Competition Act, 2002

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Competition

Is a situation in a market in which firms or

sellers independently strive for the buyers

patronage in order to achieve a particular

business objective for example, profits, sales or

market share (World Bank, 1999)

Competition is an age-old phenomenon Benefits of Competition:

Companies : Efficiency, cost-saving operations, better utilization of resources, etc.

The Consumer : Wider choice of goods at competitive prices The Government : Generates revenue

BUT

.Benefits of Competition
all these benefits are lost if Competition is UNFAIR or NON-EXISTANT

OBJECTIVES OF COMPETITION LAW & POLICY

ensuring fairness and equity in market place transactions Protecting the public interest including in some cases considerations relating to industrial competitiveness and employment

Protecting opportunities for small and medium business

Competition Law

It is a tool to implement and enforce competition policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government interference in the market. Competition Law generally covers 3 areas: Anti - Competitive Agreements, e.g., cartels, Abuse of Dominant Position by enterprises, e.g., predatory pricing, barriers to entry and Regulation of Mergers and Acquisitions (M&As).

Evolution of Competition Law

Before MRTP Act came into force (1970), limited provisions existed under : The Indian Contract Act Directive Principles of State Policy The MRTP Act brought in a four-pronged thrust : Concentration of economic power Restrictive Trade Practices Monopolistic Trade Practices Unfair Trade Practices

MRTPs vis--vis Competition Act

Under the Competition Act : No provision for Unfair Trade Practices Only Consumer Courts will have jurisdiction Pending cases will be continued by MRTPC for 2 years

After 2 years :

All cases (except Disparagement Cases) will be transferred to National Commission under CPA All Disparagement Cases will be transferred to Competition Commission

Status of the Competition Commission

It is a body corporate It has Regulatory and quasi-judicial powers; functions through Benches Each Bench shall consist of at least two Members and one of such Members must be a judicial Member

Suo Moto Inquiry

Commission has suo moto power to enquire whether an Anti-Competitive Agreement or Abuse of Dominant Position causes or is likely to cause an appreciable adverse effect on competition

This power must be exercised within one year from the date combination has taken effect

Anti-competitive Agreements
These are agreements which cause or are likely to cause an appreciable adverse effect on competition within India: Horizontal Agreements: These are between and among competitors who are at the same stage of production, supply, distribution, etc.

These are presumed to be illegal Examples: cartels, bid rigging, collusive bidding, sharing of markets, etc.

Anti-Competitive Agreements
Vertical Agreements: Vertical Agreements are between parties at different stages of production, supply, distribution, etc. These are not presumed illegal; are subject to rule of reason.

Examples: tie-in arrangements, exclusive supply/distribution agreements, refusal to deal.

Agreement

Any arrangement or understanding or action in concert

Whether or not such arrangement or understanding is formal or in writing Or whether or not such understanding or arrangement is intended to be enforceable by legal proceedings

Adverse effect on competition

Creation of barriers to entry Driving existing competitors out of market Benefits to consumers Benefit to Scientific and technical knowhow

Agreements presumed to have adverse effect

Directly or indirectly determines purchase or sales price Limits or controls production, supply, technical know how Shares the market or sources of production Results in bid rigging or collusive bidding

CCI orders against Anti-competitive agreements

Penalty equal to three times the amount of

profit made out of such agreement or 10% of

average turnover of the cartel for preceding

three years whichever is higher

Modification directed to the agreement

Powers of Competition Commission as Regards Agreements

After the inquiry into the Agreement, Competition Commission can: direct parties to discontinue the agreement

prohibit parties from re-entering such agreement

direct modification of the agreement impose penalty upto 10% of average turnover of the enterprise

PROTECTION OF INTELLECTUAL PROPERTY RIGHTS Competition Act

The prohibition on horizontal and vertical

agreements do not restrict the right of any

person to impose reasonable restrictions to

protect any of his rights under the Copyright Act, the Patents Act, the Trade and Merchandise Marks Act, Designs Act

For those who would want to know more about anti competitive agreements --- pls. visit the site given below; it is a good ppt by CCI

http://www.competition-commissionindia.nic.in/Capacity_Building_Initiatives/In vestigating_Anticompetitive_Agreements.pdf

Abuse of Dominance

Dominant position is defined as a position of strength which enables the enterprise to operate independently of competitive forces in the market, or to affect its competitors or consumers in its favor. No mathematical or statistical formula is adopted to measure dominance

Abuse of Dominant Position

Includes practices like:

Unfair or discriminatory conditions or prices,

Limiting or restricting production or technical/scientific development, Denial of market access, and Predatory pricing.

Power of the Competition Commission

After inquiry into abuse of dominant position, the Competition Commission can order:

discontinuance of abuse of dominant position

impose a penalty upto 10% of the average turnover of the enterprise

Combinations Regulation

Combinations, in terms of the meaning given to them in the Act, include mergers, amalgamations, acquisitions. in order to establish whether the higher concentration in the market resulting from the merger will increase the possibility of collusive or unilaterally harmful behavior, it must first be established as to what the relevant market is

Contd
Horizontal Mergers

Vertical Mergers
Conglomerate Mergers Pre-Notification The requirements for prior notification

Relevant Product Market

Physical characteristics or end-use of goods

Price of goods or service

Consumer preferences Exclusion of in-house production Existence of specialized producers

Classification of industrial products

Factors to be considered while determining Dominance

Dominant position linked to a host of factors Market share of enterprise

Size and resources of enterprise

Size and importance of competitors Commercial advantage of enterprise over competitors

Relevant Geographic market

Relevant geographic market can be defined as the area in which products are available at approximately the same price given transport costs and any increase in demand can be met from neighboring areas profitably

Mergers and Acquisitions

Commission is expected to regulate Combinations, i.e.,

large mergers, acquisitions, etc. likely to have

appreciable adverse effect on competition.

Threshold:
For single enterprise

Assets > Rs.1000 crores

Turnover > Rs.3000 crores

Mergers and Acquisitions

Threshold:

For group of enterprises

Assets > Rs.4000 crores

Turnover > Rs.12000 crores

Similarly, threshold is provided for overseas groups.

Mergers & Acquisitions

Notification of Combination to Commission is voluntary

If notified, Commission to take a decision within 90 days on the combination. Decision may allow, disallow, modify, etc. the combination.

Powers of Commission
Cease and desist order

Impose penalty up to 10% of turnover.

In case of cartel, penalty can be 10% of turnover or 3 times of profit illegally gained from cartel activity, whichever is higher.

Powers of Commission
Recommend to Government the division of dominant Enterprise Various penalties ranging from Rs.1 lac upto Rs.1 crore are also provided for failure to comply with direction/order of Commission.

Competition Advocacy

The Competition Commission of India, in terms of advocacy provisions in the Act, is enabled to participate in the formulation of the countrys economic policies and to participate in the reviewing of laws related to competition at the instance of the Central Government. Commission is required to take measures for promotion of Competition Advocacy, creating Awareness and imparting Training about competition issues [Section 49(3)]

Contd

Advocacy means competition promotion through nonenforcement measures For promotion of competition advocacy and creation of awareness about competition issues, the Commission may:i) Undertake appropriate programmes / activities etc.;

ii) Encourage and interact with the organizations of stakeholders, academic community etc. to undertake activities, programmes, studies, research work, etc. on competition issues;