Using competition policy to promote international competitiveness william j k...
ICN, Indian & BRICS Perspective
1. GROUP 10
Moona Savela
Isha Gupta
Veena Swaminathan
Rahul Kumar
Vivek Raju N
INTERNATIONAL COMPETITION
NETWORK
INDIA AND THE BRICS ASPECT
EMLYON Business School
European Competition Policy
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INTERNATIONAL COMPETITION NETWORK
Table of Contents
1. INRODUCTION ..........................................................................................................3
2. INTERNATIONAL COMPETITION NETWORK................................................................3
2.1. ICN – A PRIMER............................................................................................................3
2.2. WHAT DOES ICN DO? ...................................................................................................5
2.2.1 MWG and CWG .....................................................................................................................5
2.3. IS ICN EFFECTIVE OR NOT?............................................................................................5
2.4. PATH AHEAD – FUTURE ROLE .......................................................................................6
3. THE BRICS ASPECT.....................................................................................................6
3.1. BRAZIL.........................................................................................................................7
3.2. RUSSIA ........................................................................................................................8
3.3. INDIA...........................................................................................................................8
3.4. CHINA..........................................................................................................................8
3.5. SOUTH AFRICA.............................................................................................................9
3.6. CONCLUSION .............................................................................................................10
4. ANTI TRUST LAW IN INDIA.......................................................................................10
4.1. COMPETITION COMMISSION OF INDIA – AN INTRODUCTION......................................10
4.2. INTERNATIONAL ACTIVITIES OF CCI ............................................................................11
4.3. CCI – MAIN ELEMENTS ...............................................................................................13
4.3.1 Cartels & Bid-Rigging...........................................................................................................13
4.3.2 Abuse of Dominance ...........................................................................................................13
4.3.3 Combinations, merger control & amalgamations...........................................................14
4.3.4 Leniency Programme ......................................................................................................15
4.3.5 Inquiry & Penalty.................................................................................................................15
4.4. CASES OF ANTITRUST HANDLED BY THE CCI................................................................16
4.4.1 The RCCI Multiplex Association vs. UPDF............................................................................16
4.4.2 The Case against 7 regional film associations.....................................................................16
4.4.3 The LPG bid rigging case......................................................................................................17
4.4.4 Aluminum Phosphide Tablets case .....................................................................................17
4.5. HOW TO FILE INFORMATION WITH THE CCI ................................................................17
4.6. INDIA vs CHINA – A COMPARATIVE STUDY..................................................................18
5. CONCLUSION ..........................................................................................................19
6. Bibliography ...........................................................................................................20
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1. INRODUCTION
Competition policy is becoming more and more an international affair as markets are
globalizing. However, national competition laws have developed through different historical
circumstances and different countries may have different goals and incentives in developing
their competition policies. Especially BRICS countries are gaining economic size and
international influence, and their perspective on competition policy is important to consider
in order to create a coherent picture of the international stage of competition law.
International Competition Network is an example of an effort to enable international dialogue
and collaboration in the domain of competition law, and it is a relevant topic to focus on when
trying to understand the international situation of competition law and the perspective that
BRICS countries bring to it. In this paper we first examine International Competition Network:
what it is, what it does, what is its role and potential in enhancing international co-operation
and discussion between national antitrust agencies across the globe. We also discuss the
perspectives of BRICS countries and especially India on competition policy: how has it
developed, what are its national characteristics and differences and where it is headed.
2. INTERNATIONAL COMPETITION NETWORK
2.1. ICN – A PRIMER
In order to understand the significance of International Competition Network, it is important
to understand the historical setting in the world during the 20th century. During the post-
world war II period, there was a special sensitivity towards foreign attitudes. At this time, U.S.
was more advanced than most countries in the antitrust law, however, it was still struggling
with the extra-territorial application of its laws to foreign countries. It was seeking the
commitment of other countries, since it wanted them to align with its ideologies rather than
the Soviet Union’s. While the U.S. wanted to assume a teaching role on the world stage, other
countries saw this effort as overreaching and an attempt to overturn the domestic economic
policies of its trading partners. With such insecurities playing out, the world has come a long
way since that period. Fast forward half a century and we have competition authorities of the
world coming together in an effort to align their antitrust laws, thus giving birth to the
International Competition Network.
International Competition Network (ICN) is an organization that aims to provide competition
authorities with an informal but specialized network to help them communicate globally and
address practical competition policy principles. It is the only international organization
focused purely on competition law enforcement and its members are national and
multinational competition authorities – not entire governments. The purpose of ICN is to
enable dynamic dialogue and address global antitrust problems and “greater convergence of
competition law and analysis, common understanding, and common culture”. In a nutshell,
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the goal is to make worldwide co-operation between competition law authorities easier.
(International Competition Network, 2015)
ICN was founded in 2001 by fourteen antitrust agencies (Australia, European Union, Canada,
France, Germany, Israel, Italy, Japan, Korea, Mexico, South Africa, United Kingdom, United
States, and Zambia). ICN is a voluntary and informal network and does not have any legal
authority to generate binding rules. It provides recommendations and recommends best
practices, but individual competition authorities make their own decisions independently. ICN
is a virtual network and does not have physical offices and works through Internet, telephone,
teleseminars and webinars and it also holds annual conferences and workshops.
(International Competition Network, 2015)
In 2015, ICN has member organizations in all continents, e.g. 68 member organizations in Asia,
including Competition Appellate Tribunal (India), Competition Commission of India and Hong
Kong Competition Commission. ICN claims it is the most important network of competition
authorities worldwide and has 132 competition agencies as members from 110 jurisdictions
and that it is a key driver for constant development in competition law and policy.
However, Ministry of Commerce of the People's Republic of China (MOFCOM) from China is
not currently a member. According to Hollman and Kovacic, the participation of China is an
important factor in the future success of ICN. (Hollman & Kovacic, 2011)
In 2011 Hollman and Kovacic evaluate the first decade of ICN and its future prospects, and
argued that ICN may prove to be a successful way to achieve greater global co-operation in
the field of competition policy. According to them, previous attempts had failed due to being
premature as only minority of economies had been heavily market-based, but growing
acceptance of competition policy and continuing acceptance of ICNs and changing and less
suspicious attitudes in the developing world could support ICN to achieve its goals and
widespread co-operation. They also count as a potential success factor for ICN that its
members are agencies rather than governments and that it has an emphasis on practically
oriented projects to identify generally agreed best practices. They also see ICN as a potential
first stepping-stone as it is voluntary and as a starting point for further co-operation in other
levels that could later lead to also binding contracts. However, they also point out that as the
ICN’s recommendations are entirely voluntary and no country is obliged to adopt any
recommendations, it is often unclear how much different countries are actually complying to
the recommendations. ICN has tried to establish voluntary peer reviews, but Hollman and
Kovacic suggest that encouragement through peer pressure and reputation and ranking could
be more effective. Another challenge they identify is the limited resources ICN has and if it
will be able to reach its ambitious goals. (Hollman & Kovacic, 2011)
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2.2. WHAT DOES ICN DO?
ICN engages in projects that seek:
1. increase understanding of individual competition systems, including similarities and
differences among them
2. identify and build consensus about superior practices
3. encourage individual jurisdictions to opt in to superior techniques
Its work product consists of recommended best practices, case-handling and enforcement
manuals, reports, legislation & rule templates, database, toolkits and workshops. Individual
jurisdictions introduce reforms as per the Best Recommended Practices of ICN, gain
experience, and assess results, Successful implementation induces other jurisdictions to
emulate the reforms.
2.2.1 MWG and CWG
It is interesting to note that ICN was initiated by competition jurisdictions of the western
powers only and legal entities. These two parties seem to possess specific interest in mind
while pursuing this initiative. While the western powers were looking at expansion plans of
their corporates into potential markets in the developing nations, the legal entities were just
looking to make money from the ensuing legal battles once the developing nations also
concretized their antitrust laws. Thus, the major work of the ICN in the early years was
focused around Mergers & Acquisitions and Cartels.
ICN set up Mergers Working Group (MWG) and started building upon a foundation of existing
work. This group started compiling Recommended Practices (RPs) on subjects ranging from
confidentiality and transparency to remedies and agency powers. In a similar manner, ICN
anti-cartel enforcement project was also built upon a foundation of existing work. In 2004, at
the 3rd ICN annual conference in Seoul, the ICN created a Cartel Working Group (CWG). Its
work product was The Anti-Cartel Enforcement Manual which compiles members’
investigative and enforcement techniques. The Manual, which is frequently updated with
new experiences, is used as a reference source and as a method of benchmarking agency
practices.
2.3. IS ICN EFFECTIVE OR NOT?
ICN’s membership has grown from 14 to 132 in just 14 years. Its efforts have yielded
important contributions to the development of widely accepted international competition
policy norms. Its annual gathering has become the single most important annual gathering of
competition agency leaders. However, since the recommendations of the ICN are not binding
on the competition agencies, it is difficult to gauge how many agencies are really adhering to
the Best Practices published by the ICN. Since this seems like an important metric, we do not
get a clear indication of the effectiveness of the ICN.
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2.4. PATH AHEAD – FUTURE ROLE
1. Measurement mechanism: As stated above, in order to understand the effectiveness
of ICN, it would be necessary to develop a measurement mechanism. An objective set
of evaluations to understand the extent to which jurisdictions are converging. A
possible solution could be a ranking mechanism according to their adherence level to
ICN’s norms. This would put a sort of peer pressure on the agencies and encourage
adoption.
2. Since OECD and UNCTAD are also working in this direction, it would make sense to
collaborate with them and improve collective effectiveness
3. Especially given the virtual nature of ICN, it is important to examine its operational
framework and determine whether its structure & operational forms are adequate to
support its current and future programs.
3. THE BRICS ASPECT
BRICS, represents the rapidly growing country Brazil, Russia, India, China, and South Africa.
The whole idea of forming the BRICS (formerly BRIC, South Africa was joined to the group in
the year 2008) group was to further enhance the cooperation among the states and show a
strong face to the developed world trying to maintain its superiority.
As these countries are growing rapidly, they are becoming more and more important to the
world dynamics both politically as well as economically. Companies from all over the world
are flocking towards these nations at the same time companies from these countries are also
competing against the established companies from the developed world. As these economies
are growing progressively they felt the need to implement antitrust provision in their
constitution for the companies operating on their soil or having impact on their economy.
Developed world also came forward to guide them on developing their antitrust bodies and
regulation. Whatever short history of antirust we have on BRICS countries, we can say that
they are treading cautiously, so that multinational companies do not take advantage of the
same antitrust regulation to uproot their well established state run enterprises. While
developed nations are trying to pressurize them through various avenues to come up with
regulations of their standard. In the following section we will mainly focus on the
development of regulations and its implementation for cartels and merger of companies
existing in BRICS countries.
IMPORTANT TERMINOLOGY AND EXPLANATION
Standstill Period: Time period (in case of suspensory regime for merger) when companies
involved in merger has to wait for the clearance from the regulatory body.
Clawback: It is a provision which allows competition authority to review transactions that fall
below the notification threshold within one year after transaction closing.
Double jeopardy: The rule of law states that someone can not be punished twice for the same
offence, while this rule holds good once you are restricted to only one jurisdiction, in case of
cartel and merger concerning two or more countries companies can be penalized separately.
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Limitation Period: A period in criminal law proceeding which states the duration and validity
of sanctions/penalty imposed.
Bid Rigging: putting price up or down and maintaining price of goods or services.
Leniency Programme: It’s a program to encourage company or individual involved in a
crime/infringement to come up to the law enforcement and inform about the infringement
to avail leniency in the penalty for the crime they have committed.
Dawn Raid: Raid by the law enforcing authority in case of any law infringement activity to
collect evidence.
Merger Threshold: The minimum amount of revenue or sales or joint revenue of participating
company above which merger has to be notified to respective competition commission or
similar body of the state.
Broad Consideration: The consideration of greater good (e.g. employment generation, other
public interest aspect) as the outcome of some activity, may it be illegal for general purpose.
REGULATORY DEVELOPMENT AND ISSUES RELATED TO MERGERS & CARTELS
Globally mergers and acquisitions day by day is becoming more related to BRICS, as the
multinational organizations always have some interest or business in these countries. BRICS
countries also understand the potential impact of these activities on their economy and have
developed the regulatory framework and institution to safeguard them from it. While we
have seen many examples of the implementation of regulation on merger control, in some
cases we can see the consideration of broader economic aspect such as employment
generation, developing national company who can give competition to the MNC’s from all
over the world.
3.1. BRAZIL
After 2012, along with other BRICS nations, Brazil also became the country implementing
suspensory regulation on merger control. All merger activities have to be notified in advance
and remains suspended until given clearance from the regulatory authority. The Brazilian
Competition Policy has three bodies (CADE) namely “Conselho Administrtivo de Defensa
Economica” (CADE) which is part of Justice Ministry of Brazil, Secretaria de Direito Economico
(SDE) which is the administrative council and part of Justice Ministry, and Secretaria de
Acompanhamento (SAEA) , which is the part of Finance Ministry.
SAEA is an investigative government body whose major responsibility is to investigative and
advise under Brazil anti-competitive law. Other two agencies focus on implementation part
of anti competition laws. Brazil has also criminalized the involvement of managers of the
companies involved in such activities and they can be fined up to 10- 50% of the fines imposed
on the company. Brazil has a Clawback period of one year for mergers not falling in the
threshold of consideration. Till early 1990’s Brazilian economy was centralized and price was
regulated by government (Sasha-Lee Afrika, 2011), but after opening up the economy and
allowing private companies to compete, Brazil has seen all forms of cartelization. Through
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various laws and regulations, Brazil also curtails the formation of cartels. Brazil also signed
cooperation agreements with different countries’ competition agencies. These include, inter
alia, agreements with Canada, The United States, Chile, the European Union, and Russia1.
3.2. RUSSIA
Russia operates with a relatively complex pre and post- closing merger control system and is
monitored and enforced by the Federal Antimonopoly Service (FAS) of Russia. It includes both
merger and certain type of joint ventures under the purview of anticompetitive legislation,
and it has mandated suspensory regulation to merger pending clearance (Rakhmanina, 2015)
Though Russia has a system in place, substantive test for clearance is unclear and is still
evolving, even though FAS releases broad interpretations of the law but doesn’t gives any
rationale behind it’s decision.
While prohibition of cartels in Russia is still in its nascent phase, it has very well defined the
scope and legislation and is almost similar to the EU anti cartel policy in terms of definition
and stands very close to OECD recommendation also. Limitation period varies depending
upon the severity and duration of infringement. Russia has two types of leniency programmes
related to cartel offences namely administrative and criminal (Khokhlov, 2015). Participation
of managers in Cartel activity is also criminalized. Most contrasting feature is that even in the
absence of definition of buyers’ cartel FAS still has penalized companies involved. Unlike
merger, cartels are very hard to prove. In case of lack of data, the FAS presumes the existence
of an oral agreement between competitors. Given the absence of direct evidence for this
claim, FAS tends to treat the information exchange as indirect evidence. FSA officials are also
allowed to conduct raid but their scope is limited to non criminal investigators, i.e. they can’t
seize anything. In case of final proof of infringement penalty is turnover based and may range
from 1-15% of turnover achieved by the infringer. According to the Competition Law, Russian
antitrust rules have extraterritorial application. This means that restrictions related to cartels
are applicable to any foreign arrangements that influence or may influence the state of
competition in Russia.
3.3. INDIA
We will separately discuss the Indian aspect in detail in next section of the report.
3.4. CHINA
Anti-Monopoly Law (AML) in China is very new and came to force in the year 2008. Ministry
of Finance and Commerce (MOFCOM) is the regulatory implementer of the AML and in quick
succession of 7 years’ period it has reviewed more than 1000 cases. The new regime is still
evolving but Anti-Monopoly Bureau (AMB) the administrator body of AML has the right to
issue guidelines on merger control (Davies, 2015). Any merger/concentration falling above
the certain turnover threshold must be informed be it domestic or international and remains
suspended until clearance. Even though China doesn’t have any laid down control rules for
joint ventures creation, in various cases like Henkel-Taiande JV, GE-Shenhua joint ventures,
1 http://www.mj.gov.br/sde
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the AML gave conditional clearance and cleared the confusion. Unlike in the EU, a joint
venture does not need to be "full-functional" to be notifiable in China. If parties do not notify
a significant transaction, or parties close a transaction before MOFCOM approves it, a fine of
up to RMB 500,000 can be imposed and MOFCOM may order the parties to stop the
transaction. It may also impose any measures it deems appropriate to restore the pre-
transaction market conditions. In China, even today most of the enterprises are state owned,
however it has not stopped AMB from imposing penalties of 300,000 RMB on Tsignghua
Unigroup (public sector Company) in the case of acquisition of RDA Microelectronics.
However, the AML requires the parties to obtain clearance from MOFCOM, or for the review
period to expire without objection or request for further information, before the parties can
implement the transaction. But review period in this case was 180 days and otherwise also it
takes more than 30 days to get approval.
Coming to the laws concerning cartel agreement, China has built it up on the Anti-Monopoly
Law (AML), and enforcement of cartel is done by State Administration for Industry and
Commerce (SAIC), while it gets help from the National Development and Reform Commission
(NDRC). The NDRC and the SAIC have distinct but often overlapping enforcement authority
over different forms of anti-competitive conduct under the AML. More specifically, the NDRC
has enforcement authority over price-related anti-competitive agreements such as horizontal
price fixing and RPM. The SAIC is responsible for enforcement related to non-price restraints
such as market allocation, output restrictions and vertical restraints other than RPM (John
Eichlin, 2015). While most of the horizontal agreements are banned, under Article 15 of AML,
China has given a non-exhaustive list of exempted circumstances in which monopoly
agreement may be exempted.
As cartel enforcement is gaining experience and becoming more active, big fines are being
slapped on MNC’s. Fines imposed can be anywhere in between 1-10% of preceding year
revenue and the agencies are also allowed to confiscate the alleged unlawful gains. China also
had its own version of leniency programme, and assumes the party taking part in leniency
program as the act to rectify the anti-competitive conduct.
3.5. SOUTH AFRICA
South Africa is the relatively new to the BRICS group and was added more for the strategic
reason than the economic reason. South Africa has great influence on its neighboring
countries hence it was brought to the group in 2008. Antitrust Law in South Africa is also very
nascent, till 2014 they didn’t have anyone looking for anti cartel activity.
Coming to the merger control regulation, it is enforced by the Competition Commission of
South Africa (CCSA). It has very clear laid down descriptions of the merger threshold, both for
large and small mergers. Like China, South Africa also follows broad considerations for the
evaluation and clearance of a merger. In case of CCSA not giving any decision within the
consideration period, deal is deemed to be approved. The consideration period is 40 days in
case of small deals and infinite in case of large deals (Webber Wentzel, 2015). While there is
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no criminal offence for managers involved in an illegal merger, an administrative penalty of
up to 10% of turnover of both companies may be imposed in the case of infringement.
Coming to cartel prohibition regulation in South Africa, it is not so strong and till 2014 they
had no one heading the Cartel Division of CCSA separately. The Competition Act of 1998
prohibits firms from entering into agreements or becoming involved in concerted conduct
that amounts to price fixing, market allocation or collusive tendering (bid rigging)
Till 2014 they haven’t conducted any Dawn Raid (Oxenham, 2015). Since the utilizing powers
of search and seizure and market inquiries, the Commission has demonstrated a far more
proactive and robust enforcement of the cartel provisions in the Act. The principal tool
employed by the Commission to uncover and prosecute cartels is the Corporate Leniency
Policy (CLP). In terms of the CLP, a successful leniency applicant can avoid prosecution for its
participation in a cartel in lieu for providing information to the Commission about the cartel,
cooperating with the Commission during the investigation and assisting the Commission and
the Tribunal in the prosecution of other members of the cartel.
3.6. CONCLUSION
The influence of BRICS in the emerging global power equation and reforming global
institutions will become a decisive issue for a future effective global governance system. And
for that these countries need to have strong legal system and also need to implement it
efficiently. They can always take help from ICN, WTO, UNCTAD and other agencies in
obtaining guidance on the development of antitrust regulations. As mentioned earlier, these
countries has become important but they should not forget that they are still developing and
always be vigilant about the each and every step and suggestion coming from the developed
world. Having said that, this no longer underestimates the importance of the Antitrust regime
in BRICS nations, because cartels are like termites which makes a country hollow from inside
and mergers can distort the market so much that may spiral out of control in the developing
economies. A multilateral agreement was signed by the ICC with its Brazil, China, Russia, and
South African counterparts called “Delhi” to strengthen relationships in the antitrust aspect
in November 2013. Steps like these are always a good sign and may be beneficial to all the
member states involved, and who knows this nascent group may go on to become the teacher
to the world on principles and practices of antitrust laws.
4. ANTI TRUST LAW IN INDIA
4.1. COMPETITION COMMISSION OF INDIA – AN INTRODUCTION
India’s anti trust law is the Competition Act passed in 2001. It was amended by the
Competition (Amendment) Act, 2007 and draws its essence from modern competition law. It
came into force on May 20, 2009.
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To help achieve the objectives of the aforementioned act, the Central Government, on 14
October 2003, set up the Competition Commission of India, the apex institute in charge of
enforcing competition law in the country. The CCI consists of a chairperson and 6 members
appointed by the central government. It was duly constituted on 1 March 2009.
The CCI is mandated to eliminate practices that adversely impact free competition in the
economy, advocate free and fair competition, create awareness and impart training about
competition issues, protect the interests of the consumer, and support freedom of trade. As
mentioned earlier, the focus and structure of the CCI conforms with modern competition
legislations globally. CCI has three core objectives, namely:
1. Prohibition of anti competitive agreements
2. Prohibition of the abuse of a dominant position
3. Regulation of mergers
The provisions of the CCI are inspired from the ‘effects doctrine’ which allows the CCI to study
the conduct of the market participant and the structural changes of the industry using the
Appreciable Adverse Effect on Competition (AAEC) test. Basically, this means the CCI can
undertake an ex post analysis of the conduct of the market participant while it can also
perform an ex ante analysis on the structural changes in a given industry.
Pre-cursor to modern competition law in India
The newly independent India in the 1950s began to tread on an economic policy rooted in
socialism. Foreign multinationals were not allowed to start business with in the geographical
boundaries of India. Domestic businessmen had to acquire a license from the concerned
government authority to start a commercial venture giving this regime, infamous in the
business world, the name ‘License Raj’. Most big companies were state owned which meant
they were monopolized naturally.
The then existing anti trust law in India was Monopolies and Restrictive Trade Practices Act
(MRTP) of 1969. The MRTP Act primarily focused on curbing monopolies regardless of its
effect on the economy.
With the 1990s came the liberalization of the Indian economy. With its now outward looking
policy, India needed a more robust and up to date competition law. The MRTP Act, firmly
planted in socialism was clearly not effective in curbing anti competitive practices in the new
economy. A high level committee was set up in 1999 to advise the government on a modern
legislative framework for competition law in India which led to the enactment of the
Competition Act and the establishment of the Competition Commission of India.
4.2. INTERNATIONAL ACTIVITIES OF CCI
CCI has been an active member of the International Competition Network (ICN). It has strived
to develop a legal framework that conforms with global practice. It has exchanged and signed
numerous memorandums of understanding and bilateral or multilateral agreements in an
effort to achieve effective antitrust law implementation.
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Here is a list of the agreements India has entered in to over the last few years.
Anti trust Authority Scope of MoU Date
Commissioner of
Competition Bureau,
Canada
Cooperation in the application of
competition laws and strengthen
the ability to address competition
enforcement matters that cross
borders
1 December 2014
The Administrative Council
for Economic Defense, Brazil
Delhi Accord in third BRICS
International Competition
Conference at New Delhi; exchange
of views on technical cooperation;
promotion of competition advocacy
22 November 2013
The Federal Antimonopoly
Service (FAS), Russia
The State Administration for
Industry and Commerce,
China
The Competition
Commission of South Africa
The Directorate General for
Competition of the
European Commission
Exchange of non-confidential
information; bilateral
enforcement as per applicable
antitrust law
21 November 2013
The Australian Competition
and Consumer Commission
Sharing of information; technical
cooperation with respective
antitrust agencies
3 June 2013
The US Federal Trade
Commission and the US
Department of Justice,
Antitrust Division
Cooperate on antitrust
investigations; share information on
investigations and consult on
enforcement and policy issues
27 September 2012
FAS, Russia Enhanced cooperation 16 December 2011
India hosted the 3rd BRICS International Conference on Competition at New Delhi in
November 2013 where the multilateral agreement was signed by the BRICS nations (see
above table) and the setting up of an effective enforcement organization was discussed. This
agreement is called “Delhi”.
Apart from the CCI, the ICN has another Indian member which is the Competition Appellate
Tribunal (COMPAT). The Competition Appellate Tribunal reviews appeals against the orders
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A dominant position in the market irrespective of the workings of the market forces
demonstrates the firm’s/person’s ability to manipulate and act in a way that is profitable by
controlling the market factors. For example, increasing the barriers to entry in a monopoly
market to prevent new players from entering the market.
Dominance is anti-competition only when the relevant market in reference to products or
geographies can be identified. Also dominance does not have appreciable adverse effect on
competition but the abuse of dominance does. Abuse of Dominance is defined by the Act as
“a situation when an enterprise or a group of enterprises uses its dominant position in the
relevant market in an exclusionary (such as denial of market access) or/and an exploitative
manner (such as excessive pricing/predatory pricing)”5 (Provisions Relating to Abuse of
Dominance – Advocacy Series 4, Competition Act, 2002) Hence the law, prohibits the use of
monopoly position in a way that distorts market forces and has an adverse effect on
competition.
4.3.3 Combinations, merger control & amalgamations:
According to Section 6 of the Competition Act, 2002, a combination is defined as “a means of
acquisition of control, shares, voting rights or assets, acquisition of control by a person over
an enterprise where such person has direct or indirect control over another enterprise engaged
in competing businesses and mergers and amalgamations between or amongst enterprises
when the combining parties exceed the thresholds set in the Act”6 (Provisions Relating to
Combinations, Advocacy Series 5, Competition Act, 2002). The threshold for a merger or an
acquisition to be deemed as anti-competition is as follows7:
Type Value of the combined
assets more than
Turnover of the combined
enterprise more than
Individual in India INR 1500 crores INR 4500 crores
Individual in & outside India USD 750 Million & atleast
INR 750 crores in India
USD 2250 Million & at least
INR 2250 crores in India
Group in India INR 6000 crores INR 18000 crores
Group in & outside India USD 3 Billion & atleast INR
750 crores in India
USD 9 billion & atleast INR
2250 crores in India
Also any acquisition or merger that leads one firm to gain more than 26% voting rights or right
to appoint more than 50% of the directors on the management board is termed as void as it
is anti-competitive.
5 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf
6 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf
7 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf
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The turnover value is computed by taking into account value of assets (brand value, good will,
IP rights, and intangible value considering reductions for depreciation wherever necessary)
and the value of the goods sold and the services provided. Always the book value of the assets
mentioned in the book of assets is used to calculate the value of the combined enterprise to
determine whether the combination is anti-competitive or not in nature.
4.3.4 Leniency Programme:
The leniency programme is a form of protection provided to whistle-blowers who inform the
CCI about any anti-competitive behavior happening in the industry (ex: Info about a cartel).
These programmes have been formed to incentivize the firms involved in cartelization to
come to the CCI with concrete evidence, facts & documents about violations of the
competition law in exchange for immunity or a less stringent action. Section 46 of the Act
provides that:
“The Commission may, if it is satisfied that any producer, seller, distributor, trader or service
provider included in any cartel, which is alleged to have violated section 3, has made a full and
true disclosure in respect of the alleged violations and such disclosure is vital, impose upon
such producer, seller, distributor, trader or service provider a lesser penalty as it may deem fit,
than leviable under this Act or the rules or the regulations”8 (Leniency Programme, Advocacy
Series 8, Competition Act, 2002)
Some of the conditions for application of leniency provisions are9:
- The informant must have come forth before the receipt of the investigation report by
the Director General
- Should stop participating in the cartel unless otherwise asked by the CCI
- Disclose all relevant documents, proof, and information as asked by the CCI
- Co-operate fully, continuously throughout the investigation
- Should not destroy, tamper with, conceal or provide false evidence
The penalty can be written off upto 100% depending on whether he was instrumental in
helping the CCI in forming a prima-facie opinion regarding the presence of the cartel.
4.3.5 Inquiry & Penalty: Under section 19 of the Act, the CCI is granted with complete power
to inquire into any alleged violation of the provisions of the Anti-competition Act. The
commission if convinced of a prima facie case of cartel, can ask the Director General to
investigate the case of cartels and produce a report. The CCI has full power vested in it by the
Civil Court to summon any official, person or examine him under oath to collect evidence on
cartelization. The Director General has full power to conduct a ‘search & seizure’ while
investigating the firms.
8 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf
9 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf
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If the firms are found colluding, then the CCI has the power to impose on each associated
member of the cartel, a penalty/fine upto 3 times the profit it earned during each year since
the cartel was formed, or upto 10% of its turnover for each year the cartel existed, whichever
is higher. The CCI can also demand the firms involved in the cartel to discontinue the
arrangement and to not re-enter it. For establishing existence of abuse of dominant position,
the CCI considers the market share of the firm, the size, the resources, the competitors,
barriers to entry in the market, dependence on consumers and the relevant market in terms
of product or geography. If a firm is found to be abusing its monopolistic position, then the
CCI can impose a penalty of up to 10% of the average turnover for last three financial years
in which the firm was involved in bid price fixing, or collusive behavior or found to be
manipulating the market using its dominant position.
4.4. CASES OF ANTITRUST HANDLED BY THE CCI
4.4.1 The RCCI Multiplex Association vs. UPDF:
The first ever case handled by the CCI, was in the movie industry. Investigations were
conducted by the CCI in this industry in 2009, and on September 16, 2011 its first order was
rolled out in the dispute between RCCI Multiplex Association and the UPDF. The producers
and the distributors of Hindi films decided to boycott the multiplexes by not allowing
screening of any Hindi movies on these screens till the multiplexes agreed to share a sizeable
portion of their revenues. This conduct was deemed anti-competitive in nature as the CCI
declared that the film distributors had acted in collusion to limit the supply of Hindi movies
which in turn led to the increase of ticket prices which ended up hurting the consumers.
4.4.2 The Case against 7 regional film associations:
In another case, seven regional movie associations were fined as they were found to be
controlling the number of screens that would show non-regional films, thus demanding
unrealistic and unreasonable contract terms from movie producers. The associations even
demanded mandatory registration of the films with the association and they refused to deal
with non-members who weren’t registered with the organization. The CCI, declared that the
association was again restricting supply of films and thus limiting healthy competition
between members and non-members. Given the prima facie evidence regarding anti-
competitive behaviour, the CCI imposed the maximum fine possible on all the seven
associations – penalty of 10% of average annual turnover of last three years. The CCI also
declared that the movies no longer needed to be registered with the regional film
associations.10
10 http://anne-tercinet.blog.em-lyon.com/inde-une-jurisprudence-sans-complaisance/
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4.4.3 The LPG bid rigging case:
The LPG (Liquid Petroleum Gas) market is a huge growth market in India with large players.
On Feb 24, 2012, the CCI imposed a fine of 7% of the total turnover on 48 makers of LPG
cylinders for being involved in bid rigging by holding meetings a day before the tender and
fixing the price of the bid, irrespective of the costs involved. This hugely impacted the new
players and the major clients of this industry like the India Oil Corporation. Thus the interest
of the consumers were seriously damaged by these LPG makers who quoted identical rates,
by manipulating the tenders for an entire year. 11
4.4.4 Aluminum Phosphide Tablets case:
Another interesting case that transpired was in the food industry where the Food Corporation
of India (FCI) lodged a complaint against 3 out of 4 manufacturers of Aluminum Phosphide
tablets in India. These tablets are used for the preservation of foodgrains. In this case, the
manufacturers quoted the same rates in the tenders to the FCI, and they even reduced the
bid by the same margins when in negotiations with the FCI. This carried on for 8 years, and in
the period between 2007 and 2009, the price of these aluminum tablets nearly doubled. The
fourth producer never participated in the tenders of the FCI. The three firms, Excel Crop Care
Ltd., United Phosphorus Ltd. And Sandhya Roganics Chemicals Pvt. Ltd, were declared to have
been involved in cartelization and bid rigging by the CCI and a penalty of 9% of the average
annual turnover of the last three years was levied on them. The CCI also ordered them to
‘cease and desist’ from acting in a manner that manipulated the tender prices.
4.5. HOW TO FILE INFORMATION WITH THE CCI12
The CCI has two types of Forms that need to be filled out - Form 1 & Form 2.
Form 1 is a short form that does not require a lot of information. But Form 2 is a long form
which is extensive and detailed in the information it requires. So as per the latest revision of
the Competition Act, all mergers involving fees of more than 1,000,000 Rs are required to file
Form 1 with the CCI and all mergers that involve a fees of more than 4,000,000 Rs being paid
out require the filing of Form 2 notices with the CCI.
What is not considered antitrust by the CCI?
The companies do not need to file information with the CCI in the following cases (Mayer
Brown, Antitrust & Competition):
- “Acquisitions that do not lead to the acquirer holding 25% or more of the total shares
or voting rights of the target while not acquiring control”
11 http://anne-tercinet.blog.em-lyon.com/inde-une-jurisprudence-sans-complaisance/
12http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/How%20to%20file
%20Info.pdf
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- “Acquisition of shares and voting rights pursuant to buy-backs and subscriptions to
rights or shares if they do not lead to acquisition of control”
- “Certain intra-group mergers (in particular involving subsidiaries wholly owned by the
holding company or by companies of the same group)”
4.6. INDIA vs CHINA – A COMPARATIVE STUDY
Now that we have understood in detail the Anti – Competition laws in both India and China,
here are some differences that can be drawn between the two:13
India China
A competition tribunal has been set up where
the undertakings concerned if dissatisfied
with the decision of the Anti - Monopoly
Enforcement Authority can apply for
administrative reconsideration
China though does not provide a competition
tribunal and both the adjudicatory and
advisory powers are in the hands of the Anti-
monopoly Enforcement Authority
The Indian Competition Law is applicable to
monopolistic behaviour, which are a direct
violation of the Indian Competition Act (i.e.
prohibition of horizontal and vertical
agreements which is termed as cartelization,
abuse of dominant position and merger
control).
Chinese Competition law targets one
particular type of monopoly - “Administrative
Monopoly” which is a specific feature due to
the Communist Regime in China.
Administrative monopoly refers to
monopolistic behaviour of State owned
companies in China.
The Indian Competition Law applies to all
cartel agreements entered into within and
outside India. It concentrates - in either cases
- on the presence of AAEC (Appreciable
Adverse effect on Competition).
The Chinese Competition Law is applicable to
monopolistic conduct in economic activities
within the territory of China (i.e. domestic
conduct). For, outside the territory of China,
the law is applicable to monopolistic conduct,
provided that such a conduct eliminates or
has restrictive effects on competition in the
domestic Chinese market (i.e. extraterritorial
conduct)14
13 http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=giulia_piombi
14 http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=giulia_piombi
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The Indian Competition Law introduces a
presumption of antitrust behavior only in case
of horizontal agreements while for the
establishment of existence of vertical
agreements evidence is required.
Whereas most of the Antitrust Cases in China
are on vertical agreements because of most of
the companies being state owned and hence
participating in cartelization while being at
different levels in the production chain
5. CONCLUSION
After having thoroughly analyzed the antitrust laws in all of the BRICS nations, and the
contrast between EU, India and China it can be concluded that the main aim behind the
formation of the ICN by the developed nations has been to help standardize the anti-
competition laws in the developing countries for ease of operation of their (developed
nations’) MNC’s in these developing countries. They want the antitrust laws to be as close to
that of the EU and the United States so that the amount of paperwork that needs to be done
is lesser and the time spent doing this paperwork is less for the MNC’s while competing in
these BRICS nations. This way they end up not having to spend on resources, (lawyers) if the
laws were drastically different from that of EU or US. ICN though informal in nature is playing
a crucial part in shaping the antitrust laws in few of these BRICS nations and hence they need
to be more cautious about the recommendations coming their way to ensure that misuse of
this delicate power of the ICN by the MNC’s of the developed nations for their own interests
does not happen.
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6. Bibliography
ICN - Statement of Achievements -
http://www.internationalcompetitionnetwork.org/uploads/library/doc757.pdf
Djelic, Marie-Laure, and Thibaut Kleiner. "The international competition network: Moving
towards transnational governance." Transnational Governance: Institutional Dynamics of
Regulation (2006): 287 – 307.
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65mfflSBFLMTVTcf5uHQ%3D&response-content-
disposition=inline%3B%20filename%3DThe_international_competition_network_Mo.pdf
Budzinski, Oliver. "Toward an International Governance of Transborder Mergers-Competition
Networks and Institutions between Centralism and Decentralism." NYUJ Int'l. L. & Pol. 36
(2003): 1.
http://heinonline.org/HOL/LandingPage?handle=hein.journals/nyuilp36&div=7&id=&page=
Evenett, Simon J., Margaret C. Levenstein, and Valerie Y. Suslow. "International cartel
enforcement: lessons from the 1990s." The World Economy24.9 (2001): 1221-1245.
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Hollman, Hugh and Kovacic, William E., The International Competition Network: Its Past,
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20, p. 274, 2011; GWU Legal Studies Research Paper No. 595; GWU Law School Public Law
Research Paper No. 595. Available at SSRN: http://ssrn.com/abstract=1967705
The International Competition Network Website
http://www.internationalcompetitionnetwork.org
John, Iang and Gray, Joshua B., The International Competition Network: A Decennial
Retrospective (2012) Antitrust, Vol. 26, No. 2, Spring 2012.
https://www.skadden.com/sites/default/files/publications/Publications2707_0.pdf
The International Competition Network – Moving Towards Transnational Governance
Marie-Laure Djelic and Thibaut Kleiner
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K2F72cjTPvPE464K6h14%3D&response-content-
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CADE. (n.d.). THE BRAZILIAN SYSTEM OF COMPETITION POLICY. Retrieved from CADE:
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Sasha-Lee Afrika, S.-D. B. (2011). Cartel Regulation in Three emerging Economies - Cartel
and Competition Policy in South AFrica, Brazil and India - A Comparative Overview. The
Internatinal Lawyer , 45 (4), 102.
CADE. (n.d.). THE BRAZILIAN SYSTEM OF COMPETITION POLICY. Retrieved from
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Rakhmanina, E. (2015, March 26). International Financial Law Review. Retrieved from
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Russia.html
Khokhlov, E. (2015, July). Global Investigation Review . Retrieved from
www.globalinvestigationreview.com :
http://globalinvestigationsreview.com/insight/chapter/31/russia-cartel-investigations
Davies, E. (2015, January). Clifford Chance. Retrieved from www.cliffordchance.com:
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ol.html
John Eichlin, X. L. (2015). Global Competition Review. (T. A.-P. Review, Producer) Retrieved
from www.globalcompetitionreview.com:
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cartels/
Webber Wentzel. (2015, december). Competitio- Merger Control in South AFrica. Retrieved
from http://www.webberwentzel.com/:
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Oxenham, J. (2015). South Africa: Development in Cartel Enforcement . Retrieved from
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developments-cartel-enforcement/
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issues-antitrust/
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http://anne-tercinet.blog.em-lyon.com/en/?s=india
All about the Competition Commission of India
http://www.cci.gov.in/about-cci
Provisions Relating to Cartels, Advocacy Series 2, Competition Commission of India.
Retrieved from:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf
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Provisions Relating to Bid Rigging, Advocacy Series 3, Competition Commission of India.
Retrieved from:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Bid%20Rigging.pdf
Provisions Relating to Abuse of Dominance, Advocacy Series 4, Competition Commission of
India. Retrieved from:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf
Provisions Relating to Combinations, Advocacy Series 5, Competition Commission of India.
Retrieved from:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf
Leniency Programmes, Advocacy Series 8, Competition Commission of India. Retrieved
from:
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How to File Information with the CCI. Retrieved from:
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20Info.pdf
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