Competition as we know and understand is about prevailing determinant of a company’s market condition and involving the concept of law makes the statement more stern as the term law would certainly impose certain obligatory duties to be met by the competitors. In different nations Competition Law is defined with different term as we can recall in United States it is known as Anti – Trust Law, in China and Russia it is known as Anti – Monopoly Law and in the previous days in United Kingdom and Australia it was known as Practice law.
Competition law is directed through public or private enforcement and is implemented to promote lawful objectives in a market in order to maintain market competition by regulating anti competitive conduct by the companies.
Elements of Competition Law
|(a)||Prohibition of all unfair trade practices becoming an impediment in the smooth flow of trade and restricting free trade practices and competition between organizations. It also directs and aims towards Elimination or Suppression of Cartels.|
|(b)||Monitoring the mergers and Acquisitions of firms and avoiding all such mergers and acquisitions which tend to focus towards generation of a dominant position or creation of monopolistic market. Transactions that tends to threaten the competitive process of the market must be supervised and if deem necessary must be prohibited altogether.|
|(c)||Provisions to support the smooth functioning of a competitive market such as “remedies” to businesses suffered due to ill practices of another organization or offering of licenses or access to the facilities to enable other businesses to continue in the market.|
|(d)||Controlling of practices which may include predatory pricing, tying, price gouging, refusal to deal and many others.|
Conduct of Unethical practices in Competition Law
Unethical Practices are also known as a Bane of free trade in a market under competition law.
Some of the unethical practices followed by the organizations are as follows :
|(a)||Predatory Pricing : another name for predatory pricing is undercutting which means setting up of pricing strategy in which a product will be priced very low with the intention to drive competitors out of competition and also to any new entry of competition in the market.
Under such market practice potential competitors will no longer sustain to such equal or lower prices without losing money, either they will walk out of business or suffer humongous losses and will ultimately face financial difficulties.
This pricing strategy is considered illegal in competition laws and hence falls under the category of Barrier to free trade.
|(b)||Tying : Tying is basically when one product is tied with another product hence it becomes mandatory for a customer to purchase both the product at the same time even though there is no need for the second product. This practice is generally considered illegal under competition law when products are not naturally related.|
|(c)||Price Gouging : It is a term used when the seller spikes the prices of the goods, services or commodities to such an extent that it becom es a repugnant practice under competition laws and is considered to be exploitative potentially to an unethical extent. Generally this practice is seen after a supply or demand shock.|
|(d)||Refusal to deal : Every business has a right to decide with whom they wish to deal but in certain situation it becomes an illegal practice, unlawful or unethical. This unlawful behavior may involve a particular company or group of companies refuse to deal with a particular competitor or business which is also termed as “group boycott”.|
Provisions Pertaining to Competition Act, 2002
In India Provisions implemented for the protection of organizations under competition Act are defined in the Competition Act, 2002 i.e (Section 3 and Section 4)
1. Enforcement Provisions :
Section 3 which defined “Anti Competitive Agreements”
Prohibition of horizontal Agreements between competitors concerning production, supply, distribution, storage, acquisition, or control of goods or provision of services which in future or current situation may affect the market conditions adversely within India. It also includes prohibition of Agreements between competitors that involves price fixation and technological innovation. Such Agreements are illegal and unethical and will be a breach to Competition Act, 2002.
Vertical Agreements such as tying, refusal to deal and fixation of minimum resale price are also prohibited as such Agreements cause an adverse effect in the market competition which is also termed as AAEC (Appreciable Adverse Effect on Competition).
Under Competition Act, Section 4 defines “Abuse of Dominant Position”
Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market, in India which enables organization or organizations to: -
- (a) Operate independently of competitive forces;
- (b) Affect the consumers and competitors which will yield favorable outcomes;
Prohibition of any organization or group of organizations under competition law making use of its dominant or monopolistic position. Use of any position will deemed to be unethical if it involves practices limiting or restriction other competitive firms or its production of goods or services, any practice leading to denial of market access, predatory pricing, refuse to deal, engagement in practices leading to reduction in competition or elimination of competitors.
2. Procedures and Penalties Prescribed Under Competition Act
Competition Act, 2002 laid down the Procedure for inquiry in case of complaint and Punishments in case of abuse of Dominant Position i.e. u/s (19,26 and 27)
Section 26 of Competition Act defines “Procedure for inquiry on complaints under section 19”
As per the notification / receipt of the State Government, Central government or statutory authority or on its own knowledge i.e. the commission under Section 19 of Competition Act which defines “Inquiry into certain agreements and dominant position of enterprise” believes there to be a fit case of contravention to competition act prima facie will initiate a proceeding by directing the Director General to raise an investigation into the matter and the procedures for trajectory of an investigation are prescribed under Section 26.
Competition Act provides only for civil consequences for breach of its provisions. U/S 27 of the Competition Act penalties have been laid down in case of contravention or infringement of section 3 and 4 and also in situations where rules and orders of the commission have not been followed.
3. Personal Liability Under Competition Act
Section 48 of the Competition Act defines “Contravention by Companies” which provides for the potential liability for the individuals actively or passively concerned for such conduct of the organization which lead to contravention of the Competition Act.
Meaning of “company” includes a firm/ body corporate or other association of individuals;
“Director” means the partner in the firm.
Provided person cannot held not to be liable unless that person substantiates such activity of contravention was committed completely without his knowledge or he attempted all possible preventions in order to circumvent such outcome.
Notwithstanding, such act of connivance in the knowledge or without the consent on part of any director, manager, secretary or any officer of the company, such director, manager or secretary or other official shall be deemed guilty of such act and any proceedings may be undertaken against him.
Directors, managers, supervisors and other officials may also face disqualification on part of their involvement in contravention to competition Act under Schedule V of the Companies Act, 2013.
4. Third Party liabilities
Section 53N under competition law defines “Awarding Compensation”
A part from complete disqualification and other sanctions that can be imposed on company or concerned individuals in is also pertinent to note that the aggrieved party may impose compensation claim as per the provisions under section 53N of Competition Act. Any application can be made to the Appellate Tribunal for compensation by the aggrieved party that may arise on the findings of the commission, or the orders of the Appellate Tribunal in an appeal against finding of the commission or under section 42A or under sub section (2) of section 53Q of the Act.
Order 8 rule 1 of Civil Procedure Code, 1908 can be invoked in situations where one or more than one person having same interest and have suffered a loss under 53N sub section (1) due to contravention of Competition Act . Aggrieved party/parties may with the permission of Appellate Tribunal make an application under the provisions or CPC, 1908 order 8 rule 1 which shall apply subject to the modifications that every reference therein to a suit or decree shall be construed as a reference to the application before the Appellate Tribunal and the order of Appellate Tribunal thereon.