2. Competition
Is “a situation in a market in which firms or
sellers independently strive for the buyers’
patronage in order to achieve a particular
business objective for example, profits, sales or
market share” (World Bank, 1999)
3. “Competition” is an age-old phenomenon
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
4. It is not necessary that there are a large number of
producers/suppliers to have competition conditions.
A single producer can exist and provide a competitive
atmosphere provided entry of new firms is easy and not
costly.
Entry barriers can be due to the market position of
incumbent firms, legal barriers or strategic barriers
Incumbent firms may use their power as “first Movers”
to block entry.
Legal barriers include licensing and other Government
regulations
5. OBJECTIVES OF COMPETITION LAW
& POLICY
Promoting economic efficiency in both static and
dynamic sense
protecting consumers from the undue exercise of
market power
facilitating economic liberalization, including
privatization. Deregulation and reduction of external
trade barriers
Preserving and promoting the sound development of a
market economy
6. OBJECTIVES OF COMPETITION LAW
& POLICY
ensuring fairness and equity in market place
transactions
Protecting the ‘public interest’ including in some
cases considerations relating to industrial
competitiveness and employment
Protecting opportunities for small and medium
business
7. Competition Law
It is a tool to implement and enforce competition policy
and to prevent and punish anti-competitive business
practices by firms and unnecessary Government
interference in the market.
Competition Law generally covers 3 areas:
– Anti - Competitive Agreements, e.g., cartels,
– Abuse of Dominant Position by enterprises, e.g.,
predatory pricing, barriers to entry and
– Regulation of Mergers and Acquisitions (M&As).
8. Contd…
The need for Competition Law arises because market
can suffer from failures and distortions, and various
players can resort to anti-competitive activities such as
cartels, abuse of dominance etc. which adversely
impact economic efficiency and consumer welfare.
Thus there is need for Competition Law, and a
Competition Watchdog with the authority for enforcing
Competition Law.
9. Competition Policy
It includes Reforms in certain Policy
areas to make these more pro-
competition:-
• Industrial policy
• Trade policy
• Privatization/disinvestment
• Economic Regulation
• State aids
10. Elements of Competition Policy
• Putting in place a set of Policies that enhance
competition in local and national markets.
• A Law designed to prevent anti competitive
business practices and unnecessary
government intervention.
11. Industrial Policy
Industrial Policy has to address and reform licensing
requirements, restrictions on capacities, or on foreign
technology tie ups, guidelines on location of
industries, reservations for small scale industry, etc.
These adversely affect free competition in the market.
12. Trade Policy
Trade policy has important implications for
development of competition in the markets. Measures
for liberalisation of trade promote greater competition
e.g. reducing tariffs, removal of quotas/physical
controls, investment controls, conditions relating to
local content etc.
13. Economic Regulations
New legislation and regulations to promote
competition and to bring about restructuring of major
industrial sectors is essential. Legislation to aim at
separating natural monopoly elements from
potentially competitive activities, and the regulatory
functions from commercial functions, and also create
several competing entities through restructuring of
essential competition activities and to create a
competitive environment .
Examples:
– Electricity sector
– Telecommunications sector
– Ports
14. Evolution of Competition Law
Before MRTP Act came into force (1970), limited
provisions existed under :
• The Indian Contract Act
• Directive Principles of State Policy (Non-enforceable)
The MRTP Act brought in a four-pronged thrust :
• Concentration of economic power
• Restrictive Trade Practices
• Monopolistic Trade Practices
• Unfair Trade Practices
15. MRTPs vis-à-vis Competition Act
Under the Competition Act :
• No provision for Unfair Trade Practices
• Only Consumer Courts will have jurisdiction
• Pending cases will be continued by MRTPC for 2 years
• After 2 years :
All cases (except Disparagement Cases) will be
transferred to National Commission under CPA
All Disparagement Cases will be transferred to
Competition Commission
16. Status of the Competition
Commission
• It is a body corporate
• It has Regulatory and quasi-judicial powers;
functions through Benches
• Each Bench shall consist of at least two
Members and one of such Members must be a
judicial Member
17. Agreement
Any arrangement or understanding or action in
concert –
Whether or not such arrangement or
understanding is formal or in writing
Or whether or not such understanding or
arrangement is intended to be enforceable by
legal proceedings
18. Anti-competitive Agreements
These are agreements which cause or are likely
to cause an appreciable adverse effect on
competition within India:
Horizontal Agreements:
These are between and among competitors who are at the
same stage of production, supply, distribution, etc.
These are presumed to be illegal
Examples: cartels, bid rigging, collusive bidding, sharing of
markets, etc.
19. Anti-Competitive Agreements
Vertical Agreements:
• Vertical Agreements are between parties
at different stages of production, supply,
distribution, etc.
• These are not presumed illegal; are
subject to rule of reason.
Examples: tie-in arrangements, exclusive
supply/distribution agreements, refusal to
deal.
20. Adverse effect on competition
Creation of barriers to entry
Driving existing competitors out of market
Benefits to consumers
Benefit to Scientific and technical knowhow
21. CCI orders against Anti-competitive agreements
Penalty equal to three times the amount of
profit made out of such agreement or 10% of
average turnover of the cartel for preceding
three years whichever is higher
Modification directed to the agreement
22. 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 average turnover of
the enterprise
23. Abuse of Dominance
“Dominant position” is defined as a position of
strength which enables the enterprise
• to operate independently of competitive
forces in the market, or
• to affect its competitors or consumers in its
favor.
No mathematical or statistical formula is
adopted to “measure” dominance –
24. Abuse of Dominant Position
Includes practices like:
• Unfair or discriminatory conditions or prices,
• Limiting or restricting production or
technical/scientific development,
• Denial of market access, and
• Predatory pricing.
25. Power of the Competition
Commission
• After inquiry into abuse of dominant position, the
Competition Commission can order:
discontinuance of abuse of dominant position
impose a penalty upto 10% of the average
turnover of the enterprise
26. Combinations Regulation
Combinations, in terms of the meaning given to
them in the Act, include mergers, amalgamations,
acquisitions.
in order to establish whether the higher
concentration in the market resulting from the
merger will increase the possibility of collusive or
unilaterally harmful behavior, it must first be
established as to what the relevant market is
28. Mergers and Acquisitions
Commission is expected to regulate “Combinations”, i.e.,
large mergers, acquisitions, etc. likely to have
appreciable adverse effect on competition.
• Threshold:
For single enterprise
– Assets > Rs.1000 crores
– Turnover > Rs.3000 crores
29. Mergers and Acquisitions
Threshold:
For group of enterprises
– Assets > Rs.4000 crores
– Turnover > Rs.12000 crores
Similarly, threshold is provided for overseas groups.
30. Mergers & Acquisitions
• Notification of Combination to Commission is
voluntary
• If notified, Commission to take a decision within
90 days on the combination. Decision may allow,
disallow, modify, etc. the combination.
