The Competition Act, 2002: Anti-Competitive Agreements and Abuse of Dominance

The Competition Act, 2002 controls business conduct through two main prohibitions. Section 3 makes void any agreement that causes or is likely to cause an appreciable adverse effect on competition within India, and Section 4 says no enterprise or group shall abuse its dominant position. Being big is not illegal; colluding with rivals or misusing market power is, and the Competition Commission of India (CCI) enforces both rules.

This explainer is written for B.A. LL.B. and LL.B. students preparing for competition law papers, and for anyone who wants to know why a regulator can fine a technology company or a group of cement makers. It follows the Act as amended by the Competition (Amendment) Act, 2023. Competition law is not criminal law, so the BNS, BNSS and BSA do not change the rules discussed here.

What does Section 3 prohibit?

Section 3(1) bars any enterprise, person or association from entering into an agreement about production, supply, distribution, storage, acquisition or control of goods or services that causes or is likely to cause an appreciable adverse effect on competition (AAEC) within India. Section 3(2) declares such an agreement void. "Agreement" is read widely: it need not be written, and the CCI treats any arrangement, understanding or concerted action as enough.

Students should split Section 3 into two parts.

• Horizontal agreements (Section 3(3)): between enterprises in identical or similar trade. Agreements that directly or indirectly fix prices, limit production or supply, share markets, or result in bid rigging or collusive bidding are presumed to have an AAEC. Cartels fall here. The presumption is rebuttable, but the burden shifts to the parties.
• Vertical agreements (Section 3(4)): between enterprises at different stages of the supply chain, such as tie-in arrangements, exclusive supply or distribution, refusal to deal and resale price maintenance. These are not presumed harmful. They breach Section 3(1) only if they actually cause or are likely to cause an AAEC.

Section 3(5) protects reasonable conditions imposed to protect intellectual property rights, though the CCI looks at whether the conditions are in fact reasonable and necessary.

What changed in 2023?

The Competition (Amendment) Act, 2023 (Act 9 of 2023) made several changes that examiners now expect you to know.

• Hub and spoke cartels: a new proviso to Section 3(3) says an enterprise or person not engaged in identical or similar trade shall also be presumed to be part of the agreement if it participates or intends to participate in furthering it. Think of a distributor or platform that coordinates prices between competing sellers.
• Global turnover: Explanation 2 to Section 27 now defines turnover as global turnover derived from all products and services of the person or enterprise, not just Indian turnover in the affected product.
• Settlement and commitment: new Sections 48A and 48B let an enterprise close a case early. A commitment offer comes after the CCI's Section 26(1) order and before the Director General's report reaches the party. A settlement application comes after the DG report and before a final order. No appeal lies under Section 53B against either kind of order.

Some of these provisions were brought into force in stages through notifications, so check the CCI website for the current position before citing a commencement date.

When does Section 4 apply?

Section 4 works in three steps, and a good answer follows them in order.

1. Define the relevant market. Identify the product market and the geographic market.
2. Find dominance. The Explanation to Section 4 defines a dominant position as a position of strength, enjoyed by an enterprise in the relevant market in India, that lets it operate independently of competitive forces or affect competitors or consumers in its favour. Section 19(4) lists factors the CCI considers, including market share and entry barriers such as regulatory barriers.
3. Identify abuse under Section 4(2). The listed abuses are: imposing unfair or discriminatory conditions or prices (including predatory price), limiting production, markets or technical development, denying market access, making contracts conditional on unconnected obligations, and using dominance in one market to enter or protect another.

Predatory price is defined as selling goods or services below cost, as determined by regulations, with a view to reduce competition or eliminate competitors. Unlike Section 3, there is no AAEC test written into Section 4: if dominance and a listed abuse are proved, the contravention is made out.

What penalties can the CCI impose?

Under Section 27, after an inquiry the CCI can order the parties to stop the conduct and can impose a penalty of up to ten per cent of the average turnover or income for the last three preceding financial years. For cartels, the proviso to Section 27(b) allows up to three times the profit for each year the agreement continued, or ten per cent of turnover for each such year, whichever is higher. With the 2023 global turnover rule, these ceilings have become much larger for multinational groups.

A well known example: on 20 October 2022 the CCI imposed a penalty of Rs. 1337.76 crore on Google for anti-competitive practices relating to Android mobile devices (CCI Press Release No. 55/2022-23). It is a useful Section 4 illustration of tying and of using strength in one market to protect another. Check the current appellate status before you cite the outcome.

Where do appeals go?

Appeals against CCI orders go to the National Company Law Appellate Tribunal (NCLAT). The NCLAT states that it took over this jurisdiction with effect from 26 May 2017, through Section 172 of the Finance Act, 2017. Under Section 53B, an appeal must be filed within sixty days of receiving the CCI's order, and late appeals may be admitted for sufficient cause. A party ordered to pay a penalty must deposit twenty five per cent of it before the appeal is entertained, and the tribunal is to try to dispose of the appeal within six months. A further appeal lies to the Supreme Court.

How should you write about this in an exam?

• Quote the test first. For Section 3 problems, ask whether the parties are horizontal or vertical before deciding if the presumption applies.
• Use Section 19(3) factors for AAEC: barriers to new entrants, driving existing competitors out, foreclosure, and benefits or harm to consumers.
• Keep dominance and abuse separate. A common mistake is to treat a high market share as an offence.
• Bring in the 2023 changes (hub and spoke proviso, global turnover, settlement and commitment). Many answer scripts still describe the pre-2023 Act.
• Use a local example. If five bus operators running the Nagercoil to Chennai route agree on one ticket price for festival weekends, that is a horizontal price fixing agreement presumed to cause an AAEC under Section 3(3)(a).

Competition law sits alongside company law and consumer law in the LL.B. syllabus; see our programmes page for where it is taught.

Sources

• The Competition Act, 2002 (Indian Kanoon): consolidated text including the 2023 amendments, Sections 3, 4, 19, 27, 48A, 48B and 53B.
• Competition Commission of India: Antitrust: the CCI's own explanation of anti-competitive agreements and abuse of dominance.
• Competition Commission of India: The Act: history of the Act and its amendments, including the 2023 Amendment Act.
• PRS Legislative Research: Competition (Amendment) Bill, 2022: summary of the 2023 changes and their passage through Parliament.
• National Company Law Appellate Tribunal: About: NCLAT jurisdiction over appeals from CCI orders since 26 May 2017.
• CCI Press Release No. 55/2022-23: penalty of Rs. 1337.76 crore on Google relating to Android mobile devices.