PRESENTATION ON

“COMPETITION LAW”
 Introduction
• What is competition?
- Competition refers to a situation in a marketplace in which
firms/entities or sellers independently strive for the patronage of
buyers in order to achieve a particular business objectives, such
as profit, sales, market share etc.
- A competitive market is a laissez faire market where every one is
price taker and no one can controls or dictates the prices.

• Why Competition?
 Low prices
 Better quality
 More choices
 Innovation
 Win –win situation for economy, government, consumers and
producers.
 Introduction

• What is competition in a market place?

- The process of rivalry between business enterprises for
customers.

• Competition the key driver

- Consumers (Choice, Quality, Price)
- Economy (Productivity, Growth, Wealth Creation)
- Society (Innovation, Welfare)

• Competition is not automatic

• Need for the market regulator

MARKET
Perfect Competition
Types of
Markets Monopoly

Oligopoly

Monopolistic competition

Monopsony

Perfect Competition

Perfect competition is a market system characterized by many

different buyers and sellers. In the classic theoretical definition of
perfect competition, there are an infinite number of buyers and
sellers. With so many market players, it is impossible for any one
participant to alter the prevailing price in the market. If they attempt
to do so, buyers and sellers have infinite alternatives to pursue.
Monopoly

A monopoly is the exact opposite form of market system as perfect

competition. In a pure monopoly, there is only one producer of a
particular good or service, and generally no reasonable substitute. In such
a market system, the monopolist is able to charge whatever price they
wish due to the absence of competition, but their overall revenue will be
limited by the ability or willingness of customers to pay their price.

Oligopoly

An oligopoly is similar in many ways to a monopoly. The primary

difference is that rather than having only one producer of a good or
service, there are a handful of producers, or at least a handful of
producers that make up a dominant majority of the production in the
market system. While oligopolists do not have the same pricing power as
monopolists, it is possible, without diligent government regulation, that
oligopolists will collude with one another to set prices in the same way a
monopolist would.
Monopsony

Market systems are not only differentiated according to the number of

suppliers in the market. They may also be differentiated according to the
number of buyers. Whereas a perfectly competitive market theoretically has
an infinite number of buyers and sellers, a monopsony has only one buyer for
a particular good or service, giving that buyer significant power in determining
the price of the products produced.
 Competition Law in India

• The Monopolies and Restrictive Trade Practices Act

• The liberalized economy post 1991

• The Competition Act, 2002/2007

• Enforcement functions from May 2009

• Combination review from June 2011

 Objective of the Competition Act

• The Preamble
 To prevent practices having an adverse effect on
Competition
 To promote and sustain Competition in markets
 To protect the interests of consumers
 To ensure freedom of trade carried on by other participants
in markets in India.

• Duties of the Commission (S18)

 Pillars of the Act

• Prohibits anti-competitive agreements (S 3)

• Prohibits abuse of dominant position (S 4)

• Regulates combinations (S 6)

• Mandates Competition Advocacy (S 49)

• Advisory (S 21)
 Exceptions to Anti-Competitive Agreements

• Horizontal and Vertical Agreements imposing reasonable

restrictions for protecting rights conferred under following
statues:

- Copyright Act, 1957;

- Patents Act, 1970;
- Trade and Merchandise Marks Act, 1958 or the Trade Mark
Act, 1999;
- Geographical Indications of Goods (Registration and
Protection) Act, 1999;
- Designs Act, 2000;
- Semi-conductor Integrated Circuits Layout-Design Act, 2000.
 DEVELOPMENT IN COMPETITION LAW

• Canada the first country to adopt the competition law in 1889.

• US enacted the Sherman Act in 18890 followed by the Clayton

Act and the Federal Trade Commission Act,1935. Collectively
these laws prohibit conspiracies in restraint of trade,
monopolization and merger & acquisitions which would
substantially lessen competition or tend to create a monopoly in
any line of business.

• UK: The Fair Trading Act was enacted in 1973. The Competition
Act of 1998 repealed the Fair Trading Act, 1973.
 COMPETITION LAW IN INDIA

• The first MRTP (Monopolies and Restrictive Trade Practices) Act

was enacted in 1969. The principle objectives are:
(a) Prevention of concentration of economic power to the common
detriment
(b) Control of monopolies
(c) Prohibition of Monopolistic Trade Practices
(d) Prohibition of Restricted Trade Practices including Unfair Trade
Practices
Sl. No. MRTP Act
1 Based on command
and control regime
2 Competition concepts not
expressly defined
3 No regulation of
combinations
4 Has no advocacy role
5 No power to impose
penalty
Competition Act
Based on liberalized
regime
Competition concepts
expressly defined
Provides for regulation of
combination
Provides for advocacy
Power to impose penalty
deterrence

A perusal of the MRPT act will show that there is

neither definition nor even a mention of certain
offending trade practices, which are restrictive
in nature like ―Abuse of Dominance, ―Cartels,
Collusion and Price Fixing, ―Bid Rigging and
―Predatory Pricing.
 Phase II
Basic Concepts
 Phase III
The Competition
Act, 2002
 The Competition Act,2002

In October 1999 Government of India Appointed a Committee under

Mr. SVS Raghavan. Committee submitted the report in May 2000
and parliament passed the new law in December 2002 named “The
Competition Act 2002”.

Objectives of The Competition Act, 2002

• To prevent anti-competitive practices

• Promote and sustain competition
• Protect the interests of the consumers
• Ensure freedom of trade in markets in India.
 Four important concepts incorporated under the Act are:

 Prohibition of Anti-competitive Agreement

Section – 3
 Prohibition of Abuse of Dominant Position
Section – 4
 Regulation of Combinations
Section – 5
 Competition Advocacy
Section - 49
 Prohibition of Anti-competitive
Agreement
Meaning of Anti-competitive Agreement

An anti-competitive agreement is an agreement having appreciable

adverse effect on competition.

Anti-competitive agreements include, but are not limited to:-

 Agreement to limit production and/or supply;

 Agreement to allocate markets;
 Agreement to fix price;
 Bid rigging or collusive bidding;
 Conditional purchase/ sale (tie-in arrangement);
 Exclusive supply / distribution arrangement;
 Resale price maintenance; and
 Refusal to deal
 What Is An “Agreement” Under The
Act?
An “agreement”
includes any
arrangement or
understanding or
concerted action
entered into
between parties. It
need not be in
writing or formal or
intended to be
enforceable in law.
Types of Anti-Competitive Agreements:

Competition laws in all over the world usually places anti-

competitive agreements in two categories namely –

1. Horizontal agreements 2. Vertical agreements

Horizontal Agreements:
Agreements prohibited under section 3(3) are described
as horizontal agreements for they apply to similar or
identical trade of goods or provision of services. The Act
under this sub-section presumes following activities as
to have appreciable adverse effect on competition.

1. Price fixing
2. Limiting the production or supply
3. Allocation of market share
4. Bid Rigging
5. Cartels:
Are engaged in identical or similar trade of goods or provision of services :-

• Determines either directly or indirectly purchase or sale prices.

• Limits or controls production, supply, markets, technical development, investment or
provision of services.
• Shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the
market or any other similar way;
• Directly or indirectly results in bid rigging or collusive bidding

Cartels The Act defines Cartel under section 2(c) it says ―

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. Activities of cartels results in collusion. Collusion
refers to combinations, conspiracies or agreements among sellers to raise or fix prices and to reduce
output in order to increase profit
Vertical Agreements:
Vertical Agreements are between parties at different stages of
production, supply, distribution, etc.

Any agreement amongst enterprises or persons at different

stages or levels of the production chain in different markets, in
respect of production, supply, distribution, storage, sale or price
of, or trade in goods or provision of services shall be an
agreement in contravention of sub-section (1) if such
agreement causes or is likely to cause anti-competitive
practices.

Example: tie-in arrangements, exclusive supply/distribution agreements, refusal to

deal.
Tie-in arrangement –

includes any agreement requiring a purchaser of goods, as a condition of such

purchase, to purchase some other goods

Example: Case- Tying of Apple products with AT&T (2007) When Apple initially
released the iPhone on June 29, 2007, it was sold exclusively with AT&T contracts
in the United States. To enforce this exclusivity, Apple employed a software "lock"
that ensured the phone would not work on any network besides AT&T's and any
user who tried to unlock or otherwise tamper with the locking software ran the
risk of rendering their iPhone permanently inoperable.
Exclusive supply agreement –

includes any agreement restricting in any

manner the purchaser in the course of his
trade from acquiring or otherwise dealing in
any goods other than those of the seller or any
other person

Exclusive distribution agreement –

includes any agreement to limit, restrict or

withhold the output or supply of any goods or
allocate any area or market for the disposal or
sale of the goods

Refusal to deal –

includes any agreement which restricts, or is

likely to restrict, by any method the persons or
classes of persons to whom goods are sold or
from whom goods are bought
Resale price maintenance –

includes any agreement to sell goods on condition that the prices to be

charged on the resale by the purchaser shall be the prices stipulated by the
seller unless it is clearly stated that prices lower than those prices may be
charged.

Example: Case –
All India Tyre Dealers Federation vs. Tyre Manufacturers (2012)
This case brought to light that the terms of the agreement between
Bridgestone and Tyre Dealers put a restriction on the dealers that they would
not sell products of Bridgestone competitors. Under these agreements,
Bridgestone also reserved the right to control the retail price of its products.
The dealer was obliged not to sell the goods of the company above or below
the price fixed by Bridgestone. This amounts to resale price maintenance
Unfair Trade Practices
Any trade practice whose harm outweighs its benefits. It can be
defined as using various deceptive, fraudulent or unethical methods
to obtain business.

Unfair trade practices include misrepresentation, false advertising,

tied selling and other acts that are declared unlawful by statute. It can
also be referred to as deceptive trade practices.

Restrictive Practices
Any trade practice that tends to block the flow of capital into
production and also bring in conditions of delivery to affect the flow
of supplies leading to unjustified cost.

Example:
A gas distributor insisted his customers to buy gas stove as a
condition to give gas connection. It was held that it was a restrictive
trade practice.
 Prohibition of Abuse of
Dominant Position
Section – 4
Section 4 of the Competition Act covers the different aspects of
abuse of dominant position. It prohibits abuse of dominance by
an enterprise or the group.

Three Stage process of determining Abuse of dominance

Stage 1 - Determination of Relevant Market

Stage 2 - Dominance of the enterprise/group in the relevant

market is ascertained

Stage 3 - "Abuse" by the dominant enterprise in the relevant

market is determined
 Stage 1 - Determination of Relevant Market CCI determines the
relevant market with reference to

i) Relevant Product Market ii) Relevant Geographic Market

The relevant product market Relevant geographic market is

means “a market comprising all defined in terms of “the area in
those products or services, which the conditions of
which are regarded as inter- competition for supply of goods or
changeable or substitutable by provision of services or demand of
the consumer, by reason of goods or services are distinctly
characteristics of the products homogenous and can be
or services, their prices and distinguished from the conditions
intended use” prevailing in the neighboring
areas”.
 Factors for determining

Relevant Product Market: Relevant Geographic Market:

•Physical characteristics or end- •Regulatory trade barriers

use of goods •Local specification requirements
•Price of goods or services •National procurement policies
•Consumer preferences •Adequate distribution facilities
•Exclusion of in house production •Transport costs
•Existence of specialized products •Language
•Classification of industrial •Consumer preferences
products •Need for secure or regular supplies or
rapid after-sales services
Stage 2 - Dominance of the enterprise/group in the relevant market is
ascertained As per the Act, dominance refers to a position of strength
which

i) Enables an enterprise to operate independently of competitive

forces, or,

ii) Enables an enterprise to affect its competitors or consumers or the

relevant market in its favor.
Factors for Determining Dominant Position
Dominance has been traditionally defined in terms of market share of the
enterprise. However, a number of other factors play a role in determining the
influence of an enterprise or the group in the market which are as follows:
•market share of the enterprise
•the size and resources of the enterprise
•size and importance of competitors
•economic power of the enterprise
•vertical integration of the enterprise or sale or service network of such
enterprise
•dependence of consumers on the enterprise;
•extent of entry and exit barriers in the market
•countervailing buying power
•market structure and size of the market
•source of dominant position viz. whether obtained due to statute or by
virtue of being a government company or a public sector undertaking or
otherwise
•social costs and obligations
•Any other factor which the Commission may consider relevant for the
inquiry.
Stage 3 - "Abuse" by the dominant enterprise in the relevant market
is determined

Abuse is stated to occur when an enterprise or the group uses its

dominant position in the relevant market in an exclusionary or/and
an exploitative manner. The objective is to eliminate or discipline
an existing competitor or to deter future entry by new
competitors; with the result that competition is prevented or
lessened.
Abuse of Dominance occurs if an enterprise/ group engages in the
following conducts:

Conduct 1 - Directly or indirectly imposing unfair or discriminatory

condition/price (including predatory price) in purchase or sale of goods or
service.

Conduct 2 - Limiting or restricting production of goods or provision of

services or market.

Conduct 3 - Limiting or restricting technical or scientific development

relating to goods or services to the prejudice of consumers.

Conduct 4 - Denying Market Access in any manner

Conduct 5 - Making conclusion of contracts subject to acceptance by

other parties of supplementary obligations which, by their nature or
according to commercial usage have no connection with the subject of
such contracts.

Conduct 6 - Using the dominant position in one relevant market to enter

into, or protect, other relevant market.
DLF Case –

For abuse of dominance position in relevant market which was determined as

services of developer/builder in respect of high-end residential
accommodation in Gurgaon.

Outcome of the Case

CCI vide order dated 12.08.2011, besides imposing penalty of Rs. 630 Crores on
DLF Ltd. under section 27(b) of the Act, at the rate of 7% of the average
turnover of DLF for the last three financial years, also passed the following
directions under section 27(a) of the Act:

i. To cease and desist from formulating and imposing such unfair conditions in
its Agreement with buyers in Gurgaon.

ii. To suitably modify unfair conditions imposed on its buyers as referred to

above, within 3 months of the date of receipt of the order.
 Regulation of Combinations
Section – 5
Combination Definitions:

Broadly, combination under the Act means acquisition of

control, shares, voting rights or assets, acquisition of control by
a person over an enterprise where such person has direct or
indirect control over another enterprise engaged in competing
businesses, and mergers and amalgamations between or
amongst enterprises when the combining parties exceed the
thresholds set in the Act. The thresholds are specified in the Act
in terms of assets or turnover in India and outside India.

Horizontal Vertical
combination combination
Combination Notice

Any combination which qualifies under this Act needs

to give mandatory pre-combination notification to the
Commission. Any person/ enterprise proposing to
enter into a combination needs to notify the
Commission in the specified form disclosing the
details of the combination within 30 days of the
approval of the proposal for combination. In case, a
notifiable combination is not notified, the
Commission has the power to inquire into it within an
year of the combination. The Commission also has the
power to impose a fine which may extend to one per
cent of the total turnover or the assets of the
combination, whichever is higher.
 Thresholds for Combinations under the Act:

In India Applicable To Assets Turnover

Individual Rs.2,000 cr. Rs.6,000 cr.

Group Rs.8,000 cr. Rs.24,000 cr.

In India & Outside Assets Turnover

Total Minimum Indian Component Total Minimum Indian

Component out of Total

Individual Parties $1 bn Rs.1000 cr. $3bn Rs.3,000 cr.

Group $4 bn Rs.1000 cr. $12 bn Rs.3,000 cr.

Example: Combination of Jet Airways & Etihad Airways.
The Jet Airways & Etihad Airways are engaged in the business of providing
international air transportation services In investment agreement Etihad had shown
interest in having 24% stake in in Jet Airways to enhance the Airlines business through
Joint initiative. Etihad‟s acquisition of 24% stake & right to nominate two directors out
of six shareholders directors, including the Board of Director of Jet.

Direction of the CCI

Considering the facts on record and the details provided in the notice, the Commission
is of the opinion that the proposed combination is not likely to have appreciable
adverse effect on competition in India and therefore, the Commission hereby
approves the same.
 Competition Advocacy
Section – 49
The mandate of the Competition Commission of India
(“CCI”) needs to extend beyond merely enforcing the
Competition Law. It needs to participate more broadly in
the formulation of the country’s economic policies, which
may adversely affect competitive market structure,
business conduct and economic performance. The CCI,
therefore, needs to assume the role of competition
advocate, acting proactively to bring about Government
policies that lower barriers to entry, promote de-
regulation and trade liberalization and promote
competition in the market place. There is a direct
relationship between competition advocacy and
enforcement of Competition Law. The aim of Competition
advocacy is to foster conditions that will lead to a more
competitive market structure and business behaviour
without the direct intervention of the Competition Law
Authority, namely the CCI.
 Phase IV
Hon’ble Commission
and Appellate Tribunal
Competition Commission of India (CCI)

Administration and enforcement of the competition law requires

an administrative set up. The administrative set up should be
favorable for the administration of competitive policy. The
administrative setup should take a proactive stand to be specified
and adopted to promote competition by enabling free and fair
competition.
Functions:

1) To prevent practices having adverse effect on competition

2) To promote and sustain competition
3) To protect the interest of consumers
4) To ensure freedom of trade carried by market participants
in markets in India
Competition Appellate Tribunal (COMPAT)

The Competition Appellate Tribunal (COMPAT) is a quasi-judicial body constituted under

the provisions of the Competition Act, 2002, as amended by Competition (Amendment)
Act, 2007. COMPAT is headed by a Chairperson, who shall be a serving/ retired Judge of
Supreme Court of India or serving/retired Chief Justice of a High Court or qualified to be
a Judge of Supreme Court or Chief Justice of a High Court. The Members shall be
eminent persons from socio-economic fields. COMPAT adjudicates appeals against the
orders of the Competition Commission of India and also adjudicates the claims of
compensation that may arise from the findings of CCI or itself.
Phase V
Case Law
 Case 1

Builders’ Association of India Vs Cement Manufacturers’

Association &Ors.

Brief facts:
The Builder’s Association of India on 26th July 2010 filed a
case against the CMA AND ACC, Ambuja cements ltd,
Ultratech Cements, Grasim Cements( Now merged with
Ultra tech cements), JK Cements, India Cements, Madras
Cements, Century textiles & Industries ltd, Binani Cements,
Lafarge India and Jaiprakash Associates.

Direction of the CCI :

In cartel cases, the CCI has the power to fine parties up to

three times of its profit for each year of the continuance of the
cartel or 10% of its turnover for each year of the continuance
of the cartel, whichever is higher.
Compat granted a stay regarding the collection of INR
63.07 billion ($1.04 billion) in fines imposed on 11
cement manufacturers for coordinating prices. The stay
and acceptance of the companies' appeal of the fine
was, however, conditioned upon the payment of a INR
6 billion ($100 million) penalty within one month of
the ruling. In April, Compat substantially reduced the
fines imposed by the CCI against several explosives
manufacturers.

The CCI reconsidered the matter after the Competition

Appellate Tribunal last December set aside its orders and
asked the watchdog to take up the case afresh.

In 2012, it had ordered 10 companies to pay Rs 6,317

crore after the Builders Association of India accused
them of fixing prices. Separately, it had imposed a Rs 397
crore fine on Shree Cement in 2016 again.
Competition is the thrust on which any economy can survive. The Law
provides for a Competition fund, which shall be utilized for promotion of
competition advocacy, prohibiting abuse of dominance, creating
awareness about competition issues and training in accordance with the
rules that may be prescribed.

Open competitive markets are the engine of economic growth.

Competition Law is therefore an important institutional pillar for a thriving
market economy as competitive pressures hone production efficiency and
stimulate product and process innovation fundamental to competitiveness
and economic growth.