The Competition Bill 2001, which seeks to repeal the Monopolistic and Restrictive Trade Practices Act 1969, was introduced during the monsoon session of parliament and may be passed during its winter session, starting November 21 2001. The Bill applies to all enterprises, including companies, firms, sole proprietorships, societies, trusts and any body corporate/associations of persons, whether incorporated or not in India, which carries on a business or commercial activity. The Bill seeks to prohibit or regulate: (i) anti-competitive agreements; (ii) abuse of dominant position; and (iii) combinations.
An anti-competitive agreement is an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provisions of services that causes or is likely to cause an appreciable adverse effect on competition in India. This includes tie-ins, exclusive supply, refusal to deal and resale price maintenance agreements.
A dominant position is a position of strength enjoyed in a market that enables an enterprise to operate independently of competitive forces prevailing in the market, or affect its competitors or consumers or the relevant market in its favour. There is an abuse of dominant position when an enterprise: (i) imposes unfair or discriminatory conditions on the purchase, sale or price of goods or services; (ii) limits or restricts the production of goods or the provision of services; (iii) indulges in practices resulting in denial of market access; (iv) makes the conclusion of contracts subject to acceptance of supplementary obligations which by their nature have no connection with the subject of such contracts; or (v) uses its dominant position in one relevant market to enter into, or protect, another relevant market.
In terms of the Bill, an enterprise is restricted from entering into a combination which causes or is likely to cause an appreciable adverse effect on competition in the relevant market in India. An acquisition is a combination where the parties to the acquisition have either: (i) more than Rs 10 billion ($208 million) in assets or a turnover of more than Rs 10 billion in India; or (ii) in aggregate, assets of more than $500 million or a turnover of more than $1.5 billion, either in or outside India. Any such combination is void.
An important aspect of the Bill is the jurisdiction assumed by the Competition Commission established under the Bill over companies incorporated outside India. Notwithstanding that an enterprise carrying on a practice restricted by the Bill is outside India or that the practice complained about has taken place outside India, the Commission is empowered to inquire into such practice and may grant a temporary injunction restraining any party from carrying on such practice until the conclusion of the inquiry. It remains to be seen how such injunctions would be enforced in the case of a foreign company which has no place of business in India and whose country of incorporation is not declared as a reciprocating country with India for enforcement of court judgments.