Competition Act 2002
The Competition Act 2002 is legislation derived from three main components:
a) the National Competition Policy
b) the Competition Appellate Tribunal and
c) the Competition Commission of India.
The primary objective of competition law is to regulate and promote fair competition in the market while protecting the rights of consumers. It aims to combat fraudulent and unfair trade practices, ensuring a level playing field for competitors.
Section 3 of the Competition Act 2002
Section 3 of the Competition Act deals with agreements between individuals or businesses that may impact competition in the market. However, there are certain exclusions outlined in this act. Section 3(3) states that certain activities are not considered fair competition strategies. Let’s explore some of these activities:
a) Price Fixing
Price fixing is when a group of owners or individuals in a specific locality agrees to set a fixed price for a particular product. This practice significantly affects consumer rights. For instance, if a product is widely available at a low price, but certain owners sell it at a high fixed price, consumers may be compelled to purchase it at an inflated cost. Price fixing undermines fair competition and consumer welfare.
b) Limiting Production
Limiting production can occur due to various reasons. However, when traders intentionally limit production to increase demand for a specific product, it increases prices and adversely affects other intermediaries involved in the trade. This practice distorts the market and restricts fair competition.
c) Market Sharing
Market sharing involves competitors allocating specific geographical areas and customers among themselves. They create agreements restricting competitors from entering each other’s business areas. Market-sharing practices have a significant negative impact on consumers. To foster healthy competition, competitors should not have predetermined agreements that impede development and harm society.
d) Area Restriction
Area restriction is a major offence committed by competitors. In this practice, competitors or traders explicitly restrict others from entering their places of business. Such restrictions infringe upon the fundamental rights of other competitors and consumer rights. Customers should be free to choose any trader from whom they wish to purchase a product.
Features of the Competition Act 2002
The Competition Act 2002 encompasses several features to promote fair competition and protect consumer rights. Some key aspects include:
The Act prohibits individuals or businesses from entering into anti-competitive agreements. These agreements aim to preserve competition and safeguard consumer rights. There are two types of agreements: horizontal agreements (involving businesses operating at the same production level) and vertical agreements (involving businesses operating at different production phases).
The Act prohibits companies from leveraging their dominant status to form cartels. Cartels are associations of companies that collaborate to manipulate prices, restrict production, or control the market. Anti-cartel measures ensure fair competition and prevent the abuse of dominant market positions.
Anti-Abuse of Dominance
The Competition Law is against agreements that diminish competition in the market. If an agreement between individuals or businesses lessens competition, it is considered an abuse of dominance and is not permissible under the Act. This provision safeguards the competitive nature of the market.
Information Sharing with the Competition Commission of India
Before making any significant decisions, organizations are required to share their views and information with the Competition Commission of India. This ensures transparency and allows the Commission to assess potential anti-competitive practices.
Competition law plays a vital role in society by effectively curbing fraudulent marketing practices and protecting consumer rights. It creates an environment that fosters fair competition, prevents anti-competitive behaviour, and ensures consumers can access various choices. By regulating the market and promoting fair practices, competition law contributes to a healthier and more competitive economy.