enterprise or a person against whom any inquiry or proceeding is instituted; - and any enterprise or person impleaded by the Commission to join the proceedings. [Section 2(ka)] “Person” includes— i. an individual; ii. a Hindu undivided family; iii. a company; iv. a firm; v. an association of persons or a body of individuals, whether incorporated or not, in India or outside India; vi. any corporation established by or under any Central, State or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; vii. any body corporate incorporated by or under the laws of a country outside India; viii. a co-operative society registered under any law relating to co-operative societies; ix. a local authority; x. every artificial juridical person, not falling within any of the preceding sub-clauses. [Section 2(l)] “Price”, in relation to the sale of any goods or to the performance of any services, includes every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which 8|Page CS EXECUTIVE BY CS GD SALUJA in effect relates to the sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing. [Section 2(o)] “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(r)] “Relevant Geographic Market” means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas. [Section 2(s)] “Relevant Product Market” means a market comprising of all those products or services— i. which are regarded as inter-changeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; or ii. the production or supply of, which are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices. [Section 2(t)] “Service” means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising.[Section 2(u)] “Shares” means shares in the share capital of a company carrying voting rights and includes— i. any security which entitles the holder to receive shares with voting rights; ii. stock except where a distinction between stock and share is expressed or implied.[Section 2(v)] “Statutory Authority” means any authority, board, corporation, council, institute, university or any other body corporate, established by or under any Central, State or Provincial Act for the purposes of regulating production or supply of goods or provision of any services or markets therefor or any matter connected therewith or incidental thereto. [Section 2(w)] “Trade” means any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any services. [Section 2(x)] PROHIBITION OF CERTAIN AGREEMENTS Section 3 deals with anti-competitive agreements. Section 3(1) provides that 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. As per Section 3(2) any agreement entered into in contravention of the provisions contained in sub- section (1) shall be void. Section 3(3) states that any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice 9|Page CS EXECUTIVE BY CS GD SALUJA 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. Provided that 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. Explanation. —For the purposes of this sub-section, “bid rigging” means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding. Some of the most commonly adopted ways in which collusive bidding or bid rigging may occur are: - agreements to submit identical bids - agreements as to who shall submit the lowest bid, agreements for the - submission of cover bids (voluntarily inflated bids) - agreements not to bid against each other, - agreements on common norms to calculate prices or terms of bids - agreements to squeeze out outside bidders - agreements designating bid winners in advance on a rotational basis, or on a geographical or customer allocation basis. If bid rigging takes place in Government tenders, it is likely to have severe adverse effects on its purchases and on public spending. Bid rigging or collusive bidding is treated with severity in the law. The presumptive approach reflects the severe treatment. Section 3(4) provides that any other agreement amongst enterprises or persons including but not restricted to 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 dealing agreement; c) exclusive distribution agreement; d) refusal to deal; e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. Provided that nothing contained in this sub-section shall apply to an agreement entered into between an enterprise and an end consumer. Explanation. —For the purposes of this sub-section, — 10 | P a g e CS EXECUTIVE BY CS GD SALUJA a) “Tie-In Arrangement” includes any agreement requiring a purchaser of goods or services, as a condition of such purchase, to purchase some other distinct goods or services; b) “Exclusive Dealing Agreement” includes any agreement restricting in any manner the purchaser or the seller, as the case may be, in the course of his trade from acquiring or selling or otherwise dealing in any goods or services other than those of the seller or the purchaser or any other person, as the case may be; c) “Exclusive Distribution Agreement” includes any agreement to limit, restrict or withhold the output or supply of any goods or services or allocate any area or market for the disposal or sale of the goods or services; d) “Refusal to Deal” includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods or services; are sold or from whom goods or services are bought; e) “Resale Price Maintenance” includes, in case of any agreement to sell goods or provide services, any direct or indirect restriction that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged. It may be noted that Section 3 shall not restrict — i. the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under— a) the Copyright Act, 1957; b) the Patents Act, 1970; c) the Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999; d) the Geographical Indications of Goods (Registration and Protection) Act, 1999; e) the Designs Act, 2000; f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000; g) any other law for the time being in force relating to the protection of other intellectual property rights. ii. the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export. What Is an Anti-Competitive Agreement? An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anticompetitive agreements include, but are not limited to: - - agreement to limit production and/or supply; - agreement to allocate markets; - agreement to fix price; - bid rigging or collusive bidding; - conditional purchase/ sale (tie-in arrangement); - exclusive supply / distribution arrangement; - resale price maintenance; and - refusal to deal. 11 | P a g e CS EXECUTIVE BY CS GD SALUJA PROHIBITION OF ABUSE OF DOMINANT POSITION According to Section 4(1) of the Act, no enterprise or group shall abuse its dominant position. Section 4(2) states that there shall be an abuse of dominant position under sub-section (1), if an enterprise or a group: a) directly or indirectly, imposes unfair or discriminatory— i. condition in purchase or sale of goods or service; or ii. price in purchase or sale (including predatory price) of goods or service. b) limits or restricts— 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; or c) indulges in practice or practices resulting in denial of market access in any manner; or d) makes 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 of such contracts; or e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. Explanation. — For the purposes of this section, the expression: “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. “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. “Group” means two or more enterprises where one enterprise is directly or indirectly, in a position to: i. exercise 26% or such other higher percentage as may be prescribed, of the voting rights in the other enterprise; or ii. appoint more than 50% of the members of the board of directors in the other enterprise; or iii. control the management or affairs of the other enterprise. What Constitutes Abuse of Dominance? Dominance refers to a position of strength which enables an enterprise to operate independently of competitive forces or to affect its competitors or consumers or the market in its favour. Abuse of dominant position impedes fair competition between firms, exploits consumers and makes it difficult for the other players to compete with the dominant undertaking on merit. Abuse of dominant position includes: i. imposing unfair conditions or price, ii. predatory pricing, iii. limiting production/market or technical development, iv. creating barriers to entry, v. applying dissimilar conditions to similar transactions, vi. denying market access, and vii. using dominant position in one market to gain advantages in another market. 12 | P a g e CS EXECUTIVE BY CS GD SALUJA COMBINATION The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if – a) any acquisition where – i. the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have, – A. either, in India, the assets of the value of more than Rs. 2,500 crores or turnover more than Rs. 7,500 crores; or B. in India or outside India, in aggregate, the assets of the value of more than 1.25 billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 3.75 billion US dollars, including at least Rs. 3,750 crores in India; or ii. the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being acquired, would belong after the acquisition, jointly have or would jointly have, – A. either in India, the assets of the value of more than Rs. 10,000 crores or turnover more than Rs. 30,000 crores; or B. in India or outside India, in aggregate, the assets of the value of more than 5 Billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 15 Billion US dollars, including at least Rs. 3,750 crores in India; or b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, if— i. the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control jointly have, — A. either in India, the assets of the value of more than Rs. 2,500 crores or turnover more than Rs. 7,500 crores; or B. India or outside India, in aggregate, the assets of the value of more than 1.25 billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 3.75 billion US dollars, including at least Rs. 3,750 crores in India; or ii. the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the acquisition, jointly have or would jointly have, — A. either in India, the assets of the value of more than Rs. 10,000 crores or turnover more than Rs. 30,000 crores; or B. in India or outside India, in aggregate, the assets of the value of more than 5 Billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 15 Billion US dollars, including at least Rs. 3,750 crores in India; or c) any merger or amalgamation in which— i. the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case may be, have, — A. either in India, the assets of the value of more than Rs. 2,500 crores or turnover more than Rs. 7,500 crores; or B. India or outside India, in aggregate, the assets of the value of more than 1.25 billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 3.75 billion US dollars, including at least Rs. 3,750 crores in India; or 13 | P a g e CS EXECUTIVE BY CS GD SALUJA ii. the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have, — A. either in India, the assets of the value of more than Rs. 10,000 crores or turnover more than Rs. 30,000 crores; or B. in India or outside India, in aggregate, the assets of the value of more than 5 Billion US dollars, including at least Rs. 1,250 crores in India, or turnover more than 15 Billion US dollars, including at least Rs. 3,750 crores in India. d) value of any transaction, in connection with acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation exceeds Rs. 2,000 crores: Provided that the enterprise which is being acquired, taken control of, merged or amalgamated has such substantial business operations in India as may be specified by regulations. e) notwithstanding anything contained in clause (a) or clause (b) or clause (c), where either the value of assets or turnover of the enterprise being acquired, taken control of, merged or amalgamated in India is not more than such value as may be prescribed, such acquisition, control, merger or amalgamation, shall not constitute a combination under section 5. Explanation. —For the purposes of section 5 — a) “Control” means the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions by— i. one or more enterprises, either jointly or singly, over another enterprise or group; or ii. one or more groups, either jointly or singly, over another group or enterprise; b) “Group” means two or more enterprises where one enterprise is directly or indirectly, in a position to – i. exercise 26% or such other higher percentage as may be prescribed, of the voting rights in the other enterprise; or ii. appoint more than 50% of the members of the board of directors in the other enterprise; or iii. control the management or affairs of the other enterprise; What is Combination? Broadly, combination under the Act means acquisition of control, shares, voting rights or assets, acquisition of control by a person over an enterprise where such person has direct or indirect control over another enterprise engaged in competing businesses, and mergers and amalgamations between or amongst enterprises when the combining parties exceed the thresholds set in the Act. The thresholds are specified in the Act in terms of assets or turnover in India and outside India. Entering into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India is prohibited and such combination shall be void. REGULATION OF COMBINATIONS Section 6(1) provides that no person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void. Section 6(2) states that subject to the provisions contained in sub-section (1), 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 which may be determined, by regulations, disclosing 14 | P a g e CS EXECUTIVE BY CS GD SALUJA the details of the proposed combination, after any of the following, but before consummation of the combination of— a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) and clause (d) of section 5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be; b) execution of any agreement or other document for acquisition referred to in clause (a) and clause (d) of section 5 or acquiring of control referred to in clause (b) of that section. According to Section 6(2A), no combination shall come into effect until 150 days have passed from the day on which the notice has been given to the Commission under sub-section (2) or the Commission has passed orders under section 31, whichever is earlier. Section 6(3) provides that the Commission shall, after receipt of notice under sub-section (2), deal with such notice in accordance with the provisions contained in sections 29, 29A, 30 and 31. Section 6(4) states that notwithstanding anything contained in sub-sections (2A) and (3) and section 43A, if a combination fulfils such criteria as may be prescribed and is not otherwise exempted under this Act from the requirement to give notice to the Commission under sub-section (2), then notice for such combination may be given to the Commission in such form and on payment of such fee as may be specified by regulations, disclosing the details of the proposed combination and thereupon a separate notice under sub-section (2) shall not be required to be given for such combination. As per Section 6(5) upon filing of a notice under sub-section (4) and acknowledgement thereof by the Commission, the proposed combination shall be deemed to have been approved by the Commission under sub-section (1) of section 31 and no other approval shall be required under sub-section (2) or sub-section (2A). Section 6(6) provides that if within the period referred to in sub-section (1) of section 20, the Commission finds that the combination notified under sub-section (4) does not fulfil the requirements specified under that subsection or the information or declarations provided are materially incorrect or incomplete, the approval under sub-section (5) shall be void ab initio and the Commission may pass such order as it may deem fit: Provided that no such order shall be passed unless the parties to the combination have been given an opportunity of being heard. Section 6(7) states that notwithstanding anything contained in this section and section 43A, upon fulfilment of such criteria as may be prescribed, certain categories of combinations shall be exempted from the requirement to comply with sub-sections (2), (2A) and (4). Section 6(8) provides that notwithstanding anything contained in sub-sections (4), (5), (6) and (7)— i. the rules and regulations made under this Act on the matters referred to in these sub-sections as they stood immediately before the commencement of the Competition (Amendment) Act, 2023 and in force at such commencement, shall continue to be in force, till such time as the rules or regulations, as the case may be, made under this Act; and ii. any order passed or any fee imposed or combination consummated or resolution passed or direction given or instrument executed or issued or thing done under or in pursuance of any rules and regulations made under this Act shall, if in force at the commencement of the Competition (Amendment) Act, 2023, continue to be in force, and shall have effect as if such order passed or such fee imposed or such combination consummated or such resolution passed or such direction given or such instrument executed or issued or done under or in pursuance of this Act. 15 | P a g e CS EXECUTIVE BY CS GD SALUJA According to Section 6(9) the provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign portfolio investor, bank or Category I alternative investment fund, pursuant to any covenant of a loan agreement or investment agreement. Open Offers, etc. Section 6A of the Act provides that nothing contained in section 6(2A) and section 43A shall prevent the implementation of an open offer or an acquisition of shares or securities convertible into other securities from various sellers, through a series of transactions on a regulated stock exchange from coming into effect, if— a) the notice of the acquisition is filed with the Commission within such time and in such manner as may be specified by regulations; and b) the acquirer does not exercise any ownership or beneficial rights or interest in such shares or convertible securities including voting rights and receipt of dividends or any other distributions, except as may be specified by regulations, till the Commission approves such acquisition in accordance with the provisions of sub-section (2A) of section 6 of the Act. COMPETITION COMMISSION OF INDIA Establishment of Commission Section 7 of the Act empowers the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a Commission to be called the “Competition Commission of India”. The Commission shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued. The head office of the Commission shall be at such place as the Central Government may decide from time to time. The Commission may establish offices at other places in India. Composition of Commission According to Section 8 the Commission shall consist of a Chairperson and not less than 2 and not more than 6 other Members to be appointed by the Central Government. The Chairperson and every other Member shall be a person of ability, integrity and standing and who has special knowledge of, and such professional experience of not less than 15 years in, international trade, economics, business, commerce, law, finance, accountancy, management, industry, technology, public affairs or competition matters, including competition law and policy, which in the opinion of the Central Government, may be useful to the Commission. The Chairperson and other Members shall be whole-time Members. Selection Committee for Chairperson and Members of Commission Section 9 provides that the Chairperson and other Members of the Commission shall be appointed by the Central Government from a panel of names recommended by a Selection Committee consisting of: i. the Chief Justice of India or his nominee – Chairperson ii. the Secretary in MCA – Member iii. the Secretary in Ministry of Law & Justice – Member iv. 2 experts of repute who have special knowledge of, and such professional experience in international trade, economics, business, commerce, law, finance, accountancy, management, 16 | P a g e CS EXECUTIVE BY CS GD SALUJA industry, technology, public affairs or competition matters, including competition law and policy, which in the opinion of the Central Government, may be useful to the Commission – Members. The term of the Selection Committee and the manner of selection of panel of names shall be such as may be prescribed. Term of office of Chairperson and other Members Section 9 of the Act states that the Chairperson and every other Member shall hold office as such for a term of 5 years from the date on which he enters upon his office and shall be eligible for re- appointment: Provided that the Chairperson or other Members shall not hold office as such after he has attained the age of 65 years. A vacancy caused by the resignation or removal of the Chairperson or any other Member under section 11 or by death or otherwise shall be filled by fresh appointment in accordance with the provisions of sections 8 and 9. The Chairperson and every other Member shall, before entering upon his office, make and subscribe to an oath of office and of secrecy in such form, manner and before such authority, as may be prescribed. In the event of the occurrence of a vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Member shall act as the Chairperson, until the date on which a new Chairperson, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office. When the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge the functions of the Chairperson until the date on which the Chairperson resumes the charge of his functions. Resignation, Removal and Suspension of Chairperson and other Members Section 10(1) provides that the Chairperson or any other Member may, by notice in writing under his hand addressed to the Central Government, resign his office: It may be noted that the Chairperson or a Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest. As per Section 10(2) notwithstanding anything contained in sub-section (1), the Central Government may, by order, remove the Chairperson or any other Member from his office if such Chairperson or Member, as the case may be, – a) is, or at any time has been, adjudged as an insolvent; or b) has engaged at any time, during his term of office, in any paid employment; or c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member; or e) has so abused his position as to render his continuance in office prejudicial to the public interest; or has become physically or mentally incapable of acting as a Member. No Member shall be removed from his office on the ground specified in clause (d) or clause (e) of that sub-section unless the Supreme Court, on a reference being made to it in this behalf by the 17 | P a g e CS EXECUTIVE BY CS GD SALUJA Central Government, has, on an inquiry, held by it in accordance with such procedure as may be prescribed in this behalf by the Supreme Court, reported that the Member, ought on such ground or grounds to be removed. Restriction on Employment of Chairperson and other Members According to Section 12(1) of the Act, Chairperson and other Members shall, for a period of two years from the date on which they cease to hold office, not accept any employment in or advise as a consultant, retainer or in any other capacity whatsoever, or be connected with the management or administration of– a) any enterprise which is or has been a party to a proceeding before the Commission under this Act; or b) any person who appears or has appeared before the Commission under section 35. Section 12(2) provides that notwithstanding anything contained in section 35, the Chairperson or any other Member after retirement or otherwise ceasing to be in service for any reason shall not represent for any person or enterprise before the Commission: Provided that nothing contained in this section shall apply to any employment under the Central Government or a State Government or local authority or in any statutory authority or any corporation established by or under any Central, State or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013. Appointment of Director General Section 16 empowers the Commission with the prior approval of the Central Government appoint a Director General for the purposes of assisting the Commission in conducting inquiry into contravention of any of the provisions of this Act and for performing such other functions as are, or may be, provided by or under this Act. The number of other Additional, Joint, Deputy or Assistant Directors General or such officers or other employees in the office of Director General and the manner of appointment of such Additional, Joint, Deputy or Assistant Directors General or such officers or other employees shall be such as may be prescribed. Every Additional, Joint, Deputy and Assistant Directors General or such officers or other employees, shall exercise his powers, and discharge his functions, subject to the general control, supervision and direction of the Director General. The salary, allowances and other terms and conditions of service of the Director General and Additional, Joint, Deputy and Assistant Directors General or, such officers or other employees, shall be such as may be prescribed. The Director General and Additional, Joint, Deputy and Assistant Directors General or such officers or other employees, shall be appointed from amongst persons of integrity and outstanding ability and who have experience in investigation, and knowledge of accountancy, management, business, public administration, international trade, law or economics and such other qualifications as may be prescribed. Appointment of Secretary, Experts, Professionals and Officers and other Employees of Commission Section 17 empower the Commission to appoint a Secretary and such officers and other employees as it considers necessary for the efficient performance of its functions under this Act. 18 | P a g e CS EXECUTIVE BY CS GD SALUJA 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 other employees shall be such as may be prescribed. The Commission may engage, in accordance with the procedure specified by regulations, such number of experts and professionals of integrity and outstanding ability, who have special knowledge of, and experience in, economics, law, business or such other disciplines related to competition, as it deems necessary to assist the Commission in the discharge of its functions under this Act. DUTIES, POWERS AND FUNCTIONS OF COMMISSION Duties and functions of Commission Section 18 of the Act deals with duties and functions of the Commission. It states that subject to the provisions of this Act, it shall be the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India: Provided that the Commission may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country: Provided further that, the Commission may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with any statutory authority or department of Government. Inquiry into Certain Agreements and Dominant Position of Enterprise Section 19(1) provides that the Commission may inquire into any alleged contravention of the provisions contained in section 391) or section 4(1) either on its own motion or on— a) 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) a reference made to it by the Central Government or a State Government or a statutory authority. It may be noted that the Commission shall not entertain an information or a reference unless it is filed within 3 years from the date on which the cause of action has arisen. Provided further that an information or a reference may be entertained after the period specified in the first proviso if the Commission is satisfied that there had been sufficient cause for not filing the information or the reference within such period after recording its reasons for condoning such delay. As per Section 19(2), without prejudice to the provisions contained in sub-section (1), the powers and functions of the Commission shall include the powers and functions specified in sub-sections (3) to (7). The Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors, namely: – a) creation of barriers to new entrants in the market; b) driving existing competitors out of the market; c) foreclosure of competition; d) benefits or harm to consumers; e) improvements in production or distribution of goods or provision of services; 19 | P a g e CS EXECUTIVE BY CS GD SALUJA f) promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely: – a) market share of the enterprise; b) size and resources of the enterprise; c) size and importance of the competitors; d) dependence of consumers on the enterprise; e) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise; For determining whether a market constitutes a “relevant market” for the purposes of this Act, the Commission shall have due regard to the “relevant geographic market’’ and “relevant product market”. The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the following factors, namely: — a) regulatory trade barriers; b) local specification requirements; c) national procurement policies; d) adequate distribution facilities; e) transport costs; f) language; g) consumer preferences; h) need for secure or regular supplies or rapid after-sales services; i) characteristics of goods or nature of services; j) costs associated with switching supply or demand to other areas. The Commission shall, while determining the “relevant product market”, have due regard to all or any of the following factors, namely: – a) physical characteristics or end-use of goods 1[or the nature of services]; b) price of goods or service; c) consumer preferences; d) exclusion of in-house production; e) existence of specialised producers; f) classification of industrial products; g) costs associated with switching demand or supply to other goods or services; h) categories of customers. Inquiry into Combination by Commission Section 20(1) states that the Commission may, upon its own knowledge or information relating to acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of section 5 or merger or amalgamation referred to in clause (c) of that section 5 or acquisition of any control, shares, voting right or assets of an enterprise, merger or amalgamation referred to in clause (d) of that section, inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on competition in India: Provided that the Commission shall not initiate any inquiry under this sub-section after the expiry of one year from the date on which such combination has taken effect. 20 | P a g e CS EXECUTIVE BY CS GD SALUJA Section 20(2) provides that the Commission shall, on receipt of a notice under section 6(2) inquire whether a combination referred to in that notice or reference has caused or is likely to cause an appreciable adverse effect on competition in India. According to Section 20(3) of the Act, notwithstanding anything contained in section 5, the Central Government shall, on the expiry of a period of two years from the date of commencement of this Act and thereafter every two years, in consultation with the Commission, enhance or reduce by notification, or keep at the same level, on the basis of the wholesale price index or fluctuations in exchange rate of rupee or foreign currencies, or such factors that in its opinion are relevant in this matter, the value of assets or the value of turnover or value of transaction, for the purposes of that section. As per Section 20(4), for the purposes of determining whether a combination would have the effect of or is likely to have an appreciable adverse effect on competition in the relevant market, the Commission shall have due regard to all or any of the following factors, namely: — a) extent of barriers to entry into the market; b) level of concentration in the market; c) likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins; d) extent of effective competition likely to sustain in a market; e) market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination; f) likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market; g) possibility of a failing business; h) nature and extent of innovation. Reference by Statutory Authority Section 21 provides that where in the course of a proceeding before any statutory authority an issue is raised by any party that any decision which such statutory authority has taken or proposes to take, is or would be, contrary to any of the provisions of this Act, then such statutory authority may make a reference in respect of such issue to the Commission: It may be noted that any statutory authority, may, suo motu, make a reference to the Commission on any issue that involves any provision of this Act or is related to promoting the objectives of this Act, as the case may be. On receipt of a reference, the Commission shall give its opinion, within 60 days of receipt of such reference, to such statutory authority which shall consider the opinion of the Commission and thereafter, give its findings recording reasons therefor on the issues referred to in the said opinion. Reference by Commission Section 21A states that where in the course of a proceeding before the Commission an issue is raised by any party that any decision which, the Commission has taken during such proceeding or proposes to take, is or would be contrary to any provision of an Act whose implementation is entrusted to a statutory authority, then the Commission may make a reference in respect of such issue to the statutory authority: It may be noted that the Commission, may, suo motu, make a reference to a statutory authority on any issue that involves provisions of an Act whose implementation is entrusted to that statutory authority. 21 | P a g e CS EXECUTIVE BY CS GD SALUJA On receipt of a reference, the statutory authority shall give its opinion, within 60 days of receipt of such reference, to the Commission which shall consider the opinion of the statutory authority, and thereafter give its findings recording reasons therefor on the issues referred to in the said opinion. Procedure for Inquiry into Certain Agreements and Dominant Position of Enterprise Section 26 deals with procedure for Inquiry into Certain Agreements and Dominant Position of Enterprise. It states that: 1. On receipt of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter: It may be noted that if the subject matter of an information received is, in the opinion of the Commission, substantially the same as or has been covered by any previous information received, then the new information may be clubbed with the previous information. 2. Where on receipt of a reference from the Central Government or a State Government or a statutory authority or information received under section 19, the Commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. 2A. The Commission may not inquire into agreement referred to in section 3 or conduct of an enterprise or group under section 4, if the same or substantially the same facts and issues raised in the information received under section 19 or reference from the Central Government or a State Government or a statutory authority has already been decided by the Commission in its previous order. 3. The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within such period as may be specified by the Commission. 3A. If, after consideration of the report of the Director General referred to in sub-section (3), the Commission is of the opinion that further investigation is required, it may direct the Director General to investigate further into the matter. 3B. The Director General shall, on receipt of direction under sub-section (3A), investigate the matter and submit a supplementary report on his findings within such period as may be specified by the Commission. 4. The Commission may forward a copy of the report referred to in sub-section (3) and (3B) to the parties concerned. Provided that in case the investigation is caused to be made based on reference received from the Central Government or the State Government or the statutory authority, the Commission shall forward a copy of the report referred to in sub-section (3) and (3B) to the Central Government or the State Government or the statutory authority, as the case may be. 5. If the report of the Director General referred to in sub-section (3) and (3B) recommends that there is no contravention of the provisions of this Act, the Commission shall invite objections or suggestions from the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be, on such report of the Director General. 6. If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission agrees with the recommendation of the Director General, it shall close the 22 | P a g e CS EXECUTIVE BY CS GD SALUJA matter forthwith and pass such orders as it deems fit and communicate its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. 7. If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission is of the opinion that further investigation is called for, it may direct further investigation in the matter by the Director General or cause further inquiry to be made in the matter or itself proceed with further inquiry in the matter in accordance with the provisions of this Act. 8. If the report of the Director General referred to in sub-section (3) and (3B) recommends that there is contravention of any of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such contravention in accordance with the provisions of this Act. 9. Upon completion of the investigation or inquiry under sub-section (7) or sub-section (8), as the case may be, the Commission may pass an order closing the matter or pass an order under section 27, and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be. Provided that before passing such order, the Commission shall issue a show-cause notice indicating the contraventions alleged to have been committed and such other details as may be specified by regulations and give a reasonable opportunity of being heard to the parties concerned. Orders by Commission after Inquiry into Agreements or Abuse of Dominant Position Section 27 of the Act provides that where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely: a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be; b) impose such penalty, as it may deem fit which shall be not more than 10% of the average of the turnover or income, as the case may be, for the last 3 preceding financial years, upon each of such person or enterprise which is a party to such agreement or has abused its dominant position. Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to 3 times of its profit for each year of the continuance of such agreement or 10% of its turnover or income, as the case may be, for each year of the continuance of such agreement, whichever is higher. c) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; d) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; e) pass such other order or issue such directions as it may deem fit: It may be noted that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group 23 | P a g e CS EXECUTIVE BY CS GD SALUJA are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group. Division of Enterprise Enjoying Dominant Position Section 28(1) of the Act provides that the Commission may, notwithstanding anything contained in any other law for the time being in force, by order in writing, direct division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its dominant position. Section 28(2) states that in particular, and without prejudice to the generality of the foregoing powers, the order referred to in sub-section (1) may provide for all or any of the following matters, namely: — a) the transfer or vesting of property, rights, liabilities or obligations; b) the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise; c) the creation, allotment, surrender or cancellation of any shares, stocks or securities; d) the formation or winding up of an enterprise or the amendment of the memorandum of association or articles of association or any other instruments regulating the business of any enterprise; e) the extent to which, and the circumstances in which, provisions of the order affecting an enterprise may be altered by the enterprise and the registration thereof; f) any other matter which may be necessary to give effect to the division of the enterprise. Notwithstanding anything contained in any other law for the time being in force or in any contract or in any memorandum or articles of association, an officer of a company who ceases to hold office as such in consequence of the division of an enterprise shall not be entitled to claim any compensation for such cesser. Procedure for Investigation of Combinations Section 29 of the Act deals with procedure of investigation of Combinations. It provides that: 1. Where the Commission is of the prima facie opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to combination calling upon them to respond within 15 days of the receipt of the notice, as to why investigation in respect of such combination should not be conducted. 1A. After receipt of the response of the parties to the combination under sub-section (1), the Commission may call for a report from the Director General and such report shall be submitted by the Director General within such time as the Commission may direct. 1B. The Commission shall, within 30 days of receipt of notice under sub-section (2) of section 6, form its prima facie opinion referred to in sub-section (1). 2. The Commission, if it is prima facie of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall, within 7 days from the date of receipt of the response of the parties to the combination, or the receipt of the report from Director General called under sub section (1A), whichever is later, direct the parties to the said combination to publish details of the combination within 7 days of such direction, in such manner, as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination. 3. The Commission may invite any person or member of the public, affected or likely to be affected by the said combination, to file his written objections, if any, before the Commission 24 | P a g e CS EXECUTIVE BY CS GD SALUJA within 10 days from the date on which the details of the combination were published under sub-section (2). 4. The Commission may, within 7 days from the expiry of the period specified in sub-section (3), call for such additional or other information as it may deem fit from the parties to the said combination. 5. The additional or other information called for by the Commission shall be furnished by the parties referred to in sub-section (4) within 10 days from the expiry of the period specified in sub- section (4). 6. After receipt of all information, the Commission shall proceed to deal with the case in accordance with the provisions contained in section 29A or section 31, as the case may be. Notwithstanding anything contained in this section, the Commission may accept appropriate modifications offered by the parties to the combination or suo motu propose modifications, as the case may be, before forming a prima facie opinion under sub-section (1). Issue of Statement of Objections by Commission and Proposal of Modifications Section 29A (1) of the Act provides that upon completion of the process under section 29, where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall issue a statement of objections to the parties identifying such appreciable adverse effect on competition and direct the parties to explain within 25 days of receipt of the statement of objections, why such combination should be allowed to take effect. As per Section 29A (2) where the parties to the combination consider that such appreciable adverse effect on competition can be eliminated by suitable modification to such combination, they may submit an offer of appropriate modification to the combination along with their explanation to the statement of objections issued under sub-section (1) in such manner as may be specified by regulations. Section 29A(3) states that if the Commission does not accept the modification submitted by the parties under sub-section (2) it shall, within 7 days from the date of receipt of the proposed modifications under that sub-section, communicate to the parties as to why the modification is not sufficient to eliminate the appreciable adverse effect on competition and call upon the parties to furnish, within 12 days of the receipt of the said communication, revised modification, if any, to eliminate the appreciable adverse effects on competition. Provided that the Commission shall evaluate such proposal for modification within 12 days from receipt of such proposal: Provided further that the Commission may suo motu propose appropriate modifications to the combination which may be considered by the parties to the combination. Procedure in case of Notice under Section 6(2) Section 30 provides that where any person or enterprise has given a notice under section 6(2) the Commission shall examine such notice and form its prima facie opinion as provided in section 29(1) and proceed as per provisions contained in that section. Orders of Commission on Combinations Section 31 deals with order of the commission on combination. It states that: 1. Where the Commission is of the opinion that any combination does not, or is not likely to, have an appreciable adverse effect on competition, it shall, by order, approve that combination in respect of which a notice has been given under section 6(2). 25 | P a g e CS EXECUTIVE BY CS GD SALUJA It may be noted that if the Commission does not form a prima facie opinion as provided under section 29(1B), the combination shall be deemed to have been approved and no separate order shall be required to be passed. 2. Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall direct that the combination shall not take effect. 3. Where the Commission is of the opinion that any appreciable adverse effect on competition that the combination has, or is likely to have, can be eliminated by modification proposed by the parties or the Commission, as the case may be, under section 29(7) or section 29A(2)(3), it may approve the combination subject to such modifications as it thinks fit. 4. Where a combination is approved by the Commission under sub-section (3), the parties to the combination shall carry out such modification within such period as may be specified by the Commission. 5. Where – i. the Commission has directed under sub-section (2) that the combination shall not take effect; or ii. the parties to the combination, fail to carry out the modification within such period as may be specified by the Commission under sub-section (4); or iii. the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition which cannot be eliminated by suitable modification to such combination, then, without prejudice to any penalty which may be imposed or any prosecution which may be initiated under this Act, the Commission may order that such combination shall not be given effect to, or be declared void, or frame a scheme to be implemented by the parties to address the appreciable adverse effect on competition, as the case may be. 6. If no order is passed or direction issued by the Commission in accordance with the provisions of subsection (1) or sub-section (2) or sub-section (3) or sub-section (5), as the case may be, within a period of one hundred and fifty days from the date of notice given to the Commission under section 6(2), the combination shall be deemed to have been approved by the Commission. Acts Taking Place outside India but Having an Effect on Competition in India According to Section 32 of the Act, the Commission shall, notwithstanding that, — - an agreement referred to in Section 3 has been entered into outside India; or - any party to such agreement is outside India; or - any enterprise abusing the dominant position is outside India; or - a combination has taken place outside India; or - any party to combination is outside India; or - any other matter or practice or action out of such agreement or dominant position or combination is outside India, have power to inquire in accordance with the provisions contained in sections 19, 20, 26, 29, 29A and 30 of the Act into such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India and pass such orders as it may deem fit in accordance with the provisions of this Act. Power to Issue Interim Orders Section 33 provides that where during an inquiry, the Commission is satisfied that an act in contravention of section 3(1) or section 4(1) or section 6 has been committed and continues to be 26 | P a g e CS EXECUTIVE BY CS GD SALUJA committed or that such act is about to be committed, the Commission may, by order, temporarily restrain any party from carrying on such act until the conclusion of such inquiry or until further orders, without giving notice to such party, where it deems it necessary. Appearance before Commission Section 35(1) states that a party or the Director General may either appear in person or authorise one or more chartered accountants or Company Secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its case before the Commission. Explanation. —For the purposes of this section, — a) “Chartered Accountant” means a chartered accountant as defined in Chartered Accountants Act, 1949 and who has obtained a certificate of practice; b) “Company Secretary” means a company secretary as defined in Company Secretaries Act, 1980 and who has obtained a certificate of practice; c) “Cost Accountant” means a cost accountant as defined in section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice; d) “Legal Practitioner” means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice. As per Section 35(2) without prejudice to sub-section (1), a party may call upon experts from the fields of economics, commerce, international trade or from any other discipline to provide an expert opinion in connection with any matter related to a case. Power of Commission to Regulate its Own Procedure Section 36 provides that in the discharge of its functions, the Commission shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules made by the Central Government, the Commission shall have the powers to regulate its own procedure. The Commission shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely: — i. summoning and enforcing the attendance of any person and examining him on oath; ii. requiring the discovery and production of documents; iii. receiving evidence on affidavits; iv. issuing commissions for the examination of witnesses or documents; v. requestioning any public record or document or copy of such record or document from any office. The Commission may call upon such experts, from the fields of economics, commerce, accountancy, international trade or from any other discipline as it deems necessary, to assist the Commission in the conduct of any inquiry by it. The Commission may direct any person: - - to produce before DG or the Secretary or an officer authorised by it, such books or other documents in the custody or under the control of such person so directed as may be specified or described in the direction, being documents relating to any trade, the examination of which may be required for the purposes of this Act; - to furnish to the DG or the Secretary or an officer authorised by it, as respects the trade or such other information as may be in his possession in relation to the trade carried on by such person as may be required for the purposes of this Act; 27 | P a g e CS EXECUTIVE BY CS GD SALUJA Execution of orders of Commission Imposing Monetary Penalty 1. If a person fails to pay any monetary penalty imposed on him under the Act, the Commission shall proceed to recover such penalty in such manner as may be specified by the regulations. 2. In a case where the Commission is of the opinion that it would be expedient to recover the penalty imposed under this Act in accordance with the provisions of the Income-tax Act, 1961 , it may make a reference to this effect to the concerned income-tax authority under that Act for recovery of the penalty as tax due under the said Act. 3. Where a reference has been made by the Commission under sub-section (2) for recovery of penalty, the person upon whom the penalty has been imposed shall be deemed to be the assessee in default under the Income-tax Act, 1961 and the provisions contained in that Act and any rules made there under shall, in so far as may be, apply as if the said provisions were the provisions of this Act and referred to sums by way of penalty imposed under this Act instead of to income- tax and sums imposed by way of penalty, fine and interest under the Income–tax Act, 1961 and to the Commission instead of the Assessing Officer. DUTIES OF DIRECTOR GENERAL Section 41 of the Act empowers the Director General to investigate contraventions. It provides that: 1. 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. 2. The Director General shall have all the powers as are conferred upon the Commission under subsection (2) of section 36. 3. Without prejudice to sub-section (2), it shall be the duty of all officers, other employees and agents of a party which are under investigation— a) to preserve and to produce all information, books, papers, other documents and records of, or relating to, the party which are in their custody or power to the Director General or any person authorised by it in this behalf; and b) to give all assistance in connection with the investigation to the Director General. 4. The Director General may require any person other than a party referred to in sub-section (3) to furnish such information or produce such books, papers, other documents or records before it or any person authorised by it in this behalf if furnishing of such information or the production of such books, papers, other documents or records is relevant or necessary for the purposes of its investigation. 5. The Director General may keep in his custody any information, books, papers, other documents or records produced under sub-section (3) or sub-section (4) for a period of 180 days and thereafter shall return the same to the person by whom or on whose behalf the information, books, papers, other documents or records were produced: Provided that the information, books, papers, other documents or records may be called for by the Director General if they are needed again for a further period of 180 days by an order in writing: Provided further that the certified copies of the information, books

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