Competition law


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Competition law

  1. 1. Avishek Singh 113 Mohammad Shadab 129 Pratik Akerkar 139 Somjeet Dutta 152 Tilottoma Sanyal 1555/4/2012 Ethical and Legal Aspects of Business 1 Sheel Malik 159
  2. 2.  Prevent concentration of economic power  What is Competition?  Why is Competition important?5/4/2012 Ethical and Legal Aspects of Business 2
  3. 3.  “A rivalry that arises when two or more firms strive for something that not all can obtain.” - Palgrave 19875/4/2012 Ethical and Legal Aspects of Business 3
  4. 4.  Goods and Services at competitive prices Efficiency and Productivity Innovation Restructuring of Uncompetitive Sectors5/4/2012 Ethical and Legal Aspects of Business 4
  5. 5.  Precursor to the current Competitions Act 2002 Reasons for enactment:  For the prevention of concentration of economic power.  Planned economic model: Licensing policy of the Govt favored big industrial houses.  Mahalonobis Committee report 1964: Top 10% of the population cornered 40% of the national income5/4/2012 Ethical and Legal Aspects of Business 5
  6. 6. The thrust area of MRTP Act 1969 is: The control of monopolies Prohibition of restrictive trade practices  Coca Cola stopping its vendors from keeping the soft drinks of rival brands  M/S TELCO ordering vehicle maintenance firm near Lonavala Ghats to refuse services of vehicles other than TATA. TELCO won the case on the grounds that the technician was trained only for servicing TATA Vehicles Prohibition of unfair trade practices Prohibition of monopolistic trade practices5/4/2012 Ethical and Legal Aspects of Business 6
  7. 7. In the New Pepsodent v Colgate case , HLL advertised its toothpaste ‘New Pepsodent’ as “102% better than the leading toothpaste”. Pepsodent claimed to perform better than the “leading toothpaste” Reference to Colgate muted in the ad When the muting was done, there was a sound of the jingle used in the Colgate advertisement5/4/2012 Ethical and Legal Aspects of Business 7
  8. 8.  Colgate Palmolive (India) Limited filed a complaint along with complainant No. 2, claiming to be a consumer, before the Monopolies and Restrictive Trade Practices Commission against M/s. Hindustan Lever Limited Complaint: the advertisement campaign of New Pepsodent disparages the leading toothpaste namely Colgate Dental Cream manufactured by it. Asked for interim relief U/S 12A of MRTP Act, 19695/4/2012 Ethical and Legal Aspects of Business 8
  9. 9.  The commission prima facie came to the conclusion that a case of unfair trade practices had been made out against the respondent, and the reference in advertisements to famous toothpaste was to Colgate Dental Cream. An order of interim injunction was passed, retraining the respondent from “referring to any Colgate toothpaste in any manner, either directly or indirectly, by means of any illusions, or hint, in TV commercials, newspaper advertisements or hoardings.”5/4/2012 Ethical and Legal Aspects of Business 9
  10. 10.  Marico launched a three-day mass media advertising warning consumers that a particular brand of hair oil (to be read as Clinic Plus Hair Oil from Hindustan Lever Limited) was not pure coconut oil "When they say plus, they mean 42 per cent coconut oil plus 58 per cent paraffin"; and "When we say Parachute, we mean 100 per cent coconut oil. When you use coconut oil, dont buy diluted, buy 100% pure.“ Competition not named in the ad, but showed a bottle with a plus sign on it5/4/2012 Ethical and Legal Aspects of Business 10
  11. 11. HLL complained to the Monopolies and Restrictive Trade Practices Commission (MRTPC). The charge was not against the comparison, but the fact that the two products were incomparable. Parachute never mentioned on its bottle that it was a hair oil – to put the product in lower excise duty bracket Technically Parachute was qualified as cooking oil– Parachute & Clinic Plus could not be compared Parachute contained 60% paraffin5/4/2012 Ethical and Legal Aspects of Business 11
  12. 12.  HLL obtained an exparte interim stay order on the Marico campaign. The campaign had to be stopped by Marico under the MRTP Act Marico issued a notice in public interest by the first week of August with the head line: "Misleading advertising by Parachute Coconut Oil stopped by the MRTP Commission."5/4/2012 Ethical and Legal Aspects of Business 12
  13. 13. Reason for repeal of MRTP Act: Outlived its utility: the Act was enacted when India had a command-and-control paradigm for the administration of the economic activity The existing law did not even mention a certain offending trade practices like:  Abuse of dominance  Cartels, collusions, and price fixing  Bid rigging  Predatory pricing5/4/2012 Ethical and Legal Aspects of Business 13
  14. 14. There are three elements: Prohibiting Anti-Competitive Agreements Prohibiting abuse of dominant position Regulating combinations5/4/2012 Ethical and Legal Aspects of Business 14
  15. 15. Agreements in respect of production, supply, distribution, storage, acqui sition or control of goods or provision of services that cause or are likely to cause appreciable adverse effects on competition within India. Agreements subjected to scrutiny fall into two broad divisions:  Horizontal agreements5/4/2012 Ethical and Legal Aspects of Business 15
  16. 16. Agreements between enterprises engaged in trade of identical or similar products (including cartels) if they  Fix prices  Limit output  Share markets  Indulge in Bid-Rigging or Collusive Bidding5/4/2012 Ethical and Legal Aspects of Business 16
  17. 17.  Regarded as most pernicious form of anti- competitive behaviour. Amino Acid Lysine cartel is one of the landmark cases decided in the US5/4/2012 Ethical and Legal Aspects of Business 17
  18. 18. Agreements between enterprises at different stages or levels of the production chain.  Tie-in sales  Exclusive supply agreements  Exclusive distribution agreements  Refusal to deal  Resale price maintenance5/4/2012 Ethical and Legal Aspects of Business 18
  19. 19. 1. No enterprise or group shall abuse its dominant position.2. There shall be an abuse of dominant position if an enterprise or a group:  Directly or indirectly, imposes unfair or discriminatory— (i) Condition in purchase or sale of goods or service (ii)Price in purchase or sale of goods or service.  Limits or restricts— (i) Production of goods or provision of services (ii) Technical or scientific development 5/4/2012 Ethical and Legal Aspects of Business 19
  20. 20.  Indulges in practice or practices resulting in denial of market access  Makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts  Uses its dominant position in one relevant market to enter into, or protect, other relevant market.5/4/2012 Ethical and Legal Aspects of Business 20
  21. 21. Important Terms: “Dominant position" means a position of strength, enjoyed by an enterprise, which operates independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour. “Predatory price" means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations with a view to reduce competition or eliminate the competitors.5/4/2012 Ethical and Legal Aspects of Business 21
  22. 22. Examples: DLF case by CCI5/4/2012 Ethical and Legal Aspects of Business 22
  23. 23.  Combination has not been defined in the act but includes the following:  Acquisition of controls, shares, voting rights or assets  Acquisition of control by a person over an enterprise where such person has control over another enterprise engaged in competing business  Merger or amalgamation between or amongst enterprises5/4/2012 Ethical and Legal Aspects of Business 23
  24. 24.  Notify and seek approval of Competition Commission of India If CCI concludes an adverse effect, it can prohibit or propose modification5/4/2012 Ethical and Legal Aspects of Business 24
  25. 25.  IPR is an intangible right “protecting commercially valuable products of the human intellect” Why IPR? To Promote Innovation, a trigger to growth of an economy. IP laws protect these innovations from unlawful exploitation It may comprise patents, copyrights, trademarks and other similar rights governed by acts such as:  Copyright Act, 1957 – Rights to creators of literary, musical and artistic works  Patents Act, 1970 – Rights to an inventor for a limited period of time
  26. 26.  Trade and Merchandise Marks Act, 1958 or Trade Marks Act, 1999 – Trade mark as an identity of the connection between a trader and his goods. Geographical Indications of Goods (Registration and Protection) Act, 1999 – Registration and better protection of geographical indications related to goods. E.g. Darjeeling tea, Kashmir apples Designs Act, 2000 – Protection of designs Semi-conductor Integrated Circuits Layout-Design Act, 2000 – Protection of IPR in areas of Semiconductor Integrated Circuit Layout Designs
  27. 27.  Competition Act opposes Monopoly while IPR promotes Monopoly IPR protects the rights of creators and owners of a work of human intellectual creativity Competition act can penalize the IPR holders who misuse their dominant position Both have to co-exist so that a balance between both laws can help economic growth while taking care of consumer/common public’s welfare
  28. 28.  Competition Commission of India established on 14th October, 2003 CCI consists of a Chairperson and not less than two and not more than six other Members appointed by the Central Government5/4/2012 Ethical and Legal Aspects of Business 28
  29. 29.  To Prevent practices having adverse effect on competition  E.g. Forming Cartels, predatory pricing To Promote and sustain competition in markets To Protect the interests of consumers  E.g. CCI notices to banks To Ensure freedom of trade carried on by other participants in markets, in India5/4/2012 Ethical and Legal Aspects of Business 29
  30. 30.  From 1st June, 2011, all M&A deals by companies in India have to pass muster at the Competition Commission of India (CCI). M&A deals under the purview of CCI  If the joint asset and turnover of the merging entities exceed Rs 1,500 crore and Rs 4,500 crore respectively  In case the asset and turnover of the target company exceed Rs 250 crore and Rs 750 crore respectively  If the joint market share exceeds 40 percent ▪ E.g. Kingfisher and Jet Airways M&A deals exempted from CCI clearance  Intra group mergers ▪ E.g. merger of Rinfra, REL, REGL, RGSPL, RIVL, etc.  Routine merger and acquisition deals  Mergers happening entirely outside India with insignificant local nexus and effect on markets in India  If an acquirer has 50% stake in a firm  An 5/4/2012 acquisition of less than Legal Aspects of Business Ethical and 15% voting right 30