Date post: | 04-Apr-2018 |
Category: |
Documents |
Upload: | nikhil-arora |
View: | 215 times |
Download: | 0 times |
of 29
7/30/2019 pptals-06-120222085940-phpapp02
1/29
CUTS Institute for Regulation &Competition, World Trade Centre, Mumbai
& Institute of Company Secretaries of India
Centre for Corporate Training &
ResearchPresents
Competition Policy and Law in aLiberalisingEconomy
by
Prof. H D. Pithawalla, Advocate & Solicitor
Thursday, 7th December 2006
7/30/2019 pptals-06-120222085940-phpapp02
2/29
2
Competition Law
A myth or a reality in India ?
7/30/2019 pptals-06-120222085940-phpapp02
3/29
3
Contents
Background of the Competition Act
Unfair Trade Practices
Restrictive Trade Practices
Protection of Intellectual Property Rights
Abuse of Dominance and Combinations
Case Studies
7/30/2019 pptals-06-120222085940-phpapp02
4/29
4
Background
Competition (L compete) is an age-
old phenomenon
In olden days, competition
existed amongst cave-men
is also reflected in the Mahabharat
In modern times, competition
has become a global phenomenon
starts right from Kindergarten & Nursery
classes
7/30/2019 pptals-06-120222085940-phpapp02
5/29
5
Benefits of Competition.
Companies : Efficiency, cost-saving
operations, better utilization of
resources, etc.
The Consumer : Wider choice of goods
at competitive prices
The Government : Generates revenue
BUT
7/30/2019 pptals-06-120222085940-phpapp02
6/29
6
.Benefits of Competition
all these benefits are lost if
Competition is UNFAIR or NON-
EXISTANT
Choice of CARS in the olden days
MTNL Monopoly : The position today
Airlines : INDIAN AIRLINES : JET :
SAHARA
Mobiles : Price Wars
Indian Railways : The monopolycontinues.
7/30/2019 pptals-06-120222085940-phpapp02
7/29
7
Perfect Competition A Myth
PERFECT COMPETITION is anideal situation which exists only onpaper. It implies: A large number of Sellers
A large number of Buyers
Free entry
Free exit
Manufacturers are price-takers andnot price-makers
No single manufacturer can influencethe market
7/30/2019 pptals-06-120222085940-phpapp02
8/29
8
Evaluation of Countrys
Competition Regime
Competition Policy & Philosophy of theGovernment
Trade Agreements & Practices which areRESTRICTIVE
Trade Agreements & Practices which are
UNFAIR Abuse of dominance
Combines : Mergers, amalgamations and take-overs
Protection (or lack of it) of Intellectual PropertyRights
Competition at the international level : TradeBlocs
Consumer activism : NGOs and ConsumerAssociations
7/30/2019 pptals-06-120222085940-phpapp02
9/29
9
Evolution of Competition Law
Before MRTP Act came into force (1970),limited provisions existed under : The Indian Contract Act
The Law of Torts
Directive Principles of State Policy (Non-
enforceable) The MRTP Act brought in a four-pronged
thrust : Concentration of economic power ( - Repealed
in 1991 - )
Restrictive Trade Practices Monopolistic Trade Practices ( - Almost a dead
letter - )
Unfair Trade Practices ( - Added in 1984 - )
7/30/2019 pptals-06-120222085940-phpapp02
10/29
10
Competition Act - Still in
Incubator
Raghwan Committee
Two Writ Petitions as soon as
Act was notified
Observations of the Hon'bleSupreme Court
The position on date
7/30/2019 pptals-06-120222085940-phpapp02
11/29
11
Unfair Trade Practices
Many competition regimes do NOT consider thisas part of Competition Law
BUT, it doesaffect competition directly orindirectly
Consumer protection provisions made for the
first time in Indiaby 1984 Amendments in the
MRTP Act
The Consumer Protection Act came only 2years later
How Consumer Courts were hurriedlyconstituted
After 1986, MRTP Commission and ConsumerCourts had parallel jurisdiction
Consumer Courts v MRTP Commission : Pros& Cons
7/30/2019 pptals-06-120222085940-phpapp02
12/29
12
Unfair Trade Practices
HOW UTPs affect competition : Warranties notbased on lab tests After sales guarantees not honoured
Contests & Competitions View of the MRTP Commission
View of the Supreme Court Disparagement of competing products
Godrej v Kelvinator
Colgate v Pepsodent
Rulings in RIDAKE (India) & XENICAL (USA)
Misleading sales ads UPTO 60% OFF
Guptajis Sales
Ads of CURRYS (U.K.s biggest electrical chain)
7/30/2019 pptals-06-120222085940-phpapp02
13/29
13
UTPs vis--vis Competition Act
Under the Competition Act : No provision for Unfair Trade Practices
Only Consumer Courts will havejurisdiction
Pending cases will be continued byMRTPC for 2 years
After 2 years : All cases (except Disparagement Cases) will
be transferred to National Commission underCPA
All Disparagement Cases will be transferredto Competition Commission
Q. : After 2 years, WHERE can aCompany file Disparagement Cases ?
7/30/2019 pptals-06-120222085940-phpapp02
14/29
14
Restrictive Trade Practices
MRTP Act
Today, the Act contains a two-pronged
approach to RTPs
RTPs (except one) are NOT declaredvoid. Only registration formalities are to
be complied with
MRTP Commission can issue Notice of
Enquiry followed by Cease-&-DesistOrder if RTP proved to be against public
interest : No jail, no fine
Gateways are available
7/30/2019 pptals-06-120222085940-phpapp02
15/29
15
Restrictive Trade Practices
Competition Act
9 Anti-competitive Agreements
are declared void
Per Se Rule applied to 4
Horizontal Agreements
Rule of Reason applied to 5
Vertical Agreements
7/30/2019 pptals-06-120222085940-phpapp02
16/29
16
Anti-competitive Agreements
Horizontal Agreements
Persons engaged in identical or similar goods orservices enter into an agreement :
to determine purchase or sales prices
to limit / control production, supply, technologicaldevelopments, etc.
to share the market, allocate geographicalmarkets or number of customers
for bid rigging or collusive tendering
All the above 4 Agreements shall bepresumed to have an appreciable adverseeffect on competition
7/30/2019 pptals-06-120222085940-phpapp02
17/29
17
Anti-competitive Agreements
Vertical Agreements
Tie-in Arrangements
Exclusive Supply Agreements
Exclusive Distribution Agreements Refusal to deal
Resale price maintenance
Such an Agreement will be contraventionof the Act IF the Agreement causes or islikely to cause an appreciable adverseeffect on competition
7/30/2019 pptals-06-120222085940-phpapp02
18/29
18
Powers of Competition Commission as
Regards Agreements
After the inquiry into the Agreement,
Competition Commission can:
direct parties to discontinue the
agreement prohibit parties from re-entering such
agreement
direct modification of the agreement
impose penalty upto 10% of averageturnover of the enterprise
7/30/2019 pptals-06-120222085940-phpapp02
19/29
19
PROTECTION OF INTELLECTUAL
PROPERTY RIGHTS
MRTP Act Firstly, the MRTP Commission cannot pass
Orders which restrict
the right of any person to restrain the infringementof a patent granted in India, or
any person as to the condition he attaches to alicence to do anything, the doing of which, but forthe licence, would be an infringement of a patentgranted in India
Secondly, Section 39, which declares resaleprice maintenance to be void, does not affect the
validity of a licence granted by the proprietor of apatent or trade-mark, so far as it regulates theprice at which articles produced by the licenseemay be sold by him.
7/30/2019 pptals-06-120222085940-phpapp02
20/29
20
PROTECTION OF INTELLECTUAL
PROPERTY RIGHTS
Competition Act
The prohibition on horizontal and
vertical agreements do not restrict
the right of any person to imposereasonable restrictions to protect
any of his rights under the
Copyright Act, the Patents Act, the
Trade and Merchandise Marks
Act, Designs Act
7/30/2019 pptals-06-120222085940-phpapp02
21/29
21
Abuse of Dominance
Mandate of the Act : No enterpriseshall abuse its dominant position.
5 categories of abuse are listed in
the Act, as for instance, - Imposing discriminatory conditions in
purchase or sale of goods
Predatory pricing
Limiting production or scientific ortechnical development
Using dominant position in one marketto enter another market, etc.
7/30/2019 pptals-06-120222085940-phpapp02
22/29
22
Abuse of Dominance
Dominant position is defined as aposition of strength which enablesthe enterprise to operate independently of competitive
forces in the market, or to affect its competitors or consumers in
its favour.
No mathematical or statisticalformula is adopted to measure
dominance as under the repealedprovisions of the MRTP Act ( - 25%of market share - )
7/30/2019 pptals-06-120222085940-phpapp02
23/29
23
Abuse of Dominance
Power of the Competition
Commission
After inquiry into abuse of
dominant position, theCompetition Commission can
order:
discontinuance of abuse of dominant
position
impose a penalty upto 10% of the
average turnover of the enterprise
7/30/2019 pptals-06-120222085940-phpapp02
24/29
24
Combinations
MRTP Act
Provisions of the MRTP Act regarding
registration of undertakings,
establishment of new undertakings,
take-overs, mergers and amalgamation
were criticized on the ground that they
were based on an impractical and
untenable proposition that BIG is BAD
Ultimately, these provisions were
repealed in 1991
7/30/2019 pptals-06-120222085940-phpapp02
25/29
25
Combinations
Competition Act NOW, the Competition Act seeks to regulate
any acquisition, acquiring of control,mergers or amalgamations if it results inassets or turnover exceeding specifiedmonetary limits
Concept of voluntary notice is introduced. Onreceipt of such notice, CompetitionCommission can inquire and approve the combination, or
direct that the combination shall not take effect,or
propose modifications
If no such Order is passed within a time-bound frame, the combination is DEEMED TOHAVE BEEN APPROVED.
7/30/2019 pptals-06-120222085940-phpapp02
26/29
26
Combinations
Powers of Competition Commission It can :
issue a Show Cause Notice to the parties
direct the parties to publish details of the
combination invite members of the public to file written
objections
pass appropriate Orders
Two questions are worth considering : Is this just a back-door entry of earlier
provisions of the MRTP Act ?
Will monetary limits fixed five years agoremain relevant five years hence ?
7/30/2019 pptals-06-120222085940-phpapp02
27/29
27
Case Studies
Columbia AVIANCA, Columbias largest airline planned a
merger with the countrys second largest airline,ACE.
Justifications given for the merger were :
AVIANCA had huge accumulated losses, and themerger would be a potential answer to its financialproblems
The merged airline could effectively compete withforeign carriers in the international market
HELD : Merger would be anti-competitive : Themerged airline would be FOUR times the size ofits nearest domestic rival.
7/30/2019 pptals-06-120222085940-phpapp02
28/29
28
Case Studies
India The JET take-over of SAHARA : A damp squib ?
Australia Co X with 75% of domestic biscuit market
proposed a merger with Co Y, which had 15%market share of Australias biscuit market.
Justification given for the merger : Snacks andNOT Biscuits is the relevant market. In thesnacks market, Co X had a 10% share of themarket and Co Y, a mere 1%.
HELD : The relevant market was Biscuits andnot Snacks. Merger NOT ALLOWED.
7/30/2019 pptals-06-120222085940-phpapp02
29/29
29
Thank
You!