Exploring the Broad Scope of the Competition Act, 2002 in India

When Parliament enacted the Competition Act, 2002, it wasn’t just drafting another piece of commercial legislation – it was reshaping the entire framework of how economic activity would be governed in India. What makes this law particularly powerful is not just what it prohibits, but how broadly it defines who it applies to and what it covers. From a small cooperative society to a multinational tech giant, from a domestic manufacturer to a foreign cartel operating thousands of miles away – the reach of this Act is deliberately and remarkably wide.

A law born out of necessity
Who does the Act apply to? Defining “enterprise” and “person”
The definition of “enterprise” under Section 2(h)
The definition of “person” under Section 2(l)
The principle of competition neutrality
Economic activities covered: the scope is deliberately expansive
Anti-competitive agreements: oral or written, formal or informal
Extraterritorial reach: the Act follows the harm, not the geography
Combinations: when size triggers scrutiny
What the Act does not cover
Why broad coverage matters

A law born out of necessity

Before the Competition Act arrived, India relied on the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 to regulate anti-competitive conduct. That legislation was designed for a different era – one of a closed, heavily regulated economy. When India liberalised its markets in 1991, the MRTP Act quickly showed its limitations. It lacked the tools to address modern anti-competitive behaviour and had no mechanism to deal with the conduct of foreign entities affecting Indian markets. The Competition Act, 2002 was the answer. It replaced the MRTP Act and built a comprehensive, forward-looking competition regime around three pillars: prohibiting anti-competitive agreements, preventing abuse of dominant position, and regulating combinations (mergers and acquisitions).

Who does the Act apply to? Defining “enterprise” and “person”

The breadth of the Act begins with its definitions. Two terms – enterprise and person – are foundational to understanding who falls within its reach, and the legislature has defined both expansively.

The definition of “enterprise” under Section 2(h)

Under Section 2(h) of the Act, an “enterprise” means any person or department of the Government that is engaged in any economic activity relating to the production, storage, supply, distribution, acquisition, or control of goods or services, or in investment activities including dealing with shares and securities of any other body corporate. Crucially, this definition covers not just private companies but also government departments – provided they are engaged in economic activity.

There is, however, a carve-out. Government activities tied to sovereign functions are excluded from this definition. Specifically, departments dealing with atomic energy, currency, defence, and space fall outside the Act’s ambit. This makes intuitive sense – the legislature did not intend to subject functions of the state that are inherently governmental in nature to competition scrutiny.

Beyond that exemption, the net is cast wide. As the India Business Law Journal has noted, the Supreme Court has interpreted “enterprise” using a functional approach – meaning what matters is the nature of the activity performed, not the form the entity takes. So an entity is an “enterprise” if it is engaged in economic activity, and profitability is not a relevant criterion. On this basis, the Competition Commission of India (CCI) has treated bodies such as the Board of Control for Cricket in India (BCCI), the Institute of Chartered Accountants of India (ICAI), and the Ghaziabad Development Authority as enterprises for the purposes of competition law.

The definition of “person” under Section 2(l)

The term “person” is equally broad. Section 2(l) includes within its scope individuals, Hindu Undivided Families (HUFs), firms, companies, associations of persons (whether incorporated in India or abroad), cooperative societies, local authorities, and even artificial juridical persons. Foreign-incorporated bodies also fall within this definition. This means that when the Act speaks of “enterprises or persons,” it is capturing virtually every conceivable legal entity that could participate in the market.

The practical significance of this is considerable. Competition law applies equally to written and oral agreements between or among enterprises and persons. A handshake deal to fix prices is as much a violation as a formally documented cartel agreement.

The principle of competition neutrality

One of the most important features of the Act’s wide coverage is the principle of competition neutrality – the idea that competition law applies regardless of who owns the enterprise. Public sector undertakings (PSUs), government companies, and private corporations are all subject to the same rules. The Act does not carve out a special zone of immunity for state-owned enterprises when they engage in commercial activity.

This is a deliberate policy choice. The Act is designed to ensure Indian markets maintain a healthy and fair competitive environment, which is impossible to achieve if government-backed entities can engage in anti-competitive practices without consequence. A state-owned telecom company, for instance, cannot abuse its dominant position to squeeze out private competitors simply because of its public ownership – the Act applies with equal force.

Economic activities covered: the scope is deliberately expansive

The Act does not limit itself to specific industries or sectors. The CCI is not a sector-based body – its jurisdiction cuts across all industries. Whether it is manufacturing, services, financial products, sports, digital platforms, or infrastructure, if there is an economic activity with the potential to affect competition in India, the Act applies. This sector-agnostic approach ensures that no industry is a “safe harbour” for anti-competitive behaviour.

At the same time, the Act does recognise concurrent jurisdiction with sectoral regulators such as SEBI (securities), TRAI (telecom), and IRDAI (insurance). But the broad mandate of the CCI means it retains the authority to examine competition concerns even in heavily regulated sectors, unless a specific statutory provision clearly excludes it.

Anti-competitive agreements: oral or written, formal or informal

A key dimension of the Act’s wide coverage is how it defines “agreement.” Under Section 2(b), an agreement includes any arrangement, understanding, or action in concert – whether or not it is formal, in writing, or intended to be enforceable by legal proceedings. This expansive definition closes a potential loophole that existed under older legislation, where parties could argue they had no enforceable agreement and thus fell outside the law’s reach.

Horizontal agreements (between competitors at the same level of production) and vertical agreements (between parties at different stages of the production chain) are both subject to the Act. Any agreement that causes or is likely to cause an Appreciable Adverse Effect on Competition (AAEC) in India is void under Section 3(1). Certain horizontal agreements – such as price-fixing, bid-rigging, market-sharing, and output limitation – are treated as presumptively anti-competitive under Section 3(3), meaning the CCI does not need to establish AAEC independently; the harm is presumed from the nature of the agreement itself.

Extraterritorial reach: the Act follows the harm, not the geography

Perhaps the most striking aspect of the Act’s coverage is its extraterritorial jurisdiction. Under Section 32 of the Act, the CCI is empowered to take action against anti-competitive conduct that occurs outside India but has an adverse effect on competition within India. This applies whether the agreement was entered into outside India, one or more parties are located abroad, or a dominant enterprise is based outside the country.

This reflects the global reality of commerce. A cartel among European chemical manufacturers that inflates the price of inputs sold to Indian manufacturers can harm Indian consumers and industries just as much as a domestic cartel would. The Act’s extraterritorial reach applies to anti-competitive agreements, abuses of dominant position, and combinations (mergers and acquisitions) outside India where they have or are likely to have an appreciable adverse effect on competition in the relevant Indian market.

To give effect to this jurisdiction in practice, Section 18 of the Act also obliges the CCI to enter into Memoranda of Understanding or arrangements with foreign competition authorities, with prior Central Government approval. This enables cross-border enforcement cooperation, which is essential for the extraterritorial provisions to be practically effective.

Combinations: when size triggers scrutiny

The Act’s coverage of mergers, acquisitions, and amalgamations – collectively termed “combinations” – is also broad in scope. Under Sections 5 and 6, any combination that exceeds specified asset or turnover thresholds and is likely to cause an appreciable adverse effect on competition must be notified to and approved by the CCI before it takes effect. Three types of combinations are regulated: a person or business acquiring shares, voting rights, or assets of another entity; gaining control over an enterprise; and mergers or amalgamations between enterprises. Foreign mergers with an Indian nexus – where the parties meet the specified thresholds in India – also require CCI clearance.

What the Act does not cover

The Act’s wide coverage does have defined limits. As noted earlier, sovereign functions of the government are excluded. Additionally, the Act provides certain exemptions for agreements that may restrict competition but promote technical innovation or export performance. Intellectual property rights protection, for instance, can justify certain restrictions under the Act’s provisions, as long as they do not go beyond what is reasonably necessary.

It is also worth noting that while the Act originally extended to the whole of India except the State of Jammu and Kashmir (as it stood at enactment), subsequent constitutional changes have altered this position, and the Act now applies across the country.

Why broad coverage matters

The wide coverage and nature of the Competition Act, 2002 are not accidental features – they are purposive. A competition law that applies only to certain entities, or only to formal agreements, or only to domestic conduct, would be riddled with gaps that could be exploited. By casting the net as wide as it does, the Act ensures that the principle of free and fair competition is a market-wide guarantee, not a selective privilege. This architecture – broad definitions, competition neutrality, sector-agnostic jurisdiction, and extraterritorial reach – is what gives the CCI the tools it needs to protect competitive markets in an increasingly complex and globalised economy.

What do you think? Given that the Competition Act applies even to government departments engaged in commercial activity, do you think sovereign immunity should be more narrowly or more broadly defined to keep pace with how public sector enterprises operate today? And with businesses increasingly operating across borders, is the extraterritorial reach under Section 32 sufficient to address anti-competitive conduct originating from jurisdictions that may be unwilling to cooperate with Indian enforcement authorities?

References

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Table of Contents

A law born out of necessity 🔗

Who does the Act apply to? Defining “enterprise” and “person” 🔗

The definition of “enterprise” under Section 2(h) 🔗

The definition of “person” under Section 2(l) 🔗

The principle of competition neutrality 🔗

Economic activities covered: the scope is deliberately expansive 🔗

Anti-competitive agreements: oral or written, formal or informal 🔗

Extraterritorial reach: the Act follows the harm, not the geography 🔗

Combinations: when size triggers scrutiny 🔗

What the Act does not cover 🔗

Why broad coverage matters 🔗