Whenever we are caught cheating in examination halls, we are charged with malpractice. This is done in order to build ethical principles among us, as students and ensure fair competition. On a similar pedestal, it is necessary to ensure that the market also has fair trade practices and isn’t inducing malpractices to get ahead in their respective business. To ensure balance and regulate a fair market, Competition law has emerged as one of the essential tools to make sure certain prominent actors don’t single-handedly run the market, instead every player gets an equal chance in representing its position and dominance in the market.
What is Competition Act, 2002?
In the backdrop of the economic development of the country, it was imperative to establish a Commission that would warrant ethical practices in the market and fair competition among the traders, to safeguard the interests of consumers and freedom of traders, which led to the enactment of the Competition Act,2002.
The essential components of the Competition Act include:
Anti-Competitive Agreements:
According to S.2(b) agreement means any arrangement or understanding or action, either written or formal, whether or not intending to be legally enforceable.
Agreements are divided into two types, i.e., Horizontal Agreement and Vertical Agreement. Horizontal agreements are entered between two or more parties, who operate at the same level of business such as bid-rigging, collusive bidding whereas vertical agreements are entered between parties operating on a different level of production and distribution chain.
Certain agreements which are restricted under the Competition Act are tie-in arrangements, exclusive supply agreement, exclusive distribution agreement, refusal to deal, resale price maintenance.
According to section 3 of the Act, any agreement which might cause an Appreciable Adverse Effect on Competition (AAEC) is realized as anti-competitive. Factors such as building barriers to prevent entries into the market, pushing the existing competition out of the market, foreclosure of competition, accumulation of benefits to consumers, enhancement in manufacturing and distribution of services, and promotion of technical, economic, and scientific development lead cause AAEC.
Abuse of Dominance:
The circumstances created by dominant companies in the market to remove their competitors or the competition law firms or even prevent such competitors from entering the market. According to section 4 of the Act, the dominant position is understood as the rank of strength, enjoyed by companies, to operate irrespective of competitive forces in the market and influence is competitors and consumers in its favor. Certain activities are recognized under S.4(2) of the Act, namely
Inflicting, either directly or indirectly, discriminatory conditions or prices of goods and services
Restricting manufacture of goods and/or services or technical improvement to the prejudice of customers
Engaging in practices to deny market access to competitors
Levying conditions irrelevant of the subject of the contract
Using one’s dominant position to limit other’s access to the market
Combination/ Acquisition:
Section 5 of the Act defines the term as a merger or amalgamation of one or more persons or enterprises. Combination, in this law, refers to the merger of two or more firms or businesses. Furthermore, there are two types of combinations, i.e., horizontal combinations and non-horizontal combinations. Horizontal combinations include merging of enterprises with a similar level of the production process, with substitute goods. It is rather a friendly merger. The latter one is further divided into vertical combination and conglomerate combination. The vertical combination is a merger of business firms engaged in different levels of production and distribution of products whereas conglomerate combination includes firms that are completely unrelated business fields.
Competition Advocacy:
One of the major motives of Competition law is to ensure a balanced yet competitive economic market. The term expresses the awareness among the people about the advantages of a competitive market. Competition Commission of India is empowered to look after the advocacy of competition law and ensure consumer welfare and trade freedom.
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