Final Law PPT

Prohibits Anticompetitive Agreements (Section 3)

Prohibits Abuse of Dominant Position (Section 4)

Provides for Regulation of Combinations (Sections 5 & 6)

Enjoins Competition Advocacy (Section 49)

Case Studies-Abuse Of Dominance Position

Ground work for Competiton

Act-MRTP

1.Aimsto regulate free and unfettered trade

2.Regulated three types of trade practices• Restrictive Trade Practice (RTP) - Restricts competition in any

manner• Unfair trade practice: adopts unfair method, or unfair or

deceptive practice• Monopolistic Trade Practices-prices at unreasonable levels,

limiting tech development, deteriorating quality


Why Competition Act?

Beneficial for• Markets• Business• Consumers• Government

Benefits lost if competition is unfair& non existent• Competition Policy• Competition Law


Competition Act• Objective

– to prevent practices having adverse effect on competition, – to promote and sustain competition in markets, – to protect the interests of consumers and – to ensure freedom of trade carried on by other participant

markets, in India• Competition amendment Act 2007

– Competition Commission• Fulfil objectives of Competition Act• Required to give opinion on competition issues • Create public awareness and impart training on competition issues.


Dimensions of Competition Act

• Prohibits Anticompetitive Agreements (Section 3)

• Prohibits Abuse of Dominant Position (Section 4)

• Provides for Regulation of Combinations (Sections 5 and 6)

• Enjoins Competition Advocacy (Section 49)

Prohibition of Anti-competitive agreements

No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. These Agreements are void.

Horizontal Agreements- Agreements between 2 or more enterprises (including cartels) that are at same stage of the production chain, & in same market. e.g. Agreement between Enterprises dealing in same products.

Below mentioned agreements shall be presumed to have an Appreciable Adverse Effect on Competition (AAEC) -& therefore void

(A) Agreement regarding prices - (for example, discounts or rebates, etc);

(B) Agreements regarding quantities - (for example, setting quotas or levels of output) (C) Agreements regarding Bid rigging or Collusive tendering(D) Agreements regarding Market Sharing

*“Bid Rigging" means any agreement, between enterprises or persons engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.

Exemption : Efficiency enhancing JVs to be examined based on ‘Rule of Reason’ (a test to establish that an agreement is illegal)


Vertical Agreements- Agreements betweens enterprises that are at different stages or levels of the production chain, & therefore in different markets. e.g. Agreement between producer & distributor.

Below mentioned agreements shall be void, if such agreement causes or is likely to cause an appreciable adverse effect on competition (AAEC) in India:

(A)Tie-in arrangement agreement (B)Exclusive supply agreement(C)Exclusive distribution agreement(D)Refusal to deal agreement(E)Resale price maintenance agreement

The presumptive rule does not apply to vertical agreements.

The question whether the vertical agreement is causing appreciable adverse effect on competition is to be determined by “Rule of Reason”, which essentially means that the positive as well as the negative impact of such agreement on competition will have to be taken into account before coming to any conclusion.

The rule of reason is applied so that only restraints that have a significant effect on the process of competition are prohibited.


The Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors, namely:-

Creation of entry barriers

Driving existing competitors out of the market

Accrual of benefits to consumers.

Improvements in goods and services

Increase in Technical development

Prohibition of Anti-competitive agreements (Factors)

The law recognizes intellectual property rights and in order to facilitate their protection, it permits reasonable restrictions imposed by their owners.

(a) The Copyright Act, 1957;(b) The Patents Act, 1970;(c) The Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999; (d) The Geographical Indications of Goods (Registration and Protection) Act, 1999; (e) The Designs Act, 2000; (f) The Semi conductor Integrated Circuits Layout Design Act, 2000.

Since exports do not impact markets in India, agreement between exporters, in spite of being horizontal, are exempted.

Exemptions:

5 firms (2 Japanese, 2 S. Korean, 1 US) prosecuted for forming cartel and fixing prices for 5 years.

High penalties imposed; ADM (cartel leader) fines $100 m.

Rigorous investigation with help of FBI.

Major role of economic analysis in calculation of overcharge.

Direct evidence usually difficult. Might require search and seizure operation as per sec 41. Might necessitate reliance on circumstantial evidence, leniency provision.

Injury caused to developing countries by global cartels.

GLOBAL LYSINE CARTEL:

Prohibition of Abuse Of Dominance Position

“Dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to— (i) operate independently of competitive forces prevailing in the relevant market, or ; (ii) affect its competitors or consumers or the relevant market in its favor.

“ Mere dominance is not an offence, But abuse of dominance is prohibited ”

Prohibition of Abuse Of Dominance Position

•ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE :

•(A) Directly or indirectly, imposes unfair or discriminatory•(i) condition in purchase or sale of goods or service; or•(ii) price in purchase or sale (including predatory price) of goods or service; or

•Predatory price- sale of goods or provision of services, at a price which is below the cost to reduce competition or eliminate the competitors.

•(B) Limits or Restricts (i) production of goods or provision of services or market therefore; or(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or

•(C) Indulges in practice or practices resulting in denial of market access; or

•(D) Uses its dominant position to enter into, or protect, other relevant market.

Prohibition of Abuse Of Dominance Position Cont…


DLF Case by CCI

Case 1

Cinergy Picture (P) Ltd.(Informant) v/s

ETC Network Ltd (Opposite party)

.

Case 2


Combinations

• Any combination which is causes or is likely to cause appreciable adverse effect on competition is void

• Combination covers:– Acquisition of shares /voting rights– Amalgamation– Mergers– Acquiring control over enterprise in same line of

business


Combinations contd..

ENTITY GROUP

IN INDIA IN INDIA OR OUTSIDE INDIA

IN INDIA IN INDIA OR OUTSIDE INDIA

Assets > Rs. 1000 crores

OR

Turnover > Rs.3000 crores

Assets >US$ 500 million, including at least Rs.500 crores in India,

OR

Turnover > US$ 1500 million, including at least Rs.1500 crores in India;

Assets > Rs. 4000 crores

OR

Turnover > Rs.12000 crores

Assets >US$ 2 billion, including at least Rs.500 crores in India,

OR

Turnover > US$ 6 billion, including at least Rs.1500 crores in India;

Threshold limits for combinations

Limits have been kept high to allow small Indian companies become active international players


Combination regulations • If show cause notice is not received within 30/60

days (when form 1 or form 2 is used ) , the combination is deemed to be approved

• Commission to decide within 210 days , else the combination is deemed to be approved

• Notification can be made by – Acquirer– Third party – Any other person having details of the agreement– Sou moto


Transaction not declared harmful

• Acquisition of current assets • Bonus or right issue • Intra-group transfer of shares• Acquisition by underwriter

Jet Airways & Kingfisher Airlines

The scope of the strategic alliance between Jet and Kingfisher, announced in October 2008.

A frequent flier, whose name the CCI refused to divulge, has filed a case with the Competition Commission of India against the proposed agreement.

The complainant said if such an agreement was inked then the two airlines would dominate the market leading to cartel formation.

According to the complainant this could (result in) an abuse of dominance as the two would control market share of close to 60 per cent

Case

Chairperson Member between 2 & 10 appointed by GOI Chairperson & it’s Members shall be whole-time Members & maximum term of 5 years Maximum age for;

– Chairperson: 65 years– Member: 65 years

In Chairperson's absence, Senior most Member , is the acting Chairperson

Suspended By Central Government– Insolvent– Engaged in alternate Paid Employment– Convicted of an office involves Moral Turpitude– Abused his position– Physically or mentally incapable to discharge duties

Composition

Make the markets work for the benefit and welfare of consumers

Ensure fair and healthy competition in economic activities in the country for development of economy.

Implement competition policies for the most efficient utilization of economic resources

Participate in formulation of country's economic policies.

Alignment of sectoral regulatory laws in tandem with the competition law.

Effectively carry out competition advocacy.

Spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.

Overview

Under the competition advocacy initiative, the Commission organizes interactive meetings, seminars, etc with different trade organizations, consumer associations, stakeholders and the public at large to spread awareness about the Competition Law and the Commission.

Objectives of Competition Advocacy

Spread awareness about Competition Act

Familiarize business enterprises, central government ministries, state government ministries, central/state PSUs about the importance and benefits of fair competition and ensure compliance of the provisions of Competition Act by all

Sensitize departments / ministries of central / state governments, and PSUs about nuances of competition law, to facilitate competition audit of their respective laws on different subjects

Take confidence building measures among business enterprises and other stakeholders associated with competition

Benefits to Centre & State Governments bodies

Savings for exchequers, accrue to central and state governments by virtue of adhering to fair competition norms

Fair competition among suppliers

Small enterprises, self-employed and micro-retailers are protected against abuse of dominance by bigger enterprises

Helping to sensitize their procurement officers to the harmful effects of anti competitive practices by suppliers, contractors or manufacturers

Helping identifying areas where bid-rigging, cartelization or abuse of dominance

Familiarizing with the legal remedies available in competition law

Helping them develop competition compliance programs

Providing competition advise.

Helping Nodal Officers at state level in overseeing the task of ensuring fair competition

CCI Benefits

Formed in 19th Oct 2009 Besides, the Chairperson, the Appellate Tribunal shall consist of not more than two Members to be

appointed by the Central Government. The Appellate Tribunal shall have, for the purposes of discharging its functions under the Act, the same

powers as are vested in a civil court under the Code of Civil Procedure,1908.

Formed for - Hearing grievances against the decisions and remedies given by the CCI - Outstanding cases before Monopolies and Restrictive Trade Practices Commission (MRTPC) - Cases on Unfair Trade Practices (UTP), Restrictive Trade Practices (RTP) & Monopolistic Trade

Practices (MTP)

Cases on ‘Disparaging Advertisements’ transferred to National Consumer Disputes Redressal Commission.

If any person contravenes, without any reasonable ground, any order of the Appellate Tribunal, he shall be liable for a penalty of not exceeding Rupees one crore or imprisonment for a term up to three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit.

Commission has suo moto power to inquire whether an anti-competitive agreement or abuse of dominant position causes or is likely to cause an appreciable adverse effect on competition [Section 19(1)]

Commission has suo moto power to enquire whether a combination causes or is likely to cause an appreciable adverse effect on competition [Section 20(1)] .

This power must be exercised within one year from the date combination has taken effect [Proviso to section 20(1)]

Suo Moto Inquiry

Suo Moto Inquiry - Case

Suo Moto Inquiry – Case 2

Inquiry u/s 19

Complaint OR State/Central/Statutory Authorities

Director General (DG) Submits inquiry Finding to CCI

Complaint Rebut Findings of DG

Dismiss Complaint Prima facie Further Inquiry

In case of abuse by dominant enterprise, may recommend

division of the enterprise to the Central Government

Compensation to the parties

Penalty < 10 % of Annual T/o of last 3 preceding years

Orders of Commission

Modify Agreements

Inquiry into Anti Competitive Agreements & Abuse of Dominant Position

Cartel: Penalty of 3 x Total profits OR 10 % of Annual T/o of

last 3 preceding years - Transfer OR Vesting of rights, Liabilities, Property or Obligations- Adjustment of Contracts By Discharge/Reduction of Liabilities/Obligation

- Creation/Allotment/Cancellation of Shares/Stocks/Securities- Compensation to the affected enterprise/person- Winding up of enterprise- Amendments to MoA or AoA

Dissolve Combination Approve Combination

If not accepted, parties to submit modificationswith 30 days

OR 90 Day’s extension period

Adverse effect

No

Modifications

Yes

Inquiry into Combinations

If modifications accepted, combination will beallowed

Orders of Commission

Order equivalent to decree/order by High Court OR Principal Civil Court.

Self rectification of Order.

Appeal against decision of the Commission can be filed to the Appellate Tribunal within 60 days from the date of communication of the direction, decision or order to him.

A further Appeal can be made against the order of the Appellate Tribunal, before the Supreme Court within 60 day’s from the date of communication of the direction.

Commission’s Order

Penalties for non-compliance with Commission’s orders:-

Penalty not less than Rs. 10 lacs [Section 42(1)]

For failure to comply with a direction of Commission or DG – Rs 1 lac per day of failure [Section 43]

If party to a combination makes a false statement or omits a material particular – not less than Rs. 50 lacs up to Rs. 1 crore [Section 44]

For willfully omitting to furnish information – penalty up to Rs. 10 lacs [Section 45]

Penalities

Benefits to Centre & State Governments bodies

Savings for exchequers, accrue to central and state governments by virtue of adhering to fair competition norms

Fair competition among suppliers

Small enterprises, self-employed and micro-retailers are protected against abuse of dominance by bigger enterprises

Helping to sensitize their procurement officers to the harmful effects of anti competitive practices by suppliers, contractors or manufacturers

Helping identifying areas where bid-rigging, cartelization or abuse of dominance

Familiarizing with the legal remedies available in competition law

Helping them develop competition compliance programs

Providing competition advise.

Helping Nodal Officers at state level in overseeing the task of ensuring fair competition

CCI Benefits

With the enactment of the new law, the competition regime in India has undergone a complete overhaul.

Though it is difficult at this early stage to tell how effective or efficient the new legislation would be, it is certainly a sincere attempt to meet the needs of the global business community.

CCI has been proactively carrying out the work of competition advocacy since its establishment but now faces a huge challenge and task ahead.

It is hoped that the CCI shall be able to overcome any shortcomings in the Act and iron out any difficulties in enforcement.

Thus, many developments in this field are expected.

Conclusion

Final Law PPT

Documents

Transcript of Final Law PPT