The Competition Act, 2002

What it does

The Act replaced the Monopolies and Restrictive Trade Practices Act, 1969 and asks a different question. The older statute asked how large an enterprise had become. This one asks what an enterprise did and what effect it had on competition in India. It does three things: it prohibits agreements that cause an appreciable adverse effect on competition, it prohibits the abuse of a dominant position, and it requires transactions above defined thresholds to be notified to the Competition Commission of India and cleared before they take effect.

The three limbs work differently and are often confused. The first two are conduct provisions, enforced after the fact, on an information filed by any person or on the Commission's own motion. The third is a filing regime, enforced before the fact, and a transaction caught by it cannot close until it is cleared or the statutory period runs out. Size alone breaks nothing. Being dominant is not an offence; abusing the position is.

Agreements

Section 3 draws a line between two kinds of agreement, and the line decides how the case runs.

A horizontal agreement is one between enterprises at the same level of the production chain, dealing in identical or similar goods or services. Where such an agreement fixes prices, limits output or supply, shares a market or a source of supply, or rigs a bid, the Act presumes the appreciable adverse effect. The presumption is rebuttable, and in practice the contest is about whether the agreement existed and whether the parties are at the same level, not about the effect. The 2023 amendment added that an enterprise which is not in the same market may still be caught where it participates in or intends to participate in the furtherance of such an agreement, which brings the hub of a hub and spoke arrangement inside the presumption.

A vertical agreement is one between enterprises at different levels: tie-in arrangements, exclusive supply, exclusive distribution, refusal to deal, resale price maintenance. There is no presumption. The Commission weighs the factors the Act lists, and an agreement is prohibited only where the adverse effect is shown. Much of the ordinary commercial agreement sits here, which is why the distinction matters at the drafting stage rather than at the enforcement one.

Dominance

Section 4 prohibits abuse. Dominance is a position of strength in the relevant market in India that lets an enterprise operate independently of competitive forces or affect competitors, consumers or the relevant market in its favour. The relevant market is defined first, by product and by geography, and the definition often decides the case before the conduct is examined.

The prohibited conduct is listed: imposing unfair or discriminatory conditions or prices, including predatory pricing; limiting production, markets or technical development to the prejudice of consumers; denying market access; making a contract subject to unconnected supplementary obligations; and using a position in one market to enter or protect another. The 2023 amendment extended the provision to a group or to two or more enterprises in a dominant position together, which matters where market power sits across companies under common control rather than in one of them.

Combinations

Sections 5 and 6 are the filing regime. An acquisition of shares, voting rights, assets or control, a merger or an amalgamation is a combination where it crosses the thresholds, and a combination must be notified and may not take effect until the Commission has cleared it or the statutory period has run. The thresholds are set on assets and turnover, at the level of the parties and at the level of the group, with Indian and worldwide tests, and the values are revised by notification rather than by amendment.

Two changes from 2023 matter to how transactions are planned. A deal value threshold was added: a transaction whose value exceeds the prescribed amount is notifiable where the target has substantial business operations in India, which catches acquisitions of companies with users and no revenue. And the review period was shortened, so a combination takes effect if the Commission has not passed an order within the period the Act now sets. Against that, the consequence of getting it wrong was not softened: closing a notifiable transaction before clearance is gun jumping, and it carries a penalty measured on the transaction, separately from anything the Commission may say about the merits.

Enforcement, settlement and the way out

The Commission investigates through the Director General, who has powers of search and seizure, and decides. Where a contravention is found the Commission may order the conduct to stop, modify an agreement, impose a penalty, and in the case of a dominant enterprise direct division. The 2023 amendment changed the base on which a penalty is calculated to global turnover derived from all products and services, which raises the exposure of a multinational group well above what the Indian turnover of the affected business would suggest.

Three routes out exist and each is confined. A party to a cartel may apply for a lesser penalty by disclosing it, and the reduction depends on the order of the applications and the value of what is disclosed; the amendment added a further reduction for an applicant who discloses a second cartel. Settlement and commitment, both introduced in 2023, are available in abuse of dominance and vertical agreement cases and are not available to a cartel: a commitment is offered before the investigation report, a settlement after it, and neither is an admission that binds in a damages claim unless the order says so.

An appeal lies to the National Company Law Appellate Tribunal, and from it to the Supreme Court of India. An appeal against a penalty is conditional on a deposit of part of the penalty, so the question of whether to appeal is partly a cash question answered at the start.

What turns on it in practice

For an operating business the Act is felt in three places. In distribution agreements, where exclusivity and resale pricing are the clauses that attract attention, and where the record of why a restriction exists is worth keeping from the day it is agreed. In trade association meetings and industry data exchanges, which is where the agreement the Act presumes against is most often formed without anyone intending to form one. And in a transaction, where the filing question is asked at the term sheet, because the answer changes the timetable, the conditions precedent and who carries the risk of a delay.