Competition Commission of India

Academic Associate – IIM Academic Associate – IIM AhmedabadAhmedabad

KALPESHKUMAR L. KALPESHKUMAR L. GUPTAGUPTA

LL.M., MBL (NLSIU), M.Phil. (Law)LL.M., MBL (NLSIU), M.Phil. (Law)

77thth Executive Development Programme - Executive Development Programme - ICSIICSI

November 8 , 2012November 8 , 2012

(C) K L GUPTA(C) K L GUPTA

Outline of the presentation :-

1. Introduction2.Some imp Definitions3.Provision for CCI in

Competition Act, 20024.Recent Orders of CCI 5.Recent News 6.Video on CCI 7.Q & A


PART IV of Constitution of IndiaDIRECTIVE PRINCIPLES OF STATE POLICY

ARTICLE 38. State to secure a social order for the promotion of welfare of the people.

(1)The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

ARTICLE 39. Certain principles of policy to be followed by the State.-

The State shall, in particular, direct its policy towards securing-

(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment;

The Competition Architecture in India :-

1. MRTP Act. 1969 enacted on the recommendations of the Monopolies Inquiry Committee (MIC). It found that there is a high concentration of economic power in over 85% of industries in India

2. The MRTP Act was amended twice in 1984 & in 1991.

3. In 1984 amendments brought unfair trade practices in its ambit in order to protect consumer. In 1991 anti competitive conduct covered.

4. The Finance Minister in his budget speech in 1999 announced of Raghavan Committee to propose a modern competition law suitable to needs Indian economy.

Cont…

The Competition Architecture in India :-

5. In accordance with the recommendations of the Raghavan Committee, the Competition Act, 2002 was passed

6. Pursuant to the provisions of the Amendment in 2007, CCI was established on March 1, 2009 as an autonomous independent body.

7. In 2009, the MRTP Act was repealed and the MRTP Commission established under that act was abolished. MRTP Commission’s pending cases were transferred to CCI.

8. An appellate body called Competition Appellate Tribunal was set up in May 2009 to hear the appeal and dispose off the appeals against the decisions made by the Commission.

Cont…


MRTP ACT, 1969For Prohibition of Monopolistic, Unfair & Restrictive Trade Practice

Liberalization – 1991After this – difficulty arose to administer present market

Competition Act, 2002 to meet the requirement of the highly competitive market

1. Anti-Competitive Agreements2. Abuse of Dominance3. Combinations4. Competition Advocacy


An Act to provide, keeping in view of the economic development of the country for the establishment of a Commission to

-prevent practices having adverse effect on competition, -to promote and sustain competition in markets,

-to protect interest of the consumer and

-to ensure freedom of trade carried on by other participants in markets


Cartel (Section 2(c))

Cartel 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, or, trade in goods or provision of services.


Anti Competitive Agreement (Section 3) :-

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.


Abuse of Dominant Position (Section 4) :-

No enterprise or group shall abuse its dominant 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 favour.


Predatory price (Explanation (b) in Section 4) :-

"predatory price" means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.


Combination (Section 5) :-

The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if—Acquirer or Acquiree or Jointly have

either in India assets of >1000 Crore or turn over >3000 Crore or

in India or Outside India, in aggregate, the assets of >$500 Million, including at least Rs. 500 crore in India or turn over >$1500 Million including at least Rs. 1500 Crore in India or

Cont..



After acquisition, jointly have

either in India assets >4000 crore or turn over >Rs. 12000 Crores or

In India or outside India, in aggregate the assets >$2 Billion including at least Rs. 500 Crores in India or turnover >$6 Billion including at least Rs. 1500 Crores in India or

Cont..

Cont..



Any merger or amalgamation in which-

the enterprise remaining after merger or the enterprise created as a result of the amalgamation have

either in India, the assets of the value of >Rs. 1000 Crores or turn over >3000 Crores or

in India or outside, In aggregate, the assets of the value of >>$500 Million including at least Rs. 500 Crores in India or turnover >$1500 including at least Rs. 1500 Crores in India

Cont..



The value of assets shall be determined by taking the book value of the assets as shown, in the audited books of account of the enterprise, in the financial year immediately preceding the financial year in which the date of proposed merger falls…..

………as reduced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, registered trade mark, registered user, geographical indication, design or layout, etc.


Regulation of Combinations (Section 6) :-

-No Person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition and such a combination shall be void.

-Notice to the Commission within 30 days from execution of agreement / approval of the proposal relating to mergers or amalgamation by the Board of Directors of the Co. concerned.

-No Combination shall come into effect until 210 days have passed from day on which notice has been given to Commission.

Cont..


Regulation of Combinations (Section 6) :-

-The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.

-Above financial organizations shall within 7 days from the days of the acquisition file in Form III with the Commission the details of acquisition.


Regulation on Combinations (Section 64) :-

-The CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Notified on May 11, 2011)

-It has completed one year, during this period the Commission received 61 notices out of which 56 notices have been cleared.

-These notices were cleared within the self-imposed limit of 30 days.


Notice for the proposed combination :-

-Form I with Fees of Rs. 10 lakhs (Schedule II)

-Where parties are engaged in production, supply, distribution sale etc. of similar or identical product with specified share market then Form II with Fees of Rs. 40 lakhs (Schedule II)

-In case of public financial institutions, FIIs, bank or venture loan or any investment agreement without fees in Form III


Failure to file notice (Regulation 8):-

Where the parties to a combination fail to file notice, then Commission upon its own knowledge or information relating to such combination, inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on competition within India and direct the parties to the combination to file notice in Form II within 30 days of the receipt of the notice.


Obligation to file notice (Regulation 9):-

-In case of Acquisition, the Acquirer shall file the notice.

-In case of merger parties to the combination shall jointly file notice.


Establishment of Commission (Section 7) :-

-Head Office at New Delhi

-The Commission may establish at other places in India

Composition of Commission (Section 8) :-

-A Chairperson

-Not less than 2 and more than 6 other members appointed by the Central Government.

-Chairperson & other members of the Commission shall be whole-time members.


Term of office of Chairperson & other Members (Section 10)

-5 years (Till age of 65)

-They shall be eligible for re-appointment

Vacancy, Defect in appointment, etc not to Invalidate proceedings of Commission (Section 15)


Restriction on Employment of Chairperson & other members (Section 12) :-

The Chairperson & other Members shall not for a period of 2 years from the date on which they cease to hold office any employment in, or connected with the management or admin of any enterprise which has been a party to a proceeding before the Competition.

However, the aforesaid restriction will not apply to any employment under Central or State Government or Local Authority or in any statutory authority.


Appointment of Director General etc. (Section 16) :-

The Central Govt. may by notification, appoint a Director-General for the purpose of assisting the Commission in conducting inquiry into contravention of any of the provisions of this Act


Duties of Commission (Section 18) :-

Duty of the Commission is to….

-eliminate practices having adverse effect on competition.

-promote and sustain competition

-protect the interest of consumers and

-ensure freedom of trade carries on by other participants in markets in India


Inquiry into certain agreements & dominant position of enterprise (Section 19) :-

-Receipt of any information from any person, consumer or their association or trade association or

-A reference made to it by the Central Government or a State Government or a Statutory Authority.

-Suo moto


Determinants – whether an agreement has an appreciable adverse effect on competition(Section 19) :- -Creation of barriers to new entrants in the market;

-Driving existing competitions out of the market;

-Foreclosure of competition by hindering entry into the market;

-Accrual of benefit to consumers;

-Improvement in production or distribution of goods or provisions of services;

-Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services etc.


Determinants – whether an enterprise enjoys a dominant position or not (Section 19) :-

-Market share of the enterprise;

-Size and resources of the enterprise;

-Size and importance of the competitors;

-Economic power of the enterprise including commercial advantages over competitors;

-Vertical integration of the enterprises or sale or services or network of such enterprise;

-Dependence of consumers on the enterprise;

-Market structure and size of the market etc..


Inquiry into combinations by Commission (Section 20) :-

-The Commission may upon its own knowledge or information relating to acquisition referred to in Section 5, inquire into whether such a combinations has caused or is likely to cause an appreciable adverse effect on competition in India.

-Commission shall not initiate any inquiry after the expiry of 1 year from the date on which such combination has taken effect.


Procedure for inquiry under Section 19 (Section 26) :-

-Under the Section 19, if the Commission is of the opinion that there exits a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter if not prima facie case, it shall close the matter.

-DG shall submit report.

-Report will be sent to parties concerned/Central Government/State Government as the case may be.


Orders by Commission after inquiry into agreements or abuse of dominant position (Section 27) :-

-Direct any enterprise, person etc. to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position.

-Impose such penalty, as it may deem fit which shall be not more than 10% of the average of the turnover for the last three proceedings financial years.

-Direct to modify agreements.


Procedure for investigation of combinations (Section 29) :-

-Commission is of the prima facie opinion that a combinations is likely to cause or has causes an appreciable adverse effect on competition, it will issue notice to the parties to combination calling upon them to respond within 30 days of the receipt of the notice as why investigation in respect of such combination should not be conducted.

-After receiving reply Commission may call for report from DG.

-Commission will ask for publication of agreement if there is prima facie case of appreciable adverse effect


Orders of Commission on certain combinations (Section 31) :-

-Where Commission is of the opinion that any combination does not or is not likely to have an appreciable adverse effect on competition it shall by order approve the combination.

-If yes then it shall direct that combination shall not take effect.

-Commission may propose to modify combination make it lawful.

-If parties accept modification then it will be approved.

-If parties do not accept modification, such combination shall be deemed to have an appreciable adverse effect on competition.

Cont.


Orders of Commission on certain combinations (Section 31) :-

If the Commission does not on the expiry of a period of 210 days from the date of notice given to the Commission under sub-section (2) of section 6, pass an order or issue direction in accordance with the provisions of sub-section (1) or sub-section (7), the combination shall be deemed to have been approved by the Commission.

Cont.


Acts taking place outside India but having an effect on competition in India (Section 32) :-

The Commission shall, notwithstanding that, an agreement referred to in Section 3 has been entered into outside India;

a.Any party to such agreement is outside India; or

b.Any enterprise abusing the dominant position is outside India or

c.A combination has taken place outside India or

d.Any other mater matter or practice or action arising out of such agreement or dominant position or combination is outside India,

Have power to inquire into such agreement or abuse of dominant position or combination if such agreement or dominant position or combination has or is likely to have an appreciable adverse effect on competition, pass such orders as it may deem fit.


Power to issue interim orders (Section 33) :-

The Commission may by order, temporarily restrain any party from carrying on such act until the conclusion of any such inquiry or until further orders, without giving notice to such party where it deems necessary.


Contravention of orders of Commission (Section 42) :-

-If any person, without reasonable cause, fails to comply with orders or directions of the Commission issued under Sections 27,28,31,32,33,42A and 43A of the Act, he shall be punishable with fine which may extend to Rs. 1 lakh for each day during which such non-compliance occurs, subject to a max of Rs. 10 Crore.

-If any person does not comply with the above, he shall be punishable with imprisonment for a term which may extend to 3 years or with fine which may extend to Rs. 25 crore or with both as the Chief Metropolitan Magistrate, Delhi may deem fit.


Compensation in case of contravention of orders of Commission (Section 42A):-

Application can be made To Appellate Tribunal for violating directions issued by Commission


Penalty for failure to comply with directions of Commission & Director General (Section 43) :-

If any person fails to comply, without reasonable cause with a direction given……

………. punishable with fine which may extend to Rs. 1 lakh for each day during which such failure continues subject to a maximum of Rs. 1 Crore.


Power to impose penalty for no-furnishing of information on combinations (Section 43A)

Commission shall impose on such person or enterprise a penalty which may extend to 1% of the total turnover or the assets whichever is higher of such combination.


Establishment of Appellate Tribunal (Section 53A) :-

The Central Govt. shall by notification establish an Appellate Tribunal to be know as Competition Appellate Tribunal,

- to hear and dispose of appeals against orders, directions passed by the Commission;

- to adjudicate on claim for compensation that may arise from the findings of the Commission.


Composition of Appellate Tribunal (Section 53B) :-

- A Chairperson &

- not more than 2 members

Term of Office (Section 53F) :-

-5 years, eligible for re-appointment

-Chairperson (68 years), Members (65 years)


Awarding compensation (Section 53N) :-

-The Central Govt. or a State Govt. or a local authority or any enterprise or any person may make an application to the Appellate Tribunal to adjudicate on claim for compensation that may arise from the findings of the commission.

-Every application made under shall be accompanied by the findings of the Commission.

-The Appellate Tribunal may, after an inquiry into the allegations mentioned above pass an order directing the enterprise to make payment to the applicant.

Power of Competition Commission of India to award compensation under Section 34 repealed by the Competition (Amendment) Act, 2007


Contravention of orders of Appellate Tribunal (Section 53Q) :-

If any person contravenes, without any reasonable ground any order of the Appellate Tribunal, he shall be liable for a penalty of not exceeding Rs. 1 Crore or imprisonment for a term upto 3 years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit.


Competition Advocacy (Section 49) :-

The Commission shall make suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues.

Competition of Commission of India (Section 7)

Competition Appellate Tribunal (Section 53A)

60 days

60 days

Appeal Flow


Organizational Strcuture of CCI


CCI is now member of International Competition Network, USA :-

-On October 25, 2001, top anti trust official from 14 countries including UK, USA, Australia, Germany, Japan, Korea etc. launched ICN

-The ICN is an informal network of established and newer agencies, competition agencies with the common aim of addressing practical antitrust enforcement and policy issues.

-The ICN has grown to 117. (As on May 2011)


DLF fined for abuse of dominance :-

DLF apartment owners associations such as the Belaire and the Park Place Owners Associations, Gurgaon filed information with the Commission against DLF Ltd. in the year 2010.

It was alleged that by imposing arbitrary, unfair and unreasonable conditions on the apartment allottees in the Belaire and Park Place situated in DLF city, Phase - V Gurgaon, DLF had abused its dominant position.

Cont…Cont…


Cont…

DLF fined for abuse of dominance :-

-CCI directed DLF to cease & desist from formulating & imposing unfair conditions in its agreements with buyers & modify unfair conditions imposed on the buyers.

-The CCI also imposed penalty @7% of the average turnover for the 3 preceding financial years aggregating to Rs. 630 Crores on DLF.

-DLF appealed in COMPAT. It also got stay on order of CCI

Cont…


Cement companies penalized for Cartelization :-

-CCI found Cement Mfgs in violation of the provisions of the Competition Act, 2002 which deals with anticompetitive agreements including Cartels.

-The order was passed pursuant to investigation carried out by the DG upon information filed by the Builder Association of India.

Cont…


-On July 30, disposing of 6-year-old investigation, initiated by its predecessor trade regulator body Monopolies and Restrictive Trade Practices Commission in 2006, the CCI had found the cement makers guilty.

-MRTPC had initiated the enquiry in 2006 suo moto based on a media report on the rise of cement prices. It was also later supplemented with a complaint filed by the Builders Association of India.

-Cement companies move tribunal against CCI order. Next hearing is on November 22, 2012.*

Cont…

Cont…

*Source :- http://articles.economictimes.indiatimes.com/2012-11-01/news/34857835_1_century-cements-grasim-cements-cci-order Dt. November 1, 2012


Rs. 6500 Crores


Commission takes suo-moto cognizance of bid-rigging by manufactures of LPG cylinders :-

-In 2011, the Commission took suo moto cognizance of the reported manipulation of the bids by manufacturers of LPG cylinders for supplying 105 lakh to IOCL during 2011-2012

-DG found identical price in bidding which deprived the IOCL from getting competitive price.

-Matter is pending before the Competition Appellate Tribunal

Cont…


Commission imposed fine of Rs. 165.59 Crores and it further directed all the contravening parties to cease and desist from indulging in anti-competitive conduct which resulted in bid rigging.


CCI fines 10 explosives manufacturers on a complaint filed by Coal India; Amarchand represents Coal India :-

The penalty has been imposed for violations of Section 3 of the Competition Act, 2002 (the Act). The complaint was filed by Coal India Limited (CIL) under Section 3 and 4 of the Act alleging that various explosives manufacturers were engaging in anti-competitive conduct by collectively determining prices, threatening to stop supplies and boycotting the reverse auctions organized by CIL in 2010 to finalize its suppliers for explosives.

Source :- http://barandbench.com/brief/8/2290/cci-fines-10-explosives-manufacturers-on-a-complaint-filed-by-coal-india-amarchand-represents-coal-india- accessed on November 1, 2012

Cont…


Competition Commission of India imposes fine on film chamber(The Hindu, April 20, 2012):-

Competition Commission of India imposing a fine of Rs. 16.82 lakh on the Karnataka Film Chamber of Commerce (KFCC) for restricting the number of prints of language films other than Kannada.

KFCC, which follows a set of norms, restricted the number of prints of the Hritik Roshan-starrer Kites and an Abhishek Bachchan film Raavan to 24 in the State in 2010. When the distributor did not heed its ruling, KFCC issued a warning and disrupted the screening of Kites.

Source :- http://www.thehindu.com/news/states/karnataka/article3332863.ece accessed on November 1, 2012

Cont…


Besides the makers of Kites and Raavan, producers of RaOne, My Name is Khan, Mousam and a few others have knocked on the doors of Competition Commission of India seeking justice. Noting that the decision of the KFCC was anti-competitive,

Competition Commission of India “found it appropriate to impose penalty at the rate of 10% of the average three years income of the KFCC”.

Source :- http://www.thehindu.com/news/states/karnataka/article3332863.ece accessed on November 1, 2012

Cont…


Competition Commission of India probes auto companies’ ‘monopolistic’ practices (Times of India, August 8 , 2012):-

The Competition Commission of India (CCI) has launched investigations into the current trend of automobile companies not allowing their dealers to diversify with other brands.

Source :- http://timesofindia.indiatimes.com/business/india-business/Competition-Commission-of-India-probes-auto-companies-monopolistic-practices/articleshow/15398329.cms accessed on November 1, 2012


Devgn vs Chopras: Ajay Devgn files complaint against Yash Raj Films :-

Ajay filing a complaint with the Competition Commission of India (CCI) alleging that the makers of Jab Tak Hai Jaan have been blocking the release of his film in certain theatres.

Source :- http://indiatoday.intoday.in/story/ajay-devgn-files-complaint-against-yash-raj-films/1/227144.html accessed on November 1, 2012

v/s


Ajay Devgn Complains Against Yash Raj Films to CCI :-

Competition Commission of India (CCI) has received a complaint from actor-producer Ajay Devgn against Yash Raj Films for alleged abuse of dominant position ahead of the release of their films this month.

"The complaint is being considered. A decision on whether to accept it or not is likely to be taken in a week or so," the official said.

Source :- http://news.outlookindia.com/items.aspx?artid=779766 accessed on November 2, 2012

v/s

ADF


CCI rejects Ajay Devgn's plea against Yash Raj Films (November 5, 2012) :-

Fair trade regulator CCI has rejected actor-producer Ajay Devgn's complaint alleging abuse of dominant position by Yash Raj Films, saying that there are no violations of competition norms in the case.

Ajay Devgn Films (ADF) said it has appealed against the Competition Commission of India's (CCI) ruling.


For Market to be just……..

……..Competition is must

For Market to be just……..

……..Competition is must

Kalpeshkumar L GuptaAcademic Associate IIM [email protected]@gmail.com

(c) K L Gupta

Competition Commission of India

Business

Transcript of Competition Commission of India