But market-distortionary practices and anti-competitive forces may restrict the working of healthy competition in the economy. Also, the era of economic reforms has unleashed an ever increasing competitive forces through liberalisation and globalisation. In the absence of adequate safeguards, enterprises may undermine the market by resorting to unfair practices for their short term gains. Thus, there arises the need to have a proper regulatory environment which can ensure a healthy competition in the economy so that all business enterprises can grow and expand and stimulate economic development of a country. Hence, Government has formulated a Competition Policy which protects the interests of consumers and producers by promoting and sustaining a fair competition.

Competition Policy

'Competition Policy' refers to the government policy designed to ensure contestability and fair competition in the market by removing or preventing those factors and forces which tend to distort such competition. It is a measure that directly affects the behaviour and structure of the enterprises .Such a policy is needed to ensure that the market-oriented economic regime results in competitive outcomes. It promotes the creation of a healthy business environment which improves static and dynamic efficiencies and leads to maximisation of consumer and producer welfare.

The main objectives of competition policy are:-

• To create and promote active competitive environment so as to ensure efficient allocation of resources in an economy.
• to promote efficiency in the market economy and maximize both consumers' and producers' welfare.
• To control the concentration of economic power and encourage innovation.
• To support small and medium sized enterprises and encourage regional integration.
• To aid the process of creating globally competitive firms with enhanced investment and technical capabilities.

There are two elements of the competition policy :-

• A set of policies that enhance competition in local and national markets.These include:- liberalised trade policy, relaxed foreign direct investment (FDI) policy, policies for protection of intellectual property rights, deregulation of financial and capital markets as well as liberalised fiscal and exchange rate policy. Such an interface with other economic policies has helped in encouraging fair competition with greater efficiency in resource allocation.
• A legislation designed to prevent anti-competitive business practices and artificial entry barriers.Such a legislation facilitates market access and complements other competition promoting efforts of the Government.

Competition Act, 2002

As per the provisions of the Competition policy, the Government of India enacted a legislation called the Competition Act,2002. The Act aimed at promoting competition through prohibition of anti-competitive practices, abuse of dominance by an enterprise and regulation of combinations such as mergers and acquisitions.

The Act repealed the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 and thus dissolved the Monopolies and Restrictive Trade Practices Commission (MRTPC) which was set up to inquire into the provisions of the MRTP Act. Moreover,in the era of liberalization, privatization and globalization, it was felt that the existing MRTP Act, 1969 had become obsolete in certain respects and there is a need to shift the focus from curbing monopolies to promoting competition. The new competition law, the Competition Act, 2002 provides for a modern framework of competition. The main objectives of the Act are:-

• To provide for the establishment of a commission to prevent practices having adverse effect on competition
• To promote and sustain competition in markets in India
• To protect the interests of consumers
• To ensure freedom of trade carried on by the participants in the markets in India and for related matters.

In order to enforce the provisions of the Competition Act, an autonomous body called Competition Commission of India (CCI) was set up with regulatory and quasi-judicial powers. The Commission's area of jurisdiction covers the following:-

1. To enquire into Anti-Competitive Agreements

It prohibits anti-competitive agreements. The Act declares void any agreement by an enterprise or association of enterprises which restricts the production, supply, distribution, acquisition or control of goods or provision of services. The Act recognises horizontal and vertical agreements as having potential of restricting competition in an economy.

The horizontal agreements are the agreements between those enterprises which are at the same stage of production,services,etc. It includes, any collusive agreement which :-

• Directly or indirectly determines purchase or sale prices
• Limits or controls production, supply, markets, technical development, investment or provision of services
• Shares the market or source 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 in any other similar way
• Directly or indirectly results in bid rigging or collusive bidding.

The vertical agreements are the agreements between those enterprises which are at the different stages of production, distribution, etc. It includes the following agreements:-

• Tie-in arrangement
• Exclusive supply agreement
• Eexclusive distribution agreement
• Rrefusal to deal
• Rresale price maintenance.

The Commission while determining whether an agreement has an appreciable adverse effect on competition shall consider the following factors:-

• Creating barriers for new entrants in the market or driving existing competitors out of the market
• Foreclosing competition by hindering entry into the market
• Providing benefits to consumers
• Improving production or distribution of goods or provision of services
• Promoting technical, scientific and economic development.


2. To enquire into abuse of dominant position

The Act prohibits abuse of dominant position by any enterprise. Dominant position means a position of strength, enjoyed by an enterprise ,in the relevant market in India . Such a position enables a firm 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 .

According to the Act, abuse of dominance by an enterprise will include the following practices :-

• directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods and services;
• restricting the technical or scientific development relating to goods or services to the prejudice of consumers;
• indulging in practice(s) resulting in denial of market access;
• making conclusions of contracts subject to acceptance by other parties,which have no connection with the subject of such contracts;
• using dominant position in one relevant market in order to enter into another market.

The Commission while determining whether an enterprise enjoys a dominant position or not shall consider the following factors:-


• Market share,size and resources of the enterprise;
• Size and importance of the competitors;
• Economic power of the enterprise, including commercial advantages over competitors;
• Dependence of consumers of the enterprise;
• Monopoly or dominant position acquired as a result of any statute or by being a Government company or a public sector undertaking or otherwise;
• Entry barriers like regulatory barriers, high capital cost of entry, marketing entry barriers, technical entry barriers, etc;
• Countervailing buying power;
• Market structure and size of market;
• Vertical integration of the enterprises or sale or service network of such enterprises;
• Any other factor which the commission may consider relevant for the enquiry.
  
  
3. Combinations regulation

The Act regulates the various forms of business combinations and not prohibit their formation. Under the Act,no person or enterprise shall enter into a combination, in the form of an acquisition, merger or amalgamation, which causes or is likely to cause an appreciable adverse effect on competition in the relevant market and such a combination shall be void.

But, all combinations do not call for scrutiny unless the resulting combination exceeds the threshold limits in terms of assets or turnover as specified by the Competition Commission of India .

The Commission while regulating a ‘combination' shall consider the following factors

• Actual and potential competition through imports
• Extent of entry barriers into the market
• Level of combination in the market
• Degree of countervailing power in the market
• Pssibility of the combination to significantly and substantially increase prices or profits
• Extent of effective competition likely to sustain in a market
• Availability of substitutes before and after the combination
• Market share of the parties to the combination individually and as a combination
• Possibility of the combination to remove the vigorous and effective competitor or competition in the market
• Nature and extent of vertical integration in the market
• Nature and extent of innovation
• Whether the benefits of the combinations outweigh the adverse impact of the combination.

Thus,the Act does not seek to eliminate combinations and only aims to eliminate their harmful effects.

4. To undertake Competition Advocacy, create public awareness and impart training on competition issue

The CCI undertakes promotion of competition advocacy and creation of awareness about competition issues in the following way:-

• The Commission shall endeavour and undertake programmes , activities etc for the promotion of competition advocacy and creation of awareness about competition issues in India and abroad as considered appropriate by the Commission
• The Commission may constitute Advocacy Advisory Committee(s) with a view to have expert and stakeholder participation and consultation, on continuous basis, to carry forward this agenda
• The Commission may develop and disseminate advocacy literature, including audio-visual and other material with a view to promote competition advocacy and create awareness about competition issues. For doing so, the Commission may outsource the professional services as deemed appropriate
• The Commission may make extensive use of the media, both print and electronic, for promoting this.For this purpose it may, inter- alia convene media meets, issue press notes, arrange publication and dissemination of articles/news, release advertisements and undertake other publicity related activities on competition issues as deemed appropriate
• The Commission shall proactively interact with the organizations of stakeholders, academic community, sectoral regulators, Central and State Governments, Civil society and other organizations concerned with competition matters and encourage debate on competition and promote a better and more informed economic decision making
• The Commission may undertake studies and market research for this purpose
• The Commission may encourage the academic and professional institutions to include competition law and policy in the curricula administered by them

To build and further strengthen the capacity of the functionaries of the Commission, the Competition Commission of India has established a Competition Forum with eminent personalities in the field of law, economics, finance, public administration, management and such other fields as are deemed appropriate.

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