Major Substantive Provisions of Competition Act 2002
1. The Three Substantive Pillars of the Act
The regulatory framework of the Competition Act 2002 is anchored on three substantive pillars:
The Three Substantive Pillars of Competition Regulation
Section 3
Anti-Competitive Agreements:
Prohibits horizontal cartels (presumed per se illegal) and vertical agreements (tie-ins, exclusive supply) causing Appreciable Adverse Effect on Competition (AAEC).
Section 4
Abuse of Dominant Position:
Dominance itself is lawful, but its abuse is strictly prohibited: predatory pricing, discriminatory conditions, and denying market access.
Sections 5 & 6
Regulation of Combinations:
Mandatory advance notification of high-value mergers, amalgamations, and acquisitions crossing statutory asset/turnover thresholds to CCI.
2. Anti-Competitive Agreements (Section 3)
A. Horizontal Agreements [Section 3(3)] — Presumed Per Se Illegal
Agreements between enterprises operating at the same level of production or distribution (e.g., between competing cement companies or airline carriers):
- Price-Fixing: Directly or indirectly determining purchase or sale prices.
- Limiting Output: Limiting or controlling production, supply, markets, or technical development.
- Market Sharing: Allocating geographical market territories or types of customers.
- Bid-Rigging / Collusive Bidding: Co-ordinating bids in public tenders to fix predetermined winners.
- Cartels: An association of producers/sellers who agree to limit, control, or attempt to control production or price.
B. Vertical Agreements [Section 3(4)] — Evaluated under “Rule of Reason”
Agreements between enterprises at different stages or levels of the production chain (e.g., manufacturer and retailer):
- Tie-in Arrangement: Requiring purchaser of goods to buy some other goods as a condition.
- Exclusive Supply / Distribution Agreement: Restricting purchaser from dealing in competitors’ goods.
- Refusal to Deal: Restricting by any method the persons to whom goods are sold.
- Resale Price Maintenance (RPM): Mandating minimum resale price for distributors.
3. Abuse of Dominant Position (Section 4)
- Definition of Dominant Position: A position of economic strength enjoyed by an enterprise in the relevant market in India which enables it to:
- Operate independently of competitive forces prevailing in the market; or
- Affect its competitors or consumers or the relevant market in its favor.
- Practices Constituting Abuse [Section 4(2)]:
- Imposing unfair or discriminatory conditions or prices (including Predatory Pricing — selling below cost to eliminate competitors).
- Limiting or restricting production of goods or technical development to the prejudice of consumers.
- Denial of market access in any manner.
- Making conclusion of contracts subject to acceptance of supplementary obligations.
- Using its dominant position in one relevant market to enter into, or protect, another relevant market.
4. Regulation of Combinations (Sections 5 & 6)
A Combination includes an acquisition of shares, voting rights, control, or merger/amalgamation crossing specified financial asset and turnover thresholds.
- Mandatory Approval: Combinations crossing statutory thresholds must notify the CCI within the prescribed period.
- Suspensive Regime: No combination can take effect until 150/210 days have elapsed or CCI has approved it, whichever is earlier.