Competition Act Final

7/28/2019 Competition Act Final

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Competition

Competition Law and Policy

MRTP Act, 1969 & COMPITITION ACT, 2002

Four segments of Act

Today we will surely learn Anti-Competitive Agreement andAbuse of Dominant Position


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Competition is a very broad term.

It is not defined in the Act. It refers to economic rivalryamongst enterprises to control greater market power.

Level of Competition does not depend upon number of

players in an industry but degree of contestability.

Story by our director Prof. (Gp. Capt.) D. P. Apte

AK-47 Avtomat Kalashnikov, C-zar to Lenin to Gorbachove

From Russia With Love


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Promotes efficiency

Encourages innovation

Leads to higher productivity

Punishes the laggards (who lags behind in giving theservices) case of RCOM, took CDMA but didnt start theservice and fined, in 2000-2001

Facilitates better governance

Boosts choice, improves quality, reduce costs Ensures availability of goods in abundance of

acceptable

Quality at affordable price


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For consumers:

Lower prices

Improved quality

Better services Wider choice

For business:

Availability of inputs at competitive price,

Level playing field,

One can readdress against denial of market access andother anti-competitive practices


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In 1980, less 40 countries had competition law

Currently over 100 countries have competition law

Over 30 countries are in the process of enacting

competition law. India is in the family of those which have

modernised their competition law


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Promotes efficiency

Encourages innovation

Punishes the laggards

Facilitates better governance Boosts choice improves quality, reduce costs

Ensures availability of goods in abundance of acceptablequality at affordable price


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Both Competition Law and Policy have roles inmaintaining free & fair competition:

Competition Policy set of market based policiesthat enhance competition, facilitate entry and exit,reduce administrative controls, minimize regulations,etc.

Competition Law a law to prohibit and penalizeanti-competitive practices by enterprises and regulate

potentially anti-competitive mergers. (Market Failures).


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Enterprise which includes person or Department ofGovernment engaged in commercial activities

Enterprise includes subsidiary

Applies to goods and services

Consumer includes commercial buyer

Law is not applicable to sovereign functions and functionsrelating to:

Atomic Energy - Currency Defence - Space


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Competition Act, 2002 states its objective inPreamble is to provide for the establishment of a

commission to;

Eliminate practices having adverse effect oncompetition.

Promote and sustain competition.

Protect interest of consumers. Ensure freedom of trade carried on by other

participants in markets in India.


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MRTP ACT, 1969

To provide that theoperation of the economic

system does not result inthe concentration ofeconomic power to thecommon detriment;

Control of monopolies; Prohibition of

monopolistic andrestrictive tradepractices.

COMPETITION ACT, 2002

Establishment of aCommission;

To prevent practices havingappreciable adverse effecton competition;

To promote and sustaincompetition in markets;

To protect the interest ofconsumers and to ensurefreedom of trade carried onby other participants inmarkets, in India.


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Monopolistic trade practices, restrictive trade practices(RTPs) and unfair trade practices

Both monopolistic trade practices and restrictivetrade practices would come under the CCI scanner

Cases ofunfairtrade practices are to be transferred tothe National Commission constituted under theConsumerProtection Act, 1986

RTPs to be registered with the Director-General ofInvestigation and Registration (DGIR)

The burden of proof that the agreement is eligible tomake use of the gateways in Section 38 of the MRTP

Act, lies on the party


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Session - 1

I. Prohibits Anti Competitive Agreement. (Sec 3)

II. Prohibits Abuse of Dominant Position. (Sec 4)

Session - 2

I. Provides for Regulation of Combinations (Sec5,6)

II. Enjoins Competition Advocacy. (Sec 49)

back!!


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HORIZONTAL RESTRAINTS :

CARTELS {FIXING PURCHASE ORSALE PRICES (EXPORT CARTELS

EXEMPTED) }

BID-RIGGING (COLLUSIVETENDERING)

SHARING MARKETS BYTERRITORY, TYPE ETC.

LIMITING PRODUCTION, SUPPLY,TECHNICAL DEVELOPMENT

THE ABOVE ARE PER SEILLEGAL.

VERTICAL RESTRAINTS :

TIE-IN ARRANGEMENTS

EXCLUSIVE SUPPLIES

EXCLUSIVE DISTRIBUTION

REFUSAL TO DEAL

RESALEPRICEMAINTENANCE

ADJUDICATION BY RULE OFREASON


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Such agreements are prohibited by law

Such agreements are void

Under the MRTP Act, 1969 only clause

which is anti-competitive is void Unlike MRTP Act, there is no requirement to file anti-

competitive agreement with DG,CCI

CCI can file suo moto


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Regarded as most pernicious form of anti competitivebehaviour

Hard core cartels is on top of the agenda of mostcompetition authorities

Leniency programs have resulted in higher rate ofdetection

Vitamins cartel, electro-graphite cartel, etc.

Loss to developing countries enormous`


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Amino Acid Lysine cartel is one of the landmark casesdecided in the US

Two Japanese, two South Korean and one UScompany agreed not to compete on price

Price of lysine rose on account of collusion from 68cents per month to 98 cents in 1990 and continued atthat level until detection in 1995

Evidence collected by DOJ with the assistance of FBIincluded documents / transcripts of secretly recordedconversations.


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The foreign companies charged were Ajinomoto andKyowa Hakko Kogyo of Japan with 20% of world salesand Sewon America Inc. and Cheil Jedang Ltd. of Koreawith 15% of world sales.

All companies were found to have violated theunreasonable restraint of interstate trade and

commerce clause in Section 1 of the Sherman Act (15

U.S.C. 1).

This violation has a penalty of a maximum fine of $10million for corporations and a maximum penalty of threeyears imprisonment and a $350,000 fine for individuals.


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According to US law,

The first person to come forward to report the existence of acartel will receive immunity from prosecution. In the case ofADM, Mr. Whitacre, a former executive did not receive thisimmunity. The judge decided that he was the organizer of thecartel and according to law he had to serve at least two andone-half years in jail.

It has also come to light that the judge weighed heavily on thefact that Mr. Whitacre was illegally taking at least 9 milliondollars from the company, even while working as aninformant.

For stealing the money Mr. Whitacre had to serve nine yearsin jail and with his cartel involvement he had to spend morethan 10 years in jail. The other two ADM executives MichaelAndreas and Terrance Wilson both received two years.


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Cease & Desist order Grant temporary stay during enquiry

Declare anti-competitive agreement void

Impose penalties

Penalty of 3 times of profits or 10% of the turnover of theenterprises whichever is more in respect of cartels

Penalty up to 10% of the turnover of enterprises inrespect of other contravention

Award compensation to aggrieved persons Violation of Commission order attract civil imprisonment

beside heavy monetary penalty


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Furnish information relating to anti-competitive practices

Make a reference for enquiry

Make a reference for opinion

File application for award of compensation Necessity to have competition compliance programme

NB: There is a provision to accord confidentiality(Gumanm hai koi!!! )


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Agreement includes arrangement orunderstanding, oral, or in writing, not necessarilyenforceable by law.

Not dominance, but its abuse is prohibited. Acts deemed to be abuse are (sec.4);

Unfair or discriminatory pricing (including predatory pricing).

Limiting production or technical development

Denial of market access.

Conclusion of contracts subject to supplementary obligations.

Use of dominant position in one market to enter into or protect the

other market


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Dominance not based on arithmetical figure, but onseveral factors listed in Act. Sec.19(4).

Relevant market needs to be first determined; Relevant product market. Sec 19(7)

Relevant geographic market. Sec 19(6)


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Abuse of a dominant position occurs when a dominantfirm in a market, or a dominant group of firms, engagesin conduct that is intended to eliminate or discipline acompetitor or to deter future entry by new competitors,

with the result that competition is prevented or lessenedsubstantially.

These provisions, contained in sections 78 and 79 ofthe Competition Act, establish the bounds of legitimatecompetitive behaviour and provide for corrective action

when firms engage in anti-competitive activities thatdamage or eliminate competitors and that maintain,entrench or enhance their market power.


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Subsection 79(1) sets out three essential elements thatmust be found to exist for the Competition Tribunal to grantan order.

The Tribunal must find that:

one or more persons substantially or completely control,throughout Canada or any area thereof, a class orspecies of business;

that person or these persons have engaged or areengaging in a practice of anti-competitive acts; and

the practice has had, is having or is likely to have theeffect of preventing or lessening competitionsubstantially in a market.


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The petition has been jointly filed by the Cellular OperatorsAssociation of India (COAI) and Vodafone Essar as theCommission's order was made applicable to all service providersagainst mobile service providers from holding schemes, contest

or lottery as part of their promotional activities. (Sep 18, 2007)

The Commission on August 22 passed an order saying thatprima facie Vodafone's scheme of offering a free gold coin andbumper prize of Maruti SX4 car by way of lucky draw to its

subscribers was a case of unfair trade practice. It held that thescheme was not to the subscribers' interests but to merelyensure that users make more calls towards generating morerevenue for the service providers.


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Unfair and excessive prices in the energy sector

It was held that: As regards the abuse of a dominantposition, although the price level of the product may not

of itself necessarily suffice to disclose such an abuse, it

may however, if unjustified by any objective criteria, and

if it is particularly high, be a determining factor.

In General Motors, the Commission used the expressionexcessive prices for the first time, suggesting that an

excessive price would be unfair. Although the ECJannulled the decision, it upheld the proposition thatunder Article 82 an abuse might lie, inter alia, in theimposition of a price which is excessive in relation to the

economic value of the service provided.


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END OF SESSION - 1

Thank You

End Of Todays Session


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Combinations includes: merger and amalgamation,acquiring of control, and acquisition of shares, votingrights, assets.

High thresholds, notification domestic nexus. Mandatory pre-notification before mergers.

Combination must decide in 210 days, else combinationdeemed approved.


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Combination assessed on rule of reason based on 14factors.

Commission can take suo moto action within 1 yearafter combination


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The Commission shalltake suitable measures to; Promote competition advocacy.

Create public awareness.

Impact training about competition issues.

The Commission shall render opinion on a referencefrom the Central Government on a policy/law oncompetition; not binding.


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Government department/undertakingincluded, Competitive Neutrality. Effects Doctrine

CCIs jurisdiction expressly extended to anti-competitive

practice taking place outside India, but having effect inmarkets in India.

This will better protect domestic markets / consumer.

Relationship with Sector Regulators

Refers to competition issue arising in a proceeding to

commission for opinion .Commission to give opinion in 60 days, after which regulator

may pass order.


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For discharging its duties/functions, ICC can enter intomemorandum/arrangement with any agency of any

foreign country.

Such arrangements imp. For inquiries against

overseas/cross-borders violations.International cooperation and effects doctrine mutually

complementary.

Excluded from competition scrutiny:

- Exports- Reasonable restriction on IPRs (Patents, Copyrights etc.)

- Efficiency enhancing Joint Ventures excluded from presumptiverule


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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.


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THANK YOU !!

Competition Act Final

Documents

Transcript of Competition Act Final