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Competition law in India is governed by the Competition Act, 2002, which was enacted by the Parliament of India to regulate anti-competitive behaviour by companies and promote consumer welfare. The act establishes the Competition Commission of India (CCI) as a market controller to enforce competition policy and prevent anti-competitive practices, such as agreements between businesses that harm competition, abuse of dominance, and mergers or acquisitions that reduce market competition. The history of competition law in India dates back to the Monopolies and Restrictive Trade Practices Act of 1969, which was repealed and replaced by the Competition Act to adapt to the country's economic liberalisation and globalisation.
| Characteristics | Values |
|---|---|
| Purpose | To regulate anti-competitive conduct and support the agreements of the World Trade Organisation (WTO) |
| Anti-competitive agreements | Any agreement between two or more firms or individuals to maintain market competition is forbidden |
| Dominance-abuse prevention | Any firm that exploits its dominating position will be penalised |
| Anti-cartels | Any agreement between businesses or individuals that harms competition is a civil offence |
| Mergers and acquisitions | The Competition Commission of India (CCI) will only approve mergers and acquisitions if they do not undermine market competition |
| Informative nature | Businesses must notify CCI of any interactions that are likely to harm market competition prior to adopting such action or engaging in such an agreement |
| Competition regulator | The Competition Act, 2002 establishes the CCI as a market controller to stop and control anti-competitive behaviour |
| Competition Appellate Tribunal (COMPAT) | A quasi-judicial authority formed to decide on appeals against any direction issued or decision taken by the CCI |
| Globalisation | The Competition Act, 2002 was a result of India's drive for globalisation and economic liberalisation |
| Monopolies | The Monopolies and Restrictive Trade Practices Act of 1969 was repealed by the Competition Act, 2002 |
| Consumer protection | The goal of the Competition Act, 2002 is to protect the interests of consumers and foster long-term economic progress |
| Recent developments | The CCI has been operating optimally, conducting significant raids and passing notable orders |
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What You'll Learn
Anti-competitive agreements
Competition law in India is governed by the Competition Act, 2002, which was established to regulate anti-competitive conduct and support the agreements of the World Trade Organisation (WTO). The Act also established the Competition Commission of India (CCI) as a market controller to stop and control anti-competitive behaviour in the country.
The Act expressly prohibits entities from entering into any agreements about production, supply, distribution, acquisition, or control of goods or services that are likely to cause an Appreciable Adverse Effect on Competition (AAEC) within India. The Competition Commission of India decides whether an agreement has an anti-competitive effect, and Section 19 of the Act provides the parameters for this judgement. These include the creation of barriers to new entrants in the market and the promotion of technical, scientific, and economic development.
- Agreement to fix prices
- Agreement to limit production and/or supply
- Agreement to allocate markets
- Bid rigging or collusive bidding
Vertical Agreements are those entered into by enterprises at different stages or levels of production, distribution, supply, etc. Vertical restraints include:
- Tie-in arrangement
- Exclusive supply/distribution arrangement
- Refusal to deal
- Resale price maintenance
To encourage compliance, competition authorities have implemented leniency programmes to incentivize actors connected with anti-competitive agreements to disclose information and assist authorities in lieu of immunity or lenient treatment.
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Abuse of dominance
Competition law in India is governed by the Competition Act, 2002, which was enacted to regulate anti-competitive behaviour in the Indian market. The Act established the Competition Commission of India (CCI) as the market controller and the Competition Appellate Tribunal (COMPAT) as a quasi-judicial authority to hear appeals against CCI decisions.
The CCI is responsible for enforcing the provisions of the Act and has wide regulatory and quasi-judicial powers. It investigates cases of alleged abuse of dominance and has the authority to impose penalties. The determination of dominance involves a qualitative assessment of market dynamics and the relative position of the enterprise. This includes considering factors such as the size and resources of the enterprise, market share, and the ability to influence prices or limit production.
Examples of abuse of dominance include imposing unfair or discriminatory conditions, restricting production or technical development, denying market access, leveraging dominance in one market to enter or protect positions in other markets, and engaging in exploitative or exclusionary pricing strategies.
Some notable cases of abuse of dominance in India include:
- The CCI found that car manufacturers abused their dominance by requiring customers to purchase spare parts and diagnostic tools solely from them, denying market access to competitors.
- In the Coal India case (2014), the CCI found that Coal India imposed unfair terms and conditions in its supply contracts, which was upheld by COMPAT and is under appeal in the Supreme Court.
- The CCI held that Google abused its dominance in the market for licensable OS and app stores for Android smart mobile devices by imposing its billing system, restricting competitors, and providing preferential treatment to its payment app.
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Cartelisation
Competition law in India is governed by the Competition Act, 2002, which was established to regulate anti-competitive conduct and support the agreements of the World Trade Organisation (WTO). The Act also established the Competition Commission of India (CCI) as the market controller for stopping and controlling anti-competitive behaviour in the country.
- Agreement to fix prices
- Agreement to limit production and/or supply
- Agreement to allocate markets
- Bid-rigging or collusive tendering
In recent years, the CCI has been very active in investigating and taking action against cartels. For instance, in 2018, the CCI issued an order against certain players in the tyre industry for "indulging in cartelisation by acting in concert to increase the prices of cross-ply/bias tyres variants sold by each of them in the replacement market and to limit and control production and supply in the said market". The CCI also has a leniency programme for cartels, which is governed by the CCI (Lesser Penalty) Regulations, 2009. This programme encourages cartel participants to provide information against their fellow cartel members in exchange for a reduction in penalties.
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Mergers and acquisitions
India's Competition Act of 2002 was enacted to govern the anti-competitive behaviour of firms in the Indian market. The Act aims to establish an open, just, competitive, and creative environment that will protect consumers' interests and foster long-term economic progress. The Competition Act of 2002 was amended in 2007 and 2009 to keep up with global economic trends and the changing landscape of mergers and acquisitions (M&A).
The CCI's review process typically consists of two phases. In Phase I, the CCI has 30 working days to issue a prima facie opinion on whether the transaction is likely to cause an Appreciable Adverse Effect on Competition (AAEC) within the relevant market in India. If the CCI determines that the transaction is unlikely to cause an AAEC, it will approve the transaction. However, if the CCI believes that the merger or acquisition may cause an AAEC, it proceeds to Phase II, where it can extend its review period up to the full 210 calendar days statutory period. During this time, the transaction must be suspended until clearance is obtained.
Certain sector-specific exemptions from merger control provisions have been granted by the Government of India. For example, in 2017, regional rural banks, nationalised banks, and Central Public Sector Enterprises operating in the oil and gas sectors were exempted from merger control provisions for varying periods.
In addition to the CCI's review, M&A transactions in India may require approvals from other regulatory bodies. For instance, mergers involving listed companies need approval from the Securities and Exchange Board of India (SEBI) and the relevant stock exchanges. Acquisitions may also require approval from the Reserve Bank of India (RBI) if they do not comply with the Foreign Exchange Regulations or exceed sectoral caps for foreign investment.
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History of competition law in India
The history of competition law in India dates back to 1969, with the Monopolies and Restrictive Trade Practices Act (MRTP). The MRTP Act came into force on 1 June 1970 and aimed to curb monopolies and restrictive trade practices. It was enacted to limit the concentration of wealth in a few hands and prohibit monopolistic and discriminatory acts harmful to the public. However, with the changing nature of business and the economy, the MRTP Act became obsolete and unable to align with the economic transformation.
In the 1980s and 1990s, India introduced a new economic policy, the LPG Model, which brought about liberalisation, privatisation, and globalisation. This progressively widened the space for market forces and reduced the government's role in the economy and various sectors. As a result, India implemented new economic plans, reduced government interference, and opened up opportunities for industry and international investment.
Following the economic reforms and liberalisation in 1991, it became evident that a new competition law was needed to replace the MRTP Act. The existing law had become outdated, and the focus needed to shift from curbing monopolies to promoting competition in the Indian market. Amendments were made to the MRTP Act in 1991, removing pre-entry restrictions regarding mergers and acquisitions. However, these changes were insufficient, and the law could not keep up with the evolving economic landscape.
To address this, the Government of India appointed Mr S.V.S. Raghavan, a retired senior official, to chair a high-level committee in 2000. The committee studied the competition laws of 80 countries and prepared a draft for a new competition law. After consultations with stakeholders, a bill was introduced in Parliament and subsequently passed in 2002 as the Competition Act, 2002. This new law came into force in January 2003, with the Competition Commission of India established in October of the same year. The Competition Act aims to prevent anti-competitive behaviour, promote and sustain competition, protect consumer interests, and ensure freedom of trade. It establishes the Competition Commission of India (CCI) as a market controller to enforce competition policy and stop anti-competitive practices.
Since its enactment, the Competition Act, 2002, has undergone amendments in 2007 and 2009 to improve enforcement and adapt to new market challenges. These amendments reflect India's drive for globalisation and economic liberalisation, aiming to create a competitive market environment conducive to economic growth and consumer welfare.
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Frequently asked questions
Competition law, also known as antitrust law, anti-monopoly law, or trade practices law, is a field of law that promotes and maintains market competition by regulating anti-competitive conduct by companies.
The history of competition law in India dates back to 1969 with the Monopolies and Restrictive Trade Practices Act ("MRTP Act"). However, after the economic reforms in 1991, this legislation became obsolete and a new competition law, the Competition Act, was enacted in 2003.
The Competition Act, 2002 is the current competition law in India. It was enacted by the Parliament of India to govern Indian competition law and replace the MRTP Act. The Act establishes the Competition Commission of India (CCI) as a market controller to stop and control anti-competitive behaviour in the country.
The Competition Act, 2002 has two main goals: regulating anti-competitive conduct and supporting the agreements of the World Trade Organisation (WTO). The Act covers four main aspects: anti-competitive agreements, dominance-abuse prevention, anti-cartels, and mergers and acquisitions.
The Competition Commission of India (CCI) is responsible for enforcing the provisions of the Competition Act. The CCI consists of a chairperson and a minimum of two and a maximum of six other members. Any order passed by the CCI can be appealed to the National Company Law Appellate Tribunal (NCLAT), and subsequently to the Supreme Court of India.
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