The Competition Act
By
Avinash Kumar Singh &
Anand Singh
1
COMPETITION –
promotes efficiency;
encourages innovation;
punishes the laggards;
facilitates better governance;
boosts choice improves quality, reduce
costs;
ensures availability of goods
in abundance of acceptable
quality at affordable price.
2
UNIQUE FEATURES OF COMPETITION
We teach and preach competition but
invariably do not practice
Competition does not have a human face
Competition kills competition
Competition is unstable
3
It is not defined in the Act
It refers to economic rivalry amongst economic
enterprises to control greater market power
Economic enterprises compete to outsmart their
competitors and in the process sometimes eliminate rivals.
Level of Competition does not depend upon
number of players in an industry but degree of
contestability.
4
History of Competition Law
In 1980, less than 40 countries had Competition Law
Currently over hundred countries have
Competition Law
Over 30 countries are in the process of enacting
Competition Law.
5
An Expert Group set up by the Union
Ministry of Commerce to study inter action
between the trade and competition. The
said Expert Group in its Report submitted
in January,1999 suggested enactment of
Competition Law.
6
The Finance Minister in his Budget Speech on 27 th
February, 1999 stated:
“The Monopolies and Restrictive Trade
Practices 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 Commission to examine
this range of issues and propose a modern
competition law suitable for four conditions”.
7
The High Level Committee on Competition
Law & Policy in its Report submitted to
Government in May, 2000 observed that
the M.R.T.P. Act, 1969 is limited in its
sweep and in the present competitive it
fails to fulfill the need of competition law.
8
The “Department Related Parliamentary
Standing Committee on Home Affairs” to which
Competition Bill, 2001 was referred for
examination and report, the Government
submitted that in view of the policy shift from
curbing monopolies to promoting competition,
there is a need to repeal the M.R.T.P. Act. The
rigidly structured M.R.T.P.Act also necessitated
its repeal in view of Government’s policy of being
facilitator rather than regulator
9
PREAMBLE
MRTP ACT, 1969 COMPETITION ACT,2002
to provide that the operation of Establishment of a Commission
the economic system does not
result in the concentration of to prevent practices having
economic power to the common appreciable adverse effect on
detriment, competition;
Control of monopolies, to promote and sustain
competition in markets;
Prohibition of monopolistic and
restrictive trade practices. to protect the interest of
consumers and to ensure
freedom of trade carried on by
other participants in markets, in
India
10
COMPETITION ACT, 2002
OBJECTIVES:-
To prevent practices having appreciable adverse effect on
competition;
to promote and sustain competition in trade and industry;
to protect the interest of consumers;
to ensure freedom of trade carried on by the participants in
market in India;
Establishment of the Competition Commission of India.
11
Law to be implemented in the phases
In the first phase, the Competition Commission I
to undertake competition advocacy;
In the second phase, the Competition Commission will
commence enquiries relating to anti-competitive
agreements and abuse of dominant position.
In the third phase, the Commission will commence
regulation of combinations
Law also stipulates that different dates may be appointed
for different provisions
12
Present Status:
The Central Government has since established the
Competition Commission of India with head office at New
Delhi with effect from 14.10.2003
The Central Government has also appointed a Member with
effect from 17.10.2003 and he has been designated as
Member Administration with effect from 21.10.2003
The Commission is presently seized of preparatory work
such as formulation of regulation, setting up of infrastructure,
advocacy material, capacity building etc.
The Government is contemplating to make certain
amendments in the Act.
13
Competition Act seeks to modernize
competition regime
The Act provides for repeal of the M.R.T.P.Act
and the dissolution of the
M.R.T.P.Commission. The notification in this
regard is yet to be issued.
The Act provides for transfer of RTP Enq. to
CCI
14
The term “Goods” includes “Shares” before allotment will
shares and shares before be outside. Shares after
allotment. allotment stands covered.
Debentures have also been
included.
The definition of “Service has
“Service” which are rendered
been rationalized and
free of charge or under a
amplified. Accounting,
contract of personal service
communication, education,
are excluded.
storage, material treatment,
construction, repairs have
been specifically covered.
15
Cartel is not explicitly defined Cartel has been explicitly defined.
It includes an association of
producers, sellers, distributors,
traders or service providers who
by agreement amongst
themselves limit, control or
attempt to control the production,
distribution, sale or price of, trade
in goods or services.
The scope of term “Enterprise”
Enterprise has been amplified and
Govt.Departments performing
non-sovereign functions has
been brought within its ambit
16
The term “Consumer” not The term “Consumer” has
defined. “Consumer” is been explicitly defined. It
referred to as one defined includes buyer of goods or
in Consumer Protection one who avails of services
Act, 1986 for consideration
irrespective whether it is for
commercial use or personal
use.
17
The trade practice concepts “Monopolistic, Restrictive
and Unfair Trade Practices” has been given good bye.
The four important Concepts incorporated in the Act are:
1. Prohibition of Anti Competitive Agreements
2. Prohibition of Abuse of Dominant Position
3. Regulation of Combinations
4. Competition Advocacy
The Act is in line with international trend.
18
Exclusions:
JVs enhancing efficiency are not presumed to
have appreciable adverse effect.
Reasonable Restrictions in exercise of IPRs
are excluded.
Agreement relating to exports
19
Under the Competition Act,
Under the 2002 appreciable adverse
M.R.T.P.Act, the effect on competition is
“prejudicial to public key factor in Anti-
interest” is a pre- Competitive agreements:
condition before These are:
passing adverse order (i) creation of barrier to new
entrants.
in restrictive Trade
(ii) driving existing competitors;
Practice Enquiry (iii) foreclosure of competition;
(iv) accrual of benefits;
(v) Improvements in production or
distribution; and
(vi) Promotion of technical, scientific
or economic development.
20
Monopolistic Trade Practices is generally
referred to as a trade practice of -
(i) maintaining cost/price at unreasonable
level,
(ii) lessening/preventing competition,
(iii) limiting technical development, increasing
unreasonably the costs or prices of
goods/services to be sold/rendered.
21
In case of Monopolistic Trade Practice, the
role of the M.R.T.P.C is advisory and final
power to take action vests in the Central
Government.
An undertaking is known as dominant if it
produces, controls, supplies or distributes
25% or more of the total production of
goods/services producers/supplied/rendered
etc.
22
To determine dominance, the factors to be
considered are:-
market share of enterprise,
size and resources of enterprise,
size and important of competitors,
Commercial advantage of competitors,
Vertical integration,
Dependence of consumers,
Dominance because of statute,
Entry barriers,
Countervailing buying power, market structure and size of
market social obligation and
Contribution to economic development any other factor.
23
Abuse of Dominance
Existence of dominance is
not bad.
Exercise of dominance if it
falls amongst ‘Abuses’, is
only frowned upon
Dominance means position
of strength which enables it
to operate independent of
competitors, consumers or
relevant market in its favour
24
Abuse include:
Unfair/discriminatory price or conditions.
Limiting or restricting production
Denial of market access
Conclusion of agreements subject to
supplementary obligations
Use of ‘dominance; to enter into another
market.
25
POWERS OF COMPETITION
COMMISSION OF INDIA
• To issue “Cease & Desist” Order
• To modify the trade agreement.
• To grant such interim relief during the
enquiry
• To award compensation.
• To impose penalty on the guilty.
• To recommend division of enterprise.
• To direct modification of trade agreements.
26
Duties, Powers and Functions of
Commission
Eliminate practices having adverse effect on
competition
Promote and sustain competition
Protect the interest of customers
Ensure freedom of trade carried by other
participants, in markets in India
Power to grant interim relief (Sec.33)
Power to award compensation (Sec.34)
Power of commission to regulate its own
procedure
Under the Competition Act:
The CCI has been empowered to impose penalty which
can be up to 10% of the average turnover for the
last three preceding financial years upon each such
enterprise who are parties to such agreements or abuse.
In case of cartel, the Commission shall impose a
penalty equivalent to three times of the amount of profits
made out or 10% of average turn over whichever is more.
Cartel is generally a secret understanding. It can be burst
conveniently with the assistant of a member of cartel.
Law empowers Commission to impose lesser penalty on a
member of cartel can be there if a member discloses
information before investigation/enquiry is taken up and
who makes first disclosure which is full, true and vital.
28
Under the existing Law, the DG has DG is divested of suo moto power
power to initiate investigation suo but in the proposed law
moto investigation by DG is a condition
precedent to Enquiry.
The existing Law requires trade
agreement containing restrictive The registration of registrable
clauses to be filed & registered with agreement is dispensed but whole
DG(I&R) agreement containing restrictive
clause is void.
An application can be moved by DG
before Commission for Enquiry. Does not exist
Civil Court powers does not vest in DG has been vested with Civil Court
DG power
29
Under the M.R.T.P. Act a registrable
agreement is required to be filed with DG.
The requirement to file trade agreement
containing anti-competitive clauses has
been dispensed .
The Agreement containing anti-competitive
clause is wholly void.
30
MRTPC experienced It has been explicitly provided
problems relating to extra that CCI shall have
territorial reach. jurisdiction in respect of Acts
taking place outside India but
having an effect on
competition in India.
No provision for entering into CCI has been empowered to
Memorandum of Under- enter into Memorandum of
standing exists under the Understanding with any
MRTP Act. foreign agency with the prior
approval of the Central
Government.
31
Combinations which exceeds threshold limits shall be regulated
Nature of Group Criterion Value
Combination Status
(a) Acquisition No Assets In India Rs.1,000 cr. US$
by enterprises Group World over 500 millions
(b) Acquisition by
individuals Turnover In India Rs.3,000 cr.
World over US$ 1500 million
(c) Mergers/ Group Assets In India Rs.4,000 cr.
World over US$ 2 billion
amalgamation
Turnover In India Rs.12,000 cr.
World over 36 billion
32
The parameters to be kept in view while examining cases
of combinations, have been prescribed.
Central Govt. has been empowered to notify threshold
limits after every two years
Notification of “Combination” is optional
COMBINATION SHALL BE DEEMED TO HAVE
BEEN APPROVED BY COMMISSION IF NOTHING
IS HEARD WITHIN 90 DAYS.
Suo moto investigation/enquiry can be taken up only
within a period of one year
Notification by Financial Institutions, Banks VCF,etc is
mandatory.
33
Factors have been prescribed to determine whether
combinations would have appreciable adverse affect on
competition.
• Under the MRTP Act, Combinations are not
regulated since 1991
• There is no requirement to get the undertaking
registered
• There is no requirement to have prior approval of
Government
• Under the MRTP Act, the “Combinations” were
regulated by the Central Government
34
Competition Advocacy – an important
compartment of Law
Govt. while formulating policy may make a
reference to the CCI for its opinion on possible
effects on competition.
Statutory Authority may make a reference on a
“Competition issue” for opinion which has to be
given by CCI within 60 days.
Training and creating awareness about competition
and its issues.
35
Competition Fund
The Act provides for establishment of “Competition
Fund” to meet expenses of CCI
The fund would have two sources:
(i) grant of money from consolidated
funds of India; and
(ii) Costs/fees received from parties.
Competition fund is to ensure financial autonomy to
CCI
36
The trial of offences of the Commission’s Order shall be by
the Commission itself.
The DG’s power of investigation have been substantially
enhanced.
There is a provision to set up additional benches in different
cities besides Principal Bench and Merger Bench
Wider pool of talent in the composition of Commission
Key factor is “Adverse” appreciable effect on Competition
Factors have been prescribed to determine dominance,
relevant market, relevant product & geographical market
37
Reasons which necessitated enactment of new
law
The M.R.T.P.Act, 1969 The Competition Act, 2002
1. The M.R.T.P. Commission has The key factor in the Competition
to pass ‘cease & desist’ order Act is “appreciable adverse effect
on being convinced that the on competition” for which the
restrictive trade practice, factors, which need to consider,
which has been subject to have also been prescribed
enquiry, is “prejudicial to
public interest”. The concept
“prejudicial to public interest”
is unclear, bald, vague and
ambiguous
38
4. Under the M.R.T.P.Act, it is In the regime of
mandatory for a party to file a liberalization, the
trade agreement within 60 days requirement to file
with the office of the DGI&R if registrable anti-competitive
such trade agreement contains agreement with the office of
restrictive clauses. the DG has been omitted.
. This is in line with the
international trend
5. Under the M.R.T.P. Act only Under the Competition Act,
“restrictive clause” of the trade the whole agreement is void
agreement can be declared void in case it is found to have
and not the whole agreement anti-competitive covenant
having appreciable adverse
effect on competition in the
market
39
6. Under the M.R.T.P. Act, the Under the Competition Act, the DG
powers of the DG have been is vested with all the powers as are
found to be deficient and vested in a Civil Court.
limited in carrying out
investigation.
7. The M.R.T.P. Act contains The Competition Act focus only on
provisions both relating to anti- “competition issues” and does not
competitive practices and contain provisions, which directly
consumer protection. relate to consumer protection.
.
40
The other differences between the M.R.T.P. Act &
Competition Act are:
1 Based on the pre-reforms Based on the post-reforms scenario
scenario
2. Based on size as a factor Based on structure as a factor
3. Competition offences implicit or Competition offences explicit and
not defined. defined.
4. Complex in arrangement and Simple in arrangement and language
language and easily comprehensible
5. 14 per se offences negating 4 per se offences. All the rest
the principles of natural justice subjected to rule of reason.
6. Frowns upon dominance Frowns upon abuse of dominance
7. Registration of agreements No requirement of registration of
compulsory agreements
41
8. No regulation on combination Combinations regulated beyond a
after 1991. high threshold.
9.. MRTPC appointed by the CCI selected by a Collegium
Government
10. Very little administrative and Relatively more autonomy for the
financial autonomy for the CCI
MRTPC
11. No competition advocacy role for CCI has competition advocacy role
the M.R.T.P.C
12. No penalties for offences Penalties for offences
13. Reactive and rigid Proactive and flexible
14. Unfair trade practices covered Unfair trade practices omitted
9consumer for a will deal with them.
15. No time framework Time is the essence
16. No provision for advocacy Advocacy provision exist.
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