Competition Act, 2002: A Position Paper

Competition Act, 2002
A Position Paper
April 2009
Compiled by:
Amit Kapur
Manas Kumar Chaudhuri
Mansoor Ali Shoket
J. Sagar Associates, New Delhi
2009
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© 2009 JSA: Kapur: Chaudhuri: Shoket
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Publisher’s Note
As Competition Commission gears up to become fully operational with
the Policy being brought into force, Manupatra is publishing this Position
Paper on Competition Act, 2002.
The position paper has been compiled by the Regulatory and Policy
Practice group heads of J Sagar Associates and is a practitioners’
perspective regarding the scheme of the Competition regulatory regime
being put in place in India as also issues facing them.
The paper studies the Competition regime in India viz. its regulatory and
structural framework and compares it with the current MRTP regime
whose flaws has triggered the establishment of the new Competition
Commission. The Competition Act, 2002 sought to regulate (a) Anti-
competitive agreements; (b) Abuse of dominance; and (c) Combinations
and mergers. The provisions relating to the above three elements has
not yet been notified since there are serious concerns on how the Act
applies to various commercial transactions. Further, a major point that
has been raised in the Position Paper while analysing the Act and the
various draft regulations is the overlap and concurrency of the different
sectoral regulators such as SEBI, Electricity Regulators, IRDA etc. with
the competition regime. The paper also points out the inconsistency in
the Draft Regulations and its contradiction with the Competition Act,
2002. Unless and until the incumbencies are properly addressed and
sorted out, the challenge of actualising the potential of the Indian
economy as well as maximising welfare which is the primary objective of
the Act cannot be accomplished.
The Position Paper endeavours to highlight certain legal issues and

challenges, the Commission may face during its regular/adjudicatory
proceedings, which may be duly considered by the Ministry as well as
the Commission while finalizing its regulations.
We hope that we are able to keep our readers well informed by

publishing this paper at this juncture.
Preface
In the recent times, the Indian economy has seen reform and
restructuring initiatives in diverse facets and dimensions (This diversity
alludes to the divergent mechanism design, processes and instruments
adopted for different utility/infrastructure facilities.) since mid 1980’s. In
context of the globalisation, the emergence of multinational
corporations, interdependence of economies, and role of private
enterprise in economic development, the global financial crisis is
emerging as a watershed in the “regulatory and reform” thinking. In
developed economies, well-established reforms are generally regarded
as belonging to the post-privatisation phase. But in developing
economies, privatisation has itself been an incomplete and altering
process, so that associated regulatory reforms are either new, or poorly
understood and conceived: often, privatisation and regulatory reforms
will proceed piecemeal, without proper sequencing or coordination.
(Adapted from “regulatory governance in developing countries” –
Martin Minogue and Ledivina Carino)
In India, after nearly two decades of regulation of various infrastructure
sectors like Telecommunications, Power, Oil and Gas, Highways, Ports,
Airports and Water in India, it is opportune that finally, the Competition
Act, 2002 and policy is being brought into force now. The challenge of
actualising the potential of the Indian economy as also maximizing
welfare, including foreign direct investment, gets exacerbated by several
factors including the governing legislative policy regulatory framework;
the effectiveness and credibility of the regulatory institutions and
processes; segments of natural/historical/monopolies in each sector; as
also gross capital formation for development in the face of competing
investment opportunities and financial constraints.
This Position paper reflects, albeit and hopefully without complexities, a
practitioners’ perspective regarding the scheme of the Competition
regulatory regime being put in place in India as also issues facing us.
We must qualify this piece by stating clearly that this is a work of
practicing Lawyers and not Economists. It is being issued at this point in
time to facilitate all stakeholders to take informed decisions in the early
stages of the Competition Law – including the competition commission
in finalising its regulations.
Content
1. Competition Regulation in India: Context and History....................1

2. Overview of Competition Regime under the
Competition Act, 2002: Competition Commission of India
and Competition Appellate Tribunal ..............................................8
3. Overview of the Provisions Governing
Anti-competitive Agreements .......................................................18
4. Overview of the Provisions Governing Abuse of Dominance ........31
5. Overview of the Provisions Governing Combinations...................37
6. Some Insights and Issues for the Way Forward.............................48
——————————
CHAPTER-I
Competition Regulation in India: Context and History
ECONOMIC RAISON D’ETRE AND CONTEXT OF COMPETITION

REGULATION
1.1 It is useful to understand economics as a discipline is fundamentally

focussed on the following aspects:
(a) Driven to work towards optimal utilisation of scarce resources
(allocative efficiencies),
(b) Seeking to maximise welfare (as distinct from mere profits), and
(c) Predicated upon the assumption that all human beings make
rational choices.
1.2 To achieve the above, economic theory treats “perfect competition”
as the ideal which is a situation characterised, amongst others, by:
(a) Multiple buyers and sellers of diverse substitutable products/services,
(b) With perfect information, and
(c) No barriers to enter, competition, trade in a market place, or to exit
from it.
1.3 In the real world, perfect competition remains utopian since all
economies and markets are characterised by:
(a) Rampant information asymmetry and
(b) Imperfect markets with:
(i) Policy/law/historical development-based monopolies or
oligopolies,
(ii) Sunk-cost based barriers to entry, and
(iii) Political economy distorting competitive signals.
1.4 The recent global financial market failure has brought to the fore the
role of robust and vigilant regulation to prevent perverse incentives and
behaviour from distorting/hijacking the gains of competitive play. A
significant part of the blame is being placed at the door-steps of the
regulators (like the Fed, SEC, etc.) and their failure to regulate the market
once the initial signals of market failure began manifesting over two years
ago. This has once again established that while competitive market
scenario can be the norm that cannot be left to its own mechanics without
robust regulatory oversight.
1
Competition Act, 2002: A Position Paper
1.5 In this construct, it is the mandate of a democratically elected

Government to decide upon economic policies for the nation. Some of
these policies are enacted as legislations in the Parliament. It is noteworthy
that certain well-established trends and developments have further helped
crystallize the raison detre’ and the contours of competition regulation for
India, being:
(a) The emergence of dominant trans-national corporations in the wake
of economic liberalisation and globalisation that swept the globe,
cross-border movement of resources-capital (equity and debt), raw
material and manpower, commerce and trade.
(b) Certain industries have evolved as natural monopolies like the
network infrastructure and industries with inherent economies of
scale as also limited right of way/user rights. They constitute the
essential or bottleneck facilities.1
(c) In case of such natural monopolies, the costs to the economy would be
much higher if the government tried to preserve a large number of
smaller firms free market.
(d) While dominance of enterprises may not be a cause for concern,
regulation is necessary to prevent abuse of dominance in light of the
likely undesirable effects like:
(i) Excessive and exploitative prices for products and services
that exploit consumers,
(ii) Resultant misallocation of resources,
(iii) Efficiency problems including poor quality of service and
disincentives to innovations,
(iv) Denial of non-discriminatory open access to the bottleneck or
essential facilities and
(v) Depriving people of access to essential services: universal
service obligations.
1.6 Competition Law focuses on the behaviour of business, and
Competition Policy provides for comprehensive action of government on
economic policies. Together they make the implementation of this
economic principle workable. For a robust economy, competitive market
scenario is the rule and sectoral regulation must be introduced as an
exception to the general rule, where considered necessary.
1.7 The first issue faced by every economy and government while
designing its competition law and policy is a range of permutations and
1 The access to which is imperative for stakeholders on both ends of the value chain -
being electricity, oil and gas pipelines, transportation (ports, aviation, highways,
railways, metro), telecommunication networks, et al.
2
combinations for each product and geographical market, choosing

between:
(a) Competitive/free economy versus triggers, levels and extent of
government intervention and controls.
(b) Per se regulation versus Rule of reason regulation
1.8 In this respect, Governments play a key role in defining the rules of
the game for competition (comprised of competition and sectoral policies
and laws governing geographical and product markets) and in ensuring
their effective implementation. It is noteworthy that:
(a) Competition Law is driven by the touch-stone of abuse of
dominance in a rule of reason regime2 governing –
(i) Merger controls;
(ii) Cartels;
(iii) Anti competitive arrangements;
(iv) Other aspects behavioural regulation;
(v) With certain specific prohibited activities which are governed
by the per-se rule.3
(b) Sectoral Regulation is brought to bear upon in markets/sectors that
have natural or policy induced monopolies/oligopolies. The
underlying objective of sectoral regulation is to:
(i) Mimic conditions of competitive markets;
(ii) For the optimal utilisation of resources; and
(iii) Consumer welfare.
CONSTITUTIONAL RAISON D’ETRE AND CONTEXT FOR COMPETITION

REGULATION
1.9 In this context, the Constitution of India provides for:

(a) Justice – social, economic and political (Preamble);
(b) State policy must secure that the ownership and control of material
resources are distributed to sub-serve the common good (Article
39(b));
2 Rule of reason regimes are characterised by proportionality and reasonableness

doctrines in exercise of regulatory powers. These are typically regimes of
behavioural regulation where regulatory intervention is predicated upon a finding
that there is or likely to be an adverse effect on competition, and where the regulatory
action will be subject to proportionality test of the corrective measures.
3 Per se rule basically is a structural regulation (as distinct from behavioural
regulation) – both organisational or transaction.
3
(c) State policy must secure that the operation of economic system does
not result in concentration of wealth and means of production to the
common detriment (Articles 39(c));
(d) Fundamental right to practice any profession, or to carry on any
occupation, trade or business under Article 19(1)(g) is subject to
reasonable restrictions in terms of a law enacted providing for
(i) Professional or technical qualifications necessary for any
profession/occupation/trade/business.
(ii) Carrying on by the State/PSU of any trade/business/industry/
service even if to complete or partial exclusion of citizens
(Article 19(6)).
(e) Constitutional right to freedom of trade, commerce and intercourse
within India is subject to
(i) Parliamentary law imposing restrictions in public interest
except for interstate discrimination.
(ii) State laws so long as it does not discriminate between goods
imported from or manufactured in other states (Articles 301 to
307).
1.10 The law making powers as also the executive powers with respect to
economic and social planning; commercial and industrial monopolies,
combines and trusts; trade, commerce and intercourse have been
allocated in terms of the Seventh Schedule to the Constitution of India
read with Articles 53, 73, 154, 162, 245, 246 and 254 thereof, such that:
(a) Economic and Social Planning is a concurrent list subject (Entry 20,
List III);
(b) Commercial and Industrial monopolies, combines and trusts are a
concurrent list subject (Entry 21, List III);
(c) Trade and commerce in and production, supply, distribution and
import of products either declared by Parliamentary law to be
expedient in public interest; or specific items listed in Entry 33, List
III are concurrent list subjects.
(d) Subject to Entry 33 of concurrent list, trade and commerce within a
State and production, supply and distribution of goods are State
subjects (Entries 26 and 27, List II);
(e) Inter-state and international trade and commerce are Central
subjects (Entries 41 and 42, List I).
1.11 Indian constitution, amongst its salient features is characterised by
(i) the Montesquian model of Parliamentary democracy, and (ii) a system
of delicate checks and balance with the separation of powers between the
three wings of state – the legislature, the executive and the judiciary. A
statutorily appointed expert competition regulator constitutes an
4
institutional innovation4 with significant structural challenges since it

appears to be vested with (a) delegated legislative powers (regulation
making), (b) executive powers and (c) determinative (quasi-judicial)
powers. This was one of the primary reasons for the public interest
litigation filed before the Supreme Court of India5 which significantly
influenced and caused the enactment of the 2007 amendment to the
Competition Act, as also the delay in its implementation.
1.12 Over the 20th century, India has seen changes in its political status
and consequential defining changes in its macro-economic policies. The
20th century saw three watersheds6 in evolution of Indian laws and policies
– each of which redefined the role of “state” and of the “private sector” in
Indian economy, the governing legal-regulatory framework and the
competition policy in India, as depicted below.
Evolution of Governing Framework

Pre-independence Laws:
PRIVATE CAPITAL
Constitution (1950);
IDR Act (1951); IPR (1956);
MRTP Act, 1969; State Ownership
Reserved Lists and Licensing
POST 1991
PRIVATE CAPITAL and PPP
• Private Ownership
• Reasonable return on invest. • Level playing field
• Economic regulation: TRAI Act, • Single window approach:
Electricity Act, AERI Act FIPB, NHAI Act, SEZ Act..
4 Though the CCI is not the first economic regulator constituted in India, its ambit and
impact will be arguably wider in the economy than any other regulatory authority
(perhaps with the notable exception of the Reserve Bank of India). In construct, its
institutional framework is akin to economic regulators of electricity,
telecommunication & broadcasting, petroleum & natural gas, capital markets, et.al.
5 Brahm Dutt v. Union of India, reported as MANU/SC/0054/2005: (2005) 2 SCC 431
at paras 5 and 6.
6 From the colony status in the pre-1947 British East India Company regime; to
independent India focussed on nation building and planned economic development
between 1947 and 1980s where the commanding heights of Indian economy was
vested in the “state”; to the phase of liberalisation, restructuring, public-private
partnerships phase since mid-1980s.
5
HISTORY AND ESTABLISHMENT OF COMPETITION REGIME
1.13 The Government of India appointed Mahalanobis Committee on

Distribution of Incomes and Levels of Living which submitted its report in
1960 highlighting growing income inequalities in India in the post-
independence period. Such inequality in income was seen as being
contrary to the constitutional ideal of “Justice-Social, Economic and
Political” as also provisions contained in the Directive Principles of State
Policy read with reasonable restrictions on fundamental rights and
constitutional freedom relating to trade and commerce.
1.14 This led to constitution of a high-powered Monopolies Inquiry
Commission (MIC) which submitted its report in 1965. Based on the MIC
recommendations, India enacted its first competition law called the
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The
MRTP Act aimed at achieving twin objectives of preventing concentration
of economic wealth by private enterprises, and ensuring non-prejudicial
public interest in economic activities within India. The MRTP Act provided
for a setting up of a Commission to implement the provisions of the law.
1.15 In the wake of economic liberalisation and reforms introduced by
Government of India since 1991 with a view to meet the challenges and
avail of the opportunities offered by globalisation, the Raghavan
Committee was set up in 1999 to assess the need to evolve India’s
competition regime. The Committee in its report of 2000 recommended
setting up of a modern competition law and phasing out of the MRTP Act.
1.16 The Competition Act, 2002 (“the Act”) was enacted by Parliament
of India in December 2002. It received the Presidential assent on 13th
January, 2003, and as discussed below it is now being implemented. The
Act has an overriding effect over any inconsistent provision in any other
law for the time being in force,7 and provides for establishment of a
commission to:
(a) Prevent practices having an adverse effect on competition,
(b) Promote and sustain the competition in the markets,
(c) Protect the interests of the consumers and
(d) Ensure the freedom of trade carried on by the other participants in
the markets in India.
1.17 Pursuant to the Act, the Competition Commission of India (the
Commission) was established and one Chairperson as also an
Administrative Member of the Commission were appointed on
7 Section 60
6
14 October, 2003.8 However, before the Chairperson could enter office,

th
a public interest litigation was filed before the Supreme Court of India on
30th October, 2003 inter alia challenging the appointment on the grounds,
amongst others, that since:
(a) The proposed Commission, to be headed by a bureaucrat, would
replace the MRTP Commission which had all along been headed by
a Judicial Member;
(b) Commission had adjudicatory functions which warranted that the
Chairperson must be a Judicial Member.
1.18 The matter was finally disposed of by the Supreme Court of India
in January 2005 noting that the Government of India was introducing an
amendment to the law to constitute a judicial appellate authority while
leaving the expert regulatory space to the Commission without answering
the challenge.
1.19 In this backdrop, the Act was amended in September 2007
providing for setting up of a Competition Appellate Tribunal (“the
Appellate Tribunal”) headed by a Judicial Member to adjudicate appeals
and the compensation claims arising out of the decisions of Commission.
Ever since its enactment in 2002, the provisions of the Act have selectively
been brought into effect. The substantive provisions being Sections 3 to 6,
18 to 21, 26 to 33, 35, 38-39, 41-48 and 66 are yet to be enforced.
1.20 On 28th February, 2009, the Government appointed the
Chairperson and two other Members of the Commission, who have
assumed office. Two other Members have been appointed and they too
have assumed office recently. Processes for appointing the Chairperson
and two Members of the (Appellate Tribunal) are at the active stage of
consideration by the Supreme Court of India and the Government,
respectively.
1.21 It is now expected that the Commission and Appellate Tribunal
would become fully operational by the third quarter of 2009. The MRTP
Act and the commission set up thereunder, is expected to be repealed and
dissolved simultaneously.9
——————————
8 Section 7
9 Section 66
7
CHAPTER-II
Overview of Competition Regime under the
Competition Act, 2002: Competition Commission of
India and Competition Appellate Tribunal
COMPETITION COMMISSION OF INDIA (CCI)
2.1 Objectives. In context of the needs of economic development of

India, the Act was enacted to establish CCI as a multi-member regulator to:
(a) Promote and sustain competition in markets;
(b) Prevent practices having adverse effect on competition;
(c) Protect consumer interest;
(d) Ensure freedom of trade carried on by participants in Indian markets.
2.2 The Entity. The Commission is a body corporate having perpetual
succession and common seal with power to acquire hold and dispose of
property both movable and immovable and to contract and shall sue and
be sued.10 The Commission is to consist of Chairperson11 and not less
than two members and not more than six members.12
2.3 Appointment. The Chairperson and the members are appointed
by the central government from the panel of names recommended by the
selection committee consisting of:
(a) The Chief Justice of India or his nominee (chairperson of the
committee);
(b) Secretaries in the Ministries of Corporate Affairs and Law and Justice;
and
(c) Two experts of repute having special knowledge of and professional
experience in international trade, economics, business, commerce,
10 Section 7
11 Section 10 stipulates that the Chairperson and every other member shall hold office
as such for a term of five years but shall not hold office after the attainment of age of
65 years.
12 Section 8(2) stipulates that the Chairperson and the every member shall be a person
of ability, integrity and standing and who has special knowledge of and such
professional experience of not less than 15 years in international trade, economics,
business, commerce, law, finance, accountancy, management, industry, public affairs
or competition matters including competition law and policy.
8
Overview of Competition Regime under the CA, 2002: CCI and CAT
law, finance, accountancy, management, industry, public affairs or

competition matters including competition law and policy in
international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs or competition
matters including competition law and policy.
2.4 Conditions of Service. The central government is empowered to
remove the chairperson and any member of the Commission on certain
specific grounds and the procedure as specified in the Act.13 The Act
prohibits Chairperson and the members to accept employment in or
connect with the management or administration of any enterprise which
has been party to proceeding before the Commission, within two years of
demitting the office.14 The Chairperson and the members of the
Commission have been given the protection of the service in as much as
their salary, allowance and other terms and conditions of the service will
not be varied to their disadvantage after their appointment.15 The
Chairperson and the members and other staff of the Commission are
deemed to be public servants within the meaning of Section 21 of the
Indian Penal Code.16 No suit or proceedings shall lie against Central
government, Commission or officer of central government or Chairperson
or member of the Commission or the officers/staff of the commission for
anything which is in good faith done or intended to be done under this
Act or the rules or regulations framed there under.17
2.5 The Chairperson has general power of superintendence, direction
and control over the administrative matters of the Commission.18
2.6 The Commission shall be assisted by a Director General (DG)
appointed by the Central Government.19 The DG shall, when directed by
the Commission assist the Commission in investigation into any
contravention of the provisions of the Act.20
2.7 The Commission shall hold the meetings for the purpose of
discharging the functions and all the questions which come up for before
the commission shall be decided by the majority of the members present
and voting. The quorum for the meetings shall three members.21
13 Sections 11(2) and (3)

14 Section 12
15 Section 14
16 Section 58
17 Section 59
18 Section 13
19 Section 16
20 Section 41
21 Section 22
9
POWERS AND THE FUNCTIONS OF THE COMMISSION
2.8 The Commission has duty to eliminate the practices having adverse
effect on competition, to promote and sustain competition in the market,
to protect the consumer interests and to ensure freedom of trade carried
on by other participants in the markets in India. The Act empowers the
Commission to enter into any arrangement or memorandum, with prior
approval of central government, with any agency of a foreign country for
the purposes of discharging its duties and performing its functions.22
2.9 The Act prescribes that the Commission in discharge of its functions
shall be guided by the principles of natural justice23 and the concerned
parties can appear before the Commission in person or shall though
authorised Chartered Accountants, Company Secretaries, Costs
Accountants or Legal Practitioners.24
2.10 In order to achieve the objectives of the Act, the Commission is
vested with functions and powers to:
(a) Inquire into certain agreements25 and dominant position26 of an
enterprise27;
(b) Conduct28 such inquiry and
(c) Pass29 certain orders which must meet the administrative law
standards of reasonableness, fairness, proportionality and being
consistent with the parent statute.
2.11 It is noteworthy that in terms of Section 27, the Commission can
pass all or any of the following Orders:
(a) When it comes to the conclusion that enterprises or persons have
entered in to anti-competitive agreements and/or there has been an
abuse of dominance:
(i) Direct discontinuance of such agreement and abuse of dominance;
(ii) Impose penalty to the extent of 10 per cent of the average turn
over for the last three preceding three financial years upon such
persons or enterprises;
(b) In case of cartels:
(i) Impose penalty on each member of cartel up to three times of
its profit for each year of the continuance of agreement or ten
22 Section 18
23 Section 36
24 Section 35
25 Section 3: Anti-competitive Agreement
26 Section 4: Abuse of the dominant position
27 Section 19
28 Section 26
29 Section 27
10
per cent of its turn over for each year of continuance of such
agreement, whichever is higher;
(ii) Modify the agreement;
(iii) Pass any other Order/direction which deems fit;
(iv) Order division of the enterprise enjoying dominant position.30
(c) Inquire31 into combinations in the manner32 and pass such Orders
33
as a prescribed under the Act. In respect of the combinations, the
Act empowers the Commission to:
(i) Approve the combination where there are no competition concerns;
(ii) Direct the parties not to give effect to the combination where
there are competition concerns;
(iii) Propose amendments to the combinations if commission is of
the view that the competition concerns can be eliminated by
such amendments.
(d) The Commission is empowered and has jurisdiction to pass ex parte
interim Orders temporarily restraining parties from carrying on any
act, where the commission has initiated an inquiry or is conducting
an investigation, during the pendency of such investigation or
inquiry and when commission is satisfied that an act is in
contravention with the provisions 3, 4 or 6 of the Act.34
(e) The Commission has extraterritorial jurisdiction in acts taking place
outside India but having effect on competition in India.35
2.12 The Commission is empowered to rectify any mistake apparent on
the face of the Order but can not, while rectifying the Order, amend the
substantive part of the Order.36
EXECUTION OF THE ORDERS OF COMMISSION AND THE PENALTY FOR

CONTRAVENTION OF THE ORDERS
2.13 Where Commission imposes a monetary penalty and the person
fails to comply with the Order, the Commission, if it of that view, may
make a reference to the concerned income-tax authority for recovery of
that penalty as tax due under the Income Tax Act37 and the person against
whom the penalty has been imposed shall be deemed to be an Assessee
in default.
30 Section 28
31 Section 20
32 Sections 29 and 30
33 Section 31
34 Section 33
35 Section 33
36 Section 38
37 Section 39
11
2.14 In case of non-compliance of the Orders of the Commission, the

Commission may impose a fine of Rs. one lac for each day during
such non-compliance subject to maximum of Rs. 10 crores. In case the
person continues with the non-compliance and also fails to pay the fine,
he shall be punishable with imprisonment for a term which may extend to
three years or with affine which may extend to Rs. 25 crores or with both
as the Chief Metropolitan Magistrate (CMM) Delhi may deem fit. the CMM
Delhi shall take cognizance only on a written complaint of the
Commission.38 Similar penalty will be imposed in case any direction of the
DG is not complied with.39 The Commission is empowered to:
(a) Impose a penalty equivalent to one percent of total turnover or
assets, whichever is higher, of a combination if parties to the
combination fail to give mandatory notice in terms of Section 6(2)40;
(b) Impose a penalty which shall not be less than Rs. 50 lacs but which
may extend Rs. 1 crore upon a person to the combination if such
person makes a statement which is false and knowing it be false or
omits to state any material particular knowing it be material41;
(c) Impose a fine which may extend to Rs. 1 crore if a person makes a
false statement; omits to state a material fact or alters, suppresses or
destroys any document which is required to be furnished42
2.15 In case of the contraventions by the Companies, every person who
at the time of the contravention was committed, was in charge of and was
responsible to the conduct of the business of the company, as well as the
company shall be deemed to be guilty of the contravention and shall be
dealt accordingly.43
44
LENIENCY PROVISIONS
2.16 While passing orders in respect of cartels, the Commission is vested

with the discretion to impose a proportionate/lesser penalty than leviable
under the Act upon a producer, seller, distributor, trader or service
providers, provided the following conditions are met:
38 Section 42
39 Section 43
40 Section 43A
41 Section 44
42 Section 45
43 Section 48
44 Section 46
12
(a) Such producer, seller, distributor, trader or service provider included

in the cartel has made full and true disclosure in respect of the
alleged violations and such disclosure is vital.
(b) Such disclosure has been made before receipt of DG's report on
investigation order under Section 26.
(c) The party making disclosures continues to co-operate with the
Commission till the completion of proceedings before the Commission.
(d) The party making disclosures has:
(i) Complied with the condition non which the lesser penalty was
imposed and
(ii) Not given false evidence.
2.17 It is noteworthy that the above leniency may be reversed if during
the course of proceedings, the Commission is satisfied that any producer,
seller, distributor, trader or service provider included in a cartel had:-
(a) Not complied with the condition on which the lesser penalty was
imposed;
(b) Given false evidence and
(c) The disclosure made is not vital.
In such an eventuality, such producer, seller, distributor, trader or service
provider may be tried for the offence and de-hors the lesser penalty
imposed shall be liable to the imposition of penalty to which such person
is liable.
2.18 The Commission is empowered by the Act to make regulations
consistent with the provisions of the Act and rules made there under to
carry out the objects of the Act. The Act requires that the Regulations
framed by the Commission shall be laid before the both Houses of
Parliament, when it is in session for a total period of thirty days.45 It is
relevant that the requirement is only for laying the regulations before the
Parliament. There is no requirement that the regulations have to be
debated and approved/disapproved by the legislature. Once the
regulations are laid before the Parliament for 30 days, the requirement is
fulfilled. It is also noteworthy that existence of the Regulations is not
condition precedent for the implementation of the provision of the Act,
as has been settled by the Hon’ble Supreme Court.46
45 Section 64
46 Please refer to (a) Mysore State Road Transport Corporation v. Gopinath Gundachar
MANU/SC/0327/1967: AIR 1968 SC 464 at Para 3; (b) U.P. State Electricity Board v.
City Board, Mussoorie MANU/SC/0179/1985: (1985) 2 SCC 16 at Para 7; (c) Delhi
Science Forum v. Union of India MANU/SC/0360/1996: (1996) 2 SCC 405 at Para
13
2.19 It is noteworthy the jurisdiction of the Civil Courts to entertain any

suit or proceeding in respect of any matter which the Commission or the
Appellate Tribunal is empowered by or under the Act. The Act specifically
bars the Courts and any other authority from granting any injunction in
respect of any action taken or to be taken in pursuance of any power
conferred by or under the Act.47
2.20 It is noteworthy that:
(a) The Commission does not have any power to grant any
compensation to any affected party48;
(b) The Director General does not have any suo moto powers to initiate
any inquiry as is the case with OFT under the UK Competition law.
2.21 It is important to note that Act empowers the Central Government to:
(a) Exempt49 from any the application of the Act:
(i) An enterprise in the interest of security of the State or public
interest50;
(ii) Any practice or agreement arising out of and in accordance
with any obligation assumed by India under any treaty,
agreement or convention with any other country or countries;
(iii) Any enterprise which performs a sovereign function on behalf
of Central Government or the State Government.
(b) Issue directions on policy issues, other than those relating to
technical and administrative matters. It is noteworthy that the
commission is bound by such directions.51
(c) Supersede the Commission if the central government is of the
opinion52:
(i) Commission is unable to discharge the functions or perform the
duties imposed on it by or under the Act; or
(ii) Commission has persistently made default in complying with any
direction given by the Central Government under the Act; or
(iii) Circumstances exist which render it necessary in the public
interest so to do.
13; and (d) Meghalaya State Electricity Board v. Jagadendra Arjun

MANU/SC/0414/2001: (2001) 6 SCC 446 at Para 12.
47 Section 61
48 This power is vested in the Competition Appellate Tribunal in terms of Section 53-L
of the Act.
49 Section 54
50 EC Treaty has a similar provision in terms of Article 296
51 Section 55
52 Section 56
14
COMPETITION APPELLATE TRIBUNAL
2.22 The Act casts an obligation upon the Central Government53 to

establish Competition Appellate Tribunal (“the Appellate Tribunal”), to
(a) Hear and dispose of appeals against any direction issued or decision
made or the Order passed by the Commission under Sub-sections
(2) and (6) of the Section 26, Sections 27, 28, 31, 32,33, 38, 39,
43, 43A, 44, 45 or 46 of the Act;
(b) Adjudicate on any claim for compensation that may arise from the
findings of the commission or the Orders of the Appellate Tribunal
in an appeal against any finding of the Commission or under
Section 42A or under Sub-section (2) of Section 53Q of this Act,
and pass Orders for the recovery of compensation under
Section 53N of the Act.
2.23 The Appellate Tribunal is to consist of a Chairperson and two
members54, where:
(a) The Chairperson shall be a person who is or has been a Judge of
the SC or a Chief Justice of High Court, and
(b) The members have to the person of ability, integrity and standing having
special knowledge of or professional experience of not less that 25
years in competition matters including competition law and policy,
international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs, administration.55
2.24 The Chairperson and the members can hold the office for a term of
five years subject to the condition that Chairperson shall not hold the
office after attaining the age of 68 years and the members shall not hold
the office after attaining the age of 65 years.56 The Chairperson and the
members have been prohibited to accept the employment of or connect in
the management of an enterprise, which has been party to a proceeding
before the Appellate Tribunal for a period of two years from the date
when they cease to hold the office.57 However, this prohibition does not
apply if the Chairperson or the members take the employment of Central
Government, State Government or any statutory authority.
2.25 The Appellate Tribunal is empowered to adjudicate upon any
claim for compensation that may arise from the findings of commission or
the Orders of the Appellate Tribunal and pass Order for recovery of
compensation from any enterprise for any loss or damage shown to
53 Section 53A
54 Section 53 D
55 Section 53D
56 Section 53F
57 Section 53L
15
have been suffered. There has to be a claim by way of an application

and the Appellate is obliged to inquire58 into the allegations made in the
application before passing an Order. The Appellate Tribunal is
empowered to entertain a class action.59 It is relevant to note that
there is no time limit prescribed for filing the claim application
with the Appellate Tribunal.
2.26 The Act prescribes 60 days limitation period from the date of
receipt of the Order of the Commission for preferring an appeal. The
delay in preferring the appeal in specified time may be condoned for
sufficient cause after giving concerned parties an opportunity of being
heard, the Appellate Tribunal may pass such Orders as may think fit,
confirming, modifying or setting aside the direction, decision or
Order appealed against.60 A party can appear before the Appellate in
person or can authorise a Chartered Account, Company Secretary, Costs
Accountant or a Legal Practitioner to represent him before the Appellate
Tribunal.61 A party can prefer an appeal to Supreme Court against the
order of the Appellate Tribunal with in the 60 days of the receipt of the
order and the delay in preferring in the prescribed period may be
condoned if the SC is satisfied that there was sufficient cause for not filing
the appeal within prescribed period.62
2.27 The Orders of the Appellate shall be enforced as if decrees made
by the courts. In case there is difficulty in execution of the Orders of the
Appellate Tribunal, the Tribunal can send its Orders to the Courts within
whose local limits:
(a) In the case of the of an Order against a company, the registered
office of the company is located;
(b) In case of an Order against any other person, place where the
person concerned voluntarily resides or carries on business or
personally works for gain, is situated.63
2.28 The Appellate Tribunal has the same jurisdiction, powers and
authority in respect of contempt of itself as a High Court and may exercise
the provisions of the Contempt of the Courts Act.64
58 The enquiry is limited to the determination the eligibility and quantum of

compensation due to a person applying of the same and not for examining afresh the
findings of the commission or the Appellate on whether any violation of the Act has
taken place.
59 Section 53N
60 Section 53B
61 Section 53S
62 Section 53T
63 Section 53P
16
PREVALENT INDIAN REGIME: MRTP ACT AND CURRENT
JURISPRUDENCE
2.29 MRTP Commission, which is functional till date, has the following
structure:
(a) The seat of the Commission is Delhi.
(b) It is comprised of a Chairperson being a Judicial Member – normally
a retired Judge of High Court of any State of India and the two to
eight other Members, which may vary from two to eight, are non-
judicial Members.65
2.30 The MRTP Commission is empowered to:
(a) Inquire and investigate into restrictive, unfair and monopolistic trade
practices of India.
(b) If a breach of restrictive and unfair trade practices provisions is
found, after hearing both parties to the dispute, the Commission
may pass “cease and desist”66 Orders against the defaulting
respondents. However, it does not have powers to impose
pecuniary fines in addition to “cease and desist Orders”.
2.31 Merger control is currently not a part of the MRTP Act. It remained
within the ambit of the law till 1991 but by an amendment in the law, the
chapter relating to merger control has been deleted. Presently, the
Commission is empowered to inquire and investigate breaches arising out
of monopolistic trade practices but is not empowered to pass final Order. It
can send its recommendations to the Central Government for decision as
may be deemed fit by that Government.67
2.32 Parties aggrieved by Orders of the Commission may prefer
appeals68 before the Supreme Court of India.
2.33 The Commission is soon to be dissolved and the Act repealed as
soon as the Competition Act, 2002 is fully notified. The cases that would
remain undecided on the date of dissolution and repeal shall be continued
to be disposed of by the MRTP Commission within a period of two years
after dissolution. However, no new cases under this law would be
instituted by the MRTP Commission.69
——————————
64 Section 53U
65 Section 5 of the MRTP Act
66 Sections 36 D and 37 of the MRTP Act
67 Section 31 of the MRTP Act
68 Section 55 of the MRTP Act, 1969
69 Section 66 of the Competition Act, 2002
17
CHAPTER-III
Overview of the Provisions Governing Anti-competitive
Agreements
70
ANTI-COMPETITIVE AGREEMENT
3.1 The Act among other things prohibits anti competitive agreements71,
the abuse of dominance72 and prohibits and /or regulates combinations.73
The Act gives wide ranging powers to CCI to achieve objects of the Act
and implement the provisions of the Act.74
3.2 The Act defines an agreement to include any arrangement,
understanding or concerted action entered between parties. The agreement
need not be in writing or formal or intended to be enforceable in law.75
3.3 An agreement in respect of production, supply, distribution, storage,
acquisition or control of goods76 or provision of services, which causes or
is likely to cause to appreciable effect on competition within India is
defined to be an Anti -Competitive Agreement. The Act prohibits such an
agreement, such that it shall be a void agreement.77 It is noteworthy that
the prohibition contained in Section 3 is not absolute and permits joint
venture agreements in case certain parameters are met.78 Anti-
Competitive Agreements could be both horizontal and vertical.
3.4 The Act prohibits Horizontal Agreements79, in case the same are:
(a) Agreement to fix prices;
70 Section 3
71 Section 3- Abuse of Dominance discussed in Chapter-3
72 Section 4- Combinations and Regulation of Combinations discussed in Chapter-4.
73 Section 6
74 Discussed in Chapter-I
75 Section 2(b)
76 Goods have been defined to mean goods as defined under Sale of Goods Act and
includes products manufactured, processed or mined, debentures, stocks and shares
after their allotment and goods imported in India (Section 2(I))
77 Section 3(2) of the Act read with Section 10 of the Indian Contract Act, 1872.
78 Please see para 3.9 below.
79 Sections 3(3) (a) to (d)
18
Overview of the Provisions Governing Anti-competitive Agreements
(b) Agreement to limit production, supply, markets, technical

development, investments or provisions of services;
(c) Agreement to geographically allocate markets or source of
production or provision of services – by allocation of geographical
area, type of goods/services or number of customers;
(d) Bid rigging and collusive bidding.
These above agreements are presumed to have appreciable adverse
effect on competition, which is similar to the per se rule.
3.5 The Act frowns upon Vertical Agreements,80 which are:

(a) Tie-in arrangement;
(b) Exclusive supply agreement;
(c) Exclusive distribution agreement;
(d) Refusal to deal;
(e) Resale price maintenance.
Horizontal agreements other than those mentioned above and the
vertical agreements including those mentioned above are dealt with on
rule of reason basis.
3.6 Cartel has been defined to include an association of producers,
sellers, distributors, traders or service providers who, by an agreement
amongst themselves, limit, control or attempt to control the production,
distribution, sale or price of, or trade in goods or provision of services.81
3.7 The CCI is empowered to inquire whether an agreement has caused
or is likely to cause appreciable adverse effect on competition on its own
motion or information received from any person, consumer or their
association or any trade association or on a reference received from the
central government, state government or a statutory authority.82
3.8 While determining whether an agreement has an appreciable
adverse effect on competition, CCI shall have due regard to the following:
(a) Creation of barriers to the new entrants in the market;
(b) Driving existing competitors out of the market;
(c) Foreclosure of competition by hindering entry into the market;
(d) Accrual of benefits to consumers;
(e) Improvements in production or distribution of goods or provision of
services;
80 Section 3(4) (a) to (c)

81 Section 2(c)
82 Section 19(1)
19
(f) Promotion of technical, scientific and economic development by

means of production or distribution of goods or provision of
services.83
3.9 It is noteworthy that prohibition contained above Sections 3(1) and
3(2) is not absolute and it can be dis-applied to a joint venture
agreement, if such joint venture agreement increases efficiency
in production, supply, distribution, storage, acquisition or
control of goods or provision of services.84 This clearly means that,
even if there is an appreciable adverse effect on competition, a joint
venture agreement shall not fall foul of the provisions of the Act if the
parties to the joint venture are able to show that the there have been
efficiency gains due to the joint venture. The burden of proof to show that
the joint venture agreement has resulted in efficiency gains is on the joint
venture partners.
3.10 Section 3(5) of the Act explicitly exempts the applicability of section 3
to–
(a) agreements containing reasonable conditions to protect any of his
rights; and
(b) right of a person to restrain any infringement of his rights.
It is noteworthy that rights are defined to mean all rights conferred
under-
(i) The Copyright Act, 1957;
(ii) The Patents Act, 1970;
(iii) The Trade & Merchandise Marks Act, 1958 or the Trade Marks Act,
1999;
(iv) The Geographical Indications of Goods (Registration & Protection)
Act, 1999;
(v) The Designs Act, 2000;
(vi) The Semi-Conductor Integrated Circuits Layout Design Act, 2000
(being hereafter referred to as 'IPRs').
3.11 Particularly noteworthy is the post 2005 products patent regime
under the Indian Patents Act, 1970 (as amended in 2005) introduced
product patent regimes in important areas of technologies-covering foods,
drugs, pharmaceutical products, any product of chemical reaction, alloys,
optical glasses and inter-metallic compounds. This presents a significant
commercial opportunity relating to production of such goods.
83 Section 19(3)
84 Proviso to Section 3
20
85
PROCEDURE FOR INQUIRY INTO ANTI-COMPETITIVE AGREEMENTS
3.12 The CCI upon receipt of reference or its own knowledge or

information received under Section 19 with regard to anti-competitive
agreement has to come to a prima facie opinion that a case exists and
once it comes to such conclusion, it shall direct the Director General (DG)
to make an investigation into the matter.86 If the CCI does not find a prima
facie case, it will close the case, pass an appropriate Order and forward
the Order to the concerned persons.
3.13 DG is required to submit a report on his findings to the CCI within
the time as may be specified by the Order of the commission such that:
(a) If the DG recommends that no case of anti-competitive agreement
exists and/or there is no contravention of the provisions of the Act,
the CCI shall invite objections/suggestions from the concerned
parties.87 Upon consideration of these objections or suggestions if
CCI agrees with the DG, it shall close the matter. If CCI does not
agree with the recommendation of the DG, it may Order further
investigation by DG or may itself conduct further investigation.
(b) If DG in its report recommends, that there is a contravention of the
provisions of the Act and the CCI is of the opinion that a further
inquiry is required, it shall inquire into such contravention in
accordance with the provisions of the Act.
ORDERS THAT CCI CAN PASS
3.14 After CCI, it finally comes to the conclusion that there is an

anti-competitive agreement, which has caused or is likely to cause
appreciable adverse effect on competition within India, it may pass all
or any of the following orders:
(a) Direct the parties to the said agreement to discontinue the said
agreement and not to re-enter such agreement88;
85 Section 26
86 DG does not have any suo moto powers as is the case with OFT and it cannot initiate
any inquiry on its own.
87 The Act does not empower the CCI to invite objections/suggestions from general
public. Objections/ suggestions are limited to the concerned persons i.e. if there is
reference then to Central and State Governments or the statutory authority and if the
inquiry is base on information then to the person who has provided such information.
88 Section 27(a)
21
(b) Impose penalty which shall not be more that 10 per cent of the
average turn over of the last three preceding financial years upon
each of the parties to the said agreement89;
(c) If the anti-competitive agreement has been entered by a cartel, the
CCI may impose upon each member of the cartel a penalty of up to
three of its profit for each year of continuance of such agreement or
ten per cent of its turn over for each year of continuance of such
agreement, which ever is higher90;
(d) Direct modification of the agreement91;
(e) Direct compliance of its orders/directions including payment of
costs92;
(f) The CCI can also pass order/directions and impose penalties upon a
group or its members if, during investigations, it finds that:
(i) The enterprise which has contravened the provisions of the
Act is a part of a Group and
(ii) Other members of the group are also responsible for or
contributed to such contravention.93
94
POWERS TO PASS EX PARTE INTERIM ORDERS
3.15 The CCI has jurisdiction and is empowered to pass ex parte

interim Order temporarily restraining a party from carrying out
an act until conclusion of an investigation or until further orders if the
CCI during investigation is satisfied that:
(a) There has been a contravention of Section 3(1) of the Act i.e.
an anti-competitive agreement having appreciable adverse effect
on competition in India has been entered into; and
(b) Such contravention continues to be committed.
95
EXTRA-TERRITORIAL JURISDICTION OF CCI
3.16 Notwithstanding that an agreement has been entered into outside

India or any party to such an agreement is outside India, CCI is
empowered to:
89 Section 27(b)
90 Proviso to Section 27(b)
91 Section 27(d)
92 Section 27 (e)
93 last proviso to Section 27
94 Section 33
95 Section 32
22
(a) Inquire into such agreement in accordance with the provisions of the
Act96 whether such agreement has caused or is likely to cause
appreciable adverse effect on competition in the relevant market in
India; and
(b) Pass such Orders as it may deem fit in accordance with the
provisions of the Act in case the agreement has caused or is likely to
cause appreciable adverse effect on competition in the relevant
market in India.
97
LENIENCY PROVISIONS
3.17 While passing Orders in respect of cartels, CCI is empowered to

impose lesser penalty than leviable under the Act upon a producer, seller,
distributor, trader or service providers provided the following conditions
are met:
(a) Such producer, seller, distributor, trader or service provider included
in the cartel has made full and true disclosure in respect of the
alleged violations and such disclosure is vital;
(b) Such disclosure has been made before receipt of DG's report on
investigation order under Section 26;
(c) The party making disclosures continues to co-operate with CCI till
the completion of proceedings before CCI;
(d) The party making disclosures has:
(i) Complied with the condition non which the lesser penalty was
imposed;
(ii) Has not given false evidence.
3.18 It is relevant to note that the CCI may decide to try a producer,
seller, distributor, trader or service provider included in the cartel for the
offence for which lesser penalty was imposed as also imposition of penalty
to which such person is liable if during the course of proceedings, in the
event that CCI is satisfied that that producer, seller, distributor, trader or
service provider had:
(a) Not complied with the condition non which the lesser penalty was
imposed;
(b) Given false evidence and
(c) The disclosure made is not vital.
3.19 In case of an agreement between enterprises engaged in identical
or similar trade of goods or provision of services (horizontal), the
96 Sections 3, 19, 26, 27, 33, 46

97 Section 46
23
Commission shall presume causation of appreciable adverse effect on

competition if such agreements come in conflict with any factors as
provided under section 19(3) of the CA.98 The presumption is, however,
rebuttable. But the onus of proof is potentially heavy on the party
(Respondent) who has been alleged to have caused appreciable adverse
effect on competition. The law does not talk about causation of
appreciable adverse effect on competition within relevant market of India
but within anywhere in India99 as such mere breach of law is sufficient to
trigger an inquiry in terms of factors laid down in Section 19(3). Thus, the
additional filters of assessing the harm in relevant product or geographic
markets would not be applicable in an inquiry against anti-competitive
agreement.
3.20 Agreement to export goods and/or services out of India is not
explicitly required to be considered restrictive. However, they run the risk
of the same being subject to scrutiny before the competition/anti-trust
authorities in the countries of import on the basis of application of “effects
doctrine” by such jurisdictions.
3.21 Overseas IPRs may not be protected from being inquired into since
the law provides for such protection only to IPRs registered in India.100 As
such agreements involving Indian enterprises and overseas enterprises
having IPRs in their respective local jurisdictions may not get this benefit
98 Section 3(3) – Any agreement entered into between enterprises or associations of

enterprises or persons or associations of persons or between any person and
enterprise or practice carried on, or decision taken by, any association of enterprises
or association of persons, including cartels, engaged in identical or similar trade of
goods or provision of services which:
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development,
investment or provision of services;
(c) shares the market or source of production or provision of services by way of
allocation of geographical area of market, or type of goods or services, or
number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding.
shall be presumed to have an appreciable adverse effect on competition.
Section 19(3) specifies:
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market
99 Section 3(1) – No enterprise or association of enterprises or person or association of
persons shall enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which causes or is
likely to cause an appreciable adverse effect on competition within India.
100 Section 3(5) (i)
24
unless some licence agreement etc. between the two are entered into
additionally in accordance with IPR laws of India.
3.22 While discharging of its functions including assessing the factors of
appreciable adverse effect on competition in India, the Commission shall
be guided by the principles of natural justice101, including affording an
opportunity of being heard. This principle enshrines “rule of reason” route
(and not a strict “per se” route).
3.23 Every inquiry into any alleged contravention of section 3 of the Act
shall be preceded by either a suo motu action by the Commission or on
receipt of information from any aggrieved party provided such party has
paid the prescribed fee.102 The condition to pay filing fee by informant
would surely benefit a respondent on the ground that frivolous allegations
would certainly be reduced to a large extent. The Commission has already
put up draft General Regulations on its website103 which indicate a sum of
Rs.50,000/- per petition payable to the Commission by an informant.
3.24 While conducting inquiries, the Commission may call upon
professional experts to assist it.104 This statutory provision may minimize
the scope of arbitrariness in the functioning of the Commission.
3.25 Anti-competitive agreements for export of goods and/or services
out of India may not be considered restrictive by the Commission.105
3.26 In case, parties have not appealed within prescribed time limit
before the Competition Appellate Tribunal and have failed to comply with
the Orders/decisions/directions of the Commission they shall be
punishable with fine which may extend to rupees one lac for each day
during which such non-compliance occurs, subject to a maximum of
rupees ten crore, as the Commission may determine.
101 Section 36 (1) In the discharge of its functions, the Commission shall be guided by
the principles of natural justice and, subject to the other provisions of this Act and of
any rules made by the Central Government, the Commission shall have the powers
to regulate its own procedure.
102 In terms of Section 19(1)(a), the Commission may inquire into any alleged
contravention of the provisions contained in Sub-section (1) of Section 3 of Sub-
section (1) of Section 4 either on its own motion or on receipt of any information, in
such manner and accompanied by such fee as may be determined by regulations,
from any person, consumer or their association or trade association
103 www.cci.gov.in
104 Section 36 (3) – The Commission may call upon such experts, from the field of
economics, commerce, accountancy, international trade or from any other discipline
as it deems necessary to assist the Commission in the conduct of any inquiry by it.
105 Section 3(5) (ici)
25
3.27 Failure to comply with the aforesaid penalty shall be punishable

with further risks as it may lead to imprisonment for a term which may
extend to three years, or with fine which may extend to rupees 25 crore,
or with both, as the Chief Metropolitan Magistrate (CMM), Delhi may
deem fit.106 Parties who operate their businesses from places other than
Delhi would be subjected to the jurisdiction of CMM, Delhi being a
statutory condition, would be liable to incur additional cost in this behalf.
3.28 Whenever companies contravene Orders of the Commission, the
person who is in charge of and is responsible to the company shall be
deemed to guilty of the contravention and shall be liable to be proceeded
against and punished accordingly.107 No appeal lies before the CAT
against Orders passed by the Commission under this provision (Section
48) of the Act. Aggrieved parties may, therefore, have to resort to judicial
reviews before High Courts if occasion so arises.
3.29 Class action proceedings against the Respondent are envisaged
and provided under the Act. Where any loss or damage is caused to
numerous persons having same interest, one or more of such persons
may, with the permission of the CAT, make an application.108
3.30 Every Order/decision/direction passed by the Commission may be
appealed by the party aggrieved by such Order/decision/direction before
the Competition Appellate Tribunal (CAT) within 60 days of such
Order.109 Frivolous appeals may be minimized as the law provides for a
filing fee for appeals before the CAT.110
3.31 Parties aggrieved by the decision or Order of the CAT may file an
appeal to the Supreme Court within 60 days from the date of the
communication of the decision or Order of the CAT to them.111
3.32 Parties, who have not preferred appeal before the Supreme Court
within prescribed time limit but have contravened the Orders of the CAT,
shall be liable for a penalty of not exceeding rupees one crore or
imprisonment for a term up to three years or with both as the CMM, Delhi
may deem fit.112 Parties having substantial business operations away from
Delhi will have to incur additional cost in this behalf since the proceedings
before the CMM, Delhi are statutory conditions.
106 Section 42 – Chapter VI

107 Section 48 (1) and (2)
108 Section 53N (4)
109 Section 53A (a)
110 Section 53B (2)
111 Section 53T
112 Section 53 Q(1)
26
JURISPRUDENCE
3.33 MRTP Act (the Act) prohibits restrictive trade practices (RTP)
and unfair trade practices (UTP). Both RTP and UTP are couched as
deeming provisions, i.e. per se illegal, the statute carves out certain
exceptions/gateways. However, the Act itself provides that RTPs and
UTPs would be considered to be void if apart from being preventing,
distorting or restricting competition, the same should also impose on
the consumers unjustified costs or restrictions.113
3.34 In this context, it is noteworthy that in the case of Voltas Limited v.
Union of India and others, the Supreme Court held that114:
“15. … Sub-section 1 of Section 38 also contains a statutory fiction
because it says that for purposes of any proceedings before the
Commission under Section 37, a “restrictive trade practice shall be
deemed to be prejudicial to public interest” unless the Commission is
satisfied of any or more of the circumstances specified in Clauses (a) to (k)
of Sub-section 1 of Section 38. The Scheme of the Act appears to be that
first it specifies some trade practices, under Sub-section 1 of Section 33, as
restrictive trade practices. Then, it has prescribed a forum under Section
37 to inquire as to whether any such trade practice is prejudicial to the
public interest. This question has to be examined in the light of Section 38
which in many Judgments has been described as “gateways”. In other
words, in spite of a finding that a particular agreement contains a Clause
which is related to a restrictive trade practice, if the Commission is satisfied
in respect of the existence of any of the circumstances specified in Clauses
(a) to (k) of Sub-section (1) of Section 38, no Order under Section 37 is to
be passed to desist or discontinue such practice or to declare any part of
the agreement as void. One of the circumstances specified in Clause (h) of
Sub-section 1 of Section 38 is:
38(1)(h) that the restriction does not directly or indirectly restrict or
discourage competition to any material degree in any relevant trade
or industry and is not likely to do so
If the Commission is satisfied that any practice which has been held to
be restrictive trade practice does not directly or indirectly restrict or
discourage competition to any material degree in any relevant trade or
industry then it can resist passing any order under Section 37 directing the
person concerned to desist or to discontinue the practice. It may be
113 Sections 2(o), 33(1), 36A, 36D, 37, 38 of the MRTP Act
114 1995 Supp (2) SCC 482, at paragraphs 15 to 17
27
mentioned that in connection with old Sub-section 1 of Section 33 in the

case of Tata Engg and Locomotive Co. (supra) this Court pointed out that
the exclusive dealings do not impede competition but promote it. It was
said:
The exclusive dealings do not impede competition but promote it.
Such dealings lead to specialisation and improvement in after-sales
service. The exclusive dealership agreements do not restrict
distribution in any area or prevent competition. The customer has
the choice of buying any make he likes. The advantage of exclusive
dealership is that a dealer specialises in his own type of vehicles with
all the attending advantages of trained personnel, special service
stations, workshops and spare parts.
It was also said that by specialising in each make of vehicle and
providing the best possible service that the competition between the
various makes is enhanced. In that connection it was also said:
By making its dealers exclusive to Telco, there cannot be said to be
any prevention, distortion or restriction of competition in the
territory in which a dealer operates, either between manufacturers of
the same type of vehicles or between dealers in these vehicles. Any
manufacturer of vehicles such as those of Telco may manufacture
and sell its vehicles in a territory in which Telco’s dealers operate.
Any other manufacturer of vehicles similar to those of Telco is also
free to appoint dealers of its choice in the same territory covered by
Telco’s dealers. The channels for outlet for vehicles have not been
blocked by the fact that the dealers appointed by Telco are exclusive
to Telco nor it can be said that Telco has by its exclusive
arrangement with its dealers affected the flow of supplies of vehicles
into the market.
Again in the case of Mahindra and Mahindra Ltd. v. Union of India
(Supra), it was said that after the Commission is satisfied in respect of
restrictive trade practices then it has to proceed to consider whether any of
the “gateways” provided in Section 38(1) exist so that the trade practice,
though found restrictive, is deemed not be prejudicial to pubic interest.
16. In the light of what has been said above, if the Order of the
Commission is examined, it shall appear that the Commission has set
out briefly the facts of the cases. Then the Commission has pointed out
that the Director General in support of his case has tendered the various
agreements. Thereafter, reference has been made to the affidavits filed
on behalf of the appellant and other documents. The real discussion is
only in para 40 of the order under appeal which is as follows:
28
We have gone through voluminous records and pleadings

pertaining to these enquires, evidence produced by the
parties, oral arguments, written submissions and cases referred
to by the parties and are of the view that no case for gateways
under Section 38(1), as pleaded, has been made out by the
Voltas in these proceedings. Likewise, the manufacturer
Simtools Limited in RTP Enquiry No. 483 of 1987 has also
failed to make out any case for the gateways. Therefore, we
hold that the Respondents have indulged into restrictive trade
practices, as alleged in the Notice of Enquiry, and those
practices are prejudicial to the public interest in each of the 15
enquires.
17. According to us, the Commission was required to go deeper
into the matter and to record findings in respect of different agreements
whether the objectionable clauses of the registered agreements were
prejudicial to public interest. It need not be impressed that any finding
recorded by the Commission under Section 37 and direction given in
terms of Clauses (a) and (b) of Sub-section 1 of Section 37 has a far
reaching effect. As such every aspect of the matter is required to be
examined in the light of the provisions of Sections 37 and 38 of the Act
before an order to cease and desist is passed by the Commission.
3.35 These three Judgments of the Supreme Court of India115 arising out
of RTP Enquires under the Act had set the precedent of “rule of reason”
even though the law provides for “deeming provision” based on per se
principles. The ratio of these Judgments would be vital and binding on all
lower courts and tribunals in trade-related matters which would determine
effect of business agreements capable of causing harm in the
market/consumers and strike a balance between anti-competitive harm
and consumer welfare.
3.36 Supreme Court in a recent Judgement116, inter alia, held the
following:
“We are distressed to see that MAHAGENCO had been encouraging
formation of cartel and, thus, allowing the rate of transportation of coal to
go high up. Unless a power generating company takes all measures to cut
115 TELCO v. Registrar of the Restrictive Trade Agreement MANU/SC/0254/1977:

(1977) 2 SCC 55; Mahindra & Mahindra Ltd v. Union of India
MANU/SC/0391/1979: (1979) 2 SCC 529; and Voltas Ltd v. Union of India
MANU/SC/0362/1995: 1995 Supp (2) SCC 498
116 BSN Joshi & Sons Limited v. Ajoy Mehta MANU/SC/8448/2008: (2009) 3 SCC 458,
at paragraph 17
29
down such malpractices, the generation cost of electricity is bound to go

higher and ultimately the same would be passed on to the consumers of
electricity. We hope a public sector undertaking would take adequate and
appropriate measures to meet the said contingency in future.
3.37 Section 33(1) (d) of the Act inter alia says:
‘that any agreement to purchase or sell goods or to tender for the sale
or purchase of goods only at prices or on terms or conditions agreed upon
between the sellers or purchasers shall be deemed to be restrictive trade
practice.’
This Sub-section read with Section 2(r) and Sections 37 and 38 of the
Act have formed the bases for inquiry into allegations of cartel under the
Act.
3.38 The definition of cartel, as stated above, under the Competition
Act, 2002117 is comprehensive and with the said Judgments of the
Supreme Court, it is imminently likely that any higher price arising out of
cartel if the same is passed on to the consumers would cause potential risk
to the members of the cartel.
——————————
117 Section 2(c) of the Competition Act, 2002
30
CHAPTER-IV
Overview of the Provisions Governing Abuse of
Dominance
DOMINANT POSITION
4.1 Dominant position held by an enterprise or a group per se is not

prohibited. The Act, however, prohibits abuse of dominance118 by an
enterprise or a group. The Commission is empowered to inquire whether
an enterprise or a group has the dominant position119 and whether it has
abused such position on the basis of:
(a) Its own motion, or
(b) Information received from any person, consumer or their association
or any trade association, or
(c) On a reference received from the central government, state
government or a statutory authority.120
4.2 Dominant position has been defined to mean121 a position of
strength, enjoyed by an enterprise, in the relevant market in India which
enables it to:
(a) Operate independently of competitive forces prevailing in the
relevant market; or
(b) Affect its competitors or consumers or the relevant market in its favour.
4.3 While determining/inquiring whether an enterprise has a dominant
position or not, the Commission has give due regard to the following122:
(a) Market share of the enterprise;
(b) Size and resources of the enterprise;
(c) Size and importance of the competitors;
(d) Economic power of the enterprise including commercial advantages
over competitors;
(e) Vertical integration of the enterprise including commercial
advantages over competitors;
118 Section 4 (1)

119 While determining whether an enterprise has a dominant position, the factors
mentioned in paragraph 1 above have to be considered by the Commission.
120 Section 19(1)
121 Explanation (a) to Section 4
122 Section 19(4)
31
(f) Dependence of the consumers on the enterprise;

(g) Monopoly or dominant position whether acquired as a result of any
statute or by virtue of being a Government company or a public
sector undertaking or otherwise;
(h) Entry barriers including barriers such as regulatory barriers, financial
risk, high capital cost of entry, marketing entry barriers, technical
entry barriers, economies of scale, high cost of substitutable goods
or service for consumers;
(i) Countervailing buying power;
(j) Market structure and size of market;
(k) Social obligations and social costs;
(l) Relative advantage, by way of the contribution to the economic
development, by the enterprise enjoying a dominant position having
or likely to have an appreciable adverse effect on competition;
(m) Any other factor which the Commission may consider relevant for
inquiry.
ABUSE OF DOMINANT POSITION
4.4 The Act enumerates the following practices which if found to be

conducted by an enterprise or a group will lead to the inference of abuse
of dominant position123 by that enterprise/group; provided that the
enterprise/ group is found to be dominant:
(a) Unfair or discriminatory condition on pricing including predatory
pricing124
(b) Limiting or restricting production of goods or provision of services;
(c) Limiting or restricting technical or scientific development relating to
goods or services to the prejudice of consumers;
(d) Denying market access in nay manner;
(e) Making conclusion of contracts subject to acceptance by other parties
of supplementary obligations which, by their nature or commercial
usage, have no connection with the subject of such contracts;
(f) Using its dominant position in one relevant market to enter into or
protect, other relevant market.
4.5 In order to ascertain the prima facie breach of Sections 4(1) and (2)
the Commission shall have due regard to assess some or all economic
factors of dominance as listed out in Section 19(4) of the Act. Therefore;
123 Section 4(2)

124 Predatory price means the sale of goods or provision of services, at a price which is below
the cost, as may be determined by regulations, of production of the goods or provision of
services, with a view to reduce the competition or eliminate the competitors.
32
Overview of the Provisions Governing Abuse of Dominance
(a) The first filter for scrutiny against this is assessing dominance and
thereafter “abuse” of such dominance in terms of Sections 4(2) (a)
to (e) of the Act.
(b) The next filter is to ascertain as to whether or not such abuse has
been caused in relevant product and geographic markets.125
(c) In cases of cross-border anti-competitive practices having effect in
India, due to the Effects Doctrine the second filter would be
supplemented by a finding of “appreciable adverse effect in India”.
This departure therefore, makes inquiry against cross-border cases
of abuse of dominance more difficult because besides examining the
basic filters as indicated above, one would need to examine the
“appreciable adverse effects” factors also as available under Section
19(3). In cross-border matters of abuse of dominance, we need to
apprise clients with this additional statutory requirement.
4.6 It is noteworthy, that the Act does not require ascertaining of the
causation of “appreciable adverse effect in the market or relevant market
within India”.
4.7 It is noteworthy, that Section 4 of the Act, which prohibits the abuse
of dominance, is somewhat similar to Article 82 of the EC Treaty in the
language, tenor and its ambit – and it is reasonable to expect strong
persuasive value of EU jurisprudence/rulings in the formative years in
India. Article 82 of the EC Treaty provides as under:
Any abuse by one or more undertakings of a dominant position within
the common market or in a substantial part of it shall be prohibited as
incompatible with the common market insofar as it may affect trade
between Member States. Such abuse may, in particular, consist of:
(a) directly or indirectly imposing unfair purchase or selling prices or
other unfair trading conditions;
(b) limiting production, markets or technical development to the
prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other
trading parties, thereby, placing them at competitive disadvantage;
(d) making the conclusion of the contracts subject to acceptance by the
other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject
to such contracts.
4.8 While Section 3(5) of the Act explicitly exempts the applicability of
section 3 to protection of IPRs agreements (reasonable conditions and
125 Sections 2 (r), (s) and (t) read with Sections 19 (5), (6) and (7)
33
restraining infringements), section 4 does not contain such a gateway in

case any enterprise or group is found abusing its dominant position.
126
PROCEDURE FOR INQUIRY INTO ABUSE OF DOMINANCE
4.9 The Commission must arrive at a prima facie opinion that a case of
abuse of dominance exists. Once it comes to such conclusion, it shall
direct the Director General (DG) to investigate into the matter.127 If the
Commission does not find a prima facie case, it will close the case, pass an
appropriate Order and forward the Order to the concerned persons.
4.10 DG is required to submit a report on his findings to the
Commission within the time as may be specified by the Order of the
Commission, such that:
(a) If the DG recommends that no case of abuse of dominance exists
and/or there is no contravention of the provisions of the Act:
(i) The Commission shall invite objections/suggestions from the
concerned parties.128
(ii) Upon consideration of these objections or suggestions if
Commission agrees with the DG, it shall close the matter.
(iii) If Commission does not agree with the recommendation of the
DG, it may Order further investigation by DG or may itself
conduct further investigation.
(b) If DG in its report recommends that that there is a contravention of
the provisions of the Act and the Commission is of the opinion that
a further inquiry is required, it shall inquire into such contravention
in accordance with the provisions of the Act.
ORDERS THAT COMMISSION CAN PASS
4.11 After CCI Commission comes to the conclusion that there is an

anti-competitive agreement, which has caused or is likely to cause
appreciable adverse effect on competition within India, it may pass all
or any of the following Orders:-
126 Section 26
127 DG does not have any suo moto powers as is the case with OFT and it can not
initiate any inquiry on its own.
128 The Act does not empower the CCI to invite objections/suggestions from general
public. Objections/ suggestions are limited to the concerned persons i.e. if there is
reference then to Central and State Governments or the statutory authority and if the
inquiry is base on information then to the person who has provided such information.
34
Overview of the Provisions Governing Abuse of Dominance
(a) Direct the parties to discontinue the abuse of dominance129;

(b) Direct compliance of its Orders/directions including payment of
costs130;
(c) Direct for the division of an enterprise abusing the dominant
position to ensure that it does not abuse its dominance131;
(d) Pass such other Order or issue such other direction as the
Commission deems fit.
DIVISION OF ENTERPRISE
4.12 The Order directing the division of an enterprise may provide for
all or any of the following matters:
(a) The transfer or vesting of property, rights, liabilities or obligations;
(b) The adjustment of contracts either by discharge or reduction of any
liability or obligation or otherwise;
(c) The creation, allotment, surrender or cancellation of any shares,
stocks or securities;
(d) The formation or winding up of an enterprise or the amendment of
the memorandum of association or articles of association or any
other instruments regulating the business of any enterprise;
(e) The extent to which, and the circumstances in which, provisions of
the Order affecting an enterprise may be altered by the enterprise
and the registration there.
132
4.13 The Commission is vested with the power to pass ex parte

interim Order temporarily restraining a party from carrying out
any act until conclusion of an investigation or until further Orders if the
CCI during inquiry is satisfied that:
(a) The party has committed and continues to commit action which
tantamounts to abuse of dominance; or
(b) Such action is about to be committed.
129 Section 27(a)

130 Section 27(e)
131 Section 28
132 Section 33
35
133
EXTRA-TERRITORIAL JURISDICTION OF COMMISSION
4.14 Notwithstanding that any enterprise abusing the dominant position

is outside India, the Commission is empowered to:
(a) Inquire into such abuse of dominance; and
provisions of the Act.
ENFORCEMENT
4.15 The Act provides, under Chapter VI, for imposing significant
penalties or imprisonment up to a period of three years or both in case
parties who have not preferred appeals against the orders of the
Commission within the stipulated period of 60 days have defaulted in
complying with the Orders of the Commission as pronounced under
Section 27 or 28.134
4.16 Contravening Orders of Appellate Tribunal would also invite huge
pecuniary penalties or imprisonment up to three years or both as the Chief
MM, Delhi may deem fit if the party aggrieved has not preferred appeal
within 60 days of communication of the Order to the Supreme Court of
India.135
——————————
133 Section 32
134 Sections 42, 42A, 43, 44, 45 and 48.
135 Section 53Q and Section 53T
36
CHAPTER-V
Overview of the Provisions Governing Combinations
COMBINATIONS
5.1 Combinations136 have been defined to mean:-

(a) The acquisition137 of control138, shares, voting rights or assets of one
or more enterprises139 by one or more persons140; or
(b) Acquiring the control by a person over an enterprise where such
person has control over another enterprise engaged production,
136 Section 5
137 Section 2(a) acquisition means, directly or indirectly, acquiring or agreeing to acquire:
(i) shares, voting rights or assets of an enterprise; or
(ii) control over management or control over assets of any enterprise.
138 Explanation a to Section 5- Control includes controlling the affairs or management
by:
(i) one or more enterprises, either jointly or singly, over another group or enterprise;
(ii) one or more groups, either jointly or singly, over another group or enterprise.
139 Section 2(h)- enterprise means a person or a department of the Government engaged
in the business activity of production, distribution, acquisition or control of articles or
goods or provisions of services of any kind or in investment or in the business of
acquiring , holding, underwriting or dealing with the shares, debentures or either
securities of any other body corporate, either directly or through one or more of its
units or divisions or subsidiaries, whether such unit or division or subsidiary is located
at the same place where the enterprise is located or at a different place or different
places, but doe s not include any activity of the Government relatable to the
sovereign functions of the Government including all activities carried on by the
departments of the Government including all activities carried on by the departments
of the Central Government dealing with atomic energy, currency , defence or space.
140 Section 2(l) Person includes- (i) an individual; (ii) a Hindu Undivided Family; (iii) a
company; (iv) a firm; (v) an association of persons or a body of individuals, whether
incorporated or not, India or outside India; (vi) any corporation established by or
under any Central, State or Provincial Act or a Government company as defined in
section 617 of the Companies Act, 1956 (1 of 1956); (vii) any body corporate
incorporated under any law relating to cooperative societies; (viii) a co-operative
society registered under any law relating to co-operative societies; (ix) a local
authority; (x) every artificial juridical person, not falling within any of the preceding
sub-clauses.
37
distribution or trading141 of similar or identical or substitutable good

or provision of similar or identical or substitutable service; or
(c) Merger or amalgamation between or amongst the enterprises
provided that the resultant entity/ies breach the stipulated
thresholds142, set out in the table below:
Assets Turnover
In India If the combination Rs. 1,000 Cr. Rs. 3, 000 Cr.
does not become a
part of a group
(No Group)
If combination Rs. 4,000 Cr. Rs. 12,000 Cr.
becomes part of
group (Group)
In India No. Group Total Assets Turnover
and
Outside $500 m Rs. 500 cr. $1500 m Rs. 1,500 cr.
Group $2000 m Rs. 500 Cr. $6000 m Rs. 1,500 Cr.
(i) 1 crore = 10 Million; US $1= Rs. 45 (approximately).

(ii) Assets or Turnover is the joint asset value or turnover of the
parties to a combination and that of the parties and the group.
(iii) It is relevant to note that these thresholds were prescribed in
2002 when the Act was enacted. Seven years have passed
since then with no revision. However, the Act empowers the
Central Government, in consultation with the Commission, to
enhance or reduce the value of assets or value of turnover
(thresholds), for the purposes of combination, on basis of
whole sale price index or fluctuations in exchange rate of
rupee or foreign currency.143
REGULATION OF COMBINATIONS
5.2 The Act prohibits entering into a combination which has caused or is
likely to cause an appreciable adverse effect on competition within the
relevant market in India. Such a combination, if entered into, would be void
ab-initio.144 Combinations are not per se prohibited. Regulation of
141 Section 2(x) Trade means any trade, business, industry, profession or occupation
relating to production, supply, distribution storage or control of goods and includes
any provision of any services
142 Section 5( a-c)
143 Section 20(3)
144 Section 6 (1)
38
combination is done on “rule of reason” by ex ante proceedings, and does

not involve any pecuniary penalty as a remedy. The Commission may
either approve the transaction or modify some portions of it or reject it.145
5.3 It is Noteworthy that Regulation 5 of the Draft Competition
Commission of India (Combinations) Regulations Provide that
the Following Combinations will not be having Appreciable
Adverse Effect on Competition:
(a) An acquisition of shares or voting rights by the parties, referred to in
Sub-clause (i) or (ii) of Clause (a) of Section 5 of the Act, solely as an
investment or in the ordinary course of business, of not more than 15
per cent of the total shares or voting rights of the company, of which
shares or voting rights are being acquired, directly or indirectly or in
accordance with the execution of any document including a share
holders’ agreement or articles of association, not leading to control of
the enterprise whose shares or voting rights are being acquired;
(b) An acquisition of assets by the parties, referred to in Sub-clause (i) or
(ii) of Clause (a) of Section 5 of the Act, not directly related to the
business activity of the party acquiring the asset or made solely as an
investment or in the ordinary course of business, not leading to
control of the enterprise whose assets are being acquired except
where the assets being acquired represent the entire business
operations in a particular location or for a particular product or service
of the enterprise, of which assets are being acquired, irrespective of
whether such assets are organised as a separate legal entity or not;
(c) An acquisition of or acquiring of control or merger or amalgamation,
referred to in Clause (a) or (b) or (c) of Section 5 of the Act, where
the assets or turnover of rupees 1,000 crores or rupees 3,000 crores
respectively, mentioned in part (A) of Sub-clauses (i) and (ii) of
Clause (a), or part (A) of Sub-clauses (i) and (ii) of Clause (b), or
part (A) of Sub-clauses (i) and (ii) of Clause (c), of Section 5 of the
Act, does not include assets of rupees 200 crores or turnover of
rupees 600 crores, respectively, of each of at least two of the parties
to the combination; or
(d) An acquisition of or acquiring of control or merger or amalgamation,
referred to in Clause (a) or (b) or (c) of Section 5 of the Act, where
the minimum assets or turnover, in India, of rupees 500 crores or
rupees 1,500 crores, respectively, mentioned in part (B) of Sub-
clauses (i) and (ii) of Clause (a), or part (B) of Sub-clauses (i) and
145 Section 31.
39
(ii) of Clause (b), or part (B) of Sub-clauses (i) and (ii) of Clause (c)
of Section 5 of the Act, does not include assets of rupees 200 crores
or turnover of rupees 600 crores, respectively, of each of at least two
of the parties to the combination; or
(e) An acquisition of shares or voting rights, referred to in Sub-clause (i)
or (ii) of Clause (a) of Section 5 of the Act, where, prior to such
acquisition, the acquirer holds more than 50 per cent of the shares
or voting rights in the enterprise of which further shares or voting
rights are being acquired; or
(f) An acquisition of control or shares or voting rights or assets resulting
from gift or interstate or testamentary succession or transfer by a
settler to an irrevocable trust; or
(g) An acquisition of current assets in the ordinary course of business.
MANDATORY NOTIFICATION REQUIREMENT
5.4 The Act casts any obligation upon a person or enterprise146, who or
which proposes to enter into a combination, to notify the commission
disclosing the details of such combination within 30 days of:
(a) Approval of the proposal relating to merger or amalgamation by the
board of directors of the enterprises concerned with such merger or
amalgamation, as the case may be;
(b) Execution of any agreement or other document for acquisition
referred to in Clause (a) of Section 5 or acquiring of control referred
to in Clause (b) of that section.
Parties to combinations shall only notify to the Commission when the
proposed transaction exceeds the statutory thresholds prescribed in the
Act.147 Parties who are bound to notify but failed to do so shall be liable
to be penalised by the Commission.148
5.5 It is relevant to note that there is a compulsory wait period of upto
210 days from the date on which the notice for such combination was
given by the parties to the commission.149 If the commission does not
146 In terms of the Regulation 10 of the draft Competition Commission of India

(Combination) Regulations, in case of the acquisition or acquiring the control, the
acquirer is required to file the notice and in case of a merger or an amalgamation, all
persons or enterprises to the combination, who or which propose such merger or
amalgamation, shall jointly file the notice.
147 Section 5.
148 Section 43-A.
149 Section 6(3). It is not to be taken that all the combinations will take 210 days to get the
clearance and/or will take effect only after the expiry of the said 210 days. The 210 days
40
pass any Order and/or issue any direction on the expiry of 210
days, the combination shall be deemed to have been approved.150
5.6 The prohibition regarding combinations having appreciable adverse
effect on competition does not apply to the share subscription or financing
facility or any acquisition by public financial institution, foreign institutional
investor, bank or venture capital fund pursuant to a loan agreement or an
investment agreement. However, such institutions are obliged to notify the
commission within seven (7) days of such acquisition. The notice must
contain details of the acquisition including:
(a) The details of control,
(b) The circumstances for exercise of such control, and
(c) The consequences of default arising out of such loan agreement or
investment agreement.
151
INQUIRY INTO COMBINATION BY COMMISSION
5.7 The Commission is empowered to inquire whether a combination

has an appreciable adverse effect on competition in the relevant market in
India. The commission can initiate inquiry upon its knowledge, on
information received or a reference received from the central government,
state government or a statutory authority. The law provides for several
filters before the Commission can commence an inquiry against a
proposed transaction of combination. These are:
(a) If the result breaches the statutory thresholds;
(b) Prima facie causation of appreciable adverse effect on competition in
the relevant product and geographic market within India.152 Factors
relating to ascertaining appreciable adverse effect on competition have
been statutorily provided in the law thereby, minimising arbitrariness.153
period is the upper limit. It is expected and hoped that most of the combinations will get
approval well before the expiry of the 210 days (perhaps mostly within 30 to 60 days),
provided that they do not raise any concerns regarding appreciable adverse effect on
competition. It is relevant to note that for determining the period of 210 days, the
extension periods in terms of Sections 31(6), (8), (11) and (12) shall be excluded.
150 Section 31(11)
151 Section 20 provides for the enquiry into combination relating to acquisition, control
and merger under Section 5(a), (b) and (c). In a case when the combination
(proposed or already been formed) while functioning in a relevant market, in its
functioning or operation, if the combination has or is likely to have an appreciable
adverse effect on competition, an inquiry may be required to be made by the
Commission, which can be post-combination inquiry under Section 20.
152 Sections 2(r), (s), (t) read with Sections 19(5), (6) and (7).
153 Section 20(4)
41
(c) Local nexus or “de minimis” thresholds have been provided under
the law for overseas transactions having adverse effect in India.
Cross-border transactions which do not exceed the statutory “de
minimis” thresholds shall be exempted from being inquired into by
the Commission.154
(d) Government-aided enterprises are not exempted from being
scrutinised thereby ensuring a level-playing field between private
and public sector competing enterprises.155
5.8 By way of guidance, the Act casts an obligation to have due regard for
all or any of the following factors while determining whether a combination
has appreciable adverse effect on competition in the relevant market156:
(a) Actual and potential level of competition through imports in the market;
(b) Extent of barriers to entry into the market;
(c) Level of combination in the market;
(d) Degree of countervailing power in the market;
(e) Likelihood that the combination would result in the parties to the
combination being able to significantly and sustainably increase
prices or profit margins;
(f) Extent of effective competition likely to sustain in a market;
(g) Extent to which substitutes are available or arc likely to be available
in the market;
(h) Market share, in the relevant market, of the persons or enterprise in
a combination, individually and as a combination;
(i) Likelihood that the combination would result in the removal of a
vigorous and effective competitor or competitors in the market;
(j) Nature and extent of vertical integration in the market;
(k) Possibility of a failing business;
(l) Nature and extent of innovation;
(m) Relative advantage, by way of the contribution to the economic
development, by any combination having or likely to have
appreciable adverse effect on competition;
(n) Whether the benefits of the combination outweigh the adverse
impact of the combination, if any.
5.9 It is noteworthy that the Act limits the powers of the Commission to
look into the combinations after the expiry of the one year from the date
on which such combination has taken effect. The proviso to section 20 of
the Act provides Provided that the Commission shall not initiate any
154 Section 5 – post 2007 amendments to the CA.

155 Section 2(h) read with 2(1).
156 Section 20(4)
42
inquiry under this sub-section after the expiry of one year from the date
on which such combination has taken effect157. As such:
(a) Proviso to Section 20(1) has to be interpreted in terms of the
thresholds provided under Sections 5(a), (b) and (c). The Act does not
provide for retrospective operation, in regard to such combinations which
had been entered into prior to the coming into force of the Act.
(b) Section 20 provides for enquiry into whether the combination “has
caused or is likely to caused appreciable adverse effect of competition”.
As such, there is an ambiguous situation created by Section 20 which may
lead to conflicting judicial interpretations in light of the legislative intent
and language of Section 20 regarding a combination entered into prior to
the coming into effect of the Act, which may seem to have caused an
appreciable adverse effect on competition. If the Commission does not get
to know about the combination within one year, it appears that the
Commission would not be able to look into the same.158
5.10 In this context, it remains to be seen how this provision will be
interpreted and implemented by the statutory authorities and Courts of
law. This is particularly so because, prima facie, the escape route if
accepted would result in setting into motion a perverse incentive in favour
of defaulters qua disclosure/reporting requirement, which threatens to
frustrate the law.
159
PROCEDURE FOR INVESTIGATION OF COMBINATION
5.11 On coming to a prima facie opinion that the combination is likely

to cause or has caused appreciable adverse effect on competition within
the relevant market:
(a) The commission shall issue a show cause notice to parties to the
combination calling upon them to show cause within 30 days of receipt
as to why investigation of such combination should not be conducted.
157 In other words, an enquiry may be instituted only on the combination comes to the
knowledge/information of the Commission within one year of its coming into
‘combination’.
158 Though the provision has been a statute book for six years, the language of proviso to
Section 20(1) does not provide for such retrospective operation of the thresholds levels
under Section 5. It is settled principle of interpretation of statute that, the provisions
which touch a right in existence at the time of passing of statute are not to be applied
retrospectively in the absence of express enactment or necessary intendment. Further,
unless clear and unambiguous intention is indicated by the Legislature by adopting
suitable express words in that behalf, no provision of a statute should be given
retrospective operation if by such operation vested rights are likely to be affected.
159 Section 29
43
(b) After the receipt of the response from the parties, the commission
may call for a report from the DG in the time as may be specified.
(c) After receipt of the response and the report of the DG, if the
commission is of the prima facie opinion that the combination has
or is likely cause appreciable adverse effect on competition, it may
direct the parties to publish the details of such combination within
10 days of such direction for the knowledge of general public and
the persons affected or likely to get affected by such combination.
(d) The public or the effected parties are required to file their
objections/suggestions, if any, with 15 days of such publication.
(e) Within 15 days of the aforementioned period of 15 days, the
commission may call additional information from the parties to the
combination.
(f) The parties are required to submit the additional information
with 15 days of the after expiry of 15 days during which the
information was sort.
(g) The Commission is mandated to proceed with the matter
within 45 days of the expiry of the 15 days provided for furnishing
the additional information.
Show Cause Notice to parties
z Response in 30 days
z Direction by Commission if Commission of prima facie opinion
of adverse impact on competition in 7 days of receipt
z Publication of combination within 10 days of direction
z Public Response within 15 days
z Call for further information with 15 days
z Furnishing of further information with 15 days
z Commission to proceed within 45 days thereafter.
160
ORDERS THAT CCI CAN PASS IN RESPECT OF THE COMBINATIONS
5.12 The Commission is empowered to pass the following Orders after

following due process:
(a) Approve the combination where no appreciable adverse effect on
competition in the relevant market in India;
160 Section 31
44
(b) Direct that combination shall not take effect where the Commission
is opinion that there is or is likely to have appreciable adverse effect
on competition;
(c) Propose modification in the combination where the commission is
of the appreciable adverse effect cause or likely to be caused by the
combination can be eliminated by the modification.
5.13 Two scenarios have been envisaged in the Act in case of the
modification proposal:
(a) The parties may accept and carry out the modification within the
specified time. If they fail to carry out the modification to the
combination with in the specified time, such combination shall be
deemed to have appreciable adverse effect on competition;
(b) The parties to the combination may within 30 days of the
modification proposal submit an amendment to the modification
proposal, whereupon:
(i) If the commission agrees with the amendment to the
modification proposal, the shall approve the combination;
(ii) If it does not agree with the amendment, the Commission will
give further 30 days to the parties to accept the modification.
If they fail to accept the modification, the combination shall be
deemed to have adverse effect on competition and shall not
be given effect.
5.14 Once the Commission has passed an order a combination to be
void, the acquisition, acquiring of the control or merger or amalgamation
shall be dealt by the authorities as if such acquisition, acquiring control or
merger or amalgamation had not taken place.
161
5.15 The Commission is vested with the power to pass ex parte

interim order temporarily restraining a party from carrying out
an act until conclusion of an investigation or until further Orders if the
CCI during investigation is satisfied that:
(a) There has been a contravention of Section 6 of the Act i.e. a
combination having caused or is likely to cause appreciable adverse
effect on competition in the relevant market has been entered into;
and
(b) Such contravention continues to be committed.
161 Section 33
45
162
EXTRA-TERRITORIAL JURISDICTION OF COMMISSION
5.16 Notwithstanding that combination has taken place outside India or

any party to combination is outside India, Commission is empowered to:
(a) Inquire into such a combination in accordance with the provisions of
the Act163 whether such combination has caused or is likely to cause
appreciable adverse effect on competition in the relevant market in
India; and
provisions of the Act.
IMPLEMENTATION ISSUES
5.17 Being a significant change in law, the regulations and guidelines

with administrative law principles of due process shall be critical in the
initial phase of implementation of the Act. Some challenges include:
(a) Forms of Notification as proposed by the Commission in its draft
Regulations may prima facie appear seeking too much of
information from parties. Some of such information may not be
relevant for the purpose of ascertaining anti-competitive harm in
relevant market post-combination.
(b) Seeking more information may cause additional cost to parties and
would be more so in cases involving cross-border transactions.
(c) Multi-jurisdictional notifications with variation in waiting periods,
filing fees, procedural formalities and above all lack of domain
knowledge in newer jurisdictions would cause additional difficulties
for the parties.
(d) Confidentiality of information shall be adhered to by the
Commission and the CAT unless otherwise consented to by
enterprises in writing for disclosure of such information.164
5.18 Appeal lies before the CAT and the Supreme Court within 60 days’
from communication of the Orders from the CCI and the CAT,
respectively.165 Non-compliance of Commission’s or CAT’s Orders if not
appealed against shall be subjected to severe pecuniary penalties besides
possibilities of civil imprisonment up to three years as the CMM, Delhi
may deem fit.
162 Section 32
163 Sections 3, 20, 30, 31, 33
164 Section 57
165 Section 53B and Section 53T.
46
JURISPRUDENCE
5.19 Since the inception of the Act, two references were made to the
MRTP Commission under the Chapter relating to merger control.
(a) The first reference related to undertakings belonging to Express
Group of Companies on the grounds inter alia that considerable
amounts of public funds were used for purposes of speculative
trading in shares; huge losses were incurred due to diversion of
funds; and inter-locking of a number of newspapers and newspaper
business with non-newspaper and trading activities. During the
course of the inquiry before the Commission, the Central
Government rescinded its Order of reference on a representation
made by the Express Group of Companies.
(b) The other reference was made in the matter of Jiyajeero Cotton
Mills Ltd. on the grounds inter alia that it enjoyed a dominant
position in the production of soda ash and failed to broad base its
capital structure to enable the public to participate in the high
growth and profitability resulting from its dominant position. The
company challenged this reference before the High Court of Delhi,
which after considering all the facts and the provisions of the law
quashed the reference.
5.20 Though reference to the Commission and inquiry by the MRTP
Commission was a pre-requisite before any Order can be passed by the
Central Government, it was not obligatory on the part of the Central
Government that the recommendations made by the Commission are
accepted.
5.21 However, the said Chapter having been deleted by the amendment
of 1991. The Commission, ever since till the repeal does not have statutory
powers to investigate into any anti-competitive combination within India.
5.22 Under the Competition Act, 2002 – detailed economic factors
relating to relevant product and geographic markets as well as appreciable
adverse effect on competition in such markets have been provided to deal
with the processes of investigation into any transaction of combination. It
also expressly provides for pecuniary thresholds which when exceeded by
parties to combinations would mandatorily make such parties to file
notifications to the Competition Commission of India for approval.
5.23 No judicial precedents exist on anti-competitive merger control as
of now. During the course of evolution of this limb of competition law, the
Commission, Tribunal and the Supreme Court may have to, more often
than not, rely upon foreign Judgments.
——————————
47
CHAPTER-VI
Some Insights and Issues for the Way Forward
ECONOMIC AND POLICY CONTEXT OF THE LAW
6.1 The emerging challenges and opportunities posed by the

implementation of the Act at this stage may be evaluated in context of the
following aspects, which can be reasonably expected to be brought to bear
upon the concerned authorities in interpreting and implementing the Act.
(a) Stated objects of the Act.
(b) India’s economic condition, opportunities and aspirations in the
prevalent global economic scenario.
(c) Significant policy shift in Indian macro-economic policies, laws and
jurisprudence since mid-1980’s characterised by:
(i) A changed role of the Government:
(1) From the controller of the “commanding heights of the
economy” to a planner and partner in economic
development with private capital and enterprise.
(2) From a license-giver to a facilitator.
(ii) Challenges of historical and policy/law based state owned
monopolies/oligopolies in crucial sectors like infrastructure
which are being unshackled through reforms (laws and
policies) by:
(1) Removing barriers to entry and exit.
(2) Establishing a facilitative legal framework to enable
private participation.
(3) Creating a level playing field for new entrants.
(4) Distancing government from day-to-day regulation of
the markets – which are increasingly being left to be
regulated by autonomous, empowered and accountable
multi-disciplinary expert regulatory authorities.
(5) Distancing Government from day-to-day operations of
economic enterprise.
6.2 It is noteworthy that Courts in India as a rule presume constitutional
validity of enacted laws. While interpreting a statute, Courts adopt such
construction as effectuates the legislative intent behind the statute,
48
resorting to purposive interpretation to give effect to a statute in view of its

context and scheme.166
EXPERT ADJUDICATION IN POLICY MATTERS V. CONSTITUTIONAL

SAFEGUARDS AND ECONOMIC IMPERATIVES
6.3 The Courts in India have adopted a balanced “common law”

approach towards economic policy decisions taken by the Government
which is characterised by:
(a) Deference to policy making powers as expert-decisions which
Governments and the Parliamentary accountability mechanism are
best suited to evolve. The Courts treat policy decisions as involving
choices between various options which require exercise of
discretion, and in this context recognize that the concerned authority
must be seen to have flexibility.
(b) Where policy issues are delegated to expert bodies, Courts exercise
judicial restraint in interfering with the decisions of such bodies
unless the same are found to:
(i) Fall foul of Wednesbury’s reasonableness and proportionality
(as adopted and evolved in Indian Courts in context of the
constitutional “reasonability” doctrine enshrined as a
fundamental right under Article 14 thereof);
(ii) Violate or unreasonably restrict any fundamental or
constitutional right; and/or
(iii) Ultra vires the present statute.
This is particularly so in a number of cases decided by the Supreme
Court of India.167
6.4 Interestingly, over the last 15 years, Indian Parliament and Courts
appear to have adopted two parallel/alternate models of mechanism
design, viz.:
166 Leelabai Gajanan Pausare v. Oriental Insurance Co. Ltd. MANU/SC/3535/2008:

(2008) 9 SCC 720 (2J); M. Nagaraj v. Union of India MANU/SC/4560/2006: (2006)
8 SCC 212 (5J); Ojas Industries Ltd. v. Oudh Sugar Mills MANU/SC/1606/2007:
(2007) 4 SCC 723: AIR 2007 SC 1619: JT 2007 (6) SC 617: 2007 (5) SCALE 256
(2J); State of Goa v. Western Builders MANU/SC/2967/2006: (2006) 6 SCC 239
(2J), Para 25; Union of India v. Azadi Bachao Andolan MANU/SC/0784/2003: (2004)
10 SCC 1 (2J), Paras 133-136; Agricultural Market Committee v. Shalimar Chemical
Works Ltd. MANU/SC/0644/1997: (1997) 5 SCC 516 (2J).
167 BALCO Employees’ Union v. Union of India MANU/SC/0779/2001: (2002) 2 SCC
333; Air India Ltd. v. Cochin International Airport Ltd. MANU/SC/0055/2000: (2000) 2
SCC 617; WBERC v. CESC Ltd. (2002) 7 SCC 715; Cellular Operators Association of
India v. Union of India MANU/SC/1142/2002: (2003) 3 SCC 186, et al.
49
(a) In cases of economic regulators with licensing powers – for

electricity168, capital markets169 and petroleum and natural gas170,
the law vests quasi-judicial powers including dispute resolution.
(b) In cases of regulators without licensing powers – telecom regulator171,
competition172 and airports economic regulator173, the law segregates
the regulatory function from the adjudicatory function, such that the
regulator (TRAI and CCI) are not vested with adjudicatory functions –
which are vested in a statutory expert Appellate and dispute
settlement tribunal (TDSAT, CAT and AERAAT).
OVERLAPS AND CONCURRENCY

6.5 Ideally, the legal framework should clearly carve out separate legal
space for statutory authorities – competition regulators and sector
regulators. However, over the past years certain regulatory laws have
evolved which create overlaps between the domain of sector regulators
and the competition regulator (relating to licensing and competition
issues). In any event, given the domains, some level of overlap is
unavoidable. Interestingly, the Airports Economic Regulatory Authority
Act, 2008 being the latest economic regulatory enactment established a
tariff and behavioural regulator without licensing powers, vesting
adjudicatory function in the Appellate authority. Second Proviso to
Section 17(a) excludes issues related to MTP, RTP or UTP under the
168 Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory
Commissions (SERCs) constituted and functioning under Parts X and XI of the
Electricity Act, 2003 are vested with regulatory and adjudicatory powers while the
Appellate Tribunal for Electricity is purely appellate and supervisory in its functions.
169 Securities and Exchange Board of India (SEBI) constituted and functioning under Chapters II
and IV of the SEBI Act, 1992 are vested with regulatory and adjudicatory powers while the
Securities Appellate Tribunal is purely appellate and supervisory in its functions.
170 Petroleum and Natural Gas Regulatory Board constituted and functioning under
Chapters II and III of the PNGRB Act, 2006 are vested with regulatory and
adjudicatory powers while the Appellate Tribunal for Energy is purely appellate and
supervisory in its functions.
171 Telecom Regulatory Authority of India constituted and functioning under parts X and
XI of the Electricity Act, 2003 and functioning under chapters II and III of the
Telecom Regulatory Authority of India Act, 1997 (as amended in 2000 to take away
the dispute resolution function and vest the same in the Telecom Disputes Settlement
and Appellate Tribunal)
172 The CCI and the CAT as discussed in detail in chapter II above
173 The Airport Economic Regulatory Authority of India is proposed to be constituted
and shall function under chapters II and III of the Airport Economic Regulatory
Authority of India Act, 2008. In this law, the Dispute resolution function is vested in
the Airports Economic Regulatory Authority Appellate Tribunal
50
MRTP Act and those within the purview of the Competition Act from
jurisdiction of airports Appellate body.
6.6 The overlap between the CCI and Electricity regulators in
noteworthy, viz.:
(a) Competition Act, 2002174 came into effect in stages and the non-
abstante clause (Section 60) was brought into effect on 19th June,
2003 which gives CA over-riding effect over all other laws
inconsistent therewith.
(b) Electricity Act, 2003175 which was enacted and brought into effect
on 10th June, 2003 wherein Sections 174 gives EA over riding effect
over all other laws inconsistent therewith except for three laws
carved out under Section 173 (the Consumer Protection Act, 1986,
the Atomic Energy Act, 1962 and the Railways Act, 1989), while
requiring a harmonious approach with other laws (Section 175).
6.7 In this case of overlaps, there is a genuine risk of forum shopping
and delays due to the fact that Sections 66, 60, 79(1)(j), 86(1)(j),
178(2)(y) and 181(2)(zi) of EA have clear overlap on CCI domain.
174 Being introduced in the Parliament on 6th August, 2002, the Bill was passed on 31st
December, 2002 and received Presidential assent on 13th January,.2003. The CCI was
constituted on 14th October, 2003 with appointment of Chairperson and Administrative
Member. However, the appointments were challenged in Writ Petition 490 of 2003 on 31st
October, 2003 whereon, the judgement was pronounced on 20th January, 2005 cited as
Brahm Dutt v. Union of India MANU/SC/0054/2005: (2005) 2 SCC 431 leaving open all
questions regarding the validity of the CA noting that a Bill was pending to amend the law.
The basic ground for challenge was that the mechanism design was violative of the
separation of powers and independence of judiciary – since adjudicatory powers were
conferred on a non-judicial body. To meet that concern, the amendment bill provided for
constitution of the Competition Appellate Tribunal which would essentially be a judicial
body conforming to the concept of separation of judicial powers as recognised by the
Supreme Court. While disposing of the same, the Supreme Court, however, noted that “if
an expert body is to be created as submitted on behalf of the Union of India consistent
with what is said to be the international practice, it might be appropriate for the
respondents to consider the creation of two separate bodies, one with expertise that is
advisory and regulatory and the other adjudicatory. This followed up by an Appellate
body as contemplated by the proposed amendment, can go a long way in meeting the
challenge sought to be raised in this Writ Petition based on the doctrine of separation of
powers recognised by the Constitution. Any way, it is for those who are concerned with the
process of amendment to consider that aspect. It cannot be gainsaid that the Commission
as now contemplated, has a number of adjudicatory functions as well.
The Amendment was passed on 7th September, 2007 to vest adjudicatory and appellate
powers in the CAT. Some provisions have been brought into effect on 20th December, 2007.
Even today, Sections 3 to 6, 18 to 21, 25 to 33, 35, 38, 39, 41 to 48 and 66 are not in effect.
175 Being introduced in the Parliament on 30th August, 2001, the Bill was passed on 5th
May, 2003 and received Presidential assent on 26th May, 2003.
51
Recognising this issue, there was significant public consultation. Drawing

upon and adapting the international precedents of UK model of
concurrency, the 2007 Amendment (Sections 21 and 21A) to the Act lays
the foundation for a time bound referral/consultation mechanism that
evolve to resolve the issue. However, it is a mere start point. Much will
depend on the wisdom of CCI and the concerned Sector Regulators in
handling issues involving mixed questions of sector regulation and
competition/anti-competitive behaviour.
INTERNATIONAL PRECEDENTS AND THEIR APPLICABILITY TO INDIA
6.8 Foreign Court precedents may be referred to in Indian Courts on the

basis of certain principles set out below. As the Act is a new legislation and
is yet to be made operational, as such no Indian Court precedents on this
Act exist. It may be noted that the jurisprudence established under the
MRTP Act and precedents there-under are likely to be of limited assistance
as the concepts under the MRTP Act are very different from those under
the Act. Therefore, in the evolution and development of Indian law on the
subject, it could be expected that references will be made and reliance
placed upon on precedents from other jurisdictions where the laws are
akin to the Act. In this respect, the Supreme Court of India has recognised
the following principles:-
(a) Where there are no decisions of Indian High Courts or Supreme
Court then interpretation of foreign Court on provision pari materia with
our statutory provision will be persuasive and relevant.176 Indian Court will
adjust and adapt, limit or extend, the principles derived from foreign
decisions, suiting the conditions of our society and the country177; context
of Indian laws, legal procedure and practical realities of litigation in
India.178
(b) Supreme Court is not bound by foreign (American) Court decisions
and those decisions have only persuasive value – but the Court can
borrow the principles laid down in foreign decisions, if the same are in
176 Sterling General Insurance Co. Ltd. v. Planters Airways (P) Ltd.
MANU/SC/0004/1974: (1975) 1 SCC 603
177 Hind Overseas (P) Ltd. v. Raghunath Prasad Jhunjhunwalla MANU/SC/0050/1975:
(1976) 3 SCC 359
178 American Home Products Corpn. v. Mac Laboratories (P) Ltd.
MANU/SC/0204/1985: (1986) 1 SCC 465; Forasol v. ONGC MANU/SC/0034/1983:
1984 Supp (1) SCC 263
52
consonance with Indian law keeping in view the changing global

scenario.179
(c) When a legislature in India enacts a statute which closely resemble
similar statute in England and both have the same purpose and object in
view, then unless the expressions used in the Indian Statute is are defined,
Courts of law cannot go wrong in interpreting the provisions in the way
English Judges have done .180
MERGER CONTROL REGULATIONS AND CLAW-BACK VERSUS PERVERSE

INCENTIVE
6.9 It is noteworthy, that the Act limits the powers of the Commission to
look into the combinations after the expiry of the one year from the date
on which such combination has taken effect. The proviso to Section 20 of
the Act provides “Provided that the Commission shall not initiate any
inquiry under this sub-section after the expiry of one year from the date
on which such combination has taken effect181'.
6.10 As such:-
(a) Proviso to Section 20(1) has to be interpreted in terms of the
thresholds provided under Sections 5(a), (b) and (c). The Act does not
provide for retrospective operation, in regard to such combinations which
had been entered into prior to the coming into force of the Act.
(b) Section 20 provides for enquiry into whether the combination “has
caused or is likely to cause appreciable adverse effect of competition”. As
such, there is an ambiguous situation created by Section 20 which may
lead to conflicting judicial interpretations in light of the legislative intent
and language of Section 20 regarding a combination entered into prior to
the coming into effect of the Act, which may seem to have caused an
appreciable adverse effect on competition. If the Commission does not get
to know about the combination within one year, it appears that the
Commission would not be able to look into the same.182
179 Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I MANU/SC/0951/2003:
(2004) 9 SCC 512
180 Godhara Borough Municipality v. Godhara Electricity Co. Ltd.
MANU/SC/0134/1968: AIR 1968 SC 1504
181 In other words, an enquiry may be instituted only on the combination comes to the
knowledge/information of the Commission within one year of its coming into “combination”.
182 Though the provision has been a statute book for six years, the language of proviso to
Section 20(1) does not provide for such retrospective operation of the thresholds levels
under Section 5. It is a settled principle of interpretation of statute that, the provisions
which touch a right in existence at the time of passing of statute are not to be applied
retrospectively in the absence of express enactment or necessary intendment. Further,
53
6.11 In this context, it remains to be seen how this provision will be

interpreted and implemented by the statutory authorities and Courts of law.
This is particularly so because, prima facie, the escape route if accepted
would result in setting into motion a perverse incentive in favour of defaulters
qua disclosure/reporting requirement, which threatens to frustrate the law.
183
DRAFT REGULATIONS OF THE COMPETITION COMMISSION OF INDIA
6.12 The Draft Regulations of the Commission being issued in terms of

the Act184 attempt to provide the detailed procedure that the Commission
intends to follow while implementing various provisions of the Act. It has
so far drafted seven Regulations.185 The draft Regulations provide for the
procedure to be adopted by CCI in exercise of its functions and powers.
The procedure shown reflects a transparent process consistent with the
principles of natural justice as enshrined in the law.186
6.13 It is noteworthy, that at present the Commission is currently
engaged in reviewing the present version of the draft Regulations with a
view to finalise and issue the same. In this context, it is hoped some of the
issues pointed out below will be addressed in the process of finalizing the
draft Regulations.
187
REGULATIONS OF COMBINATIONS
6.14 The Regulations relating to Combinations shall have significant

bearing on economic enterprise, cross-border and international transactions
as also the Indian economy. As a base-line principle, combinations must
enhance economic efficiencies and consumer welfare, and not result in
abuse of dominance or adverse effect on competition in the relevant
market. In the above context, it is imperative that the maximum possible
transparency be provided in the Regulations, in particular governing:
(a) The considerations and bench marks for time-bound automatic
approval (in say 30 days of filing);
unless clear and unambiguous intention is indicated by the Legislature by adopting

suitable express words in that behalf, no provision of a statute should be given
retrospective operation if by such operation vested rights are likely to be affected.
183 Please refer to paragraphs 2.22, 3.37 4.16 and 5.24 above.
184 Section 64 of the CA
185 Being drafts of Regulations framed by the Competition Commission of India dealing
with (a) Calling upon Experts to Assist in Conduct of Inquiry; (b) Procedure for
Engaging of Experts and other Professionals; (c) General; (d) Lesser Penalty; (e)
Combinations; (f) Determination of Cost of Productions; and (g) Meeting for
Transaction of Business.
186 Section 36(1) of the CA
187 Section 6(2A) of the CA
54
(b) The process (timelines and milestones) to be followed in the event

that a filing is found to not meet the time-bound automatic approval
requirements;
(c) The nature of conditions that shall be attached in terms of compliances
and disclosure requirements pre-approval and post-approval;
(d) A process for facilitation for the applicants/potential Applicants like a fast
track consultation prior to the filing and during the approval process;
(e) Tests and benchmarks specifically setting out treatment for non-
compliant filings or non-disclosure including the impact on Proviso
to Section 20(1);
(f) The CCI on being satisfied that a valid notification has been filed as
per relevant provisions of the Regulations, may inform in writing the
notifying entities about the exact Waiting Period. For example, if a
notification has been examined and found to be valid by the
Commission on 1st May, 2009 then the Commission may inform the
parties that the 210th day shall expire on 26th November, 2009 –
provided that the parties notifying as well as the DG or other officers
of the Commission do not pray for additional time;
(g) The express provision of granting from 45 days up to 105 days in
Clause 31 to the investigating officer of the CCI may be replaced by
“reasonable time as the Commission may allow from time to time
not exceeding 45 calendar days” and bring it at par with the intents
and purposes of Clause 18 of the Regulations; and
(h) Parameters or norms for allowing extra time should be spelt out.
6.15 In the above context, it is noteworthy that :
(a) By the 2007 amendments the ceiling of the waiting period for
combinations/merger control has been enhanced from 90 working
days to 210 days. The intention appeared to be to give certainty to
the period by covering calendar days.
(b) Yet, Clause 21 of the concerned Draft Regulations, it appears that
the CCI is continuing to use the pre-amended phrase i.e. “working
days”. Consequently, this would inflate the outer limit further as that
would mean 42 weeks in a 5-day working week scenario or 294
calendar days of Waiting Period.188
(c) Clause 18 of the concerned Draft Regulations contemplates that the
waiting period may also be enlarged with the consent of parties
which may be reasonable.
(d) Under clause 32 of the concerned Draft Regulations, the DG can
seek additional time to submit report – the DG has specifically been
188 Clauses 18, 21 and 31 of the Regulations on Combinations
55
provided with additional time from 45 days to 105 working days to

submit report which ranges between 9 to 21 weeks.
(e) As such, in the event that all requests for additional time made by
parties and the DG are allowed by the CCI, a notification of merger
found to be valid by the Commission may go well beyond one and a
half years (42 weeks + 21 weeks + additional time that parties take +
gazetted holidays). This would be contrary to the legislative intent
underlying Sections 6(2A) and 31 (11) of the Act. To illustrate the point,
in the current calendar year 2009, there are 17 government holidays
and 104 Saturdays and Sundays. Therefore, the total working days
available in the whole year are 244 days and in this real time scenario
the 210 working days would mean about 11 months’ of Waiting Period
without any grant of extra time to the parties or the investigating officer
of the CCI.
(f) The Draft Regulations have stipulated two alternate forms for filing
under Section 6(2) of the Act. However, there is lack of clarity as to the
treatment (and the difference) of the filings made in the two forms.
6.16 Section 26 of the Act empowers189 CCI to refer matters that come
within the mischief of Sections 3 and/or 4 to the DG to cause an
investigation into the matter and file a report in the event that the CCI has
arrived at a “prima facie” view in that behalf. In terms of Section 29 (1A)
of the Act the CCI may call for a report from the DG.
6.17 It appears that the legislature intended to cause a detailed
investigation by the DG post-formation of prima facie view by the CCI for
breach of Sections 3 and/or 4. This is also because both sections talk
about “ex post facto” breaches and require to be proceeded under quasi-
judicial adjudicatory processes. The captions of Sections 3 and 4 under
Chapter II of the Act also say so which are “prohibition of agreements”
and “prohibition of abuse of dominant position” respectively. Whereas,
the caption above Section 5 indicates the intention of legislation, which is
“regulation of combinations”; hence, processes are “ex ante”. However, it
is noteworthy that:
(a) With the use of the word “may” in Section 29(1A) the CCI may call
for a report from the DG or from some other officers of the
Commission (other than the DG) depending on the complexity of
the transaction and expertise required to investigate such
transactions. This variation between Sections 26(1) and 29(1A),
does not get reflected in the draft Regulations (especially clause 31)
189 Section 26(1) mandates CCI to “… direct the DG to cause an investigation to be

made into the matter”.
56
when it requires that the Secretary under orders of the CCI shall
convey to the DG to submit a report. As such, the difference
between Sections 26(1) and 29(1A) does not get reflected.
(b) If DG alone is given all investigating duties – i.e. Sections 3 to 6 then
he would be so over-burdened that praying additional time in cases
of combinations would become routine instead of an “exception”.
(c) In this respect, we believe that the DG or any other officer (other
than the DG) should also be included in Clause 31 of the
Regulations and such other officer (Advisor Economics or Advisor
Law etc.) should also be able to submit the report to the CCI. The
DG is the investigating arm of the Commission for contravention of
any provision of the Act, as per Section 41(1). Ex ante regulatory
investigation of notification of combinations is not ex post
contravention of the law, as such mandatory investigation by the
DG may not send positive signal to the industry besides
contravening the intention of the legislation.
CONFIDENTIALITY AND DATA PROTECTION
6.18 It is imminently desirable that the draft Regulations (General or

Transaction of Business) be evolved with certain standards of data
protection qua the filings and disclosure made by parties to the CCI which
inherently may include matters of significant commercial secrets and
confidential information. To induce corporate entities to part with their
commercial secrets and encourage compliance, it would be imperative
that the Regulations include:
(a) Process-mapping with data protection responsibility and disclosure
norms at all stages of human interface and CCI record maintenance.
This should cover all stages from the filing counter / electronic
document receipt to the process ending with closure of a case.
(b) The underlying principles that govern all proceedings must be able
to strike a balance between two apparently conflicting issues:
(i) The normal judicial authority perspective that it is a court of
record and that transparency requires disclosure of all filings and
proceedings to the parties concerned as also the public at large.
(ii) The need to protect any significant commercial secrets and confi-
dential information filed by a compliant and law abiding entity.
IPRs UNDER THE COMPETITION ACT
6.19 The Competition Act does not prima facie put any restriction to use
and enforce such IPRs through agreements containing reasonable condi-
tions, but the section 4 to 6 build in safeguards against abuse of dominance
57
and errant combinations. This must be borne in mind for all technology and
other joint ventures/commercial arrangements involving IPRs including
patents. Often patentees, Indian and overseas included, do not manufacture
products (drugs and pharmaceutical) directly in India but do so through
licence agreements with Indian counterparts. The terms of such licence
agreements may contain unreasonable restrictions, like restrictions to
manufacture the patented product beyond the expiry of the Patent thereby–
(a) causing serious barriers to exit, and/or
(b) prohibiting the Indian manufacturer to innovate and market cheaper
but equally effective generic drugs.
In these circumstances, the licensee is further inconvenienced by the fact
that many competing manufacturers who are capable of manufacturing
similar and substitutable products beyond the expiry of a Patent and not
having Licence Agreements would by then produce cheaper varieties of
the same/similar products and distorting level-playing field for the licencee,
who has invested substantial efforts and capital in the venture. These and
similar other conditions in the agreement may cause harmful effects on
competition in the market, economy of the country and affect the interests
of the consumers.
6.20 Under the IPR laws (including the Patents Act) there are reasonable
built-in checks and balances provided to prevent misuse of the
monopolies such as ‘compulsory licensing’, ‘revocation of patents’ etc.
The Courts tend to dilute the monopoly rights by refusing to grant interim
injunctions for infringement of patents if the patents are of recent origin
and relate to life-saving drugs which are not manufactured in India but
imported and sold at exorbitant prices.
6.21 In Europe, the principles of exhaustion of trade mark rights are
applied to prohibit the importation of genuine trade-marked products
provided the imports are being made from outside Europe, whereas the free
movement of such goods within the European Union is exempted from
infringement claims. The application of these principles has acted as source
of anti-competitive monopolies to the exclusion of even genuine grey
market imports. In India, the Trade Marks Act, exempts from infringement
claims any dealings in a genuine product where such goods are lawfully
acquired by a person. However, this exemption is not available if there
exists legitimate reasons for the proprietor to oppose further dealings in the
goods in particular where the condition of the goods has been changed or
impaired after they have been put on the market.
——————————
58
Firm Profile
J. Sagar Associates (“JSA”) is a leading national law firm with over 160 lawyers
including 26 partners based in New Delhi, Gurgaon, Mumbai, Bangalore and
Hyderabad. For almost two decades we have provided legal advice and services
to international and domestic clients.
Our mission is to provide outstanding legal solutions in our chosen practice
areas with a strong emphasis on ethics. Our clients benefit from our expertise
and experience as a large firm while still enjoying the privilege of personal
attention and responsiveness of a small firm.
Our advice is delivered by well informed, accessible, partner-led teams who
strive to provide the highest quality of service to our clients, by listening,
understanding their needs, responding promptly and living up to the commitments
that we make. We use plain English to communicate verbally and in our
documentation.
JSA’s practice extends across diverse sectors of industry and services such as
consumer and industrial products, consumer durables, financial services and
banking, energy and transportation. We understand and appreciate the different
challenges that our clients face in the current business environment as a result of
technological change, evolving government regulation and competitive pressures
in the marketplace. We provide a diverse set of legal services to our clients and
assist them to meet these challenges successfully.
Our practice areas are Corporate & Commercial, Banking & Finance, Capital Markets
& Securities, Regulatory & Policy, Indirect Tax, Dispute Resolution and Employment.
Our sectors include Energy (Power, Oil & Gas), Mining, Hospitality & Leisure,
Education, Asset Management & Financial Institutions, Transportation (Highways,
Metro rail, Ports & Airports), Real Estate, Knowledge Based Industry (IT / ITES / Life
Sciences), Media / Entertainment / Sports, Communications (Telecom & Broadcasting),
Municipal & Developmental Infrastructure, Retail & Franchising, Construction &
Engineering, Insurance and Defence & Internal Security.
We have recently been awarded as the “Top Three Indian Law Firms” and as the
“Best Employer in Indian Law Firms” by the first annual Rainmaker Law Firm
Survey 2008.
“JSA is clearly one of As “a dynamic firm “favorite referral “Opened in 1991, this
the star performers of with a modern partner of several UK relatively new firm is
recent years... It can outlook” which has and US firms for its already regarded by
now justifiably claim a “gone on a push to transparent partnership many in the field as a
place as one of the challenge India’s old and intelligent sector mature firm.... many
country’s three leading guard firms” focus” appreciate its
corporate firms” responsiveness and
attentiveness”
The Asia Pacific Legal 500 Chambers Global The Asia Pacific Legal 500 IFLR 1000
Regulatory & Policy Practice Group
Contacts
NEW DELHI
Mr. Amit Kapur

Partner
e-mail: amit@jsalaw.com
Phone: +91-11-4311 0630
Mr. Manas Kumar Chaudhuri

Head, Competition Law & Policy
e-mail: manas@jsalaw.com
Phone: +91-11-4311 0648
Mr. Mansoor Ali Shoket

Partner
e-mail: mansoor@jsalaw.com
Phone: +91-11-4311 0670
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Partner
e-mail: anupam@jsalaw.com
Phone: +91-11-4311 0626
MUMBAI
Mr. Farhad Sorabjee

Partner
e-mail: farhad@jsalaw.com
Phone: +91-22-4341 8502
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Partner
e-mail: abeezar@jsalaw.com
Phone: +91-22-4341 1503
Mr. Amitabh Sharma

Partner
e-mail: amitabh@jsalaw.com
Phone: +91-22-4341 1508
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Mr. Venkatesh Raman Prasad

Partner
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Phone: +91-124-4390 653
Mr. Vishnu Sudarsan

Partner
e-mail: vishnu@jsalaw.com
Phone: +91-124-4390 677
Mr. S P Purwar
Head – Telecom Practice
e-mail: purwar@jsalaw.com
Phone: +91-124-4390 678
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Competition Act, 2002

B-37, Sector 1, Noida-201301, U.P.

Ahmedabad Allahabad Bangalore Chandigarh Chennai

First Published 2009

All rights reserved. No part of this publication may be reproduced or transmitted

Not for sale. For free distribution only.

Our New Launch – Desktop Alert

The Position Paper endeavours to highlight certain legal issues and

We hope that we are able to keep our readers well informed by

1. Competition Regulation in India: Context and History....................1

ECONOMIC RAISON D’ETRE AND CONTEXT OF COMPETITION

1.1 It is useful to understand economics as a discipline is fundamentally

1.5 In this construct, it is the mandate of a democratically elected

combinations for each product and geographical market, choosing

CONSTITUTIONAL RAISON D’ETRE AND CONTEXT FOR COMPETITION

1.9 In this context, the Constitution of India provides for:

2 Rule of reason regimes are characterised by proportionality and reasonableness

institutional innovation4 with significant structural challenges since it

Evolution of Governing Framework

1.13 The Government of India appointed Mahalanobis Committee on

14 October, 2003.8 However, before the Chairperson could enter office,

COMPETITION COMMISSION OF INDIA (CCI)

2.1 Objectives. In context of the needs of economic development of

law, finance, accountancy, management, industry, public affairs or

13 Sections 11(2) and (3)

EXECUTION OF THE ORDERS OF COMMISSION AND THE PENALTY FOR

2.14 In case of non-compliance of the Orders of the Commission, the

2.16 While passing orders in respect of cartels, the Commission is vested

(a) Such producer, seller, distributor, trader or service provider included

2.19 It is noteworthy the jurisdiction of the Civil Courts to entertain any

13; and (d) Meghalaya State Electricity Board v. Jagadendra Arjun

2.22 The Act casts an obligation upon the Central Government53 to

have been suffered. There has to be a claim by way of an application

58 The enquiry is limited to the determination the eligibility and quantum of

(b) Agreement to limit production, supply, markets, technical

3.5 The Act frowns upon Vertical Agreements,80 which are:

80 Section 3(4) (a) to (c)

(f) Promotion of technical, scientific and economic development by

3.12 The CCI upon receipt of reference or its own knowledge or

ORDERS THAT CCI CAN PASS

3.14 After CCI, it finally comes to the conclusion that there is an

3.15 The CCI has jurisdiction and is empowered to pass ex parte

3.16 Notwithstanding that an agreement has been entered into outside

3.17 While passing Orders in respect of cartels, CCI is empowered to

96 Sections 3, 19, 26, 27, 33, 46

Commission shall presume causation of appreciable adverse effect on

98 Section 3(3) – Any agreement entered into between enterprises or associations of

3.27 Failure to comply with the aforesaid penalty shall be punishable

106 Section 42 – Chapter VI

mentioned that in connection with old Sub-section 1 of Section 33 in the

We have gone through voluminous records and pleadings

115 TELCO v. Registrar of the Restrictive Trade Agreement MANU/SC/0254/1977:

down such malpractices, the generation cost of electricity is bound to go

117 Section 2(c) of the Competition Act, 2002

4.1 Dominant position held by an enterprise or a group per se is not

118 Section 4 (1)

(f) Dependence of the consumers on the enterprise;

ABUSE OF DOMINANT POSITION

4.4 The Act enumerates the following practices which if found to be

123 Section 4(2)

restraining infringements), section 4 does not contain such a gateway in

ORDERS THAT COMMISSION CAN PASS