Competition Act: Remedies for Sections 3 & 4 Violations
The Competition Act, 2002, prohibits specific business practices that can harm competition. Key provisions include:
- Section 3: Prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition in India (anti-competitive agreements).
- Section 4: Prohibits the abuse of a dominant position by an enterprise or association of enterprises.
Understanding Section 27 Remedies
The primary remedies and penalties for violations of Section 3 and Section 4 are laid down under Section 27 of the Competition Act, 2002.
After an inquiry finds a contravention of Section 3 or Section 4, the Competition Commission of India (CCI) can pass orders under Section 27. These orders may include:
- Directing the contravening party to cease the anti-competitive agreement or abuse of dominant position.
- Ordering modifications to the agreement.
- Prohibiting the party from entering into future agreements or engaging in such conduct.
- Imposing penalties. For violations of Sections 3 and 4, the penalty can extend up to $10\%$ of the average turnover from such agreement/conduct for each year of its continuance.
Rationale for Other Options
The other sections mentioned serve different purposes within the Act:
- Section 26: Governs the procedure for the CCI's inquiry into alleged violations, including investigation stages, rather than the final remedy.
- Section 42A: Deals with penalties specifically for failing to comply with orders or directions issued by the CCI under other sections of the Act.
- Section 43A: Imposes penalties for contravening regulations related to combinations (mergers and acquisitions), which is distinct from Sections 3 and 4 violations.
Therefore, Section 27 is the designated section for remedies concerning violations of Sections 3 and 4.
Important Questions from Business Competition
- Choose the correct section of the Competition Act, 2002 Which provides that 'No enterprise shall abuse its dominant position' :
Select the correct code of the following statements being correct or incorrect.
Statement (I) : The ‘law of one price’ states that in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.
Statement (II) : An ‘Efficient market’ has no impediments to the free flow of goods and services, such as trade barriers.
- Consider the following statements :
(a) The stage of industry's development (life cycle) cannot influence the nature of competitive rivalry.
(b) As the industry starts to mature in terms of life cycle, rules are rejected, consumer expectations about quality and performance are blurred and industry standards are put for modification.
(c) A major feature of maturing industries is the tendency for competition based on product pricing becoming similar.
(d) In declining industries, only the most efficient firms can earn reasonable profits.
In the light of Industry Life Cycle, which of the above statements are true ?
Codes : The market share data for an industry, comprising five companies, is given below :
Company Market Share (%) A 35 B 25 C 18 D 12 E 10 This industry’s three-firms Herfindahl-Hirschman index shall be :
Match the items of List-I with the items of List-II and find the correct combination:
List - I
(Market Structure)List - II
(Nature of industry where prevalent)(a) Perfect competition (i) Aluminium and passenger cars (b) Oligopoly (ii) Public utilities like Telephones and Electricity (c) Monopoly (iii) Manufacturing : T.V. Sets, Refrigerators (d) Monopolistic competition (iv) Farm Products : Grains
