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Competition Act

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Competition Act

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Presentation on salient features and provisions of the Competition Act in India as a part of coursework
Course - MMS/MBA
Semester - 2
Subject - Business Laws

Presentation on salient features and provisions of the Competition Act in India as a part of coursework
Course - MMS/MBA
Semester - 2
Subject - Business Laws

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Competition Act

  1. 1. Need for Competition Act in a globalised world, which is a single platform for carrying out trade and commerce
  2. 2. Topics Covered
  3. 3. Meaning of Competition
  4. 4. Advantages of Healthy Competition Economic Efficiency and Welfare Consumer Welfare Better Quality goods and Services Reduction in corruption and lobbying Better Accountability and Transparency
  5. 5. MRTP Act, 1969 Enforced in June 1970 Objectives Control Monopolies and Monopolistic Trade Practices 1 Prevention of Concentration of Economic Power in few hands 2 Regulate Restrictive Trade Practices 3 Regulate Unfair Trade Practices 4
  6. 6. Monopolistic Trade Practices 1 Practices 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
  7. 7. Concentration of Economic Power 2
  8. 8. Restrictive Trade Practices 3 Practices that, 1. Obstruct the flow of capital or 2. Resources in the stream of production
  9. 9. Unfair Trade Practices 4 Practices 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
  10. 10. Shortcomings of MRTP • Anti-welfaristic results • Stringent Provisions • Ambiguity • International Norms
  11. 11. 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
  12. 12. 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
  13. 13. Competition Act, 2002
  14. 14. Main Components Anti - Competitive Agreements Abuse of Dominance Regulation of Combinations Competition Advocacy
  15. 15. 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 Effect on the Competition
  16. 16. Types of Anti-Competitive Agreements Horizontal 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
  17. 17. 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
  18. 18. Types of Anti-Competitive Agreements Vertical 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
  19. 19. Types of Anti-Competitive Agreements Vertical Agreements Tie - in Refusal to Deal Exclusive Supply Exclusive Distribution Re-sale Price Maintenance
  20. 20. 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
  21. 21. Abuse of Dominance Determining 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
  22. 22. Abuse of Dominance Determining Relevant Market The Act lays down the following factors that help determine a relevant market : Relevant Product Market Relevant Geographic Market
  23. 23. Abuse of Dominance Relevant Product Market
  24. 24. Abuse of Dominance Relevant Geographic Market
  25. 25. 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 :
  26. 26. 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.
  27. 27. Regulation of Combinations Monetary 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 Total Minimum Indian Component Total Minimum Indian Component Individual $750 Mn. Rs. 750 Cr. $2250 Mn. Rs. 2250 Cr. Group $3 Bn. Rs. 750 Cr. $9 Bn. Rs. 2250 Cr.
  28. 28. Regulation of Combinations
  29. 29. Competition Advocacy CCI’s Role in pro-actively brining Government policies for, - Reducing barriers to trade - Trade Liberalisation - Promote Competition
  30. 30. Competition Commission of India
  31. 31. 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)
  32. 32. 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
  33. 33. Competition Commission of India Process of Filing Complaints (Sec. 19)
  34. 34. 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.
  35. 35. CCI in Numbers
  36. 36. CCI in Numbers Status of Cases (2009 to 31st March 2014) Total Cases : 461
  37. 37. CCI in Numbers Sources of Enquiry (31st March 2014) Total Cases : 461
  38. 38. Cases before the commission 2013 - 14
  39. 39. Cases before the commission 2012 - 13
  40. 40. 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
  41. 41. Indian Competition act in light of Global Environment
  42. 42. 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 efficiency 5) promote the healthy development of the socialist market economy. One regime Law establishes a two tier enforcement regime which includes (i) The Anti-monopoly Commission (ii) the Anti-Monopoly
  43. 43. 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 conducts Targets 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 Presumptions Introduces 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.
  44. 44. Case study
  45. 45. Adani Gas penalised for its abuse of dominance Abuse 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.
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. Findings Sun 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
  50. 50. Horizontal Overlaps found Sun Pharma - Ranbaxy Merger
  51. 51. Proposals by the CCI Sun 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.
  52. 52. Final Order Sun 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.
  53. 53. Conclusion

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