1 GREETINGS TO CHARTERED ACCOUNTANTS FOR ICAIS POST QUALIFICATION COURSE VIDEO CONFERENCE FROM...

1

GREETINGS

TO

CHARTERED ACCOUNTANTS

FOR

ICAI’S POST QUALIFICATION COURSE

VIDEO CONFERENCE FROM HYDERABAD

25 AUGUST 2005

Copyright - Dr. S. Chakravarthy 2

EVOLUTION OF COMPETITION POLICY AND LAW IN INDIA

Dr. S. CHAKRAVARTHY

(Profession : Civil Servant)

Formerly, Member, Monopolies and Restrictive Trade Practices Commission, Member, High Level Committee on Competition Policy and Law And Member of Committee for

Drafting the Law.Presently, Adviser/Consultant Competition Policy and Law

HYDERABAD, INDIA


EXTANT COMPETITION LAW OF INDIA

MONOPOLIES AND RESTRICTIVE

TRADE PRACTICES ACT,1969

BROUGHT INTO FORCE IN 1970


MRTP ACT’S ROOT PEG

A LODE STAR

• CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF STATE POLICY

B PRINCIPLES

• SOCIAL JUSTICE WITH ECONOMIC GROWTH

• WELFARE STATE

• REGULATING CONCENTRATION OF ECONOMIC POWER TO THE COMMON DETRIMENT

• CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE TRADE PRACTICES


CONSTITUTION – DIRECTIVE PRINCIPLES

ARTICLES 38 & 39 MANDATE THAT

1. THE OWNERSHIP AND CONTROL OF MATERIAL RESOURCES OF THE COMMUNITY ARE SO DISTRIBUTED AS BEST TO SUBSERVE THE COMMON GOOD; AND

2. THE OPERATION OF THE ECONOMIC SYSTEM DOES NOT RESULT IN THE CONCENTRATION OF WEALTH AND MEANS OF PRODUCTION TO THE COMMON DETRIMENT.


THREE WATERSHEDS

1. INDUSTRIAL POLICY RESOLUTION OF 1948 – ROLE OF STATE AS ENTREPRENEUR AND AUTHORITY.

2. INDUSTRIAL POLICY RESOLUTION POLICY OF 1956 – EMPHASIS ON GROWTH, SOCIAL JUSTICE AND SELF RELIANCE – GOVERNMENT INTERVENTION AND REGULATION – PUBLIC SECTOR TO ACHIEVE “COMMANDING HEIGHTS”.

3. ECONOMIC REFORMS OF 1991 – LIBERALISATION, PRIVATISATION AND GLOBALISATION.

ON THE WHOLE TRANSITION FROM COMMAND – CONTROL PARADIGM TO MARKET PARADIGM.


THREE STUDIES SHAPE THE MRTP ACT

HAZARI COMMITTEE REPORT ON INDUSTRIAL LICENSING PROCEDURE, 1955 – WORKING OF THE LICENSING SYSTEM HAS RESULTED IN DISPROPORTIONATE GROWTH OF SOME BIG HOUSES

MAHALANOBIS COMMITTEE REPORT ON DISTRIBUTION AND LEVELS OF INCOME, 1964 – TOP 10 % OF THE POPULATION CORNERED 40 % OF INCOME AND BIG BUSINESS HOUSES WERE EMERGING BECAUSE OF PLANNED ECONOMY MODEL

MONOPOLIES INQUIRY COMMISSION REPORT OF DAS GUPTA, 1965 – THERE WAS CONCENTRATION OF ECONOMIC POWER AND A FEW INDUSTRIAL HOUSES WERE CONTROLLING A LARGE NUMBER OF COMPANIES AND THERE EXISTED LARGE SCALE RTP & MTP.


MRTP ACT DREW UPON

SHERMAN ACT, 1890, CLAYTON ACT, 1914– USA

MRTP (INQUIRY AND CONTROL) ACT, 1948, RESALE PRICES ACT, 1964, RTP ACT, 1964 – UK

COMBINES INVESTIGATION ACT, 1910 – CANADA

LEGISLATIONS IN JAPAN, GERMANY AND SOME OTHER COUNTRIES


OBJECTIVES OF THE MRTP ACT

PREVENTION OF CONCENTRATION OF ECONOMIC POWER TO THE COMMON DETRIMENT

CONTROL OF MONOPOLIES PROHIBITION OF MONOPOLISTIC TRADE

PRACTICES (MTP) PROHIBITION OF RESTRICTIVE TRADE

PRACTICES (RTP) PROHIBITION OF UNFAIR TRADE PRACTICES

(UTP)


1984 AMENDMENTS TO THE MRTP ACT

HIGH - POWERED EXPERT COMMITTEE REPORT OF JUSTICE SACHAR

THE REPORT RECOMMENDED THAT A SEPARATE CHAPTER SHOULD BE ADDED TO THE MRTP ACT DEFINING UTPs ESSENTIALLY IN THE INTERESTS OF CONSUMERS.

ADVERTISEMENT AND REPRESENTATION TO CONSUMERS SHOULD NOT BECOME DECEPTIVE BUT SHOULD BE TRANSPARENT.


1991 REFORMS AND SINCE

RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:

DEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURES

EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS

NEW ECONOMIC ADJUSTMENT MEASURES

DIVESTITURE AND SALE OF GOVERNMENT ASSETS

GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTOR

PRIVATISATION

ENCOURAGING COMPETITION


1991 AMENDMENTS TO MRTP ACT

1. SIZE CONCEPT GIVEN UP

2. CURBS ON GROWTH OF MONOPOLY COMPANIES DELETED

3. MERGER CONTROL REMOVED

4. MORE EMPHASIS ON PROHIBITION OF RTPs, UTPs AND MTPs

IN SUM, BIG BECOMING BIGGER IS NO MORE UGLY


EXPERIENCE IN THE LAST THREE DECADES

NO MENTION OR DEFINITION OF OFFENCES LIKE NO MENTION OR DEFINITION OF OFFENCES LIKE (ILLUSTRATIVE)(ILLUSTRATIVE)

•ABUSE OF DOMINANCE

•CARTELS, COLLUSION AND PRICE FIXING

•BID RIGGING

•BOYCOTTS AND REFUSAL TO DEAL

•PREDATORY PRICING

LARGE NUMBER OF INTERPRETATIONS & CASE LAWS LARGE NUMBER OF INTERPRETATIONS & CASE LAWS AFFECTING THE INTENT/SPIRIT OF THE MRTP ACTAFFECTING THE INTENT/SPIRIT OF THE MRTP ACT

WTO FALL OUT OBLIGATIONSWTO FALL OUT OBLIGATIONS


NEED FOR A NEW WINENEED FOR A NEW WINE

NEED FOR A NEW LAW HAS ITS ORIGIN IN FINANCE MINISTER’S BUDGET SPEECH IN FEBRUARY,1999 :

“ THE MRTP ACT HAS BECOME OBSOLETE IN CERTAIN AREAS IN THE LIGHT OF INTERNATIONAL ECONOMIC DEVELOPMENTS RELATING TO COMPETITION LAWS. WE NEED TO SHIFT OUR FOCUS FROM CURBING MONOPOLIES TO PROMOTING COMPETITION. THE GOVERNMENT HAS DECIDED TO APPOINT A COMMITTEE TO EXAMINE THIS RANGE OF ISSUES AND PROPOSE A MODERN COMPETITION LAW SUITABLE FOR OUR CONDITIONS.”


HIGH LEVEL COMMITTEE

GOVERNMENT APPOINTED A HIGH LEVEL COMMITTEE TO ADVISE A MODERN COMPETITION LAW FOR INDIA IN LINE WITH INTERNATIONAL DEVELOPMENTS AND TO SUGGEST A LEGISLATIVE FRAME WORK.

THE COMMITTEE INCLUDED COMPETITION EXPERT, REPRESENTATIVES OF INDUSTRY AND CONSUMERS, ECONOMIST, CHARTERED ACCOUNTANT, ADVOCATE ETC.


TRIGGER FOR METAMORPHOSIS FROM MRTP ACT TO COMPETITION ACT

RECOMMENDATIONS OF EXPERT GROUP RECOMMENDATIONS OF HIGH LEVEL COMMITTEE RECOMMENDATIONS OF STANDING COMMITTEE OF

PARLIAMENT UNANIMITY TO REPEAL MRTP ACT AND TO ENACT A NEW

LAW APPRECIATION THAT THE MRTP ACT WAS MORE

CONCERNED WITH CURBING MONOPOLIES RATHER THAN WITH PROMOTING COMPETITION

APPRECIATION THAT PRE-1991 LPG HAS CHANGED TO POST-1991 LPG

RECOGNITION THAT INDIAN ENTERPRISES ARE SMALL IN SIZE AND NEED TO GROW TO BECOME GLOBALLY COMPETITIVE


COMPETITION NEEDS TO BE INCORPORATED IN

•INDUSTRIAL POLICY

•RESERVATIONS FOR SSI

•TRADE POLICY (TARIFFS, SUBSIDIES ETC)

•STATE MONOPOLIES POLICY

•LABOUR POLICY

•REFORMS POLICY (PRIVATISATION ETC)

COMPETITION LAW CAN NOT OPERATE IN A VACUUM UNLESS PRE-REQUISITES OF COMPETITION POLICY ARE ALSO IN PLACE


INDUSTRIAL POLICY

INDUSTRIES DEVELOPMENT AND REGULATION ACT, 1951 (IDR ACT)

SETS THE POLICY DURING PRE-1991 LPG ERA

LICENSING PREDOMINATED DURING POST-1991 LPG ERA 1. LICENSES REQUIRED ONLY FOR SIX

INDUSTRIES 2. GREATER AUTONOMY FOR PEs 3. GREATER PRIVATE SECTOR OWNERSHIP


SMALL SECTOR PROTECTION

POLICY - ENCOURAGE AND PROMOTE SMALL, COTTAGE AND HANDLOOM SECTORS

RESERVATIONS FOR THE SMALL SCALE SECTOR

THEY SUFFER FROM OLD TECHNOLOGY, LACK OF RESOURCES AND MANAGEMENT, HIGH COST OF PRODUCTION AND SALE

GLOBAL COMPETITION CAN EXTINGUISH THE SMALL SCALE AND COTTAGE SECTORS

UNDER COMPETITION ACT, 2002, GOVERNMENT CAN EXEMPT SMALL SECTOR FOR A SPECIFIC PERIOD OF TIME TO ENABLE IT TO BRACE ITSELF TO MEET THE CHALLENGE OF COMPETITION


PRIVATISATION AND REGULATORY REFORMS

FIRST GENERATION REFORMS UNDER IMPLEMENTATION

SECOND GENERATION REFORMS BEING FORMULATED AND IMPLEMENTED

REFORMS POLICIES NEED TO INHERE COMPETITION PRINCIPLES

NEED FOR FLEXIBILITY TO PROVIDE FOR NEEDS, ASPIRATIONS AND GOALS OF THE COUNTRY


TRADE POLICY

THIS INCLUDES (ESSENTIALLY WTO – RELATED)

TARIFFS QUOTAS SUBSIDIES ANTI-DUMPING ACTION DOMESTIC CONTENT REGULATIONS

EXPORT RESTRAINTS TRADE POLICY NEEDS TO CONFORM

TO COMPETITION PRINCIPLES


STATE MONOPOLIES POLICY STATE MONOPOLIES AND PUBLIC ENTERPRISES -

AGENTS OF GOVERNMENT WITH SOCIO-ECONOMIC AND POLITICAL GOALS

BUT SUCH ENTERPRISES SHOULD ALSO BE IN COMPETITION TO SUBSERVE CONSUMER INTEREST

APPROPRIATE BLEND OF COMPETITION PRINCIPLES AND GOVERNMENT POLICIES TOWARDS STATE AND OTHER MONOPOLIES COMPETITION ACT, 2002 APPLIES TO ALL UNDERTAKINGS INCLUDING PUBLIC ENTERPRISES AND STATE MONOPOLIES AND THEREFORE CAN PREVENT RTPs, UTPs & MTPs ON THEIR PART


LABOUR POLICY INDUSTRIAL DISPUTES ACT, 1947

PROTECTS LABOUR INTEREST ENTERPRISES DESIRING TO EXIT CANNOT

DO SO EASILY UNVIABLE UNITS IMPOSE HEAVY PRICE

ON THE SOCIETY COMPETITION DEMANDS CONTESTABLE

MARKET (EASY ENTRY, EASY EXIT) LEGISLATION NEEDS AMENDMENTS TO

PROVIDE FOR EASY EXIT SUBJECT TO PROTECTION OF LEGAL OBLIGATIONS AND LIABILITIES DUE TO THE LABOUR


FINALE

COMPETITION POLICY AND COMPETITION LAW NEED TO BE COMPLEMENTARY AND IN TANDEM

COMPETITION POLICY SHOULD BE FLEXIBLE TO MEET THE NEEDS, ASPIRATIONS AND GOALS OF THE COUNTRY. FOR INDIA, PRO-POOR POLICIES SHOULD BE FACTORED IN

COMPETITION LAW NEEDS TO BE GRADUALLY PHASED IN TO AVOID TURBULENCE

THERE SHOULD BE POLITICAL WILL TO ENFORCE COMPETITION LAW EFFECTIVELY AND EFFICIENTLY

NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW


IDEOLOGY

COMPETITION NEEDS TO BE FOUNDED NOT

ON ANY ISM

LIKE CAPITALISM, SOCIALISM OR COMMUNISM

BUT ON

PRAGMATISM

THANK YOU

FOR YOUR

KIND ATTENTIONCopy right Dr. S. Chakravarthy

1 GREETINGS TO CHARTERED ACCOUNTANTS FOR ICAIS POST QUALIFICATION COURSE VIDEO CONFERENCE FROM...

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