Daily News Analysis

COMPETITION COMMISSION OF INDIA

24th July, 2021 Economy

Context:

  • E-commerce companies lost their legal battle before the High Court of Karnataka against the Competition Commission of India’s order to conduct an investigation into whether they had entered into anti-competitive agreements in violation of the provisions of the Competition Act, 2002.

Background

  • Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest range of goods and services at the most competitive prices.
  • Competition is a process of economic rivalry between market players to attract customers.
  • With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers.
  • A fair competition in the market is essential to achieve this objective.
  • Its main goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.
  • Free and fair competition is one of the pillars of an efficient business environment.

The Competition Act

  • The Competition Act, 2002 was passed by the Parliament in the year 2002.
  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws.
  • The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse enect on competition within India.
  • In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established.
  • The Competition Commission of India is now fully functional with a Chairperson and six members.
  • The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified under this Act.

Objectives

  • The objectives of the Act are sought to be achieved through the Competition Commission of India, which has been established by the Central Government with effect from 14th October 2003.
  • CCI consists of a Chairperson and 6 Members appointed by the Central Government.
  • It is the duty of the Commission to eliminate practices having adverse e ects on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

Anti-Competitive behaviour by firms and companies

  • Foreclosing competitors/ competition.
  • Unfair or discriminatory pricing/ conditions.
  • Limiting or restricting production of goods or provision of services.
  • Limiting or restricting scientific or technical development to the prejudice of consumers.
  • Mutual anti-competitive agreements.
  • Predatory pricing.
  • Denial of market access to others.
  • Making conclusions of contracts subject to the acceptance by other parties of supplementary obligations that are unrelated to the original contract.

Need of the hour

  • Firms should fix internal protocols for decision making and information sharing with regard to sensitive financial and commercial information.
  • Firms should create awareness and run regular training programs amongst all employees handling sensitive financial and commercial information.
  • A competition law due diligence should be conducted by firms that have a high market share or perhaps have exclusive rights at ports etc. so as to avoid anti-competitive clauses in agreements with suppliers, vendors and other market players.
  • Communication with competitors with regard to any business discussion should be limited/ restricted as well as recorded properly to mitigate any competition law risk.
  • Any pricing below the cost must have a sound economic rationality to justify its efficiency and business