The Competition Act, 2002: formula sheet

Key formulas

Extent of the Act

Whole of India except the State of Jammu and Kashmir

Taken from the short title, extent and commencement section. Commencement is by Central Government notification, and different dates may be set for different provisions.

Dominant position

Position of strength in the relevant market in India that lets the enterprise (i) operate independently of competitive forces, or (ii) affect competitors, consumers or the market in its favour

Either limb is enough. The market must be the relevant market in India.

Predatory price

Sale or provision of service below cost (as determined by regulations), with a view to reduce competition or eliminate competitors

Both the below-cost price and the intent are needed. Prices adopted to meet competition are excluded from unfair or discriminatory price.

Relevant market

Relevant market = relevant geographic market + relevant product market

The Commission must have due regard to both for the purposes of the Act.

Relevant geographic market factors

Regulatory trade barriers; local specification requirements; national procurement policies; distribution facilities; transport costs; language; consumer preferences; need for secure supplies or quick after-sales service; characteristics of goods or nature of services; switching costs

The Commission considers all or any of these.

Relevant product market factors

Physical characteristics or end-use; price; consumer preferences; exclusion of in-house production; specialised producers; classification of industrial products; switching costs; categories of customers

The Commission considers all or any of these.

Limitation for information or reference

Filed within 3 years from the date the cause of action arose; delay can be condoned for sufficient cause, with reasons recorded

Applies to inquiry into sections 3(1) and 4(1) contraventions.

Penalty under section 27(b)

Not more than 10% of the average of turnover or income for the last three preceding financial years

For a cartel: up to three times profit for each year of the agreement, or 10% of turnover or income for each year, whichever is higher. Turnover means global turnover from all products and services.

General prohibition

Agreement on production, supply, distribution, storage, acquisition or control of goods/services + AAEC in India (caused or likely) → prohibited and void

Section 3(1) and 3(2). The effect must be on competition within India.

Horizontal agreements (presumption)

Agreement between parties in identical or similar trade (or a person outside that trade who participates or intends to participate in furthering it) that (a) fixes prices, (b) limits production/supply/markets/technical development/investment/services, (c) shares markets, or (d) rigs bids → AAEC presumed

Section 3(3). The Act says 'presumed'; the accepted reading is that the presumption can be rebutted. Joint venture proviso applies if the agreement increases efficiency.

Vertical agreements (effect test)

Tie-in, exclusive dealing, exclusive distribution, refusal to deal, resale price maintenance, or any other vertical agreement → contravention only if AAEC is caused or likely

Section 3(4). No presumption of AAEC; it is assessed using the Section 19(3) factors. Agreements with an end consumer are outside this sub-section.

Factors for AAEC

Barriers to entry; driving out competitors; foreclosure; benefit or harm to consumers; improvements in production or distribution; technical, scientific and economic development

Section 19(3). Commission has due regard to all or any of these.

Limitation for information or reference

Filing within 3 years from the date the cause of action arose; later only if sufficient cause for delay is shown and reasons recorded

Section 19(1) provisos.

Prohibition

Section 4(1): No enterprise or group shall abuse its dominant position

Dominance itself is not an offence. Abuse is.

Dominant position

Position of strength in the relevant market, in India, enabling it to (i) operate independently of competitive forces, or (ii) affect competitors, consumers or the relevant market in its favour

Explanation (a) to Section 4. Either limb is enough.

Heads of abuse

Section 4(2)(a) unfair or discriminatory condition or price; (b) limiting production or technical development; (c) denial of market access; (d) supplementary obligations; (e) leveraging into another relevant market

Learn the five heads in this order.

Predatory price

Price below the cost (as determined by regulations) of production or provision, with a view to reduce competition or eliminate competitors

Both the below-cost price and the intent are in the definition.

Meeting competition exception

Unfair or discriminatory condition or price adopted to meet the competition is not covered by clause (a)

This exception applies only to clause (a), not to clauses (b) to (e).

Relevant market

Relevant geographic market + relevant product market (Section 19(5))

Factors are in Section 19(6) and 19(7).

Limitation

Information or reference to be filed within three years from the date the cause of action arose; delay may be condoned for sufficient cause with reasons recorded

Section 19(1) provisos, inserted in 2023.

Section 5(a)(i)(A): parties test, India only

Acquirer + target together: assets in India > ₹1,000 crore OR turnover in India > ₹3,000 crore

Parties are the acquirer and the enterprise whose control, shares, voting rights or assets are acquired. 'More than' means equal to the limit does not qualify.

Section 5(a)(i)(B): parties test, India and abroad

Aggregate assets > US$ 500 million, including at least ₹500 crore in India OR turnover > US$ 1,500 million, including at least ₹1,500 crore in India

Assets and turnover limits are alternatives. The Indian minimum must be met within the same limb.

Section 5(a)(ii)(A): group test, India only

Group after acquisition: assets in India > ₹4,000 crore OR turnover in India > ₹12,000 crore

Group is that to which the acquired enterprise would belong after the acquisition.

Section 5(a)(ii)(B): group test, India and abroad

Group: aggregate assets > US$ 2 billion, including at least ₹500 crore in India OR turnover > US$ 6 billion, including at least ₹1,500 crore in India

Clauses (b) and (c) use the same figures. In (c) the test is on the merged or created enterprise, and its group.

Section 5(d): deal value test

Value of transaction > ₹2,000 crore

The enterprise acquired, controlled, merged or amalgamated must have substantial business operations in India, as specified by regulations. The Section 5(e) de minimis exemption does not override this clause.

Section 5(e): de minimis

Assets or turnover of the target in India not more than the prescribed value → not a combination

Applies notwithstanding clauses (a), (b) and (c) only, not the deal-value test in clause (d). The prescribed value is set by the Central Government, so do not quote a figure without your material.

Control

Control = ability to exercise material influence, in any manner, over management, affairs or strategic commercial decisions

Explanation to Section 5.

Group

Group = enterprises where one can exercise 26% (or higher prescribed) voting rights, or appoint more than 50% of directors, or control management or affairs of the other

Any one of the three conditions is enough.

Value of assets

Book value as in audited accounts of the preceding financial year, less depreciation; includes brand value, goodwill, copyright, patent and similar rights

Where only a division is acquired, use that portion's assets, turnover or deal value.

Section 20(1) time limit

Own-motion inquiry barred after 1 year from the date the combination took effect

Section 20(2): on receipt of a notice under Section 6(2), the Commission shall inquire whether the combination has caused or is likely to cause AAEC in India.

Duty of the Commission (Section 18)

Eliminate adverse practices + promote and sustain competition + protect consumers + ensure freedom of trade, in markets in India

Four limbs. Write all four in a descriptive answer.

Director General (Section 16)

Appointed by the Commission with prior approval of the Central Government; assists in inquiry into contraventions

Other DG officers work under the DG's general control, supervision and direction.

Civil Court powers (Section 36(2))

Summoning and examining on oath; discovery and production of documents; evidence on affidavit; commissions for witnesses or documents; requisitioning public records

Five matters. Record requisition is subject to sections 123 and 124 of the Indian Evidence Act, 1872.

Penalty for non-compliance (Section 43)

Fine up to ₹1,00,000 per day of continuing failure, maximum ₹1,00,00,000

Applies if a person fails, without reasonable cause, to comply with Commission directions under section 36(2) and (4) or DG directions under section 41(2).

Lesser penalty (Section 46(1))

Cartel member + alleged violation of section 3 + full, true and vital disclosure + continued cooperation → lesser penalty as specified by regulations

Not available if the section 26 investigation report was received before the disclosure.

Use of leniency evidence (Section 46(3))

DG and Commission may use evidence submitted, except the admission

Even if the application is withdrawn.

Core rule of section 32

Act outside India + appreciable adverse effect (actual or likely) on competition in the relevant market in India = CCI has power to inquire

Location of the act or party is irrelevant. Effect in India is the test.

Situations covered (clauses a to f)

Agreement entered outside India | party outside India | abusing enterprise outside India | combination outside India | party to combination outside India | any other matter, practice or action outside India

Clauses (a)-(b) agreements, (c) abuse, (d)-(e) combinations, (f) related matters.

Procedure sections applied

Inquiry in accordance with sections 19, 20, 26, 29, 29A and 30

Section 29A was added by Act 9 of 2023, w.e.f. 10-9-2024. Then the Commission may pass such orders as it deems fit.

Effects standard

"has, or is likely to have" appreciable adverse effect on competition in the relevant market in India

Actual harm is not needed. Likely harm is enough.

Reference and opinion (Section 49(1))

Central or State Government refers → CCI gives opinion within 60 days

The reference concerns the possible effect of a policy on competition. Policy may be on competition or any other matter.

Nature of opinion (Section 49(2))

CCI opinion is not binding on the Central or State Government

Government decides what further action to take.

Promotional duty (Section 49(3))

CCI shall take suitable measures for advocacy, awareness and training

Mandatory duty of the Commission; no reference is needed.

Reporting (Section 53)

Returns on advocacy measures to Central Government; annual report laid before each House of Parliament

Section 53(1) covers returns and particulars; 53(2) and (3) cover the annual report.

Commission's duty (Section 18)

Eliminate adverse practices, promote and sustain competition, protect consumers, ensure freedom of trade

Advocacy supports the promote-and-sustain limb of this duty.

Appeal to NCLAT (section 53B)

Time limit = 60 days from receipt of the CCI direction, decision or order

NCLAT may admit a late appeal if there was sufficient cause. It should try to dispose of the appeal within six months of receipt.

Who can appeal to NCLAT

Central Government, State Government, local authority, enterprise or any person aggrieved

The order must be one referred to in section 53A(a).

Powers on appeal (53B(3))

Confirm, modify or set aside the order, after hearing the parties

NCLAT sends a copy of every order to the CCI and the parties.

Appeal to Supreme Court (section 53T)

Time limit = 60 days from communication of the NCLAT decision or order

The Supreme Court may allow a late appeal if sufficient cause prevented filing earlier.

Compensation (section 53N)

Application to NCLAT, with the finding or order and the prescribed fee

Allowed only after a finding of violation of Chapter II or a settlement order, or where section 42A or 53Q(2) applies. NCLAT may seek the CCI's recommendations.

Representative claim (53N(4))

One or more persons with the same interest, with NCLAT's permission, may apply for all

Order 1 Rule 8 of the Code of Civil Procedure, 1908 applies with modifications.

Contravention of NCLAT order (section 53Q(1))

Penalty up to ₹1 crore or imprisonment up to 3 years, or both

Imposed by the Chief Metropolitan Magistrate, Delhi, only on a complaint by an officer authorised by NCLAT. Applies where there is no reasonable ground.

Execution of NCLAT orders (section 53P)

Enforced as a decree of a court in a suit pending before it

NCLAT may send the order to a civil court with local jurisdiction for execution.

Recovery of CCI penalty (section 39)

CCI recovers as per regulations, or refers to the income-tax authority

On reference, the person is deemed an assessee in default and the recovery machinery referred to in section 39(3) applies.

Quick revision

• Section 4(1): no enterprise or group shall abuse its dominant position.
• Dominant position means strength in the relevant market in India that lets an enterprise operate independently of competitive forces or affect competitors, consumers or the market in its favour.
• Predatory price means selling below cost, as determined by regulations, to reduce competition or eliminate competitors.
• Unfair or discriminatory conditions or prices adopted to meet competition are not abuse under section 4(2)(a).
• Section 27(b): penalty up to ten per cent of average turnover or income of the last three preceding financial years.
• Cartel proviso: up to three times profit or ten per cent of turnover for each year of continuance, whichever is higher.
• Turnover for section 27 means global turnover from all products and services.
• Section 27 orders can also be passed against other members of a group that contributed to the contravention.
• Section 28: the Commission may direct division of a dominant enterprise; an officer who loses office cannot claim compensation.
• Section 32: the Commission can inquire into acts outside India if they have, or are likely to have, an appreciable adverse effect on competition in the relevant market in India.
• Section 49: the Commission gives its opinion within sixty days of a reference; the opinion is not binding.
• Section 49(3): the Commission promotes advocacy, awareness and training on competition issues.

Common mistakes

• Saying the Act applies to all of India including Jammu and Kashmir. Fix: Recall the exact words: whole of India except the State of Jammu and Kashmir, as given in the short title and extent section.
• Treating dominant position as just a large market share. Fix: Dominance is a position of strength in the relevant market in India that allows independence from competitive forces or the ability to affect others in its favour. Market share is only one of many factors in section 19(4).
• Saying all anti-competitive agreements are presumed to have AAEC. Fix: The presumption is only in Section 3(3) for horizontal agreements. For vertical agreements under Section 3(4), AAEC is not presumed; it is assessed on the Section 19(3) factors.
• Calling a vertical agreement horizontal because both parties are in the same industry. Fix: Ask whether the parties are at the same stage or different stages. A manufacturer and its dealer are vertical even in the same industry.
• Saying that being dominant is itself prohibited. Fix: Write that Section 4(1) prohibits abuse of dominant position, not dominance.
• Judging dominance only on market share. Fix: Use the other factors too, such as entry barriers, dependence of consumers and size and resources. The Commission may have regard to all or any of them.
• Treating a figure equal to the limit as crossing it. Fix: Every limit in Section 5 is 'more than'. Exactly ₹1,000 crore assets does not meet the test.
• Requiring both assets and turnover to cross the limit. Fix: They are alternatives joined by 'or'. Either assets or turnover crossing the limit is enough.
• Saying the DG is appointed by the Central Government. Fix: The Commission appoints the DG, with the prior approval of the Central Government.
• Applying lesser penalty to any party to any anti-competitive agreement. Fix: Section 46 covers cartel members alleged to have violated section 3 who make full, true and vital disclosure.

Exam tips

• Learn the extent line word for word: whole of India except the State of Jammu and Kashmir. It is an easy MCQ.
• For case questions on dominance, never stop at market share. First define the relevant market, then apply the section 19(4) factors that match the facts.
• Keep the two lists of market factors separate: geographic (transport costs, language, distribution) and product (end-use, price, switching).
• Remember the amended penalty rule: 10% of the average turnover or income of the last three financial years, and the higher cartel formula.
• Use the definitions given in the text of the Act as your answer wording. Examiners reward exact conditions.
• Always start by labelling the agreement horizontal or vertical. That label decides whether you write presumption or effect test.
• In MCQs, watch for the word 'presumed'. It points to Section 3(3) and not to vertical agreements.
• Learn the four heads of Section 3(3) and the five named vertical types of Section 3(4) as lists, and recall the 2023 additions: facilitator proviso and end consumer proviso.