1. THE COMPETITION ACT(2002)Presented ByP.G.DM. 1st SemesterAcharya Bangalore B School

2. Competition Act 2002 HistoryThe Govt. Of India introduced the bill in 2001.Bill passed in Dec 2002.On 13 Jan 2003 The President of India gave his assent.Competition Commission Of India(CCI) is advocacy for competition Act 2002.It replaces Monopolies and Restrictive Trade Practices Act 1969. 3. Objectives Of Competition Act 2002Competition Act 2002 notified in Jan 2003 for establishment of a commission.ObjectivesEliminate practices having adverse effect on competition.Promote & sustain competition.Protect interests of consumers.Ensure the freedom of trade carried on by other participants of the market.(seesec 18) 4. Main Features Of Competition Act 2002Prohibits anti competitive arguments. (Sec 3)Prohibits abuse Dominant positions. (Sec 4)Provides the Regulations of combinations.(Sec 5&6)Enjoins Competition Advocacy.(sec 49) 5. Anti Competitive Agreements phase 1stThere are two typesHorizontal & VerticalAgreement amongst competitors (horizontal agreements),including cartels.Cartels presumed to have appreciable adverse effect on competition. Cartels areThe most pernicious violation.Fix pricing, market sharing, limiting production, supply etc.bid rigging , collusivebidding. 6. Anti Competative Agreements phase 2ndAgreementsAgreements such as between manufacturer and distributor(vertical agreement)subject to Rule to reason; burden of proof lies on prosecutor .Tie in arrangements,exclusive supply/distribution agreement,refusal to deal,resaleprice maintenance.Agreement includes arrangement or understanding, oral or in writing notnecessarily enforceable by law.[sec 3] 7. Anti Competitive agreements ExampleGlobal lysine cartel, decided in US in( 1996)---turning point in anti cartel action5 firms (2 japanese,2 S. Korean,1 US) prosecuted for forming cartels and fixingPrices for five years.High penalties imposed ;ADM(cartel leader) fined $100m.Rigorous investigation with the help of FBI.Major role of economic analysis in calculation of overcharge.Issues Direct evidence is usually difficult.might required search and seizureoperation as per section41.might necessitate reliance on circumstantial evidenceleniency provision.Injury caused to developing countries by global cartels. 8. Abuse Of DominanceNot dominance but abuse of dominance is prohibited.Acts deemed to be abuse are(Sec 4):Unfair or discriminatory pricing ( including predatory pricing).Limiting production or technical development.Denial of market accessConclusion of contract s subject to supplementary obligations.Use of dominant position in one market enter in to or protect other market. 9. Abuse Of Dominance 2ndDominance is based on arithmetical figure; but on several factors listed inAct.Sec19(4).Relevant markets needs to be first determined:Relevant product market Sec 19(7).Relevant geographic market. Sec 19(6). 10. Abuse Of Dominance ExampleUnited Brands Company prosecuted by European competition commissioner.Court determined UBs dominance from combination several factors.Court held following amounted to abuse (1978).Refusal to supply long standing customer.Discriminatory pricing for equivalent transactions.Excessive pricing ,having no reasonable relation to economic value.Issues: Determination of relevant product market, relevant geographic marketEconomic tools available e.g. cross elasticity, subsitutability,SSNIP/HMT.Factorsgiven in Sec 19.Another example: Microsoft case(Typing-in ,dying access, using dominance inone market to enter another). 11. Regulation Of CombinationsCombination includes: merger and amalgamation ,acquiring of control andacquisition of shares ,voting rights, assets.High thresholds, including domestic nexus.Mandatory pre-notification before merger.Commission must decide in 210 days, else combination deemed approved.Combination assessed on rule of reason based on 14 factors.Commission can take Suo moto action within 1 year after combination. 12. Regulation Of Combinations ExampleFTC,US successfully opposed(1997)merger between staples and office depots-twooffice supplies super stores:Court accepted office supply super stores "as relevant market: used economictools eg:CR,HHI Brown shoes indices.Court recognized benefits to consumers by firm but found reasonable probabilitythat proposed merger may substantially lessen competition; rejected efficiencyarguments.ISSUES:Involves predicting future structure/conducts; factors given in Sec 20. 13. Competition advocacyCommission shall take suitable measures to:Promote competition advocacyCreate public awareness.Impart training about competition issues.The Commission render opinion on a reference from the central government on apolicy / law of competition; not binding.(Sec 49) 14. Examples Of Competition AdvocacyInitiatives by commission in respect of:Department Of posts- Indian post office (Amendment Bill),2006- monopoly ofletter mail ,USO fee, new regulator etc.Department Of Shipping-Shipping conferences-tariff fixing; and shipping tradePractices bill,2005.Department Of Telecom & TRAI- Number portability, spectrum allocationAdditional merger regulation, open access to telecom infrastructure.Ministry Of Civil Aviation-Price fixing by airlines association.Reserve Bank Of India- Competition issues in banking sector. 15. Examples Of Competition Advocacy 2Department Of Food & Distribution-Warehousing(Development & Regulation) Bill2005- price monitoring by proposed regulator.Department Of Roads Transport & Highways- Competition Oriented reforms inpassenger road transport (in states).Planning Commission- Model concession agreement.Planning Commission-Competition Policy for 11th five year plan document. 16. Government departments /Undertaking included [Section 2(h)] I.e.,Competitive neutrality.Effects Doctrine.[Sec 32]Relationship sector regulators.[Sec 21,21A]International Co-Operation[Previous Sec 18]Excluded from competition scrutiny:ExportsResponsible restrictions on IPRs (patents,copywright etc,)Efficiency enhancing JVs excluded from presumptive rule..Other Highlights Of Act 17. Effects DoctrineFollowing liberalization/globalization, cross border economic activity has grownenormously.This has increased vulnerability to overseas/cross border economic mal-practices/offences.CCIs jurisdiction expressly extended to anti competitive practices /combinationtaking place outside India ,but having effects in market in India.This will better protect domestic market/consumers.[Sec 32] 18. Relationship With Sector RegulatorsRegulator can refer a competition issue arising in a proceeding to commission foropinion. Commission to opinion in 60 days; after which regulator pass order.Similarly commission may refer competition issue to sector regulator who mustgive opinion in 60 days after which commission may pass order. 19. International Co-Operation For discharging its duties/functions CCI can enter in tomemorandum/arrangements with any agency of foreign country.Such arrangements important for inquires against cross border/overseasviolations.International Co-Operation & effects doctrine mutually complementary.Such agreements exist between several competitive authorities.[Sec 18] 20. CompetitionAct An Economic LawEconomic concepts/analysis fundamental to the law:Relevant marketRelevant product market, relevant geographic market.(SSNIP test)Dominant position.(Abuse Of Dominance)AAEC- Appreciable Adverse Effects n competition by agreements/Abuse OfDominance.AACE by combinations.(HHI,CR) 21. Competition Act & MRTP ActBased on liberalized regime. Based command and controlEconomically literate law.Not form- Regimebased But effect basedComparison concept expressly defined Competition concept not expressly definemajor role for economic analysis.. provides for regulation of combinations. Not regulation for combinationsProvides for advocacy. . Has no advocacy role.Power to impose penalty deterrence factor. No power to impose penalty.Statutory authority can seek CCIs opinion. No provision for statutory authorities toGovernment. Departments within its ambit. Seek opinion.Government Departments outside its ambit 22. Power Of CommissionCease and desist order.In case of cartelized penalty up to 10% of turnover or three times of cartelizedprofit.Penalty up to 10% for three preceding financial years.To declare agreement having AAEC as void.Oder can modified agreement.In case of combination - can be approved ,approved with modification, or refusalapproval.In case of dominant enterprise- order for division of dominant enterprise. 23. Who Can Approach CommissonAny person ;includes individual,company,firm,association,,government companyStatutory cooperation ,body coperate,leagal authority etc.Consumer; means one who buys goods/avails services for consideration.Association of persons or consumers or trade association.Reference by central/state government, statutory authority.Thus an enterprise, adversely affected can also approach commission . 24. How Enterprises Can achieve ComplianceCompliance important because consequences potentially serious:Investigation,penalty,demages, voidance of agreements, adverse publicity.Businesses advised to raised awareness among employees,esecially those insales,marketing,purchasing.Large businesses advised to have formal compliance programme with foursuggested features:Support of senior management. 25. Continued..Appropriate policies and procedures; compliance manual incorporating clearpolicy statements, giving provision of competition law, example of prohibitedbehavior etc.TrainingRegular evaluationCompliance programme is mitigating factor for OFT;invovlment of seniormanagement is aggravating factor. [Reference see guide of OFT U.K.] 26. Role Of Trade AssociationFunctions of trade association are useful for membersMay also beneficial in increasing efficiency of markets.However, trade associations should take care not to be directly/indirectly asvehicle for anti competitive activity.Trade association can facilitate compliance by generating awareness ,educatingmembers, propagating compliance programme;etc.[See guide of OFT U.K] 27. ConclusionThis presentation provides only an introduction to competition law, and shouldnot be relied on as a substitute law itself.Further, this presentation is subject to any amendmentswhich may be made in competition law at any time in future. 28. Thank you