Key Concepts under Competition Act, 2002
1. Anti-Competitive Agreements: Anti-competitive agreements, as defined in Section 2(b) of the act, encompass arrangements between business parties that have the potential to undermine fair competition or show undue favoritism. These agreements, whether written or informal, fall within the broad scope outlined by Section 3 of the act, prohibiting arrangements that significantly reduce competition within India. Notably, the act considers cartels, often characterized by secrecy, as one form of anti-competitive agreement. If any agreement violates section 3 of the Competition Act 2002, it is deemed void.
2. Abuse of Dominant Position: The act addresses the abuse of dominant positions by entities or individuals that can exploit their strong market position to the detriment of fair competition. Dominant positions are determined based on a firm’s impact on the relevant market. Section 4 of the act specifies instances constituting an abuse of dominant position, such as unfair pricing practices, limiting production, hindering market access, or leveraging dominance in one market to influence another. Unlike offenses related to anti-competitive agreements and combinations, the offense of “abuse of dominant position” doesn’t hinge on establishing an appreciable adverse effect on competition.
3. Regulation of Combinations: The act regulates three types of combinations: acquisition of stock or assets, gaining control over an enterprise, and mergers. To prevent undue concentration of economic power, Section 5 of the Competition Act, 2002 sets specific thresholds for scrutiny. Certain agreements with governmental financial institutions are exempted to accommodate strategic financial arrangements. Section 6 of the Competition Act, 2002 outlines the notification process, requiring entities to inform the Competition Commission of India (CCI) within 30 days of execution of the acquisition instrument or board approval for mergers. The combination comes into effect 210 days after notice or the date of the CCI’s order, whichever is earlier.
4. Limitations under Section 5: Section 5 of the Competition Act, 2002 imposes limitations on combinations based on assets and turnover to ensure that larger combinations undergo scrutiny, preventing adverse effects on competition in the Indian market. For acquisitions, both the acquiring and target entities must meet specific criteria, including asset and turnover thresholds. In the case of mergers or amalgamations, the resulting entity must satisfy prescribed thresholds for assets and turnover. These limitations are designed to strike a balance, allowing smaller combinations that may not significantly harm competition while subjecting larger combinations to thorough evaluation.