GREETINGS TO DELEGATES AT THE LAUNCH MEETING ON MEKONG PROJECT HANOI 23-24 APR 2004 1.
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Transcript of GREETINGS TO DELEGATES AT THE LAUNCH MEETING ON MEKONG PROJECT HANOI 23-24 APR 2004 1.
GREETINGS
TO
DELEGATES AT THE
LAUNCH MEETING ON
MEKONG PROJECT
HANOI
23-24 APR 200423-24 APR 20041
2Copyright - Dr. S. Chakravarthy
MRTP ACT METAMORPHOSES INTO COMPETITION ACT
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
Copyright - Dr. S. Chakravarthy 3
LPG SYNDROMEEARLIER TILL 1991 NOW AFTER 1991
• LICENSING
• PLANNING
• GOVERNMENT
• LIBERALISATION
• PRIVATISATION
• GLOBALISATION
Copyright - Dr. S. Chakravarthy 4
L P G S Y N D R O M EL P G S Y N D R O M E( POST 1991 )( POST 1991 )
RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDERECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:
• DEREGULATION AND SIMPLIFICATION OF LICENSING ANDDEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURESAPPROVAL PROCEDURES
• EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTASAPPROVALS AND QUOTAS
• NEW ECONOMIC ADJUSTMENT MEASURESNEW ECONOMIC ADJUSTMENT MEASURES
• DIVESTITURE AND SALE OF GOVERNMENT ASSETSDIVESTITURE AND SALE OF GOVERNMENT ASSETS
• GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTORSECTOR
• PRIVATISATIONPRIVATISATION
• ENCOURAGING COMPETITIONENCOURAGING COMPETITION
Copyright - Dr. S. Chakravarthy 5
C O M P E T I T I O N…….
• IS A DYNAMIC CONCEPT
• IS AN AMALGAM OF FACTORS THAT STIMULATE ECONOMIC RIVALRY
• IS A TOOL TO MOUNT MARKET PRESSURE TO PENALISE LAGGARDS AND TO REWARD THE ENTERPRISING
Copyright - Dr. S. Chakravarthy 6
COMPETITION POLICY - GOALS
PRESERVATION AND PROMOTION OF THECOMPETITIVE PROCESS
EFFICIENCY IN PRODUCTION ANDALLOCATION OF GOODS AND SERVICES
INNOVATION AND ADJUSTMENT TOTECHNOLOGICAL CHANGE
SUSTAINED ECONOMIC GROWTH
Copyright - Dr. S. Chakravarthy 7
EXTANT COMPETITION LAW OF INDIA
MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ACT,1969
BROUGHT INTO FORCE IN 1970
Copyright - Dr. S. Chakravarthy 8
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
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
Copyright - Dr. S. Chakravarthy 9
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)
Copyright - Dr. S. Chakravarthy 10
1991 AMENDMENTS TO MRTP ACT
1. SIZE CONCEPT GIVEN UP2. CURBS ON GROWTH OF MONOPOLY
COMPANIES DELETED3. MERGER CONTROL REMOVED 4. MORE EMPHASIS ON PROHIBITION
OF RTPs, UTPs AND MTPsIN SUM, BIG BECOMING BIGGER IS NO
MORE UGLY
Copyright - Dr. S. Chakravarthy 11
RESTRICTIVE TRADE PRACTICES
REFUSAL TO DEAL TIE-UP SALES FULL LINE FORCING EXCLUSIVE DEALINGS PRICE DISCRIMINATION RE-SALE PRICE MAINTENANCE AREA RESTRICTION
Copyright - Dr. S. Chakravarthy 12
UNFAIR TRADE PRACTICES
MISLEADING ADVERTISEMENT AND FALSE REPRESENTATION
BARGAIN SALE, BAIT AND SWITCH SELLING
OFFERING OF GIFTS OR PRIZES WITH THE INTENTION OF NOT PROVIDING THEM AND CONDUCTING PROMOTIONAL CONTESTS
PRODUCT SAFETY STANDARDS HOARDING OR DESTRUCTION OF GOODS
Copyright - Dr. S. Chakravarthy 13
MONOPOLISTIC TRADE PRACTICES
1. UNREASONABLE PRICING 2. PREVENTING OR LESSENING
COMPETITION IN SUPPLY/DISTRIBUTION OF GOODS/SERVICES
3. LIMITING TECHNICAL DEVELOPMENT, CAPITAL INVESTMENT OR PRODUCTION/SUPPLY
4. UNREASONABLE PROFITS (PROFITEERING)
Copyright - Dr. S. Chakravarthy 14
ALL UNDERTAKINGS ENGAGED IN MANUFACTURE, SUPPLY AND DISTRIBUTION IN THE PRIVATE SECTOR
PUBLIC SECTOR UNDERTAKINGS OWNED BY THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS
STATUTORY CORPORATIONS
UNDERTAKINGS UNDER THE MANAGEMENT OF CONTROLLERS APPOINTED BY LAW
COOPERATIVE SOCIETIES
FINANCIAL INSTITUTIONS, BANKS
APPLICABILITY OF THE MRTP ACT
Copyright - Dr. S. Chakravarthy 15
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
Copyright - Dr. S. Chakravarthy 16
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.”
Copyright - Dr. S. Chakravarthy 17
RUBRIC OF THE NEW RUBRIC OF THE NEW COMPETITION LAWCOMPETITION LAW
THE NEW LAW, COMPETITION ACT, 2002 WILL REPEAL THE MRTP ACT
FOUR COMPARTMENTS OF NEW LAW:
ANTI-COMPETITION AGREEMENTS
ABUSE OF DOMINANCE
MERGERS, AMALGAMATIONS, ACQUISITIONS AND TAKE-OVERS
FOSTERING COMPETITION
Copyright - Dr. S. Chakravarthy 18
ANTI - COMPETITION AGREEMENTS HORIZONTAL RESTRAINTS : :
CARTELS {FIXING PURCHASE OR SALE PRICES (EXPORT CARTELS EXEMPTED) }
BID-RIGGING (COLLUSIVE TENDERING)
SHARING MARKETS BY TERRITORY, TYPE ETC.
LIMITING PRODUCTION, SUPPLY, TECHNICAL DEVELOPMENT
THE ABOVE ARE “PER SE” ILLEGAL.
VERTICAL RESTRAINTS : :
TIE-IN ARRANGEMENTS
EXCLUSIVE SUPPLIES
EXCLUSIVE DISTRIBUTION
REFUSAL TO DEAL
RESALE PRICE MAINTENANCE
ADJUDICATION BY RULE OF REASON
Copyright - Dr. S. Chakravarthy 19
ABUSE OF DOMINANCE
DOMINANCE NOT LINKED TO ANY ARITHMETIC FIGURE OF MARKET SHARE
DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS.
ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE
• IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING
PREDATORY PRICES)
• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT
• DENIES MARKET ACCESS
• CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION
WITH THE SUBJECT OF THE CONTRACTS.
• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS
RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC MARKETMARKET
Copyright - Dr. S. Chakravarthy 20
DOES DOMINANCE REQUIRE AN ARITHMETIC FIGURE?
SOME SUGGEST AN ARITHMETIC FIGURE OF MARKET SHARE TO ASCERTAIN DOMINANCE
EXISTING MRTP ACT STIPULATES 25% MARKET SHARE NEW LAW DISTINGUISHES DOMINANCE FROM ITS
ABUSE AND ESCHEWS ARITHMETIC FIGURE LOGIC IS AGAINST A THRESHOLD AS IT MAY HARASS A
GOOD COMPETING ENTITY AND ALLOW AN OFFENDING ENTITY TO ESCAPE
AS LONG AS DOMINANCE IS NOT TO BE FROWNED UPON, A GENERIC DEFINITION IS BETTER THAN MARKET SHARE THRESHOLD DEFINITION
Copyright - Dr. S. Chakravarthy 21
COMBINATIONS MERGERS/AMALGAMATIONS
1. REDUCTION IN NUMBER OF PLAYERS
2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH
3. DISCOURAGEMENT OF NEW ENTRANTS
PEJORATIVE EFFECTS
4. DICTATION OF PRICES
5. DOMINANCE
1. COMPETITION LAW TO HAVE SURVEILLANCE OVER COMBINATIONS BEYOND A THRESHOLD LIMIT [Assets > Rs.1000 Crores (about US $ 220 m) or Turnover > Rs.3000 Crores (about US $ 660 m)]
2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND NOT MANDATORY3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS ELSE DEEMED APPROVAL
REGULATION ON COMPETITION PERSPECTIVE
Copyright - Dr. S. Chakravarthy 22
IS COMBINATION CONTROL REQUIRED AT ALL?
SCAN OF 72 COMPETITION LAWS IN THE WORLD SHOWS THEY HAVE MERGER CONTROL
51 OF THOSE HAVE MANDATORY PRE MERGER NOTIFICATION REQUIREMENT ANOTHER 12 ALSO HAVE MANDATORY NOTIFICATION REQUIREMENT BUT AT A
SLIGHTLY LATER STAGE, NAMELY, POSTCLOSING STAGE REMAINING 9 HAVE VOLUNTARY NOTIFICATION REQUIREMENT THIS IS NOT THE ONLY REASON WHY INDIAN LAW SHOULD HAVE MERGER
CONTROL OTHER REASONS : POSSIBLE ABUSE OF DOMINANCE, LESS CHOICE AND
BARRIERS TO NEW ENTRANTS ETC THE NEW LAW IS VERY BENIGN ON MERGER CONTROL NOTIFICATION IS VOLUNTARY HIGH THRESHOLD LIMIT DEEMED APPROVAL AFTER 90 WORKING DAYS VERTICAL AND CONGLOMERATE MERGERS WILL GENERALLY BE ALLOWED TO
PASS ONLY HORIZONTAL MERGERS WILL BE SCREENED ON COMPETITION
PERSPECTIVE
Copyright - Dr. S. Chakravarthy 23
COMPETITION ADVOCACY
THE COMPETITION COMMISSION OF INDIA IS ENABLED TO PARTICIPATE IN THE
FORMULATION OF POLICIES AND REVIEWING OF POLICIES RELATING TO COMPETITION AT THE INSTANCE OF THE GOVERNMENT
IS REQUIRED TO CREATE COMPETITION CULTURE
IS REQUIRED TO ACT AS COMPETITION ADVOCATE
Copyright - Dr. S. Chakravarthy 24
EXEMPTIONSEXEMPTIONS
GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE COMPETITION LAW COMPETITION LAW
A ANY CLASS OF ENTERPRISES IN THE INTEREST OF NATIONAL SECURITY/PUBLIC INTEREST.
B. ANY PRACTICE/AGREEMENT ARISING OUT OF INTERNATIONAL TREATY/AGREEMENT
C. ANY ENTERPRISE PERFORMING A SOVEREIGN FUNCTION ON BEHALF OF GOVERNMENT
DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.
Copyright - Dr. S. Chakravarthy 25
COMPETITION COMMISSION OF INDIA
COMPRISES ::
CHAIRPERSON
• MEMBERS
SELECTION BY : :
A COLLEGIUM OR SEARCH COMMITTEE APPOINTED BY THE GOVERNMENT.
SELECTION ON:
MERIT BASED ON QUALIFICATIONS, EXPERIENCE, RELEVANT KNOWLEDGE AND INTEGRITY.
Copyright - Dr. S. Chakravarthy 26
DEPOLITICISATION AND CASTING NET WIDE
RATIONALE FOR THE COLLEGIUM APPROACH IS TO MINIMISE POLITICISATION OF APPOINTMENTS
CHAIRPERSON NEED NOT BE FROM THE JUDICIARY
CHAIRPERSON AND MEMBERS FROM FIELDS – JUDICIARY, ECONOMICS, LAW, INTERNATIONAL TRADE, BUSINESS, COMMERCE, INDUSTRY, FINANCE, ACCOUTANCY, MANAGEMENT, PUBLIC AFFAIRS, AND ADMINISTRATION
EVERY BENCH WILL HAVE A JUDICIAL MEMBER
Copyright - Dr. S. Chakravarthy 27
OLD WINE OR NEW WINE ?OLD WINE OR NEW WINE ?
MRTP ACT
1. BASED ON PRE-1991 LPG
2. PREMISED ON SIZE
3. PROCEDURE ORIENTED
4. NO TEETH (REFORMATORY)
5. OFFENCES DEFINED IMPLICITLY
(CARTELS, BID-RIGGING ETC.)
6. FROWNS ON DOMINANCE
(25% OF MARKET SHARE)
7. A LARGE NO. OF PER SE OFFENCES
(AGAINST PRINCIPLES OF NATURAL JUSTICE)
NEW LAW1. BASED ON POST-1991 LPG
2. PREMISED ON BEHAVIOUR/ CONDUCT
3. RESULT ORIENTED
4. CAN BITE (PUNITIVE )
5. OFFENCES DEFINED EXPLICITLY
6. FROWNS ON ABUSE OF DOMINANCE
(NO PERCENTAGE OF MARKET SHARE)
7. JUST FOUR ARE PER SE OFFENCES
(REST BY RULE OF REASON)
Copyright - Dr. S. Chakravarthy 28
OLD WINE OR NEW WINE ?OLD WINE OR NEW WINE ?MRTP ACT
8. COVERS UNFAIR TRADE PRACTICES (INDIVIDUAL CONSUMER INTEREST)
9. POLITICAL APPOINTMENTS OF
CHAIRPERSON/MEMBERS
10. NO COMPETITION ADVOCACY
ROLE
11. REACTIVE
NEW LAW 8. UNFAIR TRADE PRACTICES
EXCLUDED (COVERED UNDER CONSUMER PROTECTION ACT)
9. APPOINTMENTS BY A COLLEGIUM
10. CCI HAS COMPETITION ADVOCACY ROLE
11. PROACTIVE
NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW
Copyright - Dr. S. Chakravarthy 29
ONE WOULD LIKE TO AVOIDTHE DANGER OF HOLLOW PURISM
THAT HAS MADE SO MUCHOF MODERN ECONOMICSUNFIT FOR ACTUAL USE
AMARTYA SENAMARTYA SENINDIAN NOBEL LAUREATE
THANK YOU
FOR YOUR
KIND ATTENTION
30Copy right Dr. S. Chakravarthy