law super final for the day

8/3/2019 Law Super Final for the Day

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INTRODUCTION

Competition is the lifeblood of the market economy. It spurs innovation and higher productivity

leading to accelerated economic growth; to the consumers it brings the benefit of lower prices,

wider choices and better products and services. But all these benefits are lost if the competition is

unfair or nonexistent e.g. MTNL ± for telecommunication had monopoly before liberalization;

Indian Railways continues to have monopoly.

Today, the whole world is facing the thought cut competition and to stand µin¶; every nation is

trying to pull their economy up. The globalization and urbanization is also playing a good role in

the same. The value of freeing entrepreneurial energies and allowing competition to drive growth

has become all the more important for India to emerge as dominant market player in world

economy.

Key Definitions:

1) "Acquisition" means, directly or indirectly, acquiring or agreeing to acquire²

y Shares, voting rights or assets of any enterprise; or

y Control over management or control over assets of any enterprise;

2) "Agreement" includes any arrangement or understanding or action in concert,²

y Whether or not, such arrangement, understanding or action is formal or in writing; or

y Whether or not such arrangement, understanding or action is intended to be enforceable

by legal proceedings;

3) "Consumer" means any person who²

y buys any goods for a consideration which has been paid or promised or partly paid and

partly promised, or under any system of deferred payment and includes any user of such

goods other than the person who buys such goods for consideration paid or promised or

partly paid or partly promised, or under any system of deferred payment when such use is



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made with the approval of such person, whether such purchase of goods is for resale or

for any commercial purpose or for personal use;

y hires or avails of any services for a consideration which has been paid or promised or

partly paid and partly promised, or under any system of deferred payment and includes

any beneficiary of such services other than the person who hires or avails of the services

for consideration paid or promised, or partly paid and partly promised, or under any

system of deferred payment, when such services are availed of with the approval of the

first-mentioned person whether such hiring or availing of services is for any commercial

purpose or for personal use;

4) "enterprise" means a person or a department of the Government, who or which is, or has been,

engaged in any activity, relating to the production, storage, supply, distribution, acquisition

or control of articles or goods, or the provision of services, of any kind, or in investment, or

in the business of acquiring, holding, underwriting or dealing with shares, debentures or other

securities of any other body corporate, either directly or through one or more of its units or

divisions or subsidiaries, whether such unit or division or subsidiary is located at the same

place where the enterprise is located or at a different place or at different places, but does not

include any activity of the Government relatable to the sovereign functions of the

Government including all activities carried on by the departments of the Central Government

dealing with atomic energy, currency, defense and space.

Explanation.-for the purposes of this clause,²

a) "Activity" includes profession or occupation;

b) "Article" includes a new article and "service" includes a new service;

c) "Unit" or "division", in relation to an enterprise, includes²

y A plant or factory established for the production, storage, supply, distribution, acquisition

or control of any article or goods;

y Any branch or office established for the provision of any service;



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y any security which entitles the holder to receive shares with voting rights;

y stock except where a distinction between stock and share is expressed or implied;

12) "Trade" means any trade, business, industry, profession or occupation relating to the

production, supply, distribution, storage or control of goods and includes the provision of any

services;

13) "Turnover" includes value of sale of goods or services;

14) ³Dominance´: In the MRTP Act, the basis of determining dominance is whether an

undertaking has as heretofore-fourth (25 percent) or more in the production, supply,

distribution or control of goods or services.

15) ³Collusive bidding and bid-rigging´: Directly or indirectly results in bid rigging or collusive

bidding, shall be presumed to have an appreciable adverse effect on competition. For the

purposes of this sub-section, "bid rigging" means any agreement, between enterprises or

persons referred to in sub-section (3) engaged in identical or similar production or trading of

goods or provision of services, which has the effect of eliminating or reducing competition

for bids or adversely affecting or manipulating the process for bidding.

16) ³Cartel´: Cartels includes an association of producers, distributors, sellers, traders, or

services providers who, by agreement amongst themselves, limit, control or attempt to

control the production, distribution, sale of price of, or, trade in goods or provision of

services. The adverse effects of cartels or collusive agreements vary in degree depending on

the nature of the companies involved. It is the hard core cartels that are the cause of

immediate concern for the government. Agreements for sharing of markets or sources of

production/supply by territory, type, size of customer or any other way are also offensive.

E.g.: CCI is investigating the Cement cartels, Sugar Cartels, etc which indulge in creating

artificial scarcity of the material, thereby increasing its price.



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As a corollary to its findings, the MIC drafted a Bill to provide for the operation of the economic

system so as not to result in the concentration of economic power to the common detriment. The

Bill provided for the control of monopolies and prohibition of monopolistic and restrictive trade

practices, when prejudicial to public interest.

The Monopolies and Restrictive Trade Practices Act came into existence on 27th December,

1969. The preamble to this enactment provided it to be An Act to provide that the operation of

the economic system does not result in the concentration of the economic power to the common

detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade

practices and for matters connected therewith or incidental thereto. Therefore, in common

parlance, the MRTP Act, 1969 aimed at preventing economic power concentration in a few

hands, the intention behind this was to avoid damage, with the end result protecting consumer

interest and the economic society at large.

The MRTP Act 1969 is an important but very controversial piece of economic legislation. The

act came into force from 1st June 1970 and has been amended in1974, 1980, 1982, 1984 and

1991. This act applies to whole states except J&K.

Objective of MRTP ACT:

y To control monopolies and monopolistic trade practices trade practices

y To regulate the concentration of economic power to the common detriment.

y To prohibit restrictive trade practices unless any of them can be justified to be in the

public interest.

y Regulation of unfair trade practices.

About the MRTP Act, 1969

The MRTP Act extends to the whole of India except the state of Jammu and Kashmir. This law

was enacted: To ensure that the operation of the economic system does not result in the

concentration of economic power in hands of few,

To provide for the control of monopolies, and

y To prohibit monopolistic and restrictive trade practices.



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Unless the Central Government otherwise directs, this act shall not apply to:

y Any undertaking owned or controlled by the Government Company,

y Any undertaking owned or controlled by the Government,

y Any undertaking owned or controlled by a corporation (not being a company) established

by or under any Central, Provincial or State Act,

y Any trade union or other association of workmen or employees formed for their own

reasonable protection as such workmen or employees,

y Any undertaking engaged in an industry, the management of which has been taken over

by any person or body of persons under powers by the Central Government,

y Any undertaking owned by a co-operative society formed and registered under any

Central, Provincial or state Act,

y Any financial institution.

MRTP Commission and Filing of Complaint

For the purpose of this Act, the Central Government has established a commission to be known

as the Monopolies and Restrictive Trade Practices Commission. This commission shall consist of

a Chairman and minimum 2 and maximum 8 other members, all to be appointed by the Central

Government. Every member shall hold the office for a period specified by the Central

Government. This period shall not exceed 5 years. However, the member will be eligible for re-

appointment.

In case of any unfair trade practice, monopolistic trade practice and/or restrictive trade practice, a

complaint can be filed against such practices to the MRTP commission. The procedure for filing

a complaint was as follows:

y Complaint is filed either by the individual consumer or through a registered consumer

organization.



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y The Director General of the MRTP commission would carry on the investigation for

finding facts of the case.

y If the prima facie case is not made, the complaint is dismissed. If the compliant is true, an

order is passed to its effect.

y The commission restricts and restrains the concerned party from carrying on such

practices by granting temporary injunction.

y Then the final order is passed. The complainant may be compensated for his loss.

MRTP Act role in reducing concentration of economic power

Monopolies Vis-à-vis concentration Of Economic Power

a) The monopolies and industrial units which are constructed to have a concentration

of economic or monopoly power are identified.

b) Such units are to make to register themselves.

c) The directors of such organizations are brought under some scrutiny with reference to the

number of directorships held by them.

d) The expansion, establishment of new undertakings, diversifications, mergers and

amalgamations of such units are subject to approval by the government.e) In exceptional cases, the government may even force an industrial undertaking to divide

into a number of divisions.

Monopolistic, R estrictive and Unf air Trade Practices

The Indian statute, as most competition laws in the world, encompasses within its ambit

essentially three types of prohibited trade practices:

1)

Restrictive Trade Practice2) Unfair Trade Practice

3) Monopolistic Trade Practice



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1) R estrictive Trade Practice (RTP)

A Restrictive Trade Practice is generally one, which has the effect of preventing, distorting or

restricting competition. In particular, a practice, which tends to obstruct the flow of capital or

resources into the stream of production, is a RTP. Likewise, manipulation of prices and

conditions of delivery or flow of supply in the market, which may have the effect of imposing on

the consumer unjustified costs or restrictions are regarded as Restrictive Trade Practices.

Certain common types of Restrictive Trade Practices listed in the MRTP Act are:

Refusal to deal: It includes any agreement which restricts, or is likely to restrict, by any method

the persons or classes of persons to whom goods are sold or from whom goods are bought.

Case let: In Raleigh Industries Ltd. The competition commission of was concerned with

investigation of supply of bicycles both from the manufacturer to the retailer and at the retailing

level. The firm was operating a selective distribution policy, and was refusing to supply to

multiple retailers. The Commission found Raleigh¶s policy to be anti competitive and against the

public interest.

a) Tie-up sales: ³It includes any agreement requiring a purchaser of goods, as a condition

of such purchase, to purchase some other goods´. In other words it means requiring a

person to purchase something else compulsorily along with the goods he wants to

purchase.

E.g.:- Morning shows in some theatre forces the customers to buy a small popcorn along

with the ticket.

b) Full line forcing: Producer or supplier insistence that the dealer must carry the

full range of products in the line. The holder of a complete line of products could for

example impose exclusive contracts or force the retailers to buy their complete line of

products or an extensive selection of them.

Case let: (hypothetical) A multi product manufacturer XYZ & Co., manufactures product

A soap, B shampoo, C detergent, D hand wash, E hair oil and F soap. XYZ & Co.



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employs full line forcing i.e. it will make sure that the retailer stocks all its products i.e. A

soap, B shampoo, C detergent, D hand wash, E hair oil and F soap.

c) Exclusive dealings: Exclusive dealing broadly involves one trader imposing restrictions

on another trader¶s freedom to choose with whom, or in what, or where they deal.

E.g. Pepsi entering into an agreement with its clients saying that they should not stock

Coke brand.

d) Price Discrimination: A pricing strategy that charges customers different prices for the

same product or service.

e) Area R estriction the act of keeping something within specified bounds (by force if

necessary)

E.g. Restriction imposed by the government on documents or weapons that are available

only to certain authorized people

f ) R esale price maintenance: includes any agreement to sell goods on condition that the

prices to be charged on the resale by the purchaser shall be the prices stipulated by the

seller unless it is clearly stated that prices lower than those prices may be charged.

All Restrictive Trade Practices under the MRTP Act are deemed legally to be prejudicial to

public interest. Therefore, the entity, body or undertaking charged with the perpetration of the

Restrictive Trace Practice, can, after the establishment of the charge, only plead for gateways

provided in the MRTP Act itself, to avoid being indicted.

Inquiry into R estrictive Practices

The Commission may inquire into any restrictive trade practice:

y Upon receiving a complaint from any trade association, consumer or a registered

consumer association, or y Upon a reference made to it by the Central or State Government or

y Upon its own knowledge or information.



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of Horlicks got the benefit of the said scheme. The prizes were many times costlier than the price

of a bottle of Horlicks, a fact on account of which the winning of the prize was of overriding

consideration and not the product in question.

Unfair practices may be categorized as under:

a) False R epresentation

The practice of making any oral or written statement or representation which:

y Falsely suggests that the goods are of a particular standard quality, quantity, grade,

composition, style or model;

y Falsely suggests that the services are of a particular standard, quantity or grade;

y Falsely suggests any re-built, second-hand renovated, reconditioned or old goods as new

goods;

i. Represents that the goods or services have sponsorship, approval, performance,

characteristics, accessories, uses or benefits which they do not have;

ii. Represents that the seller or the supplier has a sponsorship or approval or affiliation

which he does not have;

iii. Makes a false or misleading representation concerning the need for, or the usefulness of,

any goods or services;

iv. Gives any warranty or guarantee of the performance, efficacy or length of life of the

goods, that is not based on an adequate or proper test;

v. Makes to the public a representation in the form that purports to be-

a. warranty or guarantee of the goods or services,

b. a promise to replace, maintain or repair the goods until it has achieved a specified

result,

c. If such representation is materially misleading or there is no reasonable prospect

that such warranty, guarantee or promise will be fulfilled

vi. Materially misleads about the prices at which such goods or services are available in the

market; or

vii. Gives false or misleading facts disparaging the goods, services or trade of another person.



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E.g.: Fairness creams: portraying that a dark person turns fair after using the product.

b) False Offer of Bargain Price

Where an advertisement is published in a newspaper or otherwise, whereby goods or services are

offered at a bargain price when in fact there is no intention that the same may be offered at that

price, for a reasonable period or reasonable quantity, it shall amount to an unfair trade practice.

The bargain price, for this purpose means:

The price stated in the advertisement in such manner as suggests that it is lesser than the ordinary

price, or

i. The price which any person coming across the advertisement would believe to be better than the price at which such goods are ordinarily sold.

ii. The price which any person coming across the advertisement would believe to be better

than the price at which such goods are ordinarily sold.

E.g. 1: Dominos: In advertisements they show that pizza is free if not deliver within 30 minutes,

but in reality the customer has to pay the taxes, which is not shown in the advertisements.

E.g. 2: Tele marketing ads on television, they show that the actual price of the product is far much higher than the price charged by them.

c) Free Gifts Offer and Prize Scheme

The unfair trade practices under this category are:

i. Offering any gifts, prizes or other items along with the goods when the real intention is

different, or

ii. Creating impression that something is being offered free along with the goods, when in

fact the price is wholly or partly covered by the price of the article sold, or

iii. Offering some prizes to the buyers by the conduct of any contest, lottery or game of

chance or skill, with real intention to promote sales or business.



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E.g.: Mc Donald¶s: They provide free toys with Happy Meals but actually the prices of the toys

are included in the meals.

d) Non-Compliance of Prescribed Standards

Any sale or supply of goods, for use by consumers, knowing or having reason to believe that the

goods do not comply with the standards prescribed by some competent authority, in relation to their

performance, composition, contents, design, construction, finishing or packing, as are necessary to

prevent or reduce the risk of injury to the person using such goods, shall amount to an unfair trade

practice.

E.g.: Not approved ISI mark on helmets.

E.g.: spurious medicines

e) Holding, Destruction, Etc.

Any practice that permits the holding or destruction of goods, or refusal to sell the goods or

provide any services, with an intention to raise the cost of those or other similar goods or services,

shall be an unfair trade practice.

E.g.: Auto rickshaws: tampering of meters and refusal of services.

Inquiry into Unf air Trade Practices

The Commission may inquire into any unfair trade practice:

a) Upon receiving a complaint from any trade association, consumer or a registered

consumer association, or

b) Upon reference made to it by the Central Government or State Government

c) Upon an application to it by the Director General or

d) Upon its own knowledge or information

R elief Available:

After making an inquiry into the unfair trade practices if the Commission is of the opinion that the

practice is prejudicial to the public interest, or to the interest of any consumer it may direct that,



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a) The practice shall be discontinued or shall not be repeated;

b) The agreement relating thereto shall be void in respect of such unfair trade practice or

shall stand modified.

c) Any information, statement or advertisement relating to such unfair trade practice shall

be disclosed, issued or published as may be specified

d) The Commission may permit the party to carry on any trade practice to take steps to

ensure that it is no longer prejudicial to the public interest or to the interest of the

consumer.

However no order shall be made in respect a trade practice which is expressly authorized by any

law in force. The Commission is empowered to direct publication of corrective advertisement and

disclosure of additional information while passing orders relating to unfair trade practices.

3) Monopolistic Trade Practice (MTP)

Such practice indicates misuse of one¶s power to abuse the market in terms of production and sales

of goods and services. Firms involved in monopolistic trade practice tries to eliminate competition

from the market. Then they take advantage of their monopoly and charge unreasonably high

prices. They also deteriorate the product quality, limit technical development, prevent competition

and adopt unfair trade practices

A monopolistic trade practice is one, which has or is likely to have the effect of:

a) Maintaining the prices of goods or charges for the services at an unreasonable level by

limiting, reducing or otherwise controlling the production, supply or distribution of goods

or services;

b) Unreasonably preventing or lessening competition in the production, supply or distribution

of any goods or services whether or not by adopting unfair method or fair or deceptive

practices;

c) Limiting technical development or capital investment to the common detriment;

d) Deteriorating the quality of any goods produced, supplied or distribute; and

e) increasing unreasonably -

y The cost of production of any good; or



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y Charges for the provision, or maintenance, of any services; or

y The prices for sale or resale of goods; or

y The profits derived from the production, supply or distribution of any goods or services.

A monopolistic trade practice is deemed to be prejudicial to the public interest, unless it is

expressly authorized under any law or the Central Government permits to carry on any such

practice. E.g.: Indian Railways has monopoly in Railroad transportation

Inquiry into Monopolistic Trade Practices

The Commission may inquire into any monopolistic trade practice,

a) Upon a reference made to it by the Central Government or

b) Upon an application made to it by the Director General or

c) Upon it own knowledge or information

R elief Available

a) Where the inquiry by the Commission reveals that the trade practice inquired into operates

or is likely to operate against public interest, the Central Government may pass such

orders as it thinks fit to remedy or present any mischief resulting from such trade practice.

b)

On an inquiry report of the Commission, the Central Government may-y Prohibit the owner(s) of the concerned undertaking(s) from continuing to indulge in a

monopolistic trade practice; or

y Prohibit the owner of any class of undertakings or undertakings generally, from

continuing to indulge in any monopolistic trade practice in relation to the goods or

services.

c) The Central Government may also make an order:

y Regulating the production, storage, supply, distribution, or control of any goods or

services by an undertaking and fixing the terms of their sale (including prices) or

supply;

y Prohibit any act or practice or commercial policy which prevents or lessens competition

in the production, storage, supply or distribution of any goods or services;

y Fixing standards for the goods used or produced by an undertaking;



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y Declaring unlawful the making or carrying out of the specified agreement;

y Requiring any party to the specified agreement to determine the agreement within the

specified time, either wholly or to specified extent;

y Regulating the profits which may be derived from the production, storage, supply,

distribution or control of any goods or services; or Regulating the quality of any goods

or services so that their standard does not deteriorate

E.g.: The Above Mentioned conditions acted as a constraint for a growing company reliance

which had to adhere to strict government regulations which limited its refining capability with

respect to setting up of petrochemicals refinery at Jamnagar.

The Governing Bodies of MRTP Act are as follows:

a) The Monopolies and Restrictive Trade Practice Commission.

b) The Director General of investigation and registration.

c) The Central Government and Supreme Court.

The Industrial policy statement of 1991 brought drastic changes in MRTP Act. These provisions

were criticized very much because of their negative impact on growth and competition. So

following are the important points regarding new policy:

Prior approval of the central government for establishment of new undertakings, expansion of

existing undertakings, merger, amalgamation and take over and appointment of certain directors

will no longer be required.

The provisions regarding restrictions on acquisition of transfer of shares are proposed to be

appropriately incorporated in the Companies Act.

The provisions of MRTP Act will be strengthened in order to enable the MRTP commission to

take appropriate action in commission the respect of the monopolistic, restrictive and unfair trade

practices.

Also the MRTP commission will be empowered and encouraged to investigate on complaints

received from individual consumers or classes of consumers.



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MRTP R EPLACED BY COMPETITION ACT

The MRTP Act, lacked provisions to deal with anti-competition practices that may accompany

the operation and implementation of the WTO agreements. Many of the anti-competition

practices will have to be spelt out instead of having to rely on section 2(o) of the MRTP Act

which merely speaks of prevention, distortion, or restriction of competition in a very broad

general sense. S pecific provisions may be necessary to deal with identifiable anti-competition

practices that may accompany international trade in the WTO regime.

Furthermore, during the administration of the MRTP Act over the last 30 years, there have been

a large number of binding rulings of the Supreme Court of India and also Bench decisions of the

MRTP Commission. These decisions have interpreted the various provisions of the MRTP Act

from time to time and have constituted as an example for the future. Thus, where the wording of

the existing law has been considered inadequate by judicial pronouncements, it may necessary to

redraft the law to inhere the spirit of the law and the intention of the lawmakers. It may therefore

be appropriate to enact a new law instead of attempting a large number of amendments and

enacting a large number of new provisions and incorporating them in the existing law i.e. the

MRTP Act.

A perusal of the MRTP Act will show that there is neither definition nor even a mention of

certain offending trade practices which are restrictive in character. Some illustrations of these

are:

a) Abuse of Dominance

b) Cartels, Collusion and Price Fixing

c) Bid Rigging

d) Boycotts and Refusal to Deal

e) Predatory pricing

One could argue that many of the anti-competition practices or restrictive trade practices may be

covered by one or other of the clauses of section 33(1) of the MRTP Act. But experience shows

that there has been a plethora of decisions on some of the clauses of the section 33(1) of the Act,



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often at variance with one another. For instance, in dealing with concessions, benefits, discounts

etc. there have been a string of decisions not necessarily in consonance with each other. Cartels,

to give another illustration, are not mentioned or defined in any of the clauses of section 33(1) of

the MRTP Act, though the MRTP Commission has attempted to fit such offences under one or

more clauses of section 33(1) by way of interpretation of the language used therein.

Another argument that could be advanced is that section 2(o) of the MRTP Act may cover all

anti-competition practices, as it is a general definition dealing with prevention, distortion or

restriction of competition. While complaints relating to anti-competition practices can be tried

under the generic definition of restrictive trade practice (which prevents, distorts or restricts

competition), the absence of specification of identifiable anti-competition practices always gives

room to different interpretations by different courts of law, with the result that the spirit of thelaw may escape being captured and enforced. While a generic definition may be necessary and

may form the substantive foundation of the law, it still will be necessary to identify specific anti-

competition practices and define them so that the scope for a valve or opening on technical

grounds for the offending parties to escape indictment may not obtain.

It has been noted earlier that a large number of anti-competition practices that may

accompany trade practices, during the implementation of the WTO agreements will have to be

drafted and incorporated in the Competition Law. Amendment of the MRTP Act, in the context

of the requirements outlined above, may, therefore will have to be very extensive, equivalent to

enacting a new Law. On balance, it appears eminently desirable to enact a new Competition

Law without tinkering with the existing MRTP Act. Furthermore, as would be seen in the next

section of this chapter, the entire provisions relating to unfair trade practices will have to be

taken out of the MRTP Act as they figure in the Consumer Protection Act, 1986. Mergers,

Amalgamations etc. will have to be brought within the contours of Competition Law afresh. For

all these reasons, a new law is warranted.

Another dimension to be kept in view is the dynamic context of international trade and market as

well as the domestic trade and market. When the 1969 Act was drafted, the economic and trade

environment prevalent at that time constituted the premise for its various provisions. There has

been subsequently a sea change in the milieu with considerable movement towards



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Liberalization, privatization and globalization. The law has to yield to the changed and changing

scenario on the economic and trade front. This is yet another reason why a new Competition Law

may be framed instead of making an effort to amend the existing MRTP Act. Many countries

like the U.K., Canada, Australia and the European Community have, in line with this thinking,

enacted new Competition Laws and repealed their earlier laws governing fair-trading, etc.



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Commission of India (herein after referred to as CCI) which shall also undertake competition

advocacy for creating awareness and imparting training on competition issues.

4. The Bill also aims at curbing negative aspects of competition through the medium of CCI.´

In accordance with the provisions of the Amendment Act, the Competition Commission of India

and the Competition Appellate Tribunal have been established. The provisions of the

Competition Act relating to anti-competitive agreements and abuse of dominant position were

notified on May 20, 2009.

Competition Commission of India

1) Establishment of Commission:

a) Central Government established a commission in 14th

October 2003 called - "Competition

Commission of India´.

b) The Commission consists of a Chairperson and six other Members appointed by the

Central Government.

2) Objective of the Commission:

a) To prevent practices having adverse effect on competition,

b) To promote and sustain competition in markets,

c) To protect the interests of consumers and

d) To ensure freedom of trade carried on by other participants in markets in India, and for

matters connected therewith or incidental thereto.

e) To function as a market regulator for preventing and regulating anti-competitive

practices in the country in accordance with the Act and it would also have advisory and

advocacy functions in its role as a regulator. ( as per The Competition (Amendment)

Bill, 2007 )



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3) The main powers of the Commission are:

a. To issue ³cease and desist´ orders;

b. To grant such interim relief as would be necessary in each case;

c. To award compensation;

d. To impose fines up to 10% of the average turnover of the enterprises for the last 3 years

upon each of such person or enterprises which are parties to such agreement or abuse;

e. To order division of dominant undertaking;

f. Power to order de-merger;

g. Power to order costs for frivolous complaints; and

h. Power to enter into arrangements with foreign competition agencies.

4) Salient features of the Act:

a) The Industries (Development and Regulation) Act, 1951 may no longer be necessary

except for location (avoidance of urban-centric location), for environmental protection

and for monuments and national heritage protection considerations, etc.

b) The Industrial Disputes Act, 1947 and the connected statutes need to be amended to

provide for an easy exit to the non-viable, ill-managed and inefficient units subject to

their legal obligations in respect of their liabilities.

c) The Board for Industrial Finance & Restructuring (BIFR) formulated under the

provisions of Sick Industrial Companies (S pecial Provisions) Act, 1985 should be

abolished.

d) World Trade Organizations (WTO) - There should be necessary provision and teeth to

examine and adjudicate upon anti-competition practices that may accompany or follow

developments arising out of the implementation of WTO Agreements. Particularly,

agreements relating to foreign investment, intellectual property rights, subsidies,

countervailing duties, anti-dumping measures, sanitary and psytosanitary measures,

technical barriers to trade and Government procurement need to be reckoned in the

Competition Policy/Law with a view to dealing with anti-competition practices. The

competition law should be the Competition Policy/Law with a view to dealing with anti-

competition practices. The competition law should be made extra territorial.

e) MRTP Act - It is suggested that:



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y The MRTP Act 1969 may be repealed and the MRTP Commission wound up. The

provisions relating to unfair trade practices need not figure in the Indian Competition

Act as they are presently covered by the Consumer Protection Act, 1986.

y The pending UTP cases in the MRTP Commission may be transferred to the

concerned consumer Courts under the Consumer Protection Act, 1986. The pending

MTP and RTP Cases in MRTP Commission may be taken up for adjudication by the

CCI from the stages they are in.

5) Extra- Territorial Jurisdiction

The mandate of the Competition Commission extends beyond the boundaries of India. In

case any agreement that has been entered outside India and is anti-competitive in terms of

sec. 3 of the Act ; or any party to such an agreement is outside India; or any enterprise

abusing the dominant position is outside India; or a combination has taken place outside

India; or any other matter or practice or action arising out of such agreement or dominant

position or combination is outside India, if such agreement, combination or abuse of

dominant position has or are likely to have an adverse effect on competition in the Indian

market, the CCI shall have the power to inquire into such agreement or dominant position or

combination if have or are likely to have an appreciable adverse effect on competition in the

relevant market in India .



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MAIN COMPONENTS OF COMPETITION ACT

The Competition Act 2002 has four main components:

1) Prohibition of certain agreements ( Anti ± Competitive Agreements)

2) Abuse of Dominant Position

3) Regulation of Combinations (Mergers & Acquisitions)

4) Competition Advocacy

1) Prohibition of Agreements (Section 3)

Anti-Competitive Agreements

Section 3 of the Act deals with agreements among enterprises or persons or association of

persons, which causes or likely to cause appreciable adverse effect on competition. Such

agreements are rendered void pursuant to this section.

The Act deals with following kind of agreements.

a) Horizontal Agreements.

b) Vertical Agreements.

c) Conglomerate Agreements.

a) Horizontal Agreements

This agreement deals with horizontal mergers. Horizontal mergers are a combination of two

or more firms in the same area of business. For example, merger of two book publishers or

two luggage manufacturing companies to gain dominant market share.

All the agreements between enterprises at the same stage of production, services, etc. and

including Cartels are included under this act.

(i) Directly or indirectly determines purchase or sale prices;

(ii) Limit or control production, supply, technical development etc.



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(iii) Allocate areas or customers

(iv) Directly or indirectly results in bid rigging or collusive bidding.

b) Vertical Agreements

This agreement deals with vertical mergers. Vertical merger is a combination of two or more

firms involved in different stages of production or distribution of the same product. For

example, merger of a TV manufacturing (assembling) company with a TV marketing

company or merger of a spinning company with a weaving company. Vertical merger may

take the form of forward or backward merger. When a company combines with the supplier

of material, it is called backward merger and when it combines with the customer, it is

known as forward merger.

Agreements between enterprises at different stages of production, distribution, etc.- subject

to Rule of Reason; burden of appreciable adverse effect on competition, they are

prohibited.

(i) Tie-in arrangement;

(ii) Exclusive supply agreement;

(iii) Exclusive distribution agreement;

(iv) Refusal to deal;

(v) Re-sale price maintenance.

c) Conglomerate Agreement

This agreement deals with conglomerate merger. Conglomerate merger is a combination of

firms engaged in unrelated lines of business activity. For example, mergers of different

businesses like manufacturing of cement products with fertilizer products or electronic

products or insurance investment or advertising agencies. L&T and Voltas Ltd are examples

of such mergers.



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All the above mention three agreements shall be in contravention of anti- competitive act if

such agreement causes or is likely to cause an appreciable adverse effect on competition in

India.

Definitions:

a) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser

in the course of his trade from acquiring or otherwise dealing in any goods other than those of

the seller or any other person;

E.g.: Coke entering into an agreement with food outlets like domino¶s to exclusively offer coke

with its products.

b) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the

output or supply of any goods or allocate any area or market for the disposal or sale of the goods;

E.g. Tata motors have an exclusive agreement of distributing FIAT Cars in India.

Agreements not under anti-competitive agreements

(i) The right of any person to restrain any infringement of or to impose reasonable conditions, as

may be necessary for protecting any of his rights which have been or may be conferred upon

him under²

y The Copyright Act, 1957

y The Patents Act, 1970

y The Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999

y The Geographical Indications of Goods (Registration and Protection) Act, 1999

y The Designs Act, 2000

y The Semi-conductor Integrated Circuits Layout-Design Act, 2000

(ii) The right of any person to export goods from India to the extent to which the agreement relates

exclusively to the production, supply, distribution or control of goods or provision of services for

such export.



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1) Unfair or discretionary conditions in purchase/sales

Directly or indirectly, imposing unfair conditions or discriminatory

a) Condition in purchase or sale of goods or services

b) Price in purchase or sale (including predatory price) of goods or services. [Sec 4(2)(1)]

Predatory price

"Predatory Price" means the sale of goods or provision of services, at a. price which is below

the cost, as may be determined by regulations, of production of the goods or provision of

services, with a view to reduce competition or eliminate the competitors. For example Coke

selling Coca Cola at Rs.5 per bottle

2) Limits or restricts the production of goods or services in the market, or the technical or

scientific development relating to such goods or services to the prejudice of consumers.

[Sec 4(2) (b)]

3) Indulging in practice or practices resulting in denial of market access is abuse of dominant

position [Sec 4 (2) (c)]

4) Making 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 to such contracts. [Sec4 (2)(d)].

5) Using dominant position in one relevant market to enter into or to protect other relevant

market. [Sec 4(2) (e)]



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The CCI shall while enquiring into any alleged abuse of dominance by an enterprise, either

on its own motion or on receipt of a complaint or reference has due regard to all or any of

the following factors:

a) Market share of the enterprise;

b) Size and resources of the enterprise;

c) Size and importance of the competitors;

d) Economic power of the enterprise including commercial advantages 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 or dominant position whether acquired as a result of any statute or by virtue of

being a Government company or a public sector undertakingh) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost

of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of

substitutable goods or service for consumers;

i) Countervailing buying power;

j) Market structure and size of market,

k) Social obligations and 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 injury [Sec 19(4)].

Types of abuse of dominance can also be categories as ±

y Exclusionary practices such as predatory pricing, denying market access, use of

dominance in one market to enter into, or protect, other relevant market.

y Exploitative practices such as discriminatory pricing and imposing discriminatory

conditions of trade, conclusion of main contract contingent upon accepting supplementary

obligations unrelated to main contract.



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The Competition (Amendment) Bill, 2007:

a) This clause seeks to amend section 28 of the Competition Act, 2002 relating to division

of enterprise enjoying dominant position. Earlier the Central Government can, on

recommendation of the Commission, order division of enterprise enjoying dominant

position.

b) It is proposed to amend section 28 so as to confer said power upon the Commission to

order division of an enterprise instead of the Central Government to order the division.

Case let for Abuse of Dominant Position: DLF Case

Competition Commission of India (CCI) in its latest judgment under Competition Act, 2002, has

imposed a penalty of US$ 140 million (INR 630 Crores) on DLF Limited (DLF), one of the

largest real estate Developers in India for abuse of dominance and unfair trade practices.

CCI while deciding in favor of consumers (allot tees of the apartments), Belaire Owner¶s

Association, held that DLF by placing discriminatory and abusive clauses in the Apartment

Agreements is guilty of abusing its dominant position. The Apartment Agreements impose

conditions unfair and to the detriment of the consumers and which are altered or included

unilaterally by DLF for its own benefit and to the detriment of the allot tees.

Earlier, the CCI in its Order dated 20th May, 2010, had concluded that a prima facie case existed

against DLF and had ordered the investigation into the matter by Director General (DG). After due investigation and submission of report by DG and hearing all the parties in the matter, the

final order holding DLF liable under the Competition Act, 2002 for abusing its dominance was

passed by CCI.

The consumers/allottees of apartments had approached CCI when DLF extended the deadline by

which the possession of the apartments was to be given to the consumers. Further, DLF also

increased the number of proposed floors to be constructed in the apartment complex from 19 to

29. The consumers/allottees of the apartment were aggrieved by the increased number of floors

as it would affect their use and enjoyment of the common facilities which would now be utilized

by more flat owners. The allottees claimed that DLF includes and imposes unfair and

discriminatory conditions in the apartment agreements which unilaterally favor DLF to the

detriment of the allottees.



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3) R egulation of combinations (Section 5)

Take over; amalgamation, merger etc. are some of the ways of increasing market dominance.

Competition Act intends to exercise control over such mergers and amalgamations, with a view

to ensure that such amalgamations and mergers are not anti-competitive.

Section5 of the Act deals with combinations. Combination includes acquisition of shares,

acquiring of control and mergers and amalgamations. These combinations can be horizontal,

vertical or conglomerate. It is the horizontal type of combinations that has very high potential to

thwart competition when compared to other two kinds of combinations.

Meaning of Combinations

The acquisition of one or more enterprises by one or more persons or merger or amalgamation of

enterprises shall be treated as µcombination¶ of such enterprises and persons or enterprises in the

following cases



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Type of Combination Group Status Criteria Location Value

(a) Any acquisition by

enterprises/individuals

The parties (i.e. acquirer

and the acquired

enterprise) jointly have

(i.e. no group)

Assets In India > Rs. 1000 crores

World Over > US $ 500 million

Turnover In India > Rs. 3000 crores


The group, to which the

acquired enterprise

would belong after the

acquisition, has:


World Over > US $ 2 billion



(b) Acquisition of control

by an enterprise/individual

competitor

The acquired enterprise

along with the

competitor¶s enterprise

jointly have:





The group, to which theacquired enterprise

would belong after the

acquisition, has:





(c) Acquisition by merger

or amalgamation

The enterprise remaining

after the merger or

created with the

amalgamation has:







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Changes in the value of assets and turnover :

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

audited books of account of the enterprise, in the financial year immediately preceding the

financial year in which the date of proposed merger falls, as reduced by any depreciation, and the

value of assets shall include the brand value, value of goodwill, or value of copyright, patent,

permitted use, collective mark, registered proprietor, registered trade mark, registered user,

homonymous geographical indication, geographical indications, design or layout-design or

similar other commercial rights.

Provision does not apply to acquisition by PFI/FII

The provisions of section 6 does not apply to share subscription or financing facility or any

acquisition, by a public financial institution, foreign institutional investor, bank or venture capital

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

The public financial institution, foreign institutional investor, bank or venture capital fund,

referred to in section, shall, within seven days from the date of the acquisition, file with the

Commission the details of the acquisition including the details of control, the circumstances for

exercise of such control and the consequences of default arising out of such loan agreement or

investment agreement, as the case maybe.

The group, the enterprise

remaining after the

merger or the enterprise

created as a result of

the amalgamation would

belong after the

acquisition, has:







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The Competition (Amendment) Bill, 2007:

1. Mandatory notice of merger or combination has to be given by a person or enterprise to the

Commission within thirty days.

2. The Commission can impose a penalty of up to 1% of the total turnover or the assets,

whichever is higher, on a person or enterprise which fails to give notice of merger or

combination to the Commission.

3. No combination shall come into effect until 210 days have passed from the day on which the

notice has been given to the Commission or the Commission has passed orders under section 31,

whichever is earlier.

Factors to be considered in determining adverse effect of combination

For the purposes of determining whether a combination would have the effect of or is likely to

have an appreciable adverse effect on competition in the relevant market, the Commission shall

have due regard to all or any of the following factors ±

a) Actual or potential level of competition through 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 and sustainably increase prices or profit margins

f) Extent of effective competition likely to sustain in a market, (g)

g) Extent to which substitutes are available or are likely to be available in the market, (h)

h) Market share, in the relevant market, of the persons or enterprise in a combination,

individually and as a combination, (i)

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

competitor or competitors in the market, (j)

j) Nature and extent of verticals integration in the market,

k) Possibility of a failing business,



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l) Nature and 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 [section 20(4)]

4) Competition Advocacy

In line with the High Level Committee's recommendation, the Act extends the mandate of the

Competition Commission of India beyond merely enforcing the law (High Level Committee,

2000). Competition advocacy creates a culture of competition.

The Commission shall take suitable measures to:

a) Promote competition advocacy.

b) Create public awareness.

c) Impact training about competition issues.

The Regulatory Authority under the Act, namely, Competition Commission of India (CCI), in

terms of the advocacy provisions in the Act, is enabled to participate in the formulation of the

country's economic policies and to participate in the reviewing of laws related to competition at

the instance of the Central Government. The Central Government can make a reference to the

CCI for its opinion on the possible effect of a policy under formulation or of an existing law

related to competition. The Commission will therefore be assuming the role of competition

advocate, acting pro-actively to bring about Government policies that lower barriers to entry, that

promote deregulation and trade liberalization and that promote competition in the market place.



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COMPARISON BETWEENMRTP ACT AND COMPETITION ACT

The MRTP Act, 1969 The Competition Act, 2002

It is based on the pre-liberalization &

globalization era. It is based on the post-reforms scenario.

The objective of the Act is to prevent

concentration of economic power to common

detriment to control of monopolies, prevention

of monopolistic & restrictive trade practices.

The objective of the Act is prevent practices

having adverse effect on competition & to

promote as well as sustaining the competition

to protect consumer interests at market place

and ensuring freedom of trade.

MRTP Commission has the power to pass only

³cease´ or ³desist´ orders.

The Competition Commission can pass an

order to prevent & punish such of those

activities, which abuses competition.

The MRTP Act did not provide for the

formation of fund for its activities.

The Competition Act provides competition

fund for promotion of competition advocacy

and creation of awareness about competitive

issues and training as may be prescribed in its

rules.

Entity having status of dominant position is

itself considered as bad.

The entity having dominant position is not

considered as bad. Whereas abuse of dominant

position affecting consumer interest is

considered as immoral.

The size of the firm, is the factor for

determining dominance etc.

It focuses on the firm¶s structure not on size

factor.

MRTP Commission role was only advisory.Competition Commission can initiate suo mote

proceeding and levy penalties.

MRTP commission dealt with the unfair trade

practices.

The cases relating to unfair trade practices will

be transferred to Consumer Courts.

Focused on Consumer interest at large. Focuses on public at large.



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The chairman of the MRTP Commission was

appointed by Central Govt.

The Chairman of the Competition Commission

will be appointed by a committee consisting of

retired judiciary persons having professional

expertise in various fields of trade commerce,

industry, finance etc.



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COMPARISON OF ENFORCEMENTMECHANISM OF ECC AND INDIA

It is true that the Competition Act of India is based on ECC law and U.K law to a very large

extent but there are certain differences which are there between the enforcement mechanism of

EC and India. Following are few of them:

Regulation1/2003 of ECC provides for Article 9 whereby if the undertakings concerned offer

commitments to meet the concerns expressed to them by the Commission in its preliminary

assessment, the Commission may by decision make those commitments binding on the

undertakings. Such an exercise amounts to saving of time of the commission. However the

Competition Act 2002 does not provide for any such mechanism.

Article 14 of the Regulation provides that the Commission should before taking any decision

should consult Advisory Committee on Restrictive Practices and Dominant Position. The

Committee consists of members who are competent in competition matters. However there is no

such provision for consultation in the Competition Act but Section 17 of the Act provides that

the Commission can appoint experts and professionals for the proper functioning of the

commission.

Further Article 20 and 21 of the Regulation provides the Commission with the power to inspectthe undertakings and the associations of the undertakings and for this purpose the officer so

authorized can enter the premises of the undertaking, examine the books and other related

records, seal the business premises etc. Further the Commission can also inspect any other place

apart from undertaking premises like homes of directors, managers and other member staff of the

undertakings. But in Competition Act no such provision for inspection is provided. The

Commission can only order the Director General to investigate and Director General while make

investigation has power similar to Commission provided under Section 36(2).

Apart from the imposition of penalty under Article 23, 1/2003 Regulation of ECC also talks of

concept of periodic penalty which provides for compelling the undertaking to abide by the

decision given by the commission under Article 7, 8, 9, 17, 18(3), 20(4) but no such compelling

mechanism is provided under the Indian Competition Act. Also there is provision of professional



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CASE STUDY

Jet Airways vs. Kingfisher

INTRODUCTION

y After 2005, jet acquired Sahara & kingfisher merged with Air Deccan

y On 13th October 2008, in a press conference jet & kingfisher declare that they are

entering into an alliance.

y Alleged that jet & kingfisher alleged anti competitive practices by jet airways and

kingfisher u/s 3 of the competition act, 2002

JET AIRWAYS & K INGFISHER

It was alleged that there existed strategic alliance/arrangement with regard to various

components/areas of passenger & airport transport services in the following areas:

y Code sharing on both domestic and international flights

y Interline agreements

y Joint fuel management

y Common ground handling

y Cross selling of flight inventories using the common global platform

y Joint network rationalization and synergies

y Cross utilization of crew on similar air craft types and commonality of training

y Reciprocity in jet privileges and king club frequent flier programmers

y Also increase in fuel charge in June 2009

y Float schemes such as ticket booklets

ISSUES CONSIDER ED BY THE DIR ECTOR GENERAL:-

1. Whether jet airways and kingfisher have abused their dominant position?

2. Whether the alleged agreement entered into is Viloative of s.3 of the act?



44

R EPLY FILED BY JET AIRWAYS

y It denied signing of any agreement with kingfisher on 13th December 2008.

y Announcement made on the 13th of October was without the intention of forming a

group, and was rather done with a view to help each other.

y Both airlines continued to work as independent Companies even after the announcement.

y Allegations with reference to ³interline agreements´ Should not be considered as they are

fairly standard Agreements between several airlines.

y Downfall of the aviation industry in 2007, there was an increase in the price of crude oil

and Decline in passengers so any agreement entered into to save each other is not anti

competitive.

y No cartelization formed.

y No record of any minutes of meetings between Kingfisher and jet airways before

October, 2008.

y Meeting on 13th October intended to work towards an alliance between two airlines with

the objective of joint fuel management.

y Also submitted that on the 15th of august 2010 many interline agreements signed with

other Airlines and such agreements are a globally accepted practice.

R EPLY FILED BY K INGFISHER

y No formation of a group with jet airways and hence s.4 not Applicable.

y Subsequently since s. 4 is not applicable abuse of dominance does not arise.

y In the month of October 2008, decline in passengers by 40%, hence both the companies

were in deep financial crisis.

y Hence the alliance was only to rationalize operations and derive Maximum synergies.

y With reference to interline agreements kingfisher has 89 of the same with different

airlines.

y The objective of rationalization would be in national interest.

y It further contended that kingfisher did not hold Dominant position in the market and all

airlines in June 2009 increased their prices due to the Increase in fuel prices.



45

y Denied that both the airlines made any profit and In fact stated that kingfisher suffered

losses to the Tune of Rs. 2155.21 Crores in 2009 and Rs. 2418 Crores in 2010.

y It also submitted that the small players were not squeezed because of the said alliance in

any way.

DG¶s INVESTIGATION R EPORT

y The DG established the ³relevant market´ to be the Services for transportation of

passengers on aircrafts in India.

y Abuse of dominance un-sustainable as both Jet and Kingfisher do not fall within the

definition of the word Group as envisaged in clause © of s. 4.

y Thus Dominance to be ascertained individually rather than considering both enterprises

as a group.

y The DG also stated that there are several other players in the market like Indigo airlines,

Air India, National Aviation co. Of India ltd each having a market shares up To 17% to

27%.

y Given the same in the last three years their market share has remained constant and they

are able to work independently.

y Hence the allegation of Abuse of dominance is unsustainable.

y The DG stated that in the event of any agreement, or Intention or even understanding

between the airlines Operators would result in having adverse effect on Competition.

y After the announcement of the alliance a MOU was signed between the parties as well as

interline Agreement and interline e-ticketing agreements and S pecial re-protection

agreements.

y Thus some of the Clauses of the alliance were operationalised by the 13thOctober, 2008

agreement.

y The DG also submitted that Jet and Kingfisher Increased their ATF by 12.2

5% and the

fuel surcharge Air component were increased by Rs.400 on the other Hand when the fuel

charges reduced the ATF still remained constant and no deduction was made.

y The report also stated that the airlines had increased their profitability by 30.25%.



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y He further contended that if Jet and Kingfisher Merge together or enter into an alliance

with each other they will hold approximately 48% of the Market share thereby creating

entry barriers for other competitors' and killing the existing Competition.

y There is no accrual of benefit to the consumers From the alliance

y The alliance has not resulted in the production or Distribution of goods or provisions of

services, rather the capacity has reduced which leads to lesser availability of airline

services.

y The DG concluded by saying that the alliance Announced has still not been rescinded and

many Of the clauses of the alliance are operationalised or Are in the midst of operation.

Further, existence of Price parallelism is a serious competition concern And the practices

of jet and kingfisher violate Provisions of s.3(3)(a), s. 3(3)(b) and s. 3(3)(c) of The act.

y With regards to s. 4 of the act, the DG found that Jet and kingfisher do not come within

the category Of the term group and individually they are not in Dominant position in the

relevant market and Hence s.4 is not applicable.

THE COMPETITION COMMISSION

The commission considered the DG report and send a copy of the report to the informant and the

opposite parties for inviting their replies/objections. Accordingly the parties filed their replies.

R EPLY OF JET AIRWAYS

y The observation in the DG report that the absence of Public announcement of rescinding

the alleged alliance Has given an impression to the stake-holders that Opposite parties are

operating together under an Agreement is misconceived and is liable to be rejected.

y The said public announcement of alliance can never be Construed as 'decision taken'

under section 3 (3) of the Act as in absence of any concluded agreement or any

conclusive decision to implement any alliance, it is not appropriate to even suggest that

opposite parties are acting in concert and thereby affecting competition adversely.

y The conclusion drawn by the DG that the said alliance between op 1 and op 2 has still

not been rescinded is not supported by any cogent evidence on record. In fact as the



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alliance as announced on 13th October, 2008 was not put into effect at all, the question of

rescinding it does not arise.

y Interline agreements and interline e ticketing and several other agreements entered into

are quite common in the airline industry .Such arrangements are prevalent in the civil

aviation industry all over the world.

y Under multilateral interline traffic agreement (MITA), two airlines operating scheduled

air Transportation services can enter into agreement To handle passenger travelling on

itineraries that multiple airlines And handling such passengers and their baggage And

each party may also Sell transportation over the routes of other carrier.

y Almost 140 ATA approved airlines across the world, Follow the same agreement. The op

1 has entered into interline electronic ticketing (IET) agreements with more than 80

carriers across the world including Air India This agreement is primarily Technical in

nature and is implemented to facilitate Issuance of interline e-ticket documents and does

not Involve any financial benefits to the parties to the Agreement.

y The special re-protection agreement (SRA) is a bilateral agreement between the operators

who Operates on similar routes to protect their passengers' Interest in case of any

disruption in operating carrier's Schedules due to flight cancellation or delay or retiming

of flights. The op 1 has entered into similar Agreements with more than 28 carriers all

over the World including Air India, S pice jet and Indigo.y Such Agreements are not for any commercial benefits to the Airlines as they are invoked

only under exceptional Circumstances as enumerated above. The technical memorandum

of understanding viou) is signed between two airlines to provide technical services.

y With regards to the observation of dg relating to price parallelism It has been submitted

that both op 1 and op 2 are competing With each other in several domestic sectors. Since

the product And services of both op 1 and op 2 are similar, the op 1 Cannot out-price op

2 in sectors it competes with it nor does it have a desire to under sell it flights either.

y Jet airways files it¶s Fares through airline tariff publishing company (ATPCO) which in

Turn distributes the fares to various global distribution system (gds). Because of this

within a matter of hours its fares become Transparent to the outside world and so do the

fares of other Carriers such as kingfisher. Jet airways after considering its Competitors

fares through atpco determine its own fares. It has also submitted that the fare that



48

actually is offered to a Customer at a particular point in time is determined by seat

availability which is managed through computerized revenue Management system.

y It has been contended that any airline offering substantially higher fares than its

competitors is likely to face a situation where no customer will be willing to buy its ticket

which would ultimately force it to lose out its market share.

y With regards to the conclusions drawn by DG it has submitted that since there is no

alliance between op 1 and op 2 Operationalized, there is no question of public

announcement Regarding 'no alliance in operation between op 1 and op 2'.

y With regards to linking fuel surcharge to actual distance it is Submitted that such

arrangements is already in place except That it is implemented in a slab wise manner. All

other airlines operating domestically levy fuel surcharge on the same basis. So, to single

out op 1 on this issue is not fair.

y With regards to dg recommendation that reduced ATF prices Should be passed on to the

consumers it is submitted that this Argument is not justified because there is no scientific

Mechanism anywhere in the world to link the actual quantum Of the fuel surcharge to

prevailing price of ATF.

y Op1 has not imposed any unfair and discriminatory conditions on its passengers and has

not violated any provision of the act as alleged by the informant.

R EPLY OF K INGFISHER

y There is no special pro rate agreement between op 1 and op 2.Objective of alliance was

not to limit supply and cooperate on revenue and cost matters, etc. The MOU has

nothing to do with the announcement made on 13th October it¶s a general practice

followed by the aviation industry.

y The special re-protection agreement is limited only to cases where there is a disruption in

the flight schedules of either of the airlines due to any unforeseen reason,

y With regards to interline traffic agreement it is submitted that it has entered into such

agreement with 88 airline operators worldwide. Similarly, it has also entered into e-

ticketing agreements with 65 airlines Operators worldwide.



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y The dg report has concluded that 'even a decision to enter into such an alliance would be

violative of the act.

y In this regard kingfisher airlines Submitted that the same is ex facie erroneous because

The term 'decision taken' used in section 3(3) of the act Is applicable only in case of

association of enterprises Or association of persons and to attract provisions of Section 3

(3) of the act there must be an agreement Between Jet airways and Kingfisher.

y It has also been contended that the conclusion of the Dg that after the declaration of

alliance between op 1 and op 2 the market share of op 2 has increased is wrong and not

based on actual fact. Rather, the fact is that after the announcements of the said alliance

the Market share of op 2 has declined.

y With regards to linking fuel surcharge with actual distance it has been submitted that

there is already an arrangement in place by which fuel surcharge his linked to distance,

except that it is done in a slab-wise manner.

y It was submitted that the dg recommendation that air fares be reduced as and when ATF

prices comedown is not justified.

y Finally, it has been submitted by op 2 that the complaint against it deserves to be

dismissed and investigation in this regard should be closed.

DECISIONS

y Activities being performed by the opposite parties are covered within the definition of

`enterprise' under section 2 (h) of the act.

y After examining the applicability of the provisions of Section 4 of the act, dg has come to

the conclusion that individually neither of the opposite parties is in a dominant Position

and since the envisaged in section 4 the allegation of abuse of dominance by the opposite

parties has no Substance.

y It is evident from the record that no other agreement apart From the interline agreements,

MOU, internet e ticketing Agreements and special re protection agreement, have been

entered into between the opposite parties. There is no Evidence on record which could

establish that the alliance as announced was operationalzed in Toto. Had all the Elements



50

of publicly announced alliance were given affect to And coordination between the

opposite parties had Extended to the fullest extent then that might have Given rise to

competition concern in view of the combined Market share of jet airways and kingfisher

airlines.

y On examining the agreements/arrangements entered into Between jet airways and

kingfisher airlines it is noted that None of these agreements can be said to have either

Determining the airfares or limiting the supply or allocating The market in terms of the

provisions of section 3(3)(a), 3(3)(b) and 3 (3) (c) of the act.

y Additionally it is also seen that such kind of Agreements/arrangements have not only

been entered Between jet airways and kingfisher airlines but they have Also separately

entered into such kind of agreements with Large number of domestic as well as

international airlines And most of these agreements have also been entered by Them with

the NACIL (Air India).

y The market share of both the parties has remained constant Even after passing of almost

two years of the public Announcement. In fact Kingfisher airlines have reported Losses

in subsequent years ending March, 2009 and March, 2010.

y Admittedly the special Re-protection agreement which was entered into between jet

airways and kingfisher Airlines on 21s' may, 2009 and extended from time to Time is an

agreement which has limited application and can be invoked only when there isdisruption in the Schedule of either of the party due to unforeseen Reason. When such

occasion arises then it enables the Airline whose schedule has been interrupted to transfer

its passengers on another airline operating on the same route. Very clearly such

agreement cannot be said to be one which either determines purchase or Sale price, or

limits or controls production, supply, Markets etc or provision of services, or which

allocates the market. Thus, it is apparent that Sra is in fact beneficial to the consumers

and in no Way it can be said to be anti-competitive in terms of Section 3(3) (a)/ (b)/(c) of

the act.

y The interline traffic arrangement agreement entered Into by both the parties appear to be

a common Industry practice and hence there does not seen to be Any violation as

provided in section 3(3) (a)/(b)/(c) of The act as it appears from records that jet has

entered Into MITA with140 airlines and kingfisher with 88.



52

CONCLUSION

Business thrives on competition, which is the critical element that distinguishes dynamic

economics. The relevance of competition is universal. However, intense competition in the

business environment also paves the way for dubious business practices. India¶s Competition

Act, 2002, enacted to fulfill the country¶s obligations under the World Trade Organization

agreements, is the country¶s first comprehensive law dealing with unfair competition or antitrust

issues. The Act¶s clearly-stated objective is not only to prevent practices which have an adverse

effect on competition, but also µto promote and sustain competition in markets, to protect the

interests of consumers and to ensure freedom of trade¶.

Benefits of Competition in markets:

a) promotes efficiency;

b) leads to higher productivity

c) punishes the laggards;

d) enhances choice, improves quality,

e) reduces costs;

f) facilitates better governance

Competitiveness involves ability of an enterprise to face competition on a sustainable basis.

When it is global competitiveness it has the added condition that the enterprise is able to stand up

to competition outside the home market. A global industry is one in which a firm¶s competitive

position in one country is significantly affected by its position in other countries.

Competitiveness, to be sustainable will have to be proved in a competitive atmosphere.

Competitiveness gained in the domestic market based on market power conferred by statute or through natural monopoly status or through anticompetitive practices does not lead to sustainable

results. An enterprise which is competitive in a monopolized domestic market, drawing on its

market power thus gained, will not be competitive in an international environment where it

would not have the market power which it enjoys in the domestic market. It will not be able to

replicate in a foreign market the anti-competitive environment endowing it with the required



53

market power. The link between competition, productivity, competitiveness and growth are well

recognized. It is productivity that immediately follows competition.

The competition act, 2002 was implemented to move away from the earlier emphasis on curbing

monopolies in particular industries, to a more particular and directed approach towards promoting competition and thereby increasing the size and scope of industry. Better competition

is believed to lead to higher efficiency in competing companies, thereby leading to a better

allocation of given resources.

The concept and the role of competition are relatively new to the Indian business community.

There is, therefore, a pressing need to increase the level of awareness about the benefits of

competition and the contribution of the competition law in this respect among the public, more

particularly among the business community. The Commission has been given, under the Act, the

mandate to generate public awareness; its efforts in this area may be further strengthened. The

Commission should formulate, publish and post in the public domain, guidelines covering

various dimensions related to competition law for enhancing public awareness. Such guidelines

will help enterprises by bringing greater clarity about the provisions of the competition law and

the manner of its enforcement. The Commission should also engage in Compliance Education

for business.

Competitiveness, productivity, growth are all linked to competition in markets. Competition in

markets implies broadly that; there is rivalry among them, there is costless entry and exit and no

single firm or any group of firms is able to influence market on its own. Modern competition

laws prohibit anti-competitive agreements and abuse of dominant position and regulate

combinations (covering mergers, amalgamations and acquisitions). The Indian competition law

is modern and nearly state-of-the-art and based on sound economic principles. This has beentestified by OECD Economic Survey 2007 of India and also by the WTO Trade Policy Review

of India in 2007. Absence of an enforceable competition law results in acquisition of undue

market power or dominant position as well as abuse of the same by enterprises in the country.

Such acquisition can be through anti-competitive agreements or through certain types of



54

mergers, amalgamation or acquisitions which rise concentration in the market unduly and also

results in four-closure of further competition in the market.

There are also certain irregularities with this act. For example, the Section 3(5) of this law

excludes all IPR (Intellectual Property Right) from its applicability. Thus, companies with IPR

can tend to monopolies industry. This is very relevant in the field of genome research and

biotech firms. Such firms can have the sole license to medicines developed through such

research, besides other key genes of organisms they might discover. Medication derived through

such research might become their own prerogative, which can affect pricing strategies. This

means that the product, with the absence of competition in the industry, might be priced at an

unaffordable price for most consumers.



BIBLIOGRAPHY

1) Corporate and Allied Laws (ICAI ± CA Final)

2) Mercantile Law - S.S Gulshan

3) http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/725(European

competition commission)

4) www.cci.gov.in

law super final for the day

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