This article on ‘An analytical study of Anti Competitive and Unfair Trade Practices in Competition Act, 2002‘ was written by an Intern at Legal Upanishad.
“It’s nice to have valid competition; it pushes you to do better.” – Gianni Versace. Competition is the way through which customers are attracted by making a situation of rivalry between the market players. Businesses try to acquire the patronage of the customers to achieve profit. Fair and healthy competitive practice helps in the growth of a market leading ultimately leads to the growth of the economy. But many times, people try to disturb the balance of the competition in the market and tend to use competitive practices which are unfair in nature. To safeguard the market and its players from these, laws are implemented and this article is based on the law which regulates these practices in India.
History of Competition Laws in India:
India has become a globally recognised market and is growing at a steady rate, so it is necessary for proper legislation to deal with unfair trade practices in the market. The first legislation which was enacted to handle the problem of anti-competitive and unfair trade practices was The Monopolies and Restrictive Trade Practices Act, 1969. The Act was passed by the Parliament on the basis of the provisions of Directive Principles of State Policy, enshrined in the Constitution of India. This Act went through several amendments.
The main drawback of this Act was that its perspective was negative in the sense that it was made to stop monopoly practice. The then Finance Minister in the budget of 1999 pointed out the problems in this Act and stated that the Act has become obsolete in nature and it needs to be altered because matching the condition of the global market at that time, the need for encouraging competition was needed and thus a committee was formed to look into the matter.
The Raghavan Committee was established in respect of the above proposition and based on the reports of this Committee, the Competition Bill was presented in the Parliament in 2000 after considering the recommendations of the Standing Committee, the Competition Act, 2002, was passed by the Legislature. Much later the Monopolies and Restrictive Trade Practices Act were repealed and replaced, by the Competition Act, 2002, from 2009.
Overview of The Competition Act, 2002:
The Competition Act, 2002, contains 66 sections which are divided into IX Chapters. The main purpose of the enactment of the Competition Act was to restrict unfair means of trade practices and anti-competitive practices while at the same time encouraging healthy competition to help in the growth of the market. The Competition Act, 2002 was made to ensure that a healthy marketplace exists where competition exists, not in a toxic way, to promote business and to protect and safeguard the interest of the consumers. The basic objectives for the enactment of The Competition Act, 2002 were as follows:
- To safeguard the interests of the customers;
- To prevent unfair trade practices while encouraging competition in the marketplace;
- To build a commission solely for the regulation of matters related to trade practices in the marketplace, thereby reducing government interference in this matter; and
- To ensure freedom for new market players to enter the marketplace.
The Competition Commission of India (CCI) was built on the basis of the provisions of The Competition Act, 2002. A tribunal, namely the Competition Appellate Tribunal, was established, which was a quasi-judicial body, to hear cases related to violations of the provisions of the Act. The Act has been amended twice, The Competition (Amendment) Act, 2007 and The Competition (Amendment) Act, 2009, respectively. Recently the Competition (Amendment) Bill, 2020, has been passed in Parliament.
Prevention of Anti-Competitive and Unfair Trade Practices:
The sole purpose for which the Competition Act was brought into existence was the prevention of anti-competitive and unfair trade practices. The Competition Act contains some principles through which its motive can be fulfilled, the principles are as follows:
- Anti-Competitive Agreements – Anti-Competitive Agreements are the agreements where two or more market players, operating in the same market, make a pact to fix the prices of products or reduce stocks in the market and do other such things which disrupt the healthy competition in the market and the consumers get affected the most due to this. Section 3 of the Act defines Anti-Competitive Agreements. Such types of agreements are also known as Appreciable Adverse Effects on Competition agreements. The practices that amount to an Anti-Competitive Agreement are,
- i) Directly or indirectly affecting sale or purchase prices;
- ii) Limiting supply of goods and services;
- iii) Limiting production of goods;
- iv) Limiting technical development of the goods and services available in the market;
- v) Limiting services relating to the goods in the market;
- vi) Directly or indirectly leading to collusive bidding. Thus, any agreements leading to any of the above results will make the agreement void vide the provisions of this Act.
- Abuse of Dominant Position – Section 4 of the Act prohibits the abuse of the dominant positions held by a company in the market. The concept of Dominant position is defined in the Act as a position of power held by a company through which the company can operate without facing the competitive forces in the market and can also affect the competition in the market and the customers and other relevant factors, in its favour. The most common practice which is example of this abuse is predatory pricing. This abuse leads to monopoly which affects the market, its consumers and the economy as a whole and thus falls under unfair means of trade practice.
Competition has become an integral part of an economy. India is a developing country and its economy is also rising at a high pace. Implementation of healthy competitive policies can act as a catalyst and boost the economic rise to a higher level. A fair marketplace is needed to be ensured because it affects the economy as a whole. The Competition Act, 2002 helps in achieving this goal which not only leads to the growth of the existing business in the market but also encourages new businesses to emerge in the scenario.
- Prashant Kumar, 2014, Competition Law in India – An Overview, LinkedIn, https://www.linkedin.com/pulse/20140821065102-73187306-competition-law-in-india-an-overview
- 2021, Competition Act 2002, ClearTax, https://cleartax.in/s/competition-act-2002
- B. Bhanukesh, 2021, The Competition Act, 2002 and Competition Commission of India: An Analysis, iPleaders, https://blog.ipleaders.in/competition-act-2002-competition-commission-india/