COMPETITION LAW AND COMPETITION LAW AND POLICYPOLICY

filma Varghesetrade mark department

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Website: www.altacit.com

INTRODUCTION

Globalization and privatization materialized Markets across the world opened up to liberalization Need for appropriate regulatory and statutory

methods India also opened up its economy removing controls

and resorting to liberalization. The Monopolies and Restrictive Trade Practices Act,

1969, (MRTP), was enacted Competition Act, 2002

Definition of competition

Competition is “a situation in the market in which firms or sellers independently strive for the buyers’ patronage in order to achieve a particular business objective for example, profit, sales or market share” (World Bank, 1999)

What is competition in the market?In common parlance, competition in the market means Sellers striving independently for buyers’ patronage

to maximize profit or other business objectives. Buyer prefers to buy a product at a price that

maximizes his benefits whereas the seller prefers to sell the product at a price that maximizes his profits.

Why do we need competition in the market?Competition Makes enterprises more efficient and offers wider

choice for consumers at lower prices. Ensures optimum utilization of available resources. Enhances consumer welfare since consumer can buy

more of better quality products at lower prices. Beneficial for the consumers, producers/sellers and

finally for the whole society since it induces economic growth.

What is meant by unfair competition?

Collusive price fixing, Deliberate reduction in output in order to increase prices, Creation of barriers to entry, Allocation of markets, Tie-up sale, Predatory pricing, Discriminatory pricing.

What constitutes competition policy? Government measures that affect the behavior of enterprises and structure of the industry with the view to promote efficiency and maximize welfare.

Two elements of competition policy: First, a set of policies, such as liberalized trade policy, relaxed FDI policy, de-regulation, etc., that enhance competition in the markets. Second, legislation to prevent anti-competitive practices with minimal government intervention.

Competition Law - 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 three 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

Salient features of the Act Prohibition of Anti-competitive Agreements Prohibition of abuse of dominance Regulation of combinations Establishment of Competition Commission of

India and functions and powers of CCI Objectives of Competition Act

To prevent anti – competitive practices, Promote and sustain competition Protect the interest of the consumers Ensure freedom of trade

How would the objective of the Act achieved?

Competition Commission of India (CCI) which has been established by the Central Government with effect from 14th October, 2003.

Functions of CCI

CCI shall prohibit non-competitive agreements and abuse of dominance, and regulate combinations (merger or amalgamation or acquisition) through a process of enquiry.

It shall give opinion on competition issues on a reference received from authority established under any law (statutory authority)/Central Government.

CCI is also mandated to undertake competition advocacy, create public awareness and impart training on competition issues.

Prohibition of Anti-competitive agreements

An anti-competitive agreement is an agreement having appreciable adverse effect on competition. This means that all restrictive agreements are not held to be Anti competitive. The agreements which have appreciable adverse effect on competition are:

If it directly or indirectly determines purchase or sale prices

Limits or controls production, supply, markets, technical development, investment or provision of services

Shares the market or source of production Directly or indirectly results in collusive bidding

Prohibition of Abuse of Dominant position

Dominant position means positions of strength enjoyed by an enterprise in the relevant market and also appreciably affect the relevant market competition and consumers by its actions.

Abuse would include agreements charging or paying unfair prices, restriction of quantities, markets and technical development. It includes discriminatory behavior, predatory prices and any exercise of market power leading to the prevention and restriction of competition.

When the commission may initiate enquiry into anti-competitive agreements/abuse of dominance?On its own on the basis of information & knowledge in its possession, orOn receipt of a complaint, orOn receipt of a reference

Who can make a complaint?

Any person, consumer, consumer association or trade association can make a complaint against anti competitive agreements and abuse of dominant position.

Who can represent the parties before the Commission?

Person, authorized representative, legal practitioner, company secretary, chartered accountant, cost and works accountant

Who can make a reference for an enquiry?

The Central Government or a State Government or an authority established under any law may make a reference for an enquiry.

How will the commission proceed with an enquiry?

On its own, or receipt of complaint/reference, if the commission is of the opinion that there is a prima facie case, it shall direct the Director General, appointed under the Act, to investigate the matter and report his findings.

What will the commission do after investigation?

After receipt of the investigation report from the Director General, the Commission shall adjudicate the matter after hearing the parties and pass orders as deemed fit.

What orders the Commission can pass in case of anti-competitive agreements and abuse of dominance?

Grant interim relief restraining a party from continuing with anti competitive agreement or abuse of dominant positionTo impose a penalty of not more than 10% of turnover of the enterprises and in case of cartel – 3 times of the amount of profit made out of cartel or 10% of turnover of all the enterprises whichever is higherCommission may direct a delinquent enterprise to discontinue and not to re-enter anti-competitive agreement or abuse the dominant positionTo award compensation To modify agreementTo recommend to the Central Government for division of enterprise in case it enjoys dominant position

What is a combination under the Act? Combination includes acquisition of shares, acquisition of control by the enterprise over another and amalgamation between or amongst enterprises. What kind of combination is regulated under the Act? Combination, that exceeds the threshold limits specified in the Act in terms of assets or turnover, which causes or is likely to cause

an appreciable adverse effect on competition within the relevant market in India, can be scrutinized by the Commission.

Procedure for investigation of combinations - Issue a show cause notice, on receipt of the response- it may direct publication of details inviting objections of public and hear them. Invite any person, to file his objections. Enquire whether the disclosure made in the notice is correct and combination is likely to have an adverse affect on competition.

Orders - Approve the combination if no appreciable adverse effect on competition is found, disapprove the combination in case of appreciable adverse effect on competition, may propose suitable modification as accepted by parties.

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