Outside cp knowledge presentation competition act _2002

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  • 1. Provisions of the Competition Act, 2002 Sanjay Bhatt Partner – Litigation Kesar Dass B. & Associates
  • 2. What is Competition?
    • A market situation, in which sellers independently strive for buyer’s patronage to achieve business objectives such as profits, sales or market share.
    • It is the foundation of an efficiently working market system.
  • 3. Competition – why ?
    • The ultimate objective of competition is to secure the interest of the Consumer - it empowers the consumer, best guarantee for consumer protection.
    • It is a means of reducing cost and improving quality.
    • It also implies an open market where shortages are rapidly eliminated through the best allocation of resources.
    • It accelerates growth and development; preserves economic and political democracy.
  • 4.
    • Government constituted a committee in 1999 to examine MRTP Act, 1969 for shifting the focus of the law from curbing monopolies to promoting competition and to suggest a modern competition law in line with international developments to suit Indian conditions.
    • As a sequel to the Report of the Committee, the Competition Act, 2002 to replace MRTP Act was enacted and notified in January, 2003.
    Competition Act 2002 - Background
  • 5. Basic objectives of Competition Act, 2002
    • To prevent practices having adverse effect on competition
    • To promote and sustain competition in markets
    • To protect the interests of consumers; and
    • To ensure freedom of trade carried on by other participants in markets
  • 6. Establishment of Competition Commission of India (CCI) & its duties
    • Competition Act 2002 provides for establishment of a Commission to prevent practices having adverse effect on competition etc.
    • To eliminate practices having adverse effect on competition
    • To promote and sustain competition
    • To protect interests of consumers, etc.
    • Enquire into Anti-Competitive Agreements (eg. Cartel, bid-rigging, etc.) [Section 3]
    • Enquire into abuse of dominant position (eg. Predatory Pricing, etc.) [Section 4]
    • Regulate combinations (Mergers, Acquisitions, etc.), [Section 5 & 6]
    • Undertake Competition Advocacy (including advise on policy issues), create public awareness, impart training on competition issues, [Section 49].
  • 8. Roadmap to Merger & Acquisition under the Act
    • S ection 5 provides detailed criteria for “combination” falling within its purview
    • Section 6 provides for regulation of “combination” having adverse effect on competition by CCI
    • “ combination” taken place outside India or party to it outside India also covered under its purview
    • Factors such as actual and potential level of competition, degree of consolidation in the market and degree of countervailing power taken into account while determining adverse effect on competition.
  • 9. continued…..
    • Reporting of such combination by parties to the CCI optional and not mandatory
    • CCI also has suo motu power to enquire whether a combination causes or is likely to cause an appreciable adverse effect on competition
    • Enterprises with a lower asset value and turnover than threshold are excluded from the purview
    • Share subscriptions, financing facilities and acquisitions by public financial institutions, foreign institutional investors, banks and venture capital funds exempted from purview
  • 10. continued …….
    • Combinations that are found to have a negative impact on competition are to be rendered void ab initio by CCI
    • Unlike abuse of dominance, which demands evidence of actual abuse, combinations that are merely likely to have an adverse effect on competition are prohibited.
    • No inquiry by CCI after expiry of one year from the date on which such combination has taken effect.
    • Modification to combination permissible during inquiry before CCI
  • 11. Critical Issues
    • Pre-notification of proposed “combination” voluntary and not mandatory
    • Bar to initiate inquiry after expiry of one year from taking effect of a “combination”
    • Likely logistical limitations of CCI to take suo motu cognizance of every violative “combination”
    • Overlapping of jurisdictions with that of High Courts and SEBI as regard merger/acquisition
    • Unrealistic time period for disposal of inquiry
  • 12. continued ………
    • Non availability of any residuary/inherent power to inquire into a “combination” not falling within threshold but giving rise to appreciable adverse effect on competition in the relevant market
    • No provision empowering CCI to seek co-operation and co-coordination directly from their counter parts abroad.
    • Trained/skilled professional manpower
    • Infrastructure support system
    • Access to updated data-base, information, international developments etc.
  • 13. Thank you Kesar Dass B. & Associates Corporate & Commercial Lawyers 15, Birbal Road, Jangpura Extn. New Delhi - 110014 Phone: 91-11-41823285-89 Fax: 91-11-41823290-91 E-mail: [email_address] Web: www.kesardass.org