In the year 2002 an act was passed by the Parliament which replaced the MRTP Act of 1969, which came to be known as the Competition Act. This act was established for the economic development of the country by preventing all the unfair trade practices which were happening in the country and majorily to ensure the interest of consumers and to bring freedom of trade to the people. The need of replacement arose with respect to competition laws to shift the main target from curbing monopolies to encouraging companies to take a part in the market and grow, by promoting competition, and keeping a control on the abuse of the dominant power in the market.
Competition is a situation in market, within which sellers independently strive for buyer’s aid to attain business objectives. Competition and liberalization, together unleash the entrepreneurial forces within the economy. Competition offers wide range of choices to consumers at reasonable prices, stimulates innovation and productivity, and results in optimum allocation of resources. There are 2 things, product selling and their services. And the consumers have imperfect knowledge about the products. It is the supplier who introduces the consumer to the product. The buyer pays the amount which is demanded by the seller of the product; either he has no or some bargaining power. The supplier uses his dominant position to obtain profit at pre determined levels. Therefor the consumer should be given protection from such trade pratices which will have adverse effect of preventing, distorting, restricting and suppressing cornpetition in the market.
EVOLUTION AND DEVELOPMENT OF INDIAN COMPETITION LAWS
The first Indian competition law was codified in 1969 and was named the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The MRTP Act was inadequate to provide remedy for complainants. The Raghavan committee was framed to make the recommendations on what framework Competition Law in India should be made. The origin of the act can be traced to Article 38 and 39 of the Constitution of India which contain the Directive Principle of State Policy which states that the states are responsible to promote the wefare of the people by ensuring the protection to them, in the way by maintaining social order in the manner of justice, social, economic and political.
Moreover they direct that the state shall in particular ensure the equitable distribution of material resources of the community so as to serve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production in the hands of a few causing harm to the great majority.
ESTABLISHMENT OF CCI
The Central Government under section 7 the Competition Act, 2002 has been empowered to establish a Commission to be called the Competition Commission of India, by issuing a notification in the Official Gazette. The commission is formed as a body corporate having its own common seal and perpetual succession. It can sue and be sued in its own name and it can enter into contracts in its own name. The central government was to decide that where will the head office of the commission will be established. Currently it is operating in New Delhi. The commission has also been authorized to establish its office at other places in India.
ANTI-COMPETlTIVE AGHEEMENTS UNDER THE COMPETITION ACT, 2002
Anti competitive agreements are those which alter the fair competition in the market or affect normal conditions of pricing supply demand or distribution of goods or services such agreements are essentially void if they do not allow the market to develop in a healthy manner if the conditions making the agreement anti-competitive or altered to remove the defects the agreement can be implemented. The agreements which cause appreciable adverse effect on the competition are anti- competitive agreeements. By adverse effect we do not have a particluar list of agreements which can have the adverse effect but when can these adverse effect can happen in a particular economic consequences which can have the effect on such agreements from varying time and circumstances. There are two forms of such agreements under section 3 of the Act .
There are certain agreeents which shall be presumed to have an appreciable adverse effect on the competition and the onus to prove in such cases lies on the defendant.
Directly or indirectly determines purchase or sale price - The fixing of price either directly or indirectly is prohibited. The agreements which are entered between the parties to curb the competition by price fixing is not allowed and is prohibited in the best interest of the consumer. The prohibition under this head is related to the effect of the raising and fixing of price of a commodity is per se illegal.
Limit or control production, supply, markets, technical development, investment or provision of services - Any agreement which restrains the trade is prohibited. Whether it is related to the amount of production or the restriction on the supply of the product in a particular market if so made then such agreement is anti competitive. As it are having adverse effects on the competition.
Share the market or source of production by way of allocation of geographic area of market or no. of consumers during a market - If the retailers or distributors mutually enter into an agreement dividing the market by geographical areas amongst themselves and supplying only to those customers, or if they mutually adjust to offer only particular goods or services to the deterrence of the consumers, such an agreement is prohibited. The agreement must no result in a territorial division or division of the merchandise market amongst enterprises.
Direcly or indirectly results in Bid Rigging or Collusive Bidding - Bidding as a practice is meant to enable the procurement of products or services on the foremost favourable terms and conditions. As any agreement between enterprise or persons which have the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the method for bidding. It takes place when bidders collude and keep the bid amount at a predetermined level. If a bid ridding takes place in government tenders it's likely to have served adverse effect on the purchase and on public spending. Thus any agreement or understanding that results in bid rigging or collusive bidding is additionally prohibited
Section 3(3) of the Act states for the horizontal agreement which are bid rigging, collusive bidding and cartels and many others. These agreements are treated to be having the rebuttable presumption between the parties to such agreements.
These are the agreements which operate at the same level of the economic process, i.e., enterprises engaged and operating at the same activity. For eg. Agreements between producers, the retailers or the wholesellers. These agreements are presumed to be anti competitive as they are subject to “per se rule” and therefore, presumed to be having appreciable adverse effect on the competition in the market.
Vertical anti-competitive agreements are entered into between parties who have a obligation or relationship to buy and sell of the products and services to each other. In vertical agreements, the parties are operating on different stagesof the production. For instance agreements essentially between manufacturers and suppliers i.e. between producers and wholesalers or between manufacturers and retailers, etc. Under the vertical category of agreements, these are to be judged by "Rule of Reason" against the "Rule of per se" and the burden of proof lies on the investigator to prove.
ABUSE OF DOMINANT POSITION
Dominance of an enterprise or of a group implies a position of supremacy arising from financial or other strength or clout, which enables an enterprise to operate independently of the surrounding competitive forces or to manipulate its competitors or consumers or to control the market as per its desires.
Actual dominance does not necessarily imply its abuse. Abuse d dominant position means impeding fair competition between two entities exploiting consumers and controlling the market towards personal ends. Identification of abusive use of dominant position they are -
• Unfair or discriminatory trade practices: According to this, abuse of dominant position happens when an enterprise or group directly or indirectly imposes discriminatory conditions on the sale of goods or deciding on the prices for sale of the product or the predatory price of the goods.
• Limiting production or technical or scientific development: Conditions that limit the production of the goods or technical or scientific development resulting in the production of the goods or services. An abuse of dominant position happens in the market where an enterprise or group directly or indirectly imposes such conditions.
• Denial of access to market, barriers to entry and expansion: Any condition that causes denial to access to the market in any manner shall constitute an abuse of dominant position.
• Protection of other markets: when an enterprise uses its position in a relevant market to enter into another market, then there is an abuse of dominant position.
• LAW RELATING TO ANTI-COMPETITIVE AGREEMENTS IN EUROPEAN UNION Article 81 and 82 of the Treaty of Rome is the law relating to anti competitive agreement in European Union. It prohibits agreement between undertakings that may affect the trade between the member states. There are certain exemptions in the European Union which are if the agreement contributes to improve in the production or distribution of goods, or to promotion of technical or economic progress while keeping a fair share of the resulting benefits for the consumers.
• LAW RELATING TO ANTI-COMPETITIVE AGREEMENTS IN UNITED KINGDOM Section 2 of The UK Competition Act, 1998 deals with anti competitive agreements, decisions and concerted parties. The Act grants the individual exemptions and block exemptions. It prohibits any activity which may affect trade within UK and have their object or effect the prevention, restriction or distortion of competition within the UK.
• LAW RELATING TO ANTI-COMPETITIVE AGREEMENTS IN UNITED STATES In the United States, Section 1 and 2 of the sherman anti trust act, 1890 and sec 2 of clayton act, 1914 are the key anti trust provisions over there. Much of the US laws relating to antitrust is judge made law and the landmark decision had added to the provisions.
Anti-competitive agreements do harm the competition in the market as it could lead to monopoly or provides unfair advantage to the business enterprise. Competition also serves to diffuse socio-economic power, broadening participation in economic, social and political advances while ensuring opportunities for new entrepreneurs to enter the market and have a free trade without any fear of competition.
The term Competition is not defined in the act, however in the Corporate world the term is generally understood as a process whereby the economic enterprise compete with each other to secure customers for their product. In the process, the enterprise completes to outsmart their competition sometimes to eliminate their rivals. Thus competition kills competition.