50037397 competition-act-ppt final

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Transcript of 50037397 competition-act-ppt final

  • 1. ByKrishnaPrabhu JKrishna Kumar RKannan PKalaiArasanKumaresanA

2. Competition-What A situation in a market, in which sellers independentlystrive for buyers patronage to achieve business objectivessuch as profits, sales or market share. It is the foundation of an efficiently working marketsystem. 3. Competition-why The ultimate objective of competition is to secure the interest ofthe Consumer - it empowers the consumer, best guarantee forconsumer protection. It is a means of reducing cost and improving quality. It also implies an open market where shortages are rapidlyeliminated through the best allocation of resources. It accelerates growth and development; preserves economic andpolitical democracy. 4. Competition Policy Competition policy is defined as those Governmentmeasures that affect the behavior of enterprises andstructure of the industry. It is to promote efficiency andmaximize welfare. (Sum of consumers. surplus &producers. surplus and taxes collected by the Government). 5. Competition Policy-Goals Preservation and promotion of the competitive process. Efficiency in production and allocation of goods andservices. Innovation and adjustment to technological change. Sustained economic growth. 6. The New Law A new law called competition act 2002 has been enacted toreplace the extant law, MRTP act 1969. The new law was challenged in the supreme court on theground that the chairperson should only be from thejudiciary. The new law has been amended on 10 sep 2007 by theparliament. 7. Competition act-Objective Competition act, 2002 notified in January 2003. Stated objectivein preamble is to provide for Establishment of a Commission. to prevent practices having appreciable adverse effect oncompetition; to promote and sustain competition in markets; to protect the interest of consumers to ensure freedom of trade carried on by other participants inmarkets, in India 8. Main Features Prohibits Anti Competitive Agreements. (sec 3) Prohibits Abuse of Dominant Position. (sec 4) Provides for Regulation of Combinations. (sec 5,6) Enjoins competition Advocacy. (sec 49) 9. Anti-Competitive Agreements Section 3 of the Act deals with agreements among enterprises orpersons or association of persons, which causes or likely to causeappreciable adverse effect on competition. Such agreements arerendered void pursuant to this section.The Act deals with following kind of agreements. Horizontal Agreements Vertical Agreements 10. Horizontal Agreements Agreements between enterprises at the same stage of production,services, etc. and including Cartels.Examples :(i) directly or indirectly determines purchase or sale prices;(ii) limit or control production, supply, technical development etc.(iii) allocate areas or customers(iv) Directly or indirectly results in bid rigging or collusive bidding. Above agreements are presumed to cause appreciable adverse effect oncompetition in the markets. 11. Vertical Agreements Agreements between enterprises at different stages of production,distribution, etc.- subject to Rule of Reason; burden of appreciableadverse effect on competition, they are prohibited.Examples :(i) Tie-in arrangement;(ii) Exclusive supply agreement;(iii) Exclusive distribution agreement;(iv) Refusal to deal;(v) Re-sale price maintenance. 12. Abuse of Dominance Unlike MRTP law, the Act does not frown on dominance by market players. But the abuse of dominance is prohibited under Section 4 of the Act. Dominance or Dominant Position means a position of strength, enjoyed by an enterprise, in the relevant market, in India which enables it to 13. Continue. a. operate independently of competitive forces in the relevant market; sec .19(7) or b. affect its competitors or consumers or the relevant market in its favors sec .19(9) Dominance is determined by several factors e.g. market share of the enterprise concerned, market share of competitors, entry barriers, size and resources commanded by the enterprise or competitors, etc. sec .19(4) 14. ContinueExamples of abuse include Exclusionary practices such as predatory pricing, denyingmarket access, use of dominance in one market to enter into, orprotect, other relevant market. Exploitative practices such as discriminatory pricing andimposing discriminatory conditions of trade, conclusion of maincontract contingent upon accepting supplementary obligationsunrelated to main contract. 15. Regulation of Combinations. Section 5 of the Act deals with combinations. Combination includesacquisition of shares, acquiring of control and mergers andamalgamations. These combinations can be horizontal, vertical orconglomerate. It is the horizontal type of combinations that has veryhigh potential to thwart competition when compared to other twokinds of combinations. In line with the market realities, the Act provides for very liberal regimeof combination regulation. The salient features of combinationregulations are 16. Continue a. The Act has set very high threshold limit based on turnover or assets of the enterprises involved in combination for notification of combinations. The objective is to keep smaller combinations outside regulation and encouraging Indian enterprises to grow in size as well market share in globalised market. b. Higher threshold limit is set for combination involving parties having operation both in India and outside India. c. The notification of combination to the Commission is voluntary not mandatory. 17. Continue d. Such notification has to be disposed off by the Commission within 90 working days, failing which the same is deemed to be approved. e. The commission also has the suo moto enquiry power. f. Limited exemption is given to combination involving public financial institution, foreign institutional investors and venture capital fund. 18. Competition Advocacy The Commission shall take suitable measures to:-Promote competition advocacy.-create public awareness.-Impact training about competition issues. The commission shall opinion on a reference from thecentral government on a policy/ law on competition; notbinding. [sec 49] 19. Examples Initiatives by commission in respect of:-Department of Posts - Indian post office (Amendmentbill), 2006 monopoly of letter mail, USO fee, newregulator, etc.-Department of shipping- shipping conference s- traifffixing; and shipping trade practices Bill, 2005-Ministry of civil aviation- price fixing by airline association 20. Power of commission Cease and desist order Penalty up to 10% of average turnover for last threepreceding financial years. In case of combination- can be approved, approved withmodification, or refused approval. In case of dominant enterprise- Order for division ofdominant enterprise. 21. Continue Approach commission any person; individual, company,firm, association, statutory corporation, governmentcompany, legal authority, etc. Consumer means one who buys goods/ avails services forconsideration. Reference by central/ state government, statutoryauthority.