Indias New Competition Law

COMPETITION ACT, 2002

Competition
Competition is an ambiguous term.

It is not defined in the Act. It refers to economic

rivalry amongst economic enterprises to control greater market power. Economic enterprises compete to outsmart their competitors and in the process sometimes eliminate rivals. Level of Competition does not depend upon number of players in an industry but degree of contestability.

Competition Act, 2002- Objective

Competition Act, 2002 states its objective in Preamble is to provide for the establishment of a commission to; Eliminate practices having adverse effect on competition. Promote and sustain competition. Protect interest of consumers. Ensure freedom of trade carried on by other participants in markets in India.

Benefits of COMPETITION
Promotes efficiency;

Encourages innovation;
Punishes the laggards; Facilitates better governance;

Boosts choice improves quality, reduce costs;

Ensures availability of goods in abundance of

acceptable quality at affordable price.

Preamble
PREAMBLE - M.R.T.P ACT, 1969
To provide that the

COMPETITION ACT, 2002

Establishment of a

operation of the economic system does not result in the concentration of economic power to the common detriment; Control of monopolies; Prohibition of monopolistic and restrictive trade practices.

Commission; To prevent practices having appreciable adverse effect on competition; To promote and sustain competition in markets; To protect the interest of consumers and to ensure freedom of trade carried on by other participants in markets, in India.

Competition Act,2002- Main features

Session - 1 I. Prohibits Anti Competitive Agreement. (Sec 3) II. Prohibits Abuse of Dominant Position. (Sec 4)

Session - 2 I. Provides for Regulation of Combinations (Sec

5,6) II. Enjoins Competition Advocacy. (Sec 49)

I. Anti-Competitive Agreements
Two type : Horizontal & Vertical

Agreement amongst competitors (horizontal

agreement), including unions most malicious violation.

Price fixing, sharing of market, limiting production, supply, etc., bid rigging, collusive bidding.

Agreement such as between manufacturer

and distributor (vertical agreement) subject to Rule of Reason; burden of proof lies on prosecutor.

Tie-in arrangement, exclusive supply/distribution agreement, refusal to deal, resale price maintenance.

Examples - Horizontal Agreements

Horizontal Agreements Agreements between enterprises at the same stage of production, services, etc. Directly or indirectly determines purchase or sale prices; ii. Limits or controls production, supply, markets, technical development, investment or provision of services; iii. Shares the market or source production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or in any other similar way; iv. Directly or indirectly results in bid rigging or collusive bidding. Above agreements are presumed to cause appreciable adverse effect on competition in the markets.
i.

Examples - Vertical Agreements

Vertical Agreements - Agreements between enterprises at different stages of production, distribution, etc. Examples : i. Tie-in arrangement; ii. Exclusive supply agreement; iii. Exclusive distribution agreement; iv. Refusal to deal; v. Re-sale price maintenance.

II. Abuse of Dominance

Agreement includes arrangement or

understanding, oral, or in writing, not necessarily enforceable by law. Not dominance, but its abuse is prohibited. Acts deemed to be abuse are (sec.4);
Unfair or discriminatory pricing (including predatory pricing). Limiting production or technical development Denial of market access. Conclusion of contracts subject to supplementary obligations. Use of dominant position in one market to enter into or protect the other market

Conti.
Dominance not based on arithmetical figure, but on

several factors listed in Act. Sec.19(4) Relevant market needs to be first determined;

Relevant product market. Relevant geographic market.

Sec 19(7) Sec 19(6)

Vodafone Case
The petition has been jointly filed by the Cellular Operators

Association of India (COAI) and Vodafone Essar as the Commission's order was made applicable to all service providers against mobile service providers from holding schemes, contest or lottery as part of their promotional activities. (Sep 18, 2007)
The Commission on August 22 passed an order saying that prima

facie Vodafone's scheme of offering a free gold coin and bumper prize of Maruti SX4 car by way of lucky draw to its subscribers was a case of unfair trade practice. It held that the scheme was not to the subscribers' interests but to merely ensure that users make more calls towards generating more revenue for the service providers.

Sirena v Eda Case

Unfair and excessive prices in the energy sector It was held that: As regards the abuse of a dominant

position, although the price level of the product may not of itself necessarily suffice to disclose such an abuse, it may however, if unjustified by any objective criteria, and if it is particularly high, be a determining factor. In General Motors, the Commission used the expression excessive prices for the first time, suggesting that an excessive price would be unfair. Although the ECJ annulled the decision, it upheld the proposition that under Article 82 an abuse might lie, inter alia, in the imposition of a price which is excessive in relation to the economic value of the service provided.

Judgement against - Sirena v Eda Case

Conceptually unfair prices are supra-monopolistic prices.

The conditions under which supra-monopolistic pricing can be considered unfair are exceptional: the dominant firm should enjoy a lasting (quasi-)monopolistic position in respect of indispensable goods, face an inelastic demand curve and systematically charge above monopoly price levels. Given this exceptional nature and the need to ensure undistorted competition, enforcement action under Article 82 EC should primarily focus on practices that harm a still existing competitive process.

END OF SESSION - 1

III. Regulation of Combinations

Combinations includes: merger and amalgamation,

acquiring of control, and acquisition of shares, voting rights, assets. High thresholds, notification domestic nexus. Mandatory pre-notification before mergers. Combination must decide in 210 days, else combination deemed approved.

Conti.
Combination assessed on rule of reason based on

14 factors. Commission can take suo moto action within 1 year after combination

IV. Competition Advocacy

The Commission shall take suitable measures to;

Promote competition advocacy. Create public awareness. Impact training about competition issues.

The Commission shall render opinion on a reference

from the Central Government on a policy/law on competition; not binding.

Other Highlights of Act

Government department/undertaking

included, Competitive Neutrality.

Effects Doctrine

CCIs jurisdiction expressly extended to anti-competitive practice taking place outside India, but having effect in markets in India. This will better protect domestic markets / consumer. Refers to competition issue arising in a proceeding to commission for opinion . Commission to give opinion in 60 days, after which regulator may pass order.

Relationship with Sector Regulators

International co-operation For discharging its duties/functions, ICC can enter into memorandum/arrangement with any agency of any foreign country. Such arrangements imp. For inquiries against overseas/crossborders violations. International cooperation and effects doctrine mutually complementary.
Excluded from competition scrutiny: - Exports - Reasonable restriction on IPRs (Patents, Copyrights etc.) - Efficiency enhancing Joint Ventures excluded from presumptive rule

Powers of Competition Commission of India

To issue Cease & Desist Order.

To modify the trade agreement.

To grant such interim relief during the enquiry. To award compensation.

To impose penalty on the guilty.

To recommend division of enterprise. To direct modification of trade agreements.

THANK YOU !!

 Abuse of a dominant position occurs when a dominant

firm in a market, or a dominant group of firms, engages in conduct that is intended to eliminate or discipline a competitor or to deter future entry by new competitors, with the result that competition is prevented or lessened substantially. These provisions, contained in sections 78 and 79 of the Competition Act, establish the bounds of legitimate competitive behaviour and provide for corrective action when firms engage in anti-competitive activities that damage or eliminate competitors and that maintain, entrench or enhance their market power.

Subsection 79(1) sets out three essential elements that must be found to exist for the Competition Tribunal to grant an order. The Tribunal must find that: one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business; that person or these persons have engaged or are engaging in a practice of anti-competitive acts; and the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.