10. Competitive Environment

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Competitive EnvironmentCompetitive Environment


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TextText

Francis Cherunilam (12Francis Cherunilam (12thth revised edition)revised edition)

Chapter 20: Competition policy and lawChapter 20: Competition policy and law


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ReferenceReference

Bedi, SureshBedi, Suresh

Chapter 23: Competitive environment.Chapter 23: Competitive environment.

Chapter 19: The MRTP Act and the newChapter 19: The MRTP Act and the newcompetition lawcompetition law


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Competition DefinedCompetition Defined

Is characterized by inter-firm rivalry.Is characterized by inter-firm rivalry.

Competitive strategies, and the degree ofCompetitive strategies, and the degree of

competition is closely related to the number ofcompetition is closely related to the number offirms in the market and the distribution offirms in the market and the distribution ofmarket share between them.market share between them.


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Levels of CompetitionLevels of Competition

Three levels of CompetitionThree levels of Competition

1.1. Direct CompetitionDirect Competition

2.2. Indirect CompetitionIndirect Competition3.3. Budget CompetitionBudget Competition


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Competition vs. ContestabilityCompetition vs. Contestability

Contestability refers to a market where there isContestability refers to a market where there isfreedom of entry and exit.freedom of entry and exit.


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FIRM

Deliscencing FDI

Infr.

deregulation

Imports

New areas

to pvt. sector

Dereservation

of SSI items

Disinvestments

The Indian Competitive environment

Portfolio

inv.


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The Competition Act 2002The Competition Act 2002

The MRTP Act has been replaced by theThe MRTP Act has been replaced by theCompetition Act 2002 on the recommendationsCompetition Act 2002 on the recommendationsof the SVS Raghvan Committee.of the SVS Raghvan Committee.

It extends to whole of India except the state ofIt extends to whole of India except the state ofJammu and KashmirJammu and Kashmir

Act empowers it to exempt any class ofAct empowers it to exempt any class ofenterprise from the Act in interest of public orenterprise from the Act in interest of public ornational securitynational security


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Continued---Continued---

No civil court has jurisdiction to entertain anyNo civil court has jurisdiction to entertain anysuit or proceeding which the competitionsuit or proceeding which the competitioncommission established under the act iscommission established under the act is

empowered to determine.empowered to determine.


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Main Provisions of the ActMain Provisions of the Act

1. Prohibition of Anti-Competitive Agreements1. Prohibition of Anti-Competitive Agreements

1. Determining purchase/sale price (directly/indirectly)1. Determining purchase/sale price (directly/indirectly)

2. Limiting/controlling production, supply, markets,2. Limiting/controlling production, supply, markets,

technical development, investment or provision oftechnical development, investment or provision ofservices.services.

3. Sharing the market or source of production or3. Sharing the market or source of production or

provision or services by allocating geographical areas.provision or services by allocating geographical areas.4. Tie-in arrangements; exclusive supply4. Tie-in arrangements; exclusive supplyarrangements.arrangements.


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2. Prohibition of Abuse of Dominant2. Prohibition of Abuse of Dominant

PositionPosition

Imposes unfair or discriminatory condition orImposes unfair or discriminatory condition orprice purchase or sale of goods or serviceprice purchase or sale of goods or service

Restricts production of goods or services orRestricts production of goods or services or

market in respect of thesemarket in respect of these

Indulges in practices which deny marketIndulges in practices which deny market

access to othersaccess to others


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3. Regulation of Mergers and3. Regulation of Mergers and

AcquisitionsAcquisitions

The following threshold apply for determiningThe following threshold apply for determiningwhether a merger or acquisition becomes awhether a merger or acquisition becomes acombination subject to scrutiny:combination subject to scrutiny:

1.1.Enterprise with operations in India:Enterprise with operations in India:

Rs. 1,000 crore asset value or Rs. 3,000 croreRs. 1,000 crore asset value or Rs. 3,000 crore

turnoverturnover

-Enterprise with global operationsEnterprise with global operations

$ 500 million asset value or $1,500 million$ 500 million asset value or $1,500 million

turnoverturnover


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Continued---Continued---

-Groups of Companies with operations in IndiaGroups of Companies with operations in IndiaRs. 4000 crore or Rs. 12000 crore turnoverRs. 4000 crore or Rs. 12000 crore turnover

-Groups of Companies with global operationsGroups of Companies with global operations

$ 2 billion assets value or $ 6 billion turnover$ 2 billion assets value or $ 6 billion turnover

2. Prohibits and voids any combination which2. Prohibits and voids any combination whichadversely affects the competitionadversely affects the competition


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4. Competition Commission of India4. Competition Commission of India

The central government shall establish aThe central government shall establish acommission to be called the competitioncommission to be called the competitioncommission of Indiacommission of India

The commission shall consist of a chairpersonThe commission shall consist of a chairpersonand not less than 2 and more than 10 otherand not less than 2 and more than 10 othermembers to be appointed by Centralmembers to be appointed by Central

GovernmentGovernment


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10. Competitive Environment

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