Rayat Bahra Group Of Institutes

Submitted To Ms Anshu Goyal

Submitted By Rohit Nayyar Inderpreet Singh Harpreet Singh

Is a situation in a market in which firms or sellers independently strive for the buyers patronage in order to achieve a particular business objective for example, profits, sales or market share (World Bank, 1999) Competition is an age-old phenomenon

Competition is an age-old phenomenon Benefits of Competition:

Companies : Efficiency, cost-saving operations, better utilization of resources, etc. The Consumer : Wider choice of goods at competitive prices The Government : Generates revenue
BUT

all these benefits are lost if Competition is UNFAIR or NON-EXISTANT

Choice of CARS in the olden days MTNL Monopoly : The position today Airlines : INDIAN AIRLINES : JET : SAHARA Indian Railways : The monopoly continues.

It is a tool to implement and enforce competition policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government interference in the market. Competition Law generally covers 3 areas: Anti - Competitive Agreements, e.g., cartels, Abuse of Dominant Position by enterprises, e.g., predatory pricing, barriers to entry and Regulation of Mergers and Acquisitions (M&As).

The need for Competition Law arises because market can suffer from failures and distortions, and various players can resort to anti-competitive activities such as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer welfare. Thus there is need for Competition Law, and a Competition Watchdog with the authority for enforcing Competition Law.

Competition:

Increases efficiency Encourages innovation Enhances consumer welfare wider choice, lower prices, better quality Conducive to economic and political democracy Apprehension of market failure has prompted 100 countries to enact modern competition laws

Main features of Competition Act

Prohibits Anti-Competitive Agreements Prohibits Abuse of Dominant Position

Provides for Regulation of Combinations

Mandates Competition Advocacy

Horizontal Agreements including cartels, e.g., price fixing, limiting production, sharing markets, bid-rigging Vertical Agreements e.g., tie-in, exclusive supply/ distribution, refusal to deal Cartel regarded most pernicious violation - heavy penalties - criminal offence (lysine, vitamins, graphite
electrodes)

Not dominance, but abuse is illegal Dominance based, not on arithmetical formula, but on economic factors listed in Acts Abuse includes : discriminatory pricing, limiting production, denying access Examples : Microsoft (penalized Euro 497m)

 Ex-post

action Notification either compulsory or optional Strict time frame for decision Threshold limits Less than 5% merger applications are prohibited worldwide

 Commission

is expected to regulate

Combinations, i.e., large mergers, acquisitions,

etc. likely to have appreciable adverse effect on

competition.
Threshold: For single enterprise
Assets

> Rs.1000 crores

Threshold:

For group of enterprises

Assets

> Rs.4000 crores

Turnover > Rs.12000 crores

Similarly, threshold is provided for overseas groups.

 Notification of Combination to Commission is voluntary

If notified, Commission to take a decision within 90 days on the combination. Decision may allow, disallow, modify, etc. the combination.

 Cease and desist order

Impose penalty up to 10% of turnover.

In case of cartel, penalty can be 10% of turnover or 3 times of profit illegally gained from cartel activity, whichever is higher.

 Recommend to Government the division of dominant Enterprise Various penalties ranging from Rs.1 lac upto Rs.1 crore are also provided for failure to comply with direction/order of Commission.

Creates an environment conducive to competition. The operation of the act is not confined to transactions strictly within the boundaries of India but also such transactions involving entities existing or established overseas.

Explicit definitions and criteria have been specified in order to access whether a practice has an appreciable adverse effect on competition.
It is the intention of our legislators that provisions of the act in its extant form should not be considered to be immutable and unchangeable. The intention is promotion of competition advocacy, creating awareness and imparting training about competition issues.

Jurisdiction
For achieving the foresaid duties, the Commission has jurisdiction to:

Enquire into Anti-Competitive Agreements (e.g. Cartels, bid-rigging, etc.) [Section 3] Enquire into abuse of dominant position (e.g. Predatory Pricing, etc.) [Section 4]

Regulate combinations (Mergers, Amalgamation, Acquisition of shares or control), [Sections 5 & 6]

Undertake Competition Advocacy (including advice on competition policy issues), create public awareness, impart training on competition issues, [Section 49]

Commission has regulatory and quasi-judicial powers. It is to function through Benches [Section 22(1)]. Bench Composition [Section 22(3)].
Constituted by Chairperson At least 2 Members At least one Judicial member ( Qualified Judge of High Court)

* Judicial Member means a Member who is, or has been, or is qualified to be, a Judge of a High Court.

The Bench over which the Chairperson presides shall be the Principal Bench and the other Benches shall be known as the Additional Benches.

Competition Act 2002

Aims at promoting competition Focus on effects on competition in the market Seeks to prohibit anti-competitive agreements, abuse of dominant position and to regulate combinations Statutory Authorities can seek CCIs opinion Appreciable adverse effect is a key factor Factors prescribed to determine AAEC Primary duty to achieve the objectives of the Act devolves on CCI Leans heavily on Rule of Reason 14 per se offences negating the principles of natural justice

MRTP Act
Aims at curbing monopolies Focus on size (uptil 1991) and on behaviour from 1991 onwards. Prohibit monopolistic, restrictive and unfair trade practices

No provision to seek opinion Prejudicial to public interest is a key factor parameters not mentioned in the law Act implemented partly by Central Government and partly by the MRTP Commission Obsessed with deemed concept 4 per se offences and all the rest subjected to rule of reason.

Competition Act 2002

Concept of Market is rationalized Relevant Market=Relevant product market + Relevant Geographical market Commission to exercise jurisdiction in case of unreasonable restraints exercised in respect of IPRs. Exclusion of jurisdiction in respect of export business Frowns upon dominance

MRTP Act
Market has not been defined nor factors to determine market have been prescribed

No explicit power with the MRTP in respect of IPRs

Implicit exclusion of jurisdiction in respect of export Frowns upon abuse of dominance

No combinations regulation Penalties for offences Reactive and rigid

Combinations regulated beyond a high threshold limit. No penalties for offences Proactive and flexible

Composition

Chairperson Member between 2 & 10 appointed by GOI Chairperson & its Members shall be whole-time Members & maximum term of 5 years Maximum age for; Chairperson: 65 years Member: 65 years
In Chairperson's absence, Senior most Member , is the acting Chairperson Suspended By Central Government Insolvent Engaged in alternate Paid Employment Convicted of an office involves Moral Turpitude Abused his position Physically or mentally incapable to discharge duties

Make the markets work for the benefit and welfare of consumers Ensure fair and healthy competition in economic activities in the country for development of economy. Implement competition policies for the most efficient utilization of economic resources

Participate in formulation of country's economic policies.

Alignment of sectoral regulatory laws in tandem with the competition law. Effectively carry out competition advocacy. Spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.

Overview

Under the competition advocacy initiative, the Commission organizes interactive meetings, seminars, etc with different trade organizations, consumer associations, stakeholders and the public at large to spread awareness about the Competition Law and the Commission.
Objectives of Competition Advocacy Spread awareness about Competition Act Familiarize business enterprises, central government ministries, state government ministries, central/state PSUs about the importance and benefits of fair competition and ensure compliance of the provisions of Competition Act by all Sensitize departments / ministries of central / state governments, and PSUs about nuances of competition law, to facilitate competition audit of their respective laws on different subjects Take confidence building measures among business enterprises and other stakeholders associated with competition

Formed in 19th Oct 2009 Besides, the Chairperson, the Appellate Tribunal shall consist of not more than two Members to be appointed by the Central Government. The Appellate Tribunal shall have, for the purposes of discharging its functions under the Act, the same powers as are vested in a civil court under the Code of Civil Procedure,1908. Formed for - Hearing grievances against the decisions and remedies given by the CCI - Outstanding cases before Monopolies and Restrictive Trade Practices Commission (MRTPC) - Cases on Unfair Trade Practices (UTP), Restrictive Trade Practices (RTP) & Monopolistic Trade Practices (MTP) Cases on Disparaging Advertisements transferred to National Consumer Disputes Redressal Commission. If any person contravenes, without any reasonable ground, any order of the Appellate Tribunal, he shall be liable for a penalty of not exceeding Rupees one crore or imprisonment for a term up to three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit.

Suo Moto Inquiry

Commission has suo moto power to inquire whether an anti-competitive agreement or abuse of dominant position causes or is likely to cause an appreciable adverse effect on competition [Section 19(1)]
Commission has suo moto power to enquire whether a combination causes or is likely to cause an appreciable adverse effect on competition [Section 20(1)] . This power must be exercised within one year from the date combination has taken effect [Proviso to section 20(1)]

Complaint OR State/Central/Statutory Authorities

Director General (DG) Submits inquiry Finding to CCI

Dismiss Complaint

Prima facie

Further Inquiry

Complaint Rebut Findings of DG

Inquiry into Anti Competitive Agreements & Abuse of Dominant Position

Orders of Commission
Compensation to the parties Modify Agreements

Penalty < 10 % of Annual T/o of last 3 preceding years

In case of abuse by dominant enterprise, may recommend division of the enterprise to the Central Government Cartel: Penalty of 3 x Total profits OR 10 % of Annual T/o of last 3 preceding years

- Transfer OR Vesting of rights, Liabilities, Property or Obligations - Adjustment of Contracts By Discharge/Reduction of Liabilities/Obligation - Creation/Allotment/Cancellation of Shares/Stocks/Securities - Compensation to the affected enterprise/person - Winding up of enterprise - Amendments to MoA or AoA

Inquiry into Combinations

Orders of Commission

Dissolve Combination Yes

Approve Combination

Adverse effect

No

Modifications

If not accepted, parties to submit modifications with 30 days OR 90 Days extension period

If modifications accepted, combination will be allowed

Commissions order

Order equivalent to decree/order by High Court OR Principal Civil Court. Self rectification of Order. Appeal against decision of the Commission can be filed to the Appellate Tribunal within 60 days from the date of communication of the direction, decision or order to him. A further Appeal can be made against the order of the Appellate Tribunal, before the Supreme Court within 60 days from the date of communication of the direction.

Penalities

Penalties for non-compliance with Commissions orders: Penalty not less than Rs. 10 lacs [Section 42(1)] For failure to comply with a direction of Commission or DG Rs 1 lac per day of failure [Section 43] If party to a combination makes a false statement or omits a material particular not less than Rs. 50 lacs up to Rs. 1 crore [Section 44] For willfully omitting to furnish information penalty up to Rs. 10 lacs [Section 45]

Benefits to Centre & State Governments bodies

Savings for exchequers, accrue to central and state governments by virtue of adhering to fair competition norms
Fair competition among suppliers Small enterprises, self-employed and micro-retailers are protected against abuse of dominance by bigger enterprises Helping to sensitize their procurement officers to the harmful effects of anti competitive practices by suppliers, contractors or manufacturers Helping identifying areas where bid-rigging, cartelization or abuse of dominance Familiarizing with the legal remedies available in competition law Helping them develop competition compliance programs Providing competition advise. Helping Nodal Officers at state level in overseeing the task of ensuring fair competition