1 GREETINGS TO PARTICIPANTS AT THE LAUNCH MEETING OF 7Up3 PROJECT AT ENTEBBE 22-23 MARCH 2005.

1

GREETINGSTO

PARTICIPANTS AT THELAUNCH MEETING OF

7Up3 PROJECT

AT ENTEBBE

22-23 MARCH 2005

Copyright - Dr. S. Chakravarthy 2

COMPETITION POLICY AND INTERESTS OF THE POOR

Dr. S. CHAKRAVARTHY

(Profession : Civil Servant)

Formerly, Member, Monopolies and Restrictive Trade Practices Commission, Member, High Level Committee on Competition Policy and Law And Member of Committee for

Drafting the Law.Presently, Adviser/Consultant Competition Policy and Law

HYDERABAD,INDIA


RUBRIC OF COMPETITION RUBRIC OF COMPETITION LAWLAW

COMPETITION LAWS GENERALLY OVER THE WORLD HAVE THE FOLLOWING

FOUR COMPARTMENTS

ANTI-COMPETITION AGREEMENTS

ABUSE OF DOMINANCE

MERGERS, AMALGAMATIONS, ACQUISITIONS AND TAKE-OVERS

FOSTERING COMPETITION(ADVOCACY)


PRE - REQUISITES FOR COMPETITION POLICY

INDUSTRIAL POLICY SMALL SCALE INDUSTRIAL SECTOR

POLICY PRIVATISATION AND REGULATORY

REFORMS TRADE POLICY STATE MONOPOLIES POLICY LABOUR POLICY


SMALL SECTOR PROTECTION

• POLICY - ENCOURAGE AND PROMOTE SMALL, COTTAGE AND HANDLOOM SECTORS

• RESERVATIONS FOR THE SMALL SCALE SECTOR

• THEY SUFFER FROM OLD TECHNOLOGY, LACK OF RESOURCES AND MANAGEMENT, HIGH COST OF PRODUCTION AND SALE

• GLOBAL COMPETITION CAN EXTINGUISH THE SMALL SCALE AND COTTAGE SECTORS


TRADE POLICY

THIS INCLUDES (ESSENTIALLY WTO – RELATED)

TARIFFS QUOTAS SUBSIDIES ANTI-DUMPING ACTION DOMESTIC CONTENT REGULATIONS

EXPORT RESTRAINTS TRADE POLICY NEEDS TO CONFORM TO

COMPETITION PRINCIPLES


STATE MONOPOLIES POLICY

STATE MONOPOLIES AND PUBLIC ENTERPRISES -

AGENTS OF GOVERNMENT WITH SOCIO-ECONOMIC AND POLITICAL GOALS

BUT SUCH ENTERPRISES SHOULD ALSO BE IN COMPETITION TO SUBSERVE CONSUMER INTEREST

APPROPRIATE BLEND OF COMPETITION PRINCIPLES AND GOVERNMENT POLICIES TOWARDS STATE AND OTHER MONOPOLIES


CAN COMPETITION LAW BE PRO-POOR?

NOT EXPLICITLY IN THE WORDING OF COMPETITION LAW

BUT PRO-POOR CONCERNS ARE ARTICULATED AS BELOW :

“POVERTY REDUCTION HAS NORMALLY BEEN SEEN AS A SPECIFIC MEASURE AND ALWAYS REMAINED AT THE SIDELINES OF ECONOMIC POLICY MAKING BUT COMPETITION POLICY IS AN ELEMENT THAT CAN MAINSTREAM DEVELOPMENT AND POVERTY REDUCTION AND PUT THEM AT THE CENTRE OF ECONOMIC POLICY REGIMES” – RUBENS RICUPERO, SECRETARY GENERAL, UNCTAD

“MARKETS WORK FOR THE POOR, BECAUSE POOR PEOPLE RELY ON FORMAL AND INFORMAL MARKETS TO SELL THEIR LABOUR AND PRODUCTS, TO FINANCE INVESTMENT AND TO INSURE AGAINST RISKS. WELL-FUNCTIONING MARKETS ARE IMPORTANT IN GENERATING GROWTH AND EXPANDING OPPORTUNITIES FOR POOR PEOPLE” – WORLD INVESTMENT REPORT, 2001

IT IS FOR THE COMPETITION AUTHORITY TO PRO-ACTIVELY GIVE A SHAPE TO THE SPIRIT BEHIND PRO-POOR CONCERNS


TABLE: SOCIO - ECONOMIC INDICATORS OF SELECT AFRICAN COUNTRIES

Unit Kenya South Africa

Tanzania Zambia Uganda Namibia Malawi Ethiopia

Population Millions 31.1 43.6 37.2 10.0 24.7 1.8 10.7 67.7

GNP/Capita US $ PPP 1000 9400 610 870 1200 4500 660 700

Adult IlliteracyMale >15 Fem >15

Percent 1430

1415

2143

1427

2646

5569

2757

5475

Poverty < National

Poverty Line

Percent 50 50 51.1 86.0 35 N.A. 54 64

Note: UGANDA, NAMIBIA, MALAWI AND ETHIOPIA ARE COVERED BY 7UP3 PROJECT AND KENYA, SOUTH AFRICA, TANZANIA, ZAMBIA WERE COVERED BY 7UP1 PROJECT OF

CUTS


ANTI - COMPETITION AGREEMENTS HORIZONTAL RESTRAINTS

CARTELS {FIXING PURCHASE OR SALE PRICES (EXPORT CARTELS EXEMPTED) }

BID-RIGGING (COLLUSIVE TENDERING)

SHARING MARKETS BY TERRITORY, TYPE ETC.

LIMITING PRODUCTION, SUPPLY, TECHNICAL DEVELOPMENT

VERTICAL RESTRAINTS

TIE-IN ARRANGEMENTS

EXCLUSIVE SUPPLIES

EXCLUSIVE DISTRIBUTION

REFUSAL TO DEAL

RESALE PRICE MAINTENANCE


PRO-POOR: BATA CASE

• BATA HAS DOMINANT PRESENCE IN FOOTWEAR MARKET

• IT ENTERED INTO AGREEMENT WITH SMALL SCALE MANUFACTURERS (COBBLERS AND POOR LEATHER WORKMEN) FOR PURCHASE OF FOOTWEAR

• AGREEMENT STRIPULATED THAT THE SMALL MANUFACTURERS SHOULD USE ONLY MOULDS SUPPLIED BY BATA

• MRTP COMMISSION HELD THIS AS A RESTRICTIVE PRACTICE AND PREJUDICIAL TO PUBLIC INTEREST

• BUT MRTP COMMISSION RECKONED THE INTERESTS OF SMALL POOR MANUFACTURERS AND ALLOWED THE RESTRICTION TO CONTINUE


IMPORTS OF 12 CARTELISED PRODUCTS BY DEVELOPING COUNTRIES, 1990-2000

0

2

4

6

8

10

12

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

YEAR

US $ billion


IMPACT OF HARDCORE CARTELS IN SOME AFRICAN COUNTRIES

• HARDCORE CARTELS IN HEAVY ELECTRICAL EQUIPMENT, STEEL AND ALUMINIUM IMPACTED SOME AFRICAN COUNTRIES ADVERSELY

• THESE CARTELS INDULGED IN OVER CHARGING AND BID-RIGGING

• CONSEQUENTLY, COST OF POWER GENERATION PLANTS WENT UP STRETCHING TREASURY

• DAMAGES AMOUNTED TO ZIMBABWE – US $ 44 MILLION KENYA - US $ 34 MILLION SOUTH AFRICAN CUSTOMS UNION – US $ 270 MILLION


SYNDICATE CARTEL IN ZAMBIA

• A SYNDICATE IS A GROUP OF FIRMS ACTING IN CONCERT

• IN ZAMBIA TRANSPORT OPERATORS FORMED A SYNDICATE, UNITED TRANSPORT AND TAXIS ASSOCIATION

• THE SYNDICATE FIXED PRICES AND PREVENTED OUTSIDERS TO ENTER TRANSPORT BUSINESS

• HIGHER PRICES ADVERSELY IMPACTED CONSUMERS PARTICULARLY, THE POOR

• ZAMBIA COMPETITION COMMISSION NOTED THAT UTTA IS A CARTEL

• TRANSPORT OPERATORS SUBSEQUENTLY BEHAVED MORE RESPONSIBLY TOWARDS CONSUMERS


EXCLUSIVE SUPPLY/DISTRIBUTION AGREEMENT IN ZAMBIA

• HYBRID POULTRY FARM (HPF) AND GALAUNIA HOLDINGS (GH) ENTERED INTO AN AGREEMENT, HPF SELLING FARM AND POULTRY UNITS TO GH

• AGREEMENT HAD EXCLUSIVE DEALING ARRANGEMENTS

• GH TO PURCHASE ONLY DAY OLD CHICKS FROM HPF AND HPF TO HAVE THE RIGHT OF FIRST REFUSAL, SHOULD GH RESELL THE FARM

• GH SHOULD NOT RAISE ANY OTHER POULTRY AND ENTER BUSINESS OF HATCHING CHICKENS.

• ZAMBIA COMPETITION COMMISSION RULED THAT HPF AND GH ABUSED THEIR DOMINANCE AND WERE FORECLOSING COMPETITION

• THE VERTICAL AGREEMENT WAS NULLIFIED


TIED SALES – AN INDIAN CASE

• GOVERNMENT OPERATES A PUBLIC DISTRIBUTION SYSTEM (PDS) THROUGH FAIR PRICE SHOPS

• PDS SUPPLIES RICE, WHEAT, SUGAR AND KEROSENE TO PEOPLE BELOW POVERTY LINE AT SUBSIDISED PRICES

• FAIR PRICE SHOP KEEPERS FORCED POOR PEOPLE TO PURCHASE RAZOR BLADES AND MATCH BOXES IF RICE/WHEAT WERE TO BE SUPPLIED

• THIS TIED SALE DEVASTATED PDS CLIENTELE


ABUSE OF DOMINANCE

DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS.

ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE

• IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING

PREDATORY PRICES)

• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT

• DENIES MARKET ACCESS

• CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION

WITH THE SUBJECT OF THE CONTRACTS.

• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS

RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC MARKET


PREDATORY PRICING – MODERN FOOD INDUSTRIES CASE

• PREDATORY PRICING IS A GENRE OF ANTITRUST VIOLATION

• IT IS SELLING GOODS AT PRICE BELOW COST WITH INTENT TO ELIMINATE COMPETITION/COMPETITORS

• ACTION BEFORE MRTP COMMISSION AGAINST MODERN FOOD INDUSTRIES PRODUCING BREAD AND BAKERY ITEMS FOR THE OFFENCE OF PREDATORY PRICING

• COMMISSION RULED MERE CHARGING PRICE BELOW COST CANNOT LEAD TO INDICTMENT - MALAFIDE INTENT TO ELIMINATE COMPETITION/COMPETITIORS SHOULD BE PROVED


COMBINATIONS MERGERS/AMALGAMATIONS

1. REDUCTION IN NUMBER OF PLAYERS

2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH

3. DISCOURAGEMENT OF NEW ENTRANTS

PEJORATIVE EFFECTS

4. DICTATION OF PRICES

5. DOMINANCE

COMPETITION LAW TO HAVE SURVEILLANCE OVER COMBINATIONS

REGULATION ON COMPETITION PERSPECTIVE


CONSOLIDATION – CEMENT INDUSTRY CASE

• IN JUNE 2003, GRASIM (BIRLA CO) ACQUIRED CEMENT DIVISION OF LARSEN AND TOUBRO (L & T)

• THIS COMBINE NOW CONTROLS 25 % OF INSTALLED CAPACITY

• GUJARAT AMBUJA CEMENT LTD AND ASSOCIATED CEMENT COMPANY (ACC) COMBINED AND CONTROL 20 % OF INSTALLED CAPACITY

• THIS CONSOLIDATION HAS RESULTED IN A DUOPOLY • CONSEQUENCE – FRESH ADDITIONS TO CAPACITY

DAMPENED, SMALLER UNITS GETTING EXTINGUISHED, NEW PLAYERS DETERRED AND SMALLER PLAYERS DRIVEN OUT

CANNIBALISATION OF MARKET SHARES OCCURS WHEN DOMINANT COMPANIES ENTRENCH AS MONOPOLIES


COMPETITION ADVOCACY

THE COMPETITION AUTHORITY NEEDS

TO PARTICIPATE IN THE FORMULATION OF

POLICIES AND REVIEWING OF POLICIES RELATING TO COMPETITION

TO CREATE COMPETITION CULTURE

TO ACT AS COMPETITION ADVOCATE


INTELLECTUAL PROPERTY INCLUDESINTELLECTUAL PROPERTY INCLUDES

1. COPYRIGHT AND RELATED RIGHTS

2. TRADE MARKS

3. GEOGRAPHICAL INDICATIONS

4. INDUSTRIAL DESIGNS

5. PATENTS

6. LAYOUT – DESIGNS OF CIRCUITS

7. PROTECTION OF UNDISCLOSED INFORMATION.


DICHOTOMYDICHOTOMY

• IPRs ENDANGER COMPETITION• COMPETITION LAW ENGENDERS COMPETITION• EXISTENCE OF IPRs MAY NOT BE CHALLENGED BY

COMPETITION LAW• EXERCISE OF IPRs MAY BE CHALLENGED BY

COMPETITION LAW• THE LITMUS TEST FOR INVOCATION OF

COMPETITION LAW IS DETRIMENT TO PUBLIC INTEREST OR CONSUMER INTEREST


KITTY OF UNREASONABLE CONDITIONS

(ANTI-COMPETITIVE)

PATENT POOLING (LOCKING TECHNOLOGY) TIE-IN ARRANGEMENTS (ACQUIRE PARTICULAR

GOODS SOLELY FROM PATENTEE) ROYALTY PAYMENT AFTER EXPIRY OF PATENT PROHIBIT LICENSEE TO USE RIVAL TECHNOLOGY PROHIBIT LICENSEE FROM CHALLENGING

VALIDITY OF IPR GRANT BACK REQUIREMENT (ANY KNOW-HOW OR

IPR ACQUIRED BACK TO THE LICENSOR) FIXING PRICES FOR THE LICENSEE TO SELL TERRITORIAL AND CUSTOMER RESTRICTION Contd Next

Slide


KITTY OF UNREASONABLE CONDITIONS

(ANTI-COMPETITIVE)

COERCING LICENSEE TO TAKE LICENSES IN IP EVEN IF HE DOES NOT NEED THEM (PACKAGE LICENSING)

RESTRICTING SALE OF PRODUCT TO THOSE OTHER THAN DESIGNATED BY LICENSOR (OFTEN FOUND IN LICENSING OF DUAL USE TECHNOLOGY)

IMPOSING TRADE MARK USE REQUIREMENT INDEMNIFICATION OF LICENSOR TO MEET

EXPENSES IN INFRINGEMENT PROCEEDINGS UNDUE RESTRICTION ON LICENSEE’S BUSINESS CONDITION ON LICENSEE TO EMPLOY/USE STAFF

DESIGNATED BY LICENSOR LIMITING THE MAXIMUM AMOUNT OF USE OF THE

INVENTION


IPRS AND TRADITIONAL KNOWLEDGE

INNOVATIONS USUALLY IN FORMAL SYSTEMS (R&D LABS, UNIVERSITIES)

INNOVATIONS ALSO IN INFORMAL SYSTEMS (ARTISANS, FARMERS, TRIBES) – KNOWN AS TRADITIONAL KNOWLEDGE (TK)

TRADITIONAL MEDICINE (TM) AN IMPORTANT TK IN INDIAN VILLAGES

TK AND TM ARE HANDED DOWN FROM GENERATION TO GENERATION, PARTLY CODIFIED AND PARTLY NON - CODIFIED

GRANT OF PATENTS ON INNOVATIONS LINKED TO TK AND TM IS A MATTER OF CONCERN


BENEFIT SHARING MODEL KANI TRIBALS IN SOUTH WESTERN INDIA – SETTLEMENTS IN

FORESTS THEY COLLECT NON - TIMBER FOREST PRODUCTS AND USE

THEM SCIENTISTS ON A RESEARCH PROJECT FOUND KANIS

ENERGETIC AND AGILE – MUNCHING SMALL BLACK FRUITS DETAILED INVESTIGATIONS REVEALED THAT THE BLACK

FRUIT CONTAINED MAINLY ANTI-FATIGUE PROPERTIES A DRUG NAMED JEEVANI WAS RELEASED FOR

COMMERCIAL PRODUCTION 50 % OF LICENSE FEE AND ROYALTY PAYABLE BY THE

COMMERCIAL FIRM PASSED ON TO THE KANI TRIBAL TRUST TO BE USED FOR THEIR WELFARE


DOHA DECLARATIONDOHA DECLARATION

• CLARIFIES THAT CLAUSES UNDER TRIPS WILL NOT OVERRIDE PUBLIC HEALTH CONCERNS

• ENDORSES THE NEED FOR TRIPS TO ADDRESS PUBLIC HEALTH PROBLEMS FOR LDCs & DCs - HIV/AIDS, TB,

MALARIA ETC.

• RECOGNISES IMPORTANCE OF IPR PROTECTION BUT APPRECIATES REALITY OF UNAFFORDABLE HIGH

PRICES OF PATENTED DRUGS

• PERMITS MEMBERS OF WTO TO INTERPRET AND IMPLEMENT MEASURES TOWARDS PROTECTION OF PUBLIC

HEALTH AND ACCESS TO MEDICINES

• RECOGNISES THE RIGHT OF MEMBERS TO DETERMINE GROUNDS FOR COMPULSORY LICENCE IN

NATIONAL EMERGENCIES


IMPLICATIONS OF DOHA IMPLICATIONS OF DOHA DECLARATIONDECLARATION

§ “ACCESS TO MEDICINES FOR ALL” IS NOW A GROUND TO GRANT

COMPULSORY LICENCES

§ THIS COVERS ANY DISEASE AT THE DISCRETION OF THE COUNTRY

CONCERNED

§ TO TAKE ADVANTAGE OF DOHA DECLARATION, DEVELOPING COUNTRIES

NEED TO PASS LEGISLATION PERMITTING ISSUE OF COMPULSORY

LICENCES

§ DEVELOPING COUNTRIES NEED TO MAKE A DETAILED ANALYSIS OF DOHA

DECLARATION AND BRING IN APPROPRIATE LEGISLATIONS, RULES AND

GUIDELINES BENEFICIAL TO HEALTH CARE NEEDS OF THE COUNTRY AND

DOMESTIC INDUSTRIES


PRE-CANCUN GENERAL COUNCIL DECISION OF 30 AUG 2003

COMPULSORY LICENSE PERMITTED FOR PRODUCTION OF PHARMACEUTICAL PRODUCTS FOR EXPORT TO AN ELIGIBLE IMPORTING MEMBER COUNTRY

THE IMPORTING COUNTRY SHOULD HAVE INSUFFICIENT OR NO MANUFACTURING CAPACITY IN THE PRODUCT

ENTIRE PRODUCTION SHOULD BE EXPORTED TO THAT COUNTRY


FINALE

COMPETITION POLICY AND COMPETITION LAW NEED TO BE COMPLEMENTARY AND IN TANDEM

COMPETITION POLICY SHOULD BE FLEXIBLE TO MEET THE NEEDS, ASPIRATIONS AND GOALS OF THE COUNTRY AND PRO-POOR POLICIES SHOULD BE FACTORED IN

COMPETITION POLICY AND LAW SHOULD BE SO DRAFTED THAT THEY ARE AN EMPOWERMENT TOOL IN THE HANDS OF CONSUMERS, PARTICULAR THE POOR.

POOR CONSUMERS SHOULD HAVE ACCESS TO BASIC NEEDS AND COMPETITION JUSTICE.

POLITICAL SUPPORT NEEDS TO BE ANCHORED FOR THIS PURPOSE. COMPETITION ADVOCACY AND AWARENESS GENERATION SHOULD BE

UNDERTAKEN IN A BIG WAY BY THE COMPETITION AUTHORITY, CIVIL SOCIETY AND THE GOVERNMENT.

COMPETITION POLICY AND LAW SHOULD BE INTERPRETED BY THE COMPETITION AUTHORITY AND THE COURTS TO SUBSERVE THE INTERESTS OF THE POOR (THIS DOES NOT IMPLY THAT THE LAW SHOULD BE INTERPRETED AGAINST THE WELL-TO-DO CONSUMERS).

MY IDEA OF A BETTER ORDERED WORLD IS ONE IN WHICH MEDICAL DISCOVERIES WOULD BE FREE OF PATENTS AND THERE WOULD BE NO PROFITEERING FROM LIFE OR DEATH.

Prime MinisterWHO Conference, Geneva

HUMANE COUNSELHUMANE COUNSEL


WHAT IS NEEDED IS NOT ANY “ISM” BUT “PRAGMATISM” ORPOORAGMATISM


THANK YOU

FOR YOUR

KIND ATTENTION

1 GREETINGS TO PARTICIPANTS AT THE LAUNCH MEETING OF 7Up3 PROJECT AT ENTEBBE 22-23 MARCH 2005.

Documents

Transcript of 1 GREETINGS TO PARTICIPANTS AT THE LAUNCH MEETING OF 7Up3 PROJECT AT ENTEBBE 22-23 MARCH 2005.