The Competition Act, India

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Information about The Competition Act, India

Published on March 12, 2014

Author: NehaKumar09


“When world at large is a single platform for carrying out trade and commerce, the need for Legal Environment of Business : Group Project on -

 1947 – Command and control , laws, policies, rules, regulation  Strategy of planned economic development - Indian Industrial Policy 1948  Emphasized Growth, social justice and self reliance  Limited licenses in private sector, Government controlled all areas  Restrictions on foreign investments  Free competition in the market was under severe threat  Monopolistic Behavior - Concentration of economic power in few individuals or business houses.

 Three studies conducted 1. Committee setup in 1960 under Professor Mahalonobis Distribution and level of Income 2. Monopolies Inquiry commission (MIC), April 1964 Concentration of economic power, restrictive and monopolistic trade practice 3. Committee Chaired by Mr. Hazari, 1965 Industrial licensing process - Disproportionate growth Articles 38 and 39 of the Constitution of India – Basic principles behind MRTP Act 1969

MRTP Act Competition Act 1. Based on command and control regime Based on liberalized regime 2. Competition concepts not expressly defined Competition concepts expressly defined 3. No regulation of combinations Provides for regulation of combination 4. Has no advocacy role Provides for advocacy 5. No power to impose penalty Power to impose penalty deterrence factor 6. Government Departments outside its ambit Government Departments within its ambit

Competition Act Defined: An act to prevent practices having adverse effect on competition, to promote and sustain competition in markets , to protect the interest of consumers & To ensure freedom of trade on by other participants in the market. Objectives of the act Establish a Commission to prevent practices having adverse effect on competition Promote and sustain competition in markets Protect the interests of consumers Ensure freedom of trade in the Indian markets Benefits:  Consumers  Businesses  Governments

 Agreements that negatively or adversely impact competition (Section 3)  Prohibition on Anti Competitive Agreements

Horizontal Agreement Section 3(3):  Cartels Vertical Agreements Section 3(4):  Tie in Arrangements  Exclusive supply Agreement  Exclusive distribution Agreement  Refusal to Deal  Resale Price Maintenance

Unfair Trade Practices  Subjecting a consumer to undue pressure/ influence to buy  Taking advantage of a consumer’s inability to understand a transaction  Representing that goods have or have not been used to the extent that is different from the fact  Representing that goods are available in a particular quantity if they are not Restrictive Trade Practices Any trade practice that tends to block the flow of capital into production and also bring in conditions of delivery to affect flow of supplies leading to unjustified cost.

3 Stage Process of determining abuse of dominance:  Determination of Relevant Market  Dominance of the enterprise/group in the relevant market is ascertained  "Abuse" by the dominant enterprise in the relevant market is determined Stage 1 - Determination of Relevant Market  Relevant Product Market  Relevant Geographic Market Stage 2 - Determination of Dominance  What is Dominance  Factors determining dominance

Stage 3 - Determination of Abuse As per the act, Abuse of Dominance occurs if an enterprise or the group engages in one or more of the following conducts:  Imposing unfair or discriminatory price or condition in purchase or sale Case Example - CCI Case/ DLF Case  Predatory Pricing Case Example – Small retailers vs e-commerce companies  Limiting production, technical or scientific development to the prejudice of consumers  Denying Market Access in any manner  Using the dominant position in one relevant market to enter into, or protect, other relevant market.

 Combinations include mergers, amalgamations and acquisition of control, shares, voting rights or assets.  Entering into a combination which causes adverse effect on competition within the relevant market in India is prohibited  Types Of Combination.  Horizontal Combination  Vertical Combination  Conglomerate Combination  Threshold for Combinations under the Act  Combination Notice

In India Applicable To Assets Turnover Individual Rs.1,500 cr. Rs.4,500 cr. Group Rs.6,000 cr. Rs.18,000 cr. In India & Outside Individual Parties Assets Turnover Total Minimum Indian Component Total Minimum Indian Component out of Total $750 m Rs.750 cr. $2,250 m Rs.2,250 cr. Group $3 bn Rs.750 cr. $ 9 bn Rs.2,250 cr.

The aim is to foster conditions that will lead to a more competitive market structure and business behaviour. A successful competition advocacy can be viewed in terms of the following efforts from CCI:  Develop relationship with the Ministries and Departments of the Government / regulatory agencies that formulate policies affecting demand and supply in various markets.  Encourage debate on competition and promote a better and more informed economic decision making  Competition advocacy must be open and transparent to safeguard the integrity and capability of the CCI  Establish good media relations and explain the importance of Competition Policy as an integral part of the Government’s economic framework

Initiatives taken by the CCI  Engaged in undertaking advocacy with ministries, regulators, & State governments  Given its opinion on the draft of many Bills E.g. the Shipping Trade Practices Bill  The Commission has given its views on regulatory policies and practices in the fields of banking, telecommunications and intellectual property rights.  Presentations on Competition law and policy to Ministries  Held a series of lectures/ seminars/ conferences dedicated to competition related issues

Need for Amendment :  The composition of the CCI  Establishment of Competition Appellate Tribunal  Imposing of penalty and other administrative powers/ changes  Competition Commission to issue its order within 210 days from making of the application  Provide for continuation of the MRTP commission for 2 years to deal with the pending cases under the MRTP act

 Administration and enforcement of competition law and competition policy to enable economic efficiency and consumer welfare  Involvement proactively in government policy formulation to ensure that markets remain fair, free open flexible and adaptable.  COMPAT adjudicates appeals against the orders of the Competition Commission of India and also adjudicates the claims of compensation that may arise from the findings of CCI or itself.

Infringement Fine/Penalty Who is liable? Anti-competitive agreements  Penalties of up to 10% of turnover (or 3x cartelized profits)  Enterprises who enter into an anti-competitive agreement  Directors/officials also liable Abuse of dominance  Penalties of up to 10% of turnover  Division of dominant enterprise  Enterprises abusing dominant position  Directors/officials also liable Failure to notify a reportable combination  Fine of up to 1% of combined turnover/assets  Person or enterprise  Directors/officials also liable Failure to comply with directions of CCI  Fines and/or imprisonment as prescribed  Compensation can also be awarded by Appellate Tribunal for loss/damage suffered by any person  Person failing to comply  Directors/officials also liable

 BRICS is a group of five major emerging economies of the world viz: Brazil, Russia, India, China and South Africa.  BRICS countries periodically review the competition regimes in their region & represent a fundamental change in international competition enforcement The BRICS countries represent 3 billion people accounting for about 43 percent of the world population and 25 percent of the world's GDP. Trade within the group amounts to about 17 percent of global commerce.

Case 1  The Competition Commission of India ("CCI") imposed one fine— INR 52.24 Crore fine against the Board for Control of Cricket in India for an alleged abuse of dominance.  This case was initiated on the basis of information filed by Sh. Surinder Singh Barmi, a cricket fan from New Delhi  The allegations leveled by the informant centre on the following three dimensions of organization of Indian Premier League (IPL), a Twenty 20, professional cricket league tournament conducted by BCCI: ○ Irregularities in the grant of franchise rights for team ownership. ○ Irregularities in the grant of media rights for coverage of the league. ○ Irregularities in the award of sponsorship rights and other local contracts related to organization of IPL.

Case 2  Builders’ Association of India Vs Cement Manufacturers’ Association &Ors.  In cartel cases, the CCI has the power to fine parties up to three times of its profit for each year of the continuance of the cartel or 10% of its turnover for each year of the continuance of the cartel, whichever is higher.  Compat granted a stay regarding the collection of INR 63.07 billion ($1.04 billion) in fines imposed on 11 cement manufacturers for coordinating prices and reduced the original fine of INR 600 million by 90% Company ACC Ltd. Ambuja Cements Ltd. Binani Cements Ltd. Century Textiles Ltd. India Cements Ltd. J.K. Cements Ltd. Lafarge India Pvt Ltd. Madras Cement Ltd. Ultra tech Cement Ltd. Jai Prakash Associates Ltd

Case 3  Belaire Owners Association vs. DLF Limited & Ors.  DLF had used its position of strength in dictating the terms of the Apartment Buyers Agreement ("Agreement') and imposed unilateral and one-sided clauses  Relevant market : the market for services of developer/builder in respect of high-end residential accommodation in Gurgaon  DLF had the highest market share (45%), vis-a-vis the market share of the nearest competitor (19%) which was more than twice of its competitor, leading to hardly any competitive constraints.  CCI imposed penalty of Rs. 630 Crores on DLF Ltd. under section 27(b) of the Act, at the rate of 7% of the average turnover of DLF for the last three financial years

 Hiranandani Hospital under CCI lens for monopoly abuse  First instance of the anti-trust regulator turning its gaze towards the under-regulated healthcare sector in India  Lady was refused maternity services by Hiranandani during the 38th week of her pregnancy because she declined to avail the stem cell banking services offered by Cryobanks International India, with which the hospital had an exclusive partnership.  Dominant player in the field of maternity services abused its dominance by restricting the patient choice.

Enforcement Activities

Office of the Director General

 Competitive markets are backbone for economic growth  Competition Act: A perfect blend for liberalized India  Multilateral Competition vital for protection of competition  Scope & Objective of competition policy are both inter- related  The elements of competition policy take care of all facets  Thus competition law is an important institutional pillar for thriving a market economy like India

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