Need for Competition Act in a globalised world, which is a single platform for carrying out trade and

commerce

Topics Covered

Meaning of Competition

Advantages of Healthy

Competition

Economic Efficiency and Welfare

Consumer Welfare

Better Quality goods and

Services

Reduction in corruption and lobbying

Better Accountability andTransparency

MRTP Act, 1969Enforced in June 1970

Objectives

Control Monopolies and Monopolistic Trade Practices1

Prevention of Concentration of Economic Power in few hands2

Regulate Restrictive Trade Practices3

Regulate Unfair Trade Practices4Introduced in 1984

Monopolistic Trade Practices1Practices that,

1.Prevent or lessen competition in,

2.Production, Supply or Distribution of,

3.Goods or Services by,

4.Misusing one’s power in the market

Concentration of Economic Power2

Restrictive Trade Practices3Practices that,

1. Obstruct the flow of capital or

2. Resources in the stream of production

Unfair Trade Practices4Practices that,

1. Involve adoption of unfair methods and /or deceptive practices for,

2. Promoting sale,

3. Use or

4. Supply of,

5. Goods or Services

Shortcomings of MRTP

• Anti-welfaristic results

• Stringent Provisions

• Ambiguity

• International Norms

v/sMRTP Competition Act

Based on pre reform scenario Based on Post-reform scenario

Based on size/ structure as a factor Based on conduct as a factor

Frowns upon dominance Frowns upon abuse of dominance

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

Registration of agreements compulsary No registration requirement

Regulation authority appointed by the government

Competition commission selected by a collegium

Reactive and rigid Proactive and flexible

Little administrative and financial autonomy

Relatively higher administrative and financial autonomy

No regulation for combinations Combinations regulated beyond a threshold

v/sMRTP Competition Act

Competition Act, 2002

Main Components

Anti - Competitive Agreements

Abuse of Dominance

Regulation of Combinations

Competition Advocacy

Anti-Competitive Agreements

An agreement entered into by,

or OR or

with respect to,

1. Production,

2. Supply,

3. Distribution,

4. Storage,

5. Acquisition or control of goods,

6. or provision of services,

That may cause an Appreciable Adverse Effecton the Competition

Types of Anti-Competitive AgreementsHorizontal Agreements

Agreements by,

Persons or Association of Persons

Or

Enterprises or Association of Enterprises

dealing in identical or similar goods or services

Manufacturer A Manufacturer B

Retailer

Types of Anti-Competitive Agreements

Horizontal Agreements

Determine Purchase/ Sale

price

Control Production,

Supply, Tech Developments,

investments etc.

Sharing/ Allocation of

market based on geography or

markets

Bid rigging

Types of Anti-Competitive AgreementsVertical Agreements

Any agreement amongst

enterprises or persons,

1. at different stages or levels of the production chain

2. in different markets,

3. in respect of production, supply, distribution, storage, sale or price of or trade in goods or provision of services

Manufacturer A Manufacturer B

Retailer

Types of Anti-Competitive Agreements

Vertical AgreementsTie - in Refusal to Deal

Exclusive Supply

Exclusive Distribution

Re-sale Price Maintenance

Abuse of Dominance

• Operate independently of competitive forces prevailing in the relevant market; or

• Affect competitors or consumers or the relevant market in company’s favour.

Dominant Position

Abuse of Dominance

Abuse of DominanceDetermining Abuse of Dominance

Determination of relevant market

Ascertainment of dominance of enterprise/ group in relevant market

Determination of Abuse by dominant enterprise

1

2

3

Abuse of DominanceDetermining Relevant Market

The Act lays down the following factors that help determine a relevant market :

Relevant Product Market

Relevant Geographic Market

Abuse of Dominance

Relevant Product Market

Abuse of Dominance

Relevant Geographic Market

Regulation of Combinations

Covers,

- acquisition of control,

- of shares, voting rights, assets and

- merger or amalgamation.

by one or more,

- person or group of persons or

- Enterprise or group of enterprises

Combination :

Regulation of Combinations

The Competition Act prohibits any combination that has an Appreciable Adverse effect on the competition.

Regulation of Combinations

- Prior approval from CCI

- Monetary Thresholds

- Intimation to CCI 30 days after board approval, or execution of any document/ agreement for proposed combination.

New 210 days rule

Regulation of CombinationsMonetary Thresholds

In India

Applicable to Assets Turnover

Individual Rs. 1500 Cr. Rs. 4500 Cr.

Group Rs. 6000 Cr. Rs. 18,000 Cr.

In and Outside India

Assets Turnover

TotalMinimum

Indian Component

TotalMinimum

Indian Component

Individual $750 Mn. Rs. 750 Cr. $2250 Mn. Rs. 2250 Cr.

Group $3 Bn. Rs. 750 Cr. $9 Bn. Rs. 2250 Cr.

Regulation of Combinations

Competition Advocacy CCI’s Role in pro-actively brining

Government policies for,

- Reducing barriers to trade

- Trade Liberalisation

- Promote Competition

Competition Commission of India

Competition Commission of India

- Established on 14th Oct 2003

- Became functional in May 2009

- Head office at New Delhi

- Composition,

- Chairman

- 2 to 6 members (Experts with 15+ years experience)

Competition Commission of India

Duties of the Commission

• to eliminate practices having adverse effect on competition;

• to promote and sustain competition;

• to protect interests of consumers and

• to ensure freedom of trade carried on by other participants, in markets in India.

• Extra territorial reach

Competition Commission of India

Process of Filing Complaints (Sec. 19)

Competition Commission of India

Notable Cases

BCCI v/s Franchise Owners DLF v/s Apartment buyers

• payments made by the buyers must be based on construction milestones and not "on demand“

• The builder will not have complete ownership of open spaces within the residential project area not sold

Jan 2013Feb 2013

• CCI imposed a penalty of US$8.2 million on BCCI for misusing its dominant position

• IPL franchise agreements were loaded in favor of BCCI and franchises had no say in the terms of the contract.

CCI in Numbers

CCI in Numbers

Status of Cases (2009 to 31st March 2014)

Total Cases : 461

CCI in Numbers

Sources of Enquiry (31st March 2014)

Total Cases : 461

Cases before the commission

2013 - 14

Cases before the commission

2012 - 13

CCI in Numbers

Monetary Penalties (2009 - 2014)

Description Nos.

1 Total number of matters and total amount of monetary penalties levied

35 Cases. Amount of Penalty levied is Rs. 9886.96 crore

2 Total amount realized without taking action as mentioned under Section 39(2) Rs. 72,74,53,618/-

3 Number of matters referred to income tax authorities Nil

4 Amount therein referred by income-tax authorities as arrears of tax Nil

Indian Competition act in light of Global Environment

Indian Competition Act in Global Environment

Comparison with Chinese Competition Law, 2008

Categories Indian Competition Act, 2002 Chinese Competition Law, 2008

Aim of Law Shifting the focus of Indian economy from curbing monopolies to promoting competition.

To separate government activities from business management and promote healthy development of the socialist market economy

Tribunal Provides for a Board Does not provide for a competition tribunal

Objectives

1) Safeguard and promote the order of market competition, 2) Protect consumers and the public interest

3) eliminate practices having adverse effect on competition, 4) ensure freedom of trade carried on by other participants in markets in India3.

3)guard against monopolistic conduct,4) improve economic efficiency5) promote the healthy development of the socialist market economy.

AuthoritiesOne regime(i)Competition commission of India

Law establishes a two tier enforcement regime which includes (i) The Anti-monopoly Commission (ii) the Anti-Monopoly Enforcement Authority

Indian Competition Act in Global Environment

Comparison with Chinese Competition Law, 2008

Categories Indian Competition Act, 2002 Chinese Competition Law, 2008

Conduct Applicable to monopolistic conductsTargets a special type of monopolistic conduct, i.e. administrative monopoly, which is a distinctive feature of the communist regime that exists in China.

Extra Terrestrial Conduct

Does not distinguish between agreements entered within India and outside India, but it focuses - in either cases on the presence of AAEC.

Distinguishes

PresumptionsIntroduces a presumption of anti-competitive behavior only in case of horizontal restrictions while evidence that vertical restrictions have an AAEC is required.13

No presumption of monopolistic conduct but the effects on competition (i.e. eliminate or restrict) in the domestic Chinese market should be proven case by case.

Case study

Adani Gas penalised for its abuse of dominanceAbuse of Dominance

?Abusing its dominance in the relevant market of ‘supply and distribution of natural gas in Faridabad’ by incorporating unconscionable and one sided terms in the Gas Supply Agreement (‘GSA’)

Case Cause

on July 3, 2014, the CCI imposed a fine of over Rs. 25 crores on Adani Gas Ltd. for abusing its dominant position in the natural gas supply market.

Unfair Conditions in the GSA

• No liability for reimbursement in case of excess payment

• Buyer’s liability to pay interest in case of delayed payment

• No liability to pay interest in case of dispute

• Lesser compliance time to buyers, longer compliance time from suppliers

• No liability to pay interest in case any amount becomes due

Adani Gas penalised for its abuse of dominance

Final Order

• CCI directed AGL to stop indulging in these practices and modify the GSA accordingly

• A penalty of Rs. 25.67 crore was imposed

Adani Gas penalised for its abuse of dominance

Regulation of Combinations

Sun Pharma - Ranbaxy Merger

Facts Findings

Sun Pharma and Ranbaxy had filed the notice with the CCI on 06.05.2014, in relation to merger.

The Commission observed that there are horizontal overlaps between the products of the Parties

FindingsSun Pharma - Ranbaxy Merger

• The commission held a meeting on 07.07.2014 and formed a opinion that the proposed combination would likely cause an adverse effect on competition in the relevant markets in India.

• The Commission noted that various generic brands of a given molecule are chemical equivalents and are considered to be substitutable. Therefore, the molecule level would be most appropriate for defining relevant markets on the basis of substitutability

Horizontal Overlaps foundSun Pharma - Ranbaxy Merger

Proposals by the CCISun Pharma - Ranbaxy Merger

Sun Pharma shall divest:

All products containing Tamsulosin + Tolterodine, Leuprorelin.

Ranbaxy shall divest:

All products containing Terlipresslin, Rosuvastatin + Ezetimibe, Olanzapine + Fluoxetine,Levosulpiride + Esomeprazole, Olmesartan + Amlodipine + Hydroclorthiazide.

Modification(amendments) to the proposed combination:

Sun Pharma shall divest all products containing Tamsulosin + Tolterodine and the rest products would be divestified by Ranbaxy.

Final OrderSun Pharma - Ranbaxy Merger

• The Commission thus approved the proposed merger between Sun Pharma and Ranbaxy.

• The Commission also directed that the proposed merger shall not take effect before the Parties have carried out the divestiture of the products.

• The combined entity would be the largest pharmaceutical company in India and the fifth-largest generic player globally by sales.

Conclusion