COMPETITION ACT

CONTENT• MRTP Act

• Competition Act 2002

• Anti-competitive agreements• Regulation of combinations • Abuse of dominant position

• Competitive commission of India (CCI)

• MRTP vs Competition Act

• Recent Events

• Other similar acts/laws:

• US Antitrust• UK Competition Law

MRTP

THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969

The MRTP Act, 1969 has its genesis in the Directive Principles of State Policy embodied in the Constitution of India. Clauses (b) and (c) of Article 39 of the Constitution lay down that the State shall direct its policy towards ensuring:

• that the ownership and control of material resources of the community are so distributed as to best serve the common good; and

• that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

Provisions of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) were inadequate to effectively deal with antitrust issues in India and post-1991 (when the Indian government initiated economic reforms and open market policies), substantial portions of the MRTP Act had more or less become redundant.

WHAT IS COMPETITION ACT 2002 ?The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and Merger and acquisition), which causes or likely to cause an appreciable adverse effect on competition within India.

ANTI-COMPETITIVE AGREEMENTS No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

REGULATION OF COMBINATIONS No person or 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 and such a combination shall be void.

ABUSE OF DOMINANT POSITION There shall be an abuse of dominant position if an enterprise or a group:

• Directly or indirectly, imposes unfair or discriminatory-

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

• Limits or restricts-

• production of goods or provision of services or market therefor• technical or scientific development relating to goods or services to the

prejudice of consumers

• Indulges in practice or practices resulting in denial of market access in any manner

• Makes 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

• Uses its dominant position in one relevant market to enter into, or protect, other relevant market.

COMPETITION COMMISSION OF INDIA (CCI)

The objectives of the Competition Act are sought to be achieved through the Competition Commission of India (CCI), which has been established by the Central Government with effect from 14th October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government.

It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.

The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

MRTP VS COMPETITION ACT 2002

MRTP Act 1996 Competition Act 2002Competition offences implicit or not defined Competition offences explicit and defined

Complex in arrangement and language Simple in arrangement and language and easily comprehensible

14 per se offences negating the principles of natural justice

4 per se offences and all the rest subjected to rule of reason.

Frowns upon dominance Frowns upon abuse of dominance

No combinations regulation Combinations regulated beyond a high threshold limit.

No penalties for offences Penalties for offences

Reactive and rigid Proactive and flexible

Unfair trade practices covered Unfair trade practices omitted (consumer fora will deal with them)

Does not vest MRTP Commission to inquire into cartels of foreign origin in a direct

manner.

Competition Law seeks to regulate them.

Concept of ‘Group’ Act had wider import and was unworkable

Concept has been simplified

FEW CASES

Competition Commission of India (CCI) has received a total number of 304 cases up to March 31, 2012 under various sections of the Competition Act. Out of these, 227 cases have been disposed off.

CCI PENALIZES CHEMISTS & DRUGGISTS ASSOCIATION, GOA (CDAG)

Anti-competitive practices followed:

• Supply of medicines to common man not at an affordable rate.

• Controls the supply of drugs in the market through a system of seeking mandatory Product Information Service (PIS) approvals

• The number of players is limited and controlled by insisting on obtaining its "No Objection Certificate (NOC)

The Commission imposed a penalty of Rs. 2 lakhs on CDAG.(2008-2010)

On similar grounds, the Commission also found Chemists and Druggists Association, Baroda (CDAB) and a penalty of 54,000 was imposed.(2006-2009

THE CEMENT CASE• The Competition Commission of India (CCI) has slapped

11 cement companies with a fine of Rs 6,304 crore for price cartelization, the highest penalty ever imposed

• The Commission in its order observed the existence of price parallelism, controlled and limited supply with a view of maximizing profits.

• Cement Manufacturers Association asked COMPAT(Competition Appellate Tribunal) to relook into the penalty imposed by CCI.

INDIAN AIRLINE INDUSTRY

Rival private airlines Jet Airways and Kingfisher Airlines, with a collective market share of over 58 per cent in 2008, announced a strategic alliance to help them reduce cost and enhance efficiency.

The alliance involved code-sharing on domestic and international flights, an interline agreement, joint fuel management, common ground-handling services and cross-selling flights through the global ticketing system.

The Competition Commission of India investigated into the agreement to check if there is a “possible cartel- like behavior”

Similar case was filed against all the private Airlines in India for charging high prices on April 26.

Both cases were later dismissed

AUTOMOBILE INDUSTRY INDIA

 International car makers, Honda, Hyundai and Volkswagen, have come under the scanner of the competition watchdog Competition Commission of India (CCI) for abusing their dominant market position by selling auto parts to customers at high prices.

A MONOPOLY!!!!• The Competition Commission of India has initiated an

investigation against the global internet giant Google, for its alleged involvement in anti-competitive practices in India.

• It has been alleged that Google, being dominant in the search engine market, is leveraging its position in the generic search to specialised search market, by way of discriminatory and retaliatory practices relating to AdWords.

• It is pertinent to note that currently Google is under scanner of several competition authorities such as in US, EU, Australia, South Korea, Brazil and Argentina.

UNITED STATES ANTITRUST LAW

The United States Antitrust laws were put in place by federal and state governments to regulate corporations. They keep companies from becoming too large and fixing prices, and also encourage competition so that consumers can receive quality products at reasonable prices. These laws give businesses an equal opportunity to compete for market share. Preventing monopolies ensures that consumer demand is met in a fair and balanced way. There are four sections that the laws focus on including agreements between competitors, contracts between buyers and sellers, mergers and monopolies.

UNITED KINGDOM COMPETITION LAW

United Kingdom competition law is affected by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. However if the effect of a business' conduct would reach across borders, the European Union has competence to deal with the problems, and exclusively EU law would apply. Even so, the section 59 of the Competition Act 1998 provides that UK rules are to be applied in line with European jurisprudence. Like all competition law, that in the UK has three main tasks.

• Prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.

• Banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others.

• Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.