84 The Competition Act, 2002
84.1 Background and Purpose
The Competition Act, 2002 replaced the older Monopolies and Restrictive Trade Practices Act, 1969 (MRTP). The MRTP regime was rooted in pre-1991 licence-permit-quota economics and proved unsuitable for the post-liberalisation era. The 2002 Act was based on the recommendations of the S.V.S. Raghavan Committee (2000) and is aligned with international competition-law standards (kapoor2023?).
The Act came into force in stages — substantive provisions on anti-competitive agreements and abuse of dominance from 20 May 2009; combination control from 1 June 2011; Competition (Amendment) Act 2023 introduced major reforms including a settlement mechanism and deal-value threshold.
84.2 Objectives
| Objective | Working content |
|---|---|
| Prevent practices having an adverse effect on competition | AAEC test |
| Promote and sustain competition in markets | Pro-market |
| Protect consumer interests | Welfare-based |
| Ensure freedom of trade carried on by other participants in markets | Open economy |
84.3 Three Core Prohibitions
The Act prohibits three anti-competitive practices:
| Practice | Section | Working content |
|---|---|---|
| Anti-competitive agreements | 3 | Agreements that have an appreciable adverse effect on competition (AAEC) |
| Abuse of dominant position | 4 | Imposing unfair conditions, predatory pricing, denial of access, etc. |
| Combinations causing AAEC | 5–6 | M&A above threshold; require CCI approval |
84.4 Anti-Competitive Agreements (Sec. 3)
Section 3 prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India. Two kinds:
| Type | Sub-type | Test |
|---|---|---|
| Horizontal (Sec. 3(3)) — between competitors | Price-fixing, output-limiting, market-sharing, bid-rigging | Per se presumed to cause AAEC |
| Vertical (Sec. 3(4)) — across the value chain | Tie-in, exclusive supply / distribution, refusal to deal, resale-price maintenance | Rule of reason — AAEC must be shown |
The cartel is the most-tested example of horizontal agreement. Leniency / Lesser-Penalty programme (Sec. 46) gives reduced penalty to a cartel member who provides full disclosure and cooperation.
84.5 Abuse of Dominant Position (Sec. 4)
A firm has dominant position if it can operate independently of competitive forces or affect competitors / consumers / market in its favour (Sec. 4 Explanation (a)). Dominance is not prohibited; abuse is.
| Abuse | Working content |
|---|---|
| Imposing unfair / discriminatory conditions or prices | Including predatory pricing |
| Limiting production or scientific development | Restricting output |
| Denial of market access | Refusing to deal |
| Tying / Tie-in | Conditioning sale of one product on another |
| Using dominance in one market to enter another | Leveraging |
84.6 Combinations (Sec. 5–6)
Combinations are mergers, acquisitions and amalgamations exceeding asset / turnover thresholds (Sec. 5). They require pre-notification and approval of the Competition Commission of India (CCI).
The 2023 amendment introduced a deal-value threshold — combinations of value > ₹2,000 crore with substantial business operations in India also require notification, regardless of asset / turnover thresholds. This addresses digital-economy concerns (e.g., WhatsApp / Facebook acquisitions).
| Threshold | Domestic | Group |
|---|---|---|
| Asset basis | > ₹2,500 crore | > ₹10,000 crore |
| Turnover basis | > ₹7,500 crore | > ₹30,000 crore |
| Cross-border | Higher; specified | |
| Deal value (2023) | > ₹2,000 crore deal value | + substantial business in India |
84.7 CCI — Competition Commission of India
| Aspect | Content |
|---|---|
| Established | 14 October 2003 (operational from 2009) |
| Composition | Chairperson + 2 to 6 Members |
| Powers | Inquiry, investigation, penalty, structural and behavioural remedies |
| Investigative arm | Director General (DG) |
| Appeal | NCLAT (replaces COMPAT in 2017) |
| Final appeal | Supreme Court |
84.8 Penalties
| Practice | Penalty |
|---|---|
| Anti-competitive agreement / Abuse of dominance | Up to 10 % of turnover of preceding 3 years |
| Cartels | Up to 3× of profit for each year of cartel; or 10 % of turnover, whichever higher |
| Combination without notification | Up to 1 % of turnover or assets |
| Failure to comply with CCI order | Up to ₹10 lakh per day, max ₹10 crore |
| Deliberate non-compliance | Imprisonment up to 3 years and fine |
The 2023 amendment introduced settlement and commitment mechanisms — allowing parties to settle Sec. 4 and 3(4) cases at the inquiry stage.
84.9 Important Exceptions
- Reasonable conditions to protect IPR (Sec. 3(5)).
- Export-only agreements relating to production, supply, distribution outside India.
- Sovereign / governmental functions.
84.10 Comparison — MRTP Act vs Competition Act
| Dimension | MRTP 1969 | Competition Act 2002 |
|---|---|---|
| Approach | Form-based; size of firm | Effects-based; behaviour |
| Concept of dominance | Pre-determined market share | Behaviour-based |
| Cartel | Not defined explicitly | Specifically prohibited |
| Penalty | Limited | Significant — % of turnover |
| Combinations | Limited control | Substantive control |
| Investigation | DGIR | Director General |
| Body | MRTP Commission | CCI |
84.11 Exam-Pattern MCQs
Q1. Which of the following is not a core prohibition under the Competition Act, 2002?
A. Anti-competitive agreements B. Abuse of dominant position C. Combinations causing AAEC D. Charging GST on goods
Answer: D. GST is a tax matter, not a competition prohibition.
Q2. Per se presumption of AAEC applies to which type of agreement?
A. Horizontal agreements like price-fixing or bid-rigging B. All vertical agreements C. All export agreements D. IPR-licensing agreements
Answer: A. Section 3(3) — horizontal agreements among competitors are presumed to cause AAEC.
Q3. Match each prohibited practice with its section:
| Practice | Section | ||
|---|---|---|---|
| (i) | Anti-competitive agreement | (a) | 5 / 6 |
| (ii) | Abuse of dominance | (b) | 3 |
| (iii) | Combinations | (c) | 4 |
A. (i)-(b), (ii)-(c), (iii)-(a) B. (i)-(a), (ii)-(b), (iii)-(c) C. (i)-(c), (ii)-(b), (iii)-(a) D. (i)-(c), (ii)-(a), (iii)-(b)
Answer: A.
Q4. Match each abuse of dominance with its example:
| Abuse | Example | ||
|---|---|---|---|
| (i) | Predatory pricing | (a) | Conditioning sale of one product on another |
| (ii) | Tie-in | (b) | Refusing to deal |
| (iii) | Denial of access | (c) | Pricing below cost to drive out rivals |
| (iv) | Leveraging | (d) | Using dominance in one market to enter another |
A. (i)-(c), (ii)-(a), (iii)-(b), (iv)-(d) B. (i)-(a), (ii)-(b), (iii)-(c), (iv)-(d) C. (i)-(b), (ii)-(c), (iii)-(a), (iv)-(d) D. (i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
Answer: A.
Q5. The CCI’s investigation arm is the:
A. Director General (DG) B. Comptroller of Accounts C. Securities Tribunal D. Director of Investigation
Answer: A. The Director General of CCI investigates anti-competitive matters.
Q6. Appeals from CCI orders go to:
A. NCLT B. NCLAT C. SEBI Tribunal D. Income-Tax Tribunal
Answer: B. NCLAT hears appeals from CCI (since 2017; previously COMPAT).
Q7. The maximum penalty for a cartel agreement under the Act is:
A. 1 % of turnover B. Up to 3× of profit for each year of the cartel, or 10 % of turnover, whichever is higher C. ₹10 lakh D. 5 % of net worth
Answer: B. Up to 3× profit per year of the cartel, or 10 % of turnover, whichever higher.
Q8. The 2023 amendment to the Competition Act introduced:
A. Removal of the CCI B. Deal-value threshold for combinations and a settlement mechanism C. Higher minimum size for abuse-of-dominance cases D. Abolition of cartel penalties
Answer: B. The 2023 amendment introduced the deal-value threshold (₹2,000 crore) and a settlement / commitment mechanism.
- Competition Act 2002 — replaced MRTP 1969; on Raghavan Committee 2000 recommendations.
- Three core prohibitions: anti-competitive agreements (Sec. 3), abuse of dominance (Sec. 4), combinations (Sec. 5–6).
- Horizontal agreements (Sec. 3(3)) — per se presumed AAEC. Cartel, price-fixing, market-sharing, output-limiting, bid-rigging.
- Vertical agreements (Sec. 3(4)) — rule of reason. Tie-in, exclusive supply / distribution, refusal to deal, resale-price maintenance.
- Dominance is not prohibited; abuse is.
- Combinations require CCI approval if asset / turnover thresholds (or 2023 deal-value threshold ₹2,000 cr) are crossed.
- CCI — established 2003, operational 2009; Chairperson + 2–6 members; Director General investigates; appeals to NCLAT.
- Penalties: up to 10 % of turnover for violations; cartels up to 3× profit per year.
- Leniency programme (Sec. 46) for cartel disclosures.
- 2023 amendment: deal-value threshold + settlement and commitment mechanism.
- MRTP (1969) was form-based; Competition Act (2002) is effects-based.