Dr. KUMUDHA RATHNA

ABUSE OF DOMINANT POSITION (AOD):

Definitions:

DOMINANT POSITION [S.4(2) Expln (a)]:

Definition:

The dictionary meaning of the word ‘dominant’ is ‘overriding/influential’.

In simple terms, abuse of dominant position refers to the conduct of an

enterprise that enjoys a ‘dominant position’ (as defined by the Act).

In substance-dominant position-means the position of strength enjoyed by an

enterprise that enables it to act independently of competitive forces prevailing in

the relevant market. Such an enterprise will be in a position to disregard market

forces & unilaterally impose trading conditions, fix prices etc.

The elements that constitute a dominant position are:-

A position of strength;

That position being enjoyed in a relevant market in India;

Such a position that gives the enterprise the power to ‘operate

independently of competitive forces in the relevant market’ (i.e., it can at

will, disregard market forces/conditions & impose its own trading

conditions (Eg: prices at which the enterprise is prepared to supply

goods/services).

Explanation to S.4(2)(a) exempts such unfair/discriminatory trading

conditions/prices [& predatory pricing-S.4(2)(a)(i & ii)]-stating that-when

enterprises are engaged in bonafide competition & readjusting their trading

strategies to meet the terms of offers of competitors in a market as it evolves,

there is no abuse by any of the enterprises. They are only responding to the

market situation. (Eg: If prices fall in the market, for reasons not the action of

an enterprise, a reduction in the price by that enterprise to match its prices to

the new prices cannot be termed unfair pricing or predatory pricing).

Dr. KUMUDHA RATHNA

Concept of DP as explained in HOFFMANN-LA ROCHE & CO. AG. BASLE

v. COMMISSION OF THE EUROPEAN COMMUNITIES IN

BRUSSELS:-“The concept of abuse is an objective concept relating to the

behaviour of an undertaking in a DP which is such as to influence the structure

of a market where, as a result of the very presence of the undertaking in

question, the degree of competition is weakened and which, through recourse to

methods different from those which condition normal competition in

products/services on the basis of the transactions of commercial operations, has

the effect of hindering the maintenance of the degree of competition still

existing in the market or the growth of that competition.’

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/consumers/relevant market in its favour.

Thus a dominant enterprise is one that has the power to disregard market forces

(Competitors, customers & others) & to take unilateral decisions that would

benefit itself & also, in the process, cause harm to the process of free

competition, injuring the consumers by saddling them with higher prices,

limited supplies etc.

This capacity to engage in the market is called ‘Market Power’.

GROUP [S.5 Expln (b)]:

2 or more enterprises which, directly/indirectly are in a position to-

i. Exercise 26% or more of the voting rights in the other enterprise OR

ii. Appoint more than 50% of the members of the Board of Directors in the

other enterprise OR

Dr. KUMUDHA RATHNA

iii. Control the management/affairs of the other enterprise.

CONSUMER [S.2(e)]:

Any person who-

i. Buys any goods for a consideration which has been paid or promised or

partly paid & partly promised or under any system of deferred payment-

includes any user of such goods other than the person who buys such

goods-when such use is made with the approval of such person, whether

such purchase of goods is for resale or for any commercial purpose or

for personal use;

ii. Hires/avails of any services for a consideration which has been paid or

promised or.....and includes any beneficiary of such services other than

the person who hires or avails of the with the approval of the first

mentioned person whether such hiring or availing of services is of any

commercial purpose or for personal use.

DOMINANT POSITION ITSELF ISN’T PROHIBITED:

Some acts are bonafide & not taken to hamper competition. S.4(2)(a) exempts

such unfair or discriminatory trading conditions/prices or predatory pricing

referred to in S.4(2)(a)(i) & (ii), setting out those practices as an abuse of

dominant position, from being considered as an abuse of a dominant position,

when they are adopted to meet competition. REASON-When enterprises are

engaged in bonafide competition & readjusting their trading strategies to meet

the terms of offers of competitors in a market as it evolves , there is no abuse of

any of the enterprises. They are only responding to the market situation.

Eg: If prices fall in the market, for reasons not the action of an enterprisea-a

reduction in the price by that enterprise to match its prices to the new prices

cannot be termed unfair/predatory pricing.

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FACTORS TO BE CONSIDERED WHILE DECIDING WHETHER AN

ENTERPRISE HAS A DOMINANT POSITION (DP):

The Commission shall (while inquiring whether an enterprise enjoys a DP or

not u/s.4) have due regard to all or any of the following factors-

a) Market share of the enterprise;

b) Size & resources of the enterprise;

c) Size & resources of the competitors;

d) Economic power of the enterprise including commercial advantage over

competitors;

e) Vertical integration of the enterprises or sale or service network of such

enterprises;

f) Dependence of consumers on the enterprise;

g) Monopoly/dominant position whether acquired as a result of any Statute

or by virtue of being a Govt. Company or a public sector undertaking or

otherwise.

h) Entry barriers including barriers such as regulatory barriers, financial

risk, high capital cost of entry, marketing entry barriers, technical entry

barriers, economics of scale, high cost of substitutable goods or service

for consumers;

i) Countervailing buying power;

j) Market structure & size of market;

k) Social obligations & social costs;

l) Relative advantage , by way of the contribution to the economic

development, by the enterprise enjoying a dominant position having or

likely to have appreciable adverse effect on competition.

m) Any other factor which the Commission may consider relevant for the

enquiry.

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WHAT IS ABUSE OF DOMINANT POSITION [S.4(2)]:

If an enterprise or group follows any of the following practices-it is abuse-NO

further PROOF of any damage/loss is required.

Unfair/Discretionary Conditions In Purchase/Sale [S.4(2)(a)]:

Unfair/discretionary conditions in purchase/sale of goods/services OR

Price in purchase/sale (including predatory price) of goods/services is

abuse of dominant position.

Expln: Above practice isn’t abuse if adopted to meet competition.

Limiting/Restricting Production/Development [S.4(2)(b)]:

Limiting/restricting-production of goods or provision of services or

market there for OR

Limiting/restricting-technical or scientific development relating to goods

or services to the prejudice of consumers, is an abuse of DP.

Denial Of Market Access [S.4(2)(c)]:

(in any manner), is abuse of dominant position.

Supplementary Obligations Unconnected To Main Contract: [S.4(2)(d)]

Making conclusion (formation) of contract subject to acceptance by other

parties who are not connected to the nature/subject matter of the contract-is

abuse of dominant position.

Using Dominant Position To Enter Another Market: [S.4(2)(e)]

Using dominant position in one relevant market to enter into another relevant

market-is abuse of dominant position. (Eg: Microsoft used its DP in disk

operating system to dominate browser market & ruined Netscape).

Dr. KUMUDHA RATHNA

DIVISION OF ENTERPRISE ENJOYING DOMINANT POSITION: [S.28 –

Incorporated into the Act in 2009]]

The Competition Commission may direct-division of an enterprise enjoying

dominant position to ensure that an enterprise enjoying dominant position,

doesn’t abuse it.

Such Order may provide for any/all of the below mentioned matters:-

Transfer/vesting of pty/rights/liabilities/obligations;

Adjustment of contracts either by discharge or reduction of

liability/obligation or otherwise;

Creation/allotment/surrender/cancellation of any shares / stocks or

securities;

Formation/winding-up of an enterprise or the amendment of the MoA or

AoA or any other instrument regulation the business of any enterprise;

Extent to which, & the circumstances in which, provision of the Order

affecting an enterprise may be altered by the enterprise & the registration

thereof;

Any other matter which may be necessary to give effect to the division of

the enterprise.

No Compensation to Officer of Company [s.28(3)]:

No Officer of a company who ceases to hold office as such in consequene of the

division of an enterprise shall be entitled to claim any compensation for such

cesser. This is not withstanding any other Law for the time being in force OR

in any contract OR in MoA OR AoA.

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INQUIRY INTO AGREEMENTS-AS TO-ABUSE OF DOMINANT

POSITION:

Enquiry by CCI:

CCI may enquire-into-any alleged contravention of provisions of Ss.3(1) &/or

4(1)-

Suo Motu OR

On receipt of any info (in the manner & with fee as determined by

regulations)-from any person/consumer/their association or trade

association OR

On a reference made to it by C.Govt/St.Govt/Statutory authority [S.19(1)].

Director General has not the power to enquire on his own.

Procedure For Enquiry u/s.19: (S.26)

o On receipt of info or suo motu-if CCI opines that there exists a-prima facie

case..

o Shall issue a direction (as per Regulation.18 of CCI (General) Regulations,

2009) to the Director General (DG) to cause an investigation to be made into

the matter. This direction shall be deemed to be commencement of an

inquiry u/s.26.

o If on such receipt of info or suo motu-if CCI opines that there exists no

prima facie case-shall close the matter forthwith & pass such Orders as it

deems fit; Copy of the Order to be sent to C.Govt/St.Govt/Statutory

Authority/parties concerned (as per Regulation.19 of CCI (General)

Regulations, 2009).

o DG shall submit a report of his findings-within such period as may be

specified by the CCI..CCI may forward a copy of the report to the parties

concerned.

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o If investigation was made on ref by C.Govt/St.Govt.Statutory Authority-CCI

shall forward a copy of report of DG to concerned Authority.

Investigation & report by DG shall be as per Regulation.20 of CCI (General)

Regulations,2009.

o If report of DG states that there is no contravention of provisions of

Competition Act, the CCI shall invite objections from C.Govt

/St.Govt/Statutory Authority/Parties Concerned.

o If after consideration of objections/suggestions-CCI agrees with the

recommendations of the DG-it shall close the matter forthwith & pass such

Orders as it deems fit.

o Copies of Order shall by communicated to concerned to the parties.

o If CCI opines that further investigation is called for-May-

Direct DG for further investigation OR

Cause further enquiry to be made OR

Itself enquire into the contravention as per provisions of Act.

o Further enquiry by CCI: If DG-opines (report) that there is a contravention

of any provisions of the Act & the CCI also opines similarly-CCI shall

conduct such enquiry.

o Order by CCI after enquiry: May pass all or any of the following Orders:-

Order to discontinue agreement/abuse & not re-enter such agreement;

Penalty – S.27-upon each of the parties to the agreement/abuse-as CCI

deems fit-BUT shall not be more than 10% of the average of the turnover

for the immediately preceding 3 financial yrs [S.27(b)]

If Cartel-penalty is equivalent to 3 times of the amount of

profits made out of such ag by cartel or 10% of the avg of the

turnover of the cartel in the immediately preceding 3 financial

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yrs..whichever is higher- will be imposed on each producer,

seller, distributor, trader, service provider included in the cartel

If penalty is proposed to be imposed on a person-show cause

notice duly signed by Secretary shall be given asking for

submission of explanation-in writing-within 15 days.

CCI may direct that the agreement be modified to the extent & in the

manner as maybe specified by CCI [S.27 (d)].

Other Orders & payment of costs [S.27(e)].

Order against any group company: If the enterprise which violated the

provisions of Competition Act (i.e., Ss.3-4) is a member of the group & if

other members of the group are also responsible for the contravention, the

CCI can pass Orders against any member of the group [S.27-Proviso].

CASE LAW:

HOFFMANN-LA ROCHE & CO. AG, BASLE v. COMMISSION OF

THE EUROPEAN COMMUNITIES IN BRUSSELS –Held (by The

European Commission)-

Roche was in a dominant position within the common market, on the

markets for certain vitamins, abused that position by concluding with 22

purchasers of these vitamins, agreements which contained an obligation

upon them, or the grant of fidelity rebates offering them an incentive, to

buy all or most of their requirements of vitamins exclusively, or in

preference from Roche. Obiter dicta-Very large shares in the market in

themselves, save in exceptional circumstances, evidence of the existence

of a DP.

Exclusive purchase contracts & the fidelity rebates offered to the

purchasers amounted to abuse of this dominant position because they

distorted competition between producers in so far as they deprived the

customers of Roche of the opportunity of choosing their suppliers.

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The effect of the contract was to apply dissimilar conditions to equivalent

transactions, viz, Roche would be charging 2 diff prices for the same

quantity of the same product, depending upon whether the buyer was

prepared to forego purchasing from Roche’s competitors.

Court Explained-‘An undertaking which has a very large market share & holds

it for some time, by means of the volume of production & the scale of the

supply which it stands for-without those having much smaller market shares

being able to meet rapidly the demand from those who would like to break away

from the undertaking which has the largest market share-is by virtue of that

share in a position of strength which makes it an unavoidable trading partner &

which, already because of this secures for it, at the very least during relatively

long periods, that freedom of action which is the special feature of a DP.’

Further the Court listed the relevant factors in determining the existence of a

DP-

Relationship between the market shares of the undertaking & its

competitors;

Technological lead of an undertaking over its competitors;

Existence of a highly developed sales network;

Absence of potential competition.

COMPAGNIE MARITIME BELGE TRANSPORTS SA & OTHERS v.

COMMISSION OF THE EUROPEAN COMMUNITIES –The members

of Associated Central West Africa Lines (CEWAL) & 2 other shipping

conferences brought this action contesting before the Court the decision

of the Commission & the Court of 1st Instance. The Commission had

decided that all the shipping conferences had violated Article 81(1) of

the EEC (European Economic Community) Treaty, by entering into non-

competition agreements with 1 another, imposing on themselves a

Dr. KUMUDHA RATHNA

restraint to the effect that each member would refrain from operating as

an independent shipping company (outsider) in the area of activity of the

others. HELD –This was abuse of their collective dominant position by

the members of CEWAL-with the intention of eliminating the principal

independent competitor-by

o Participating in the implementation of the co-operation ag with

Ogefrem;

o Modifying its freight rates by departing from the tariff in force in order

to offer rates.

It was argued that in order to show that DP was shared by more than 1

undertaking a close economic link bet them had to be established.

Court Ruled-

DP may be held by 2 or more economic entities legally independent of

each other, provided that from an economic point of view they present

themselves or act together on a particular market as a collective entity.

It should be ascertained whether the undertakings constitute a collective

entity vis-a-vis their competitors / trading partners & consumers for a

particular market & if that collective entity actually holds a DP &

whether its conduct constitutes abuse.

Court held that the co-operation agreement with Ogefrem amounted to abuse of

DP.

EUROPEMBALLAGE CORPN & CONTINENTAL CAN COMPANY INC v.

COMMISSION OF THE EUROPEAN COMMUNITIES –Continental was

already enjoying a DP through the control of 1 company, in a substantial part

of the common market for certain types of containers. HELD-Abuse of DP

by the acquisition by Continental, through its subsidiary, Europemballage,

by approximately 80% of the shares & convertible debentures of Thomassen

Dr. KUMUDHA RATHNA

& Drijver-Verbliva-this practically eliminated in a substantial part of the

common market. Though the subsidiary had a separate Legal personality, its

conduct could be attributed to the parent company, particularly when in

essentials it follows the directives of the parent company.

TETRA PAK INTERNATIONAL SA v. COMMISSION OF THE EUROPEAN

COMMUNITIES –the Tetra Pak group specialized in equipment for the

packaging of liquid or semi-liquid food products in cartons (covering both

aseptic & non-aseptic packaging sectors).Tetra Pak held 90-95% of the

market in the aseptic sector & 50-55% in the non-aseptic sector. The

complainant Elopak, held 27%. The complaint by Elopak Italia before EC

was that Tetra Pak imposed unfair conditions on the supply of machines for

filling cartons & that the sale of cartons & equipment, in certain cases were

at predatory prices. HELD –Contracts for the sale/lease of Tetra Pak

equipment for manufacturing cartons contained several clauses found to be

anti-competitive. Main such clauses were:-

o Buyers of Tetra Pak equipment were prohibited from changing the

configuration of the equipment bought.

o They were also not allowed to add any part or accessory to that

equipment.

o Tetra Pak reserved to itself the exclusive rights to inspect the

equipment, maintain & repair it & to supply spare parts.

o The IPR in relation to any improvement made to the product by the

buyer was to be assigned to Tetra Pak.

o The purchaser from Tetra Pak was to ensure that his buyer assumed

his obligations to Tetra Pak. Breach of this condition entailed a

penalty.

Also, given the almost complete domination of the aseptic markets by Tetra

Pak, thanks to this position in this market, it could concentrate its efforts on the

Dr. KUMUDHA RATHNA

non-aseptic market by acting independently of the other economic operators,

and placed it in a situation comparable to that of holding a DP on the markets in

question, as a whole.

COMBINATIONS:

Take-over, amalgamation, mergers etc are some of the means of increasing

market dominance.

Competition Act intends to exercise control over such mergers &

amalgamations, with a view to ensure that such amalgamations & mergers are

not anti-competitive.

COMBINATION-MEANING:

The acquisition of 1 or more enterprises by 1 or more persons OR

mergers/amalgamation of enterprises shall be treated as combinations..in the

following instances:-

a) Acquisition of large enterprises: An acquisition where the parties (acquirer

& enterprise) whose control/shares/voting rights/assets have been/being

acquired-jointly have

i. In India-assets of value of more than Rs.1K crores / turnover more than

Rs.3K crores OR

ii. In & outside India, in aggregate, assets of the value of more than $500

milion-including at least Rs,.500 crores in India / turn-over more than

$1,500 million-including at least Rs.1,500 crores in India

Assets/turn-over exceeding specified limits: If after acquisition, the joint

assets/turn-over increases the aforesaid limits, it will be a combination.

If the acquirer already had the assets/turnover-any further acquisition will be

combination.

Dr. KUMUDHA RATHNA

Type of Combination Assets/turnover in India Assets/turnover in or outside

India

Any Acquisition-where-

acquirer+enterprise jointly

have - [S.5(a)(i)]

Joint assests-over-Rs.1K

Crores/turnover over Rs.3K

Crores

Joint assets-over $500

Million-including at least

Rs.500 Crores in India OR

turnover more than $1,500

Million-including at least

Rs.1,500 Crores in India.

Acquisition by group of

enterprise – [S.5(a)(ii)]

Assets over Rs.4K Crores /

turnover over Rs.12K Crores

Joint assets-over $2 Billion-

including at least 500 Crores

in India / turnover more than

$6 Billion-including at least

Rs.1,500 crores in India.

Acquisition by a person of an

enterprise-when such person

is having direct/indirect

control over another

enterprise engaged in

production / distribution /

trading of similar / identical /

substitutable goods/service) –

[S.5(b)(i)]

Joint assets over Rs.1K

Crores/turnover over Rs.3K

Crores.

Joint assets over $500

Million / turnover $1,500

Million.

Acquisition by a group with

similar / identical /

substitutable goods / services

– [S.5(b)(ii)]

Group assets over Rs.4K

Crores / turnover over

Rs.12K Crores

Group assets over $2

Billion /turnover over $6

Billion.

Merger / amalgamation of 2

enterprises (goods / services

may be similar / dissimilar) –

[S.5(c)(i)]

Combined assets over Rs.1K

Crores / turnover over Rs.3K

Crores.

Combined Assets over $500

Million / turnover over

$1,500 Million

Merger / amalgamation in a

group (goods / services

Combined assets over Rs.4K

Crores / turnover over

Combined assets over $2

Billion / turnover over $6

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maybe similar/dissimilar) Rs.12K Crores. Billion.

CALCULATION of VALUE OF ASSETS [S.5(c) Explanation]:

The value of assets shall be determined by taking the book value of the assets as

shown, in the audited boks of a/c of the enterprise, in the financial year

immediately preceding the financial year in which the date of proposed merger

falls, as reducd by any depreciation, & the value of assets shall include the

brand value, value of Good-will or value of rights, patent, permitted use,

collective mark, registered proprietor, registered trade mark, registered user,

homonymous geographical indication, geographical indications, design or

layout-design or similar oher commercial rights, if any referred to in S.3 (5).

EFFECT OF INFLATION ON VALUE OF ASSETS/TURNOVER [S.20 (3)]:

The Central Govt. shall, on the expiry of every 2 years-in consultation with the

CCI-by notification-enhance/reduce-on the basis of the wholesale price

index/fluctuations in exchange rate of rupees/foreign currencies-the value of

assets or the value of turnover, for the purposes of that section.

REGULATION OVER COMBINATIONS [S.6 (1)]:

No person/enterprise shall enter into a combination which causes or is likely to

cause an appreciable adverse effect on competition within the relevant market in

India & such a combination shall be void. (S.6 came into effect on May,2009).

PROVISON DOESN’T APPLY TO PFI/FII [S.6 (4)]:

The provisions of S.6 do not apply to share subscription or fianancing facility or

any acquisition, by a public financial institution, FII, bank or venture capital

fund, pursuant to any covenant of a loan agreement or investment agreement.

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Public Financial Institution: means such an institution specified under s.4A of

the Companies Act, 1956 (Includes a State Financial, Industrial or Investment

Corpn - S.2(o).

As per s.4A of the Companies Act-all bodies (eg. ICICI, IFCI, IDBI, LIC, UTI)

are Public Financial Institutions. Also includes Securitisation Company &

Asset Reconstruction Company registered with RBI under Securitisation Act,

2002.

MANDATORY NOTICE TO COMMISSION:

Any person/enterprise-who/which proposes to enter into a combination-shall

give notice to the Commission-in the (prescribed) form & fee-disclosing details

of the proposed combination-within 30 days of –

o Approval of the proposal relating to merger/amalgamation (as per

s.5(c) by Board of Directors of the enterprise concerned with such

merger/amalgamation OR

o Execution of any agreement/document for acquisition (as per s.5(a) or

acquiring of control referred to in s.5(b).

COOLING PERIOD OF 210 DAYS: after the notice. Combination can’t

become effective during the cooling period.

PENALTY FOR NOT GIVING NOTICE u/s.6 (2) [S.43A]:

If any person/enterprise fails to give notice to the Commission u/s.6 (2) of the

Competition Act-the Commission shall impose on such person/enterprise-a

penalty which may extend to 1% of the total turnover or the assets, whichever in

higher, of the combination.

Show cause Notice [Regulation 48 of Competition Commission of India

(General) Regulations, 2009]: If penalty is proposed to be imposed by

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Commission on a person-showcause notice duly signed by Secretary shall be

given-asking for submitting explanation in writing within 15 days. Penalty shall

be imposed only after giving opportunity of personal hearing to the person.

PROCEDURE AT COMMISSION AFTER RECEIVING NOTICE:

On receipt of notice [u/s.6(2)]-examine the notice & form prima facie opinion

[as provided in s.29(1)]-proceed as per provisions of s.29-31.

S.29(1): CCI has to form a prima facie opinion-whether a combination is likely

to cause/has caused-an appreciable adverse effect on competition within the

relevant market in India. If yes-issue a notice to the parties, to show cause.

Combination not effective for 210 days from date of notice, or till CCI issues

order u/s.31:

The combination shal not come into effect until 210 days or order of

Commission u/s.31is recd, whichever is earlier.

U/s.31, Commission can either-

Approve the combination or

Order that the combination shall not be effective or

Propose modifications in the combination.

FACTORS TO BE CONSIDERED [by CCI] IN DETERMINING ADVERSE

EFFECT OF COMBINATION: [S.20 (4)]

a) Actual/potential level of competition thru imports in the market.

b) Extent of barriers to entry to the market.

c) Level of combination in the market.

d) Degree of countervailing power in the market.

e) Likelihood that the combination would result in the parties to the

combination being able to significantly & sustainably increase prices/profit

margins.

f) Extent of effective competition likely to sustain in a market.

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g) Extent to which substitutes are available or likely to be available in the

market.

h) Market share, in the relevant market, of the persons/enterprises in a

combination, individually/combination.

i) Likelihood that the combination would result in the removal of a vigorous &

effective competitor/s in the market.

j) Nature & extent of verticals integration in the market.

k) Possibility of a failing business.

l) Nature & extent of innovation.

m) Relative advantage, by way of the contribution to the economic

development, by any combination having or likely to have appreciable

adverse effect on competition.

n) Whether the benefits of the combination outweigh the adverse impact of the

combination, if any.

ENQUIRY INTO COMBINATION BY CCI & ORDER:

CCI can enquire-

Suo motto

On receipt of notice.

Enquiry Into Combination By Commission-On Its Own:

Upon its own knowledge OR

Info relating to acquisition referred to it u/s.5(a) OR

Acquiring of control referred to in s.5(b) OR

Merger/amalgamation referred to in s.5(c)

S.20(1) Proviso: Commission shall not initiate any inquiry under this sub-

section after the expiry of 1 yr from the date on which such combination has

taken effect.

Enquiry On Combination-On Receiving Notice:

S.20(2): On receipt of notice u/s.6(2)-Inquire as to whether a combination

referred to in that notice/reference has caused or is likely to cause an

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appreciable adverse effect on competition in India. [Note: 1yr period

mentioned in S.20(1) is inapplicable to S.20(2)]

[CONFLICT of Statutory provisions:

S.20(2): Inquiry mandatory.

S.6(3) read with S.29(1): Commission can drop proceedings-if on prima facie

opinion-it concludes that competition in India will not be adversely affected.]

PROCEDURE FOR INVESTIGATION OF COMBINATIONS:

S.29(1): Show-cause for investigation: If Commission prima facie opines that

a combination is likely/causes ...India-it shall issue notice to the parties to

show-cause-as to why investigation in of such combination should not be

conducted-to respond within 30 days of receipt of notice.

S.29(1A): After receipt of response from parties:

Commission may call for a report from Director General (DG)-to be submitted

within 60 days (Commission-may extend time for a further 60 days).

S.6(2): Inquiry into disclosures:

If any person/enterprise-gives notice under this section-Commission shall

examine such notice-form prima facie opinion [as per s.29(1)] & proceed [as

per s.30].

S.29(2): Publish information for public knowledge:

If Commission-prima facie opines that the combination is or

likely..appreciable adverse effect...India-shall (within 7 working days from

date of receipt of the response of the parties to the combination OR report of

DG u/s.29(1A) whichever is later-direct the parties to-publish details of the

combination (within 10 working days of such direction, in such manner as it

thinks appropriate)-Reason-for bringing the combination to the

knowledge/info of the public & persons affected or likely to be affected by

such combination.

S.29(3): Invite Objections:

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The Commission may invite any person/member of the pubic (affected or

likely to be affected by the combinations)-within 15 working days from date

on which the details of the combination were published.

S.29(4): Call for Additional Details:

The Commission may-within 15 working days from the expiry of the period

specified in S.29(3)-call for such additional/other info as it deems fit-from the

parties to the combination.

S.29(5): The additional info shall be furnished by the parties-within 15 days

from the expiry of the period specified in s.29(4).

S.29(6): Proceed to deal with the case: After receipt of all info & within 45

working days from expiry of the period specified in s.29(5)-Commission shall

proceed to deal with the case as per s.31.

Order of Commission after Enquiry:

Commission may pass any of the following Orders:

S.31(1): Approve the combination.

S.31(2): Direct that the combination shall not take effect.

S.31(3): If Commission opines that the combination has/is likely to have

appreciable adverse effect on competition-BUT-that such adverse effect can be

eliminated by modification-it may propose appropriate modification to the

combination.

S.31(4): The parties (who accept the modification) shall carry it out within the

time specified by the Commission.

S.31(5): If the parties to the combination, who have accepted the modification

proposed- do not carry them out within time specified by the Commission-

shall be deemed to have an appreciable adverse effect..& Commission shall

deal with such combination as per the provisions of the Act.

S.31(6): If the parties to the combination do not accept the modifications

proposed by the Commission-they may submit an amendment to the

Dr. KUMUDHA RATHNA

modifications proposed by the Commission-to the Commission-within 30

working days of modification proposed by the Commission.

S.31(7): If the Commission agrees with the amendment proposed by the

parties-it shall-by Order-approve the combination.

S.31(8): If the Commission doesn’t accept the amendments proposed by the

parties-it shall I allow a further 30 working days-within which time they shall

accept the modifications proposed by the Commission.

S.31(9): If the parties do not accept the modifications proposed by the

Commission (within period specified in sub.s.6/8) the combination shall be

deemed to have an appreciable adverse effect on competition & be dealt with

according to the provisions of this Act.

S.31(10): Further Orders by Commission:

Where the Commission

has declared that the combination shall not take effect [S.31(2)] OR

Combination deemed to be having appreciable adverse effect on

competition [S.31(9)]

Without prejudice to any penalty which may be imposed or any other

prosecution-Commission may Order as follows-

a) The acquisition referred to S.5(a) OR

b) The acquiring of control referred to in S.5(b) OR

c) The merger/amalgamation referred to in S.5(c)

Shall not be given effect to.

Also, the Commission may, if it thinks appropriate-frame a scheme to

implement its Order-under this section.

S.31(11): Deemed Approval: If Commission doesn’t-within 210 days from

date of notice to Competition Commission-deemed to have been approved by

the Commission.

Expln: Exclusion in computing 210 days: The 30 days specified in sub.s.6 &

further 30 days specified in sub.s.8 shall be excluded.

Dr. KUMUDHA RATHNA

S.31(12): If any extension of time is sought by the parties to the combination-

the period shall be computed after deducting the extended period.

S.31 (13): Where the Commission has ordered a combination to be void-any

acquisition/merger/amalgamation-shall be dealt with by authorities under any

other Law for the time being in force as if such acq/merger/amalgamation-had

not taken place.

S.31 (14): The provisions of Chapter shall not affect-proceedings initiated or

which may be initiated under any other Law for the time being in force.

S.32: Acts taking place outside India but having an effect on competition in

India:

The Commission shall, not withstanding that-

a) An ag referred to in S.3 has been entered into outside India OR

b) Any party to such ag is outside India OR

c) Any enterprise abusing the dominant position is outside India OR

d) A combination has taken place outside India OR

e) Any party to combination is outside India OR

f) Any other matter/practice/action arising out of such ag or dominant position

or combination is outside India

Have power to inquire into such ag or abuse of dominant position or

combination-if such ag/dominant position/combination-has or is likely to have-

an appreciable adverse effect on competition in the relevant market in India.

S.33: empowers the Commission to issue interim Orders restraining any party

from carrying on such act until the conclusion of such inquiry or until further

Orders [even sans giving notice to such party, where it deems it necessary].

S.35: Appearance before Commission:

A person/enterprise/DG may

Appear in person OR

Authorise – 1 or more

o Chartered accountants

Dr. KUMUDHA RATHNA

o Company secretaries

o Cost accountants

o Legal practitioners

o Any of his/its Officers

to present his/its case before the Commission.

S.36: Power of Commission to regulate its own procedure:

1) In discharging its functions-Commission shall be guided by-principles of

natural Justice-subject to

a. Provisions of this Act

b. Rules framed by Central Govt.

Commission shall have power to regulate its own procedure.

2) Commission-for the purpose of discharging its functions-has vested in itself

the same powers as that of a Civil Court under C.P.C.-namely-

a. Summoning/enforcing attendance of any person

b. Examine him on oath

c. Require discovery & production of documents

d. Receive evidence on affidavit

e. Issue commissions for examination of witnesses/docs

f. Requisition any pubic record/doc or copy thereof from any office

(subject to ss.123 & 124 of Indian Evidence Act, 1872).

3) Call upon such experts, from any discipline as it deems necessary-to assist

the Commission in the conduct of any inquiry by it.

4) The Commission may direct any person-to

produce/furnish-before-DG/Secretary/any Officer authorised by it-

a. Such books/documents in custody/control of such person

b. Trade or any info (in relation to the trade carried on by such person) as

may be in his possession.

Dr. KUMUDHA RATHNA

S.38: Rectification of Orders: The Commission may-suo moto or on notice

given by any party to an Order-rectify any mistake apparent from the record.

Expln: The Commission shall not-in rectifying any mistake-amend a substantive

part of its Order.

S.39: Execution of Orders of Commission imposing penalty:

1) If a person on whom monetary penalty has been imposed by the

Commission-fails to pay it-the Commission may proceed against the person

to recover the penalty in such manner as may be specified by the regulations.

2) If the Commission opines that recovery of penalty is to be as per provisions

of the Income-Tax Act, 1961-it may make a reference to this effect to the

concerned IT authority-for recovery.

3) Where a reference has been made by the Commission-under sub-section.2-

the person on whom the penalty has been imposed shall be deemed to be an

assessee in default under IT Act.

DUTIES OF THE DIRECTOR GENERAL:

S.41: DG shall when directed by the Commission-assist the Commission in-

investigating into any contravention of the provisions of this Act or any

rules/regulations made there under.

S.42: Contravention of the Orders of the Commission:

The Commission may cause an inquiry to be made into compliance of its

Orders/directions.

If any person (sans sufficient cause) fails to comply with the Orders...he

shall be punishable with-fine (max-Rs.1 lakh for each day of non-

compliance subject to a max of Rs.10 crores)-as determined by the

Commission.

If any person doesn’t comply with Orders/directions or fails to pay the above

said fine-Imprisonment for a max of 3 yrs &/or fine (max-Rs.25 crores)-as

Chief Metropolitan Magistrate, Delhi, deems fit.

Dr. KUMUDHA RATHNA

But, Chief Metro Magistrate, Delhi-shall take cognizance of any offence

under this section-ONLY on a complaint filed by the Commission.

S.42A: (inserted by 2007 amendment Act): Compensation in case of

contravention of Orders of Commission:

Any person-may make an application to the Appellate Tribunal for an Order for

the recovery of-compensation for any loss/damage-suffered as a result of-

An enterprise violating directions issued by the Commission; or

Contravening (sans reasons) any decision/Order of Commission or

Contravening (sans reasons) any conditions/restrictions subject to which any

approval/sanction/direction/exemption in relation to any matter has been

granted under this Act or

Delay in carrying out such Orders/Directions of the Commission.

S.43: Penalty for failure to comply with directions of Commission and Director

General:

If any person fails to comply (sans reasonable cause)-with a Direction given by

–

The Commission u/s.36 (2 & 4) or

The DG while exercising powers referred to in s.41 (2)

Such person shall be punishable with fine (max-Rs.1 lakh per day of continuing

default with a total max of Rs.1 crore)-as determined by the Commission.

S.43A: Power to impose penalty for non-furnishing of info on combinations:

If any person/enterprise-fails to give notice to the Commission [u/s.6 (2)]-

Commission shall impose penalty-may extend to 1% of the total turnover or the

assets (whichever is higher) of such combination.

S.44: Penalty for making false statement/omission to furnish material

information:

If any party to a combination-

Makes a statement which is false-of a material particular-knowingly OR

Omits to state any material particular-knowing it to be material

Dr. KUMUDHA RATHNA

Such person shall be liable to a penalty-Rs.50 lakhs (minimum) & max of Rs.1

crore (as determined by the Commission.

S.45: Penalty for offences in relation to furnishing of info:

[Without prejudice to S.44] If any person-furnishes or reqd to furnish any

info/particulars/docs-

Makes any statement/furnishes any doc-which he knows or has reason to

believe to be false (relating to any material particular) OR

Omits to state any material fact-knowing it to be material OR

Wilfully alters/suppresses/destroys-any doc-which is reqd to be furnished

Punishable with fine (max) of Rs.1 crore-by the Commission.

S.46: Power of Commission to impose lesser punishment:

If the Commission is satisfied that-any Producer/seller/distributor etc-included

in a cartel (which is alleged to have violated S.3)-has made a full & true

disclosure-in respect of the alleged violations-may impose of such person-a

lesser penalty-as it deems fit.

S.47: Crediting sums realised by way of penalties-to-Consolidated Fund of

India:

All sums realised by way of penalties under this Act shall be credited to this

fund.

S.49: Competition Advocacy:

The Central Govt/St. Govt. may-in formulating a policy on competition (or any

other matter)-make a reference to the Commission-for its opinion-on possible

effect of such policy on competition-AND-on receipt of such reference-the

Commission shall-within 60 days of making the reference-give its opinion-to

the Central/St. Govt.

The opinion of the Commission-shall not be binding upon the Govt.

The Commission shall take suitable measures for the promotion of competition

advocacy-creating awareness & imparting training about competition issues.

Dr. KUMUDHA RATHNA