Competition Act, 2002


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Competition Act, 2002

  1. 1. Competition Act, 2002 ( an up gradation to the MRTP Act 1969) Presented by : Group 6 Section C
  2. 2. Introduction & Interpretation An act to provide, keeping in view of the economic development of the country, for the establishment of a commission 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 trades carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. - The Competition Act, 2002, Opening para.
  3. 3. COMPETITION ACT , 2002 • Predecessor : MRTP Act, 1969. • Followed by : Competition ( Amendment) Act Some of the objectives of Competition Act are as follows :• Establishment of a Commission to prevent adverse effect on competition. • Promotion and sustenance of competition in the market. • Protection of consumers’ interests. • Freedom of trade.
  4. 4. Economic Reforms , 1991 • Post 1991 was seen with the introduction of policies of Liberalization, Privatization and Globalization. • MRTP was found inadequate to meet the challenges of a modern globalized economy. • Government of India in October 1999 appointed a high level Committee on Competition Policy and Law (the Raghavan Committee) to advise on the competition law in consonance with the international developments.
  5. 5. Competition Act,2002 v/s MRTP Act,1969 • Competition concepts expressly defined. • Competition concepts not defined clearly. • Provisions for regulation of Combination. • No provisions for regulation of Combination. • Power to impose penalty. • No power to impose penalty. • Statutory authority can seek CCI’s opinion. •No authority to seek opinion.
  6. 6. Competition Act,2002 v/s MRTP Act,1969 • Based on post reforms scenario. • Based on structure as factor. •Relatively more autonomy for the Competition Commission. • Penalties for offences. • Proactive & Flexible. •Based on pre-reforms scenario. • Based on size as a factor. •Very little financial and administrative autonomy. • No penalties for offences. • Reactive and Rigid.
  7. 7. Activities Prevented Under Competition Act • Price fixing : If two or more supplier fixes the same price for supplying the goods then it will be restricted practice. • Bid rigging : If two or more supplier exchange sensitive information of bid, then it will also be restricted practice and against competition. • Re-sale price fixation : If the producer sells the goods to the distributors on the condition that he will not sell on any other price which is not fixed by the producer. • Exclusive dealing : This is also restricted practice. If the distributor purchases the goods on a condition that supplier will not supply the goods to any other distributor. All the above activities promote monopoly and will not be entertained by Competition Commission.
  8. 8. Scope Of Competition Act • Fundamental principle of free market economy – free and fair promoted. On the basis of such principle stimulates productivity, innovation, improvised quality and efficient usage of resources. • The Act provides adequate safeguards to all the players in the market with the help of a regulatory authority called the Competition Commission of India (CCI).
  9. 9. Prohibition of Certain Agreements, Abuse of Dominant Position & Regulation of Combinations No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable effect on competition within India. -The Competition Act , 2002, Section 3(1)
  10. 10. ANTI–COMPETITION • Also known as anti-trust competition. • Section 3 provides that no enterprise or person shall enter into any agreement in respect of production, supply, distribution, storage acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. • The anti-trust agreements that the companies enter into are of two types, viz. Horizontal & Vertical. These are in contravention of the provisions of the Competition Act, 2002.
  11. 11. Horizontal • These are agreements made between two or more competing firms. Basically called as formation of CARTEL. - Any agreements violating the above Sec.3(1) are void. The reasons are – • Directly or indirectly determines the sale or purchase prices, • Limits or controls production, supply, markets etc. • Shares the market or source of production of services by way of allocation of geographical area etc. • Directly or indirectly involves in bid rigging or collusive bidding. v/s Vertical • These are agreements between firms relating to actual or potential relationship of purchasing or selling to each other with a purpose of dominating the market. - Any agreements violating the above Sec.3(1) are void. The reasons are – • Tie-in arrangement, • Exclusive supply agreement, • Exclusive distribution agreement, • Refusal to deal, • Resale price maintenance.
  12. 12. Prohibition of Abuse of Dominant Position • A dominant position implies that a company, is so overriding that the competitors are unable to match its actions or control the prices. • Sec.4 of the Competition Act prohibits such activities which include: i. Directly or indirectly imposes unfair or discriminatory Conditions/Price in purchase or sale of goods or service. ii. Limits or restricts - production of goods or provision of services or market thereof, - technical or scientific development relating to the goods or services to the prejudice of consumers. iii. Indulges in practices that result in denial of market access in any manner. iv. Uses its position to enter into relevant market or protect the relevant market. This Act does not block companies from being leader or dominant in an
  13. 13. Regulation of Combinations • Competition Act, 2002, Sec.5 • The Act is not against any combinations of acquisition, merger or amalgamation, • but, they prevent such activities with an intention to beat competition and establish monopolies which is illegal.
  14. 14. COMPETITION COMMISSION OF INDIA (CCI) (1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a Commission to be called the „Competition Commission of India‟. (2) The Commission shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued. The head office of the Commission shall be at such place as the Central Government shall decide from time to time. The Commission may establish offices at other places in India. - The Competition Act, 2002, Sec.7,(1-4)
  15. 15. Composition of the Commission • The chairperson and other six members of the Commission are appointed by the Central Government. • The term of office is for five years.(Sec.9-11) • Selection Committee includes Chief Justice of India or his nominee, Secretary in the Ministry of Corporate Affairs.
  16. 16. Duties and Powers of CCI • Sec.18-20 deals with the duties. - Summary of the duties are : • Eliminate practices having adverse effect on competition. • Promote and sustain competition. • Protect the interests of the consumers. • Ensure freedom of trade carried on by other participants in the market. • Conduct enquiry into cases of abuse of dominant position and combinations.
  17. 17. Procedures i. ii. iii. iv. v. vi. ( Sec.26 of the Act) On receiving a receipt from any Statutory Authority like Central or State Govt. Director General(DG) starts commences investigation. DG submit report to CCI. CCI forwards a copy to concerned parties. Under DG’s report if there is no contravention of Competition Act, the CCI invites objections from the Statutory Authority or as the case maybe. If these agree, then the case is closed. Time limit for the enquiry is one year.
  18. 18. Powers (Sec. 36 of the Act) • It has powers to regulate its own procedure. • It shall be guided by the principles of natural justice and the rules and regulations of the central government. • It will exercise the same power as a civil court under the Code of Civil Procedure 1908.
  19. 19. Penalties (Sec. 42-48 of the Act) • If any person, without reasonable clause, fails to comply with the orders or directions of the act, he shall be punishable with fine which may extend to Rs.1 lakh for each day during which such non compliance occurs, subject to a maximum of rupees 10cr, as the Commission may determine. • Further if any person does not comply with the orders or directions issued, or fails to pay the fine imposed be punishable with imprisonment for a term which may extend to 3 years, or with fine which may extend to Rs.25cr.
  20. 20. Competition appellate tribunal • To hear and dispose of appeals against any direction issued or decision made or order passed by the Commission. • To forward appeal against any finding of the Commission and pass orders for recovery of the compensation under the report of CCI. • The appeal should be made within a period of 60 days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central government or State government or a local authority or enterprise accompanied by such fee as may be prescribed.
  21. 21. Benefits of Competition Act i. ii. iii. Consumers - wider choice or goods. - Better quality and improved value of money. Businesses - Redressal against anti competitive practices. - Competitively priced inputs. Governments (Central & State) - Savings of public money in procurement - Enhanced availability of resources for social sector.
  22. 22. In short: • Free market economy is the new world order, i.e. ‘free & fair’ . • Transparency is the best policy. • Competition advocacy is the new mantra. • Market dominance is an outdated idea.
  23. 23. Case study : 1 (Relating to the Dominance abuse and Appellate function) Relating Yash Raj films and “Son of Sardar” The tassel between Yash Raj films and Ajay Devgan Films - Case no. 66 of 2012
  24. 24. • Informant: - Ajay Devgan Films • Opposite Parties: - Yash Raj films
  25. 25. • The informant’s grievance : Opposite party released a mega starrer film ’ Ek Tha Tiger’ on 15th August 2012. Meanwhile, they were also contemplating release of the film ‘Jab Tak Hain Jaan’ during Diwali. They have put a condition on single screen and multiplex owners that if they wanted to exhibit ETT then they would have to simultaneously agree to exhibit the other film JTHJ.
  26. 26. •Claim highlights : i. Abuse of dominance ii. Violation of Sec 3 and Sec 4 of the CCI iii. Informant feared that he will not get enough theatres for his own film ‘Son of Sardar’ iv. Tie in arrangement and vertical agreements
  27. 27. • Result of the case : i. Case dismissed. ii. CCI did not find any misgivings on the opposition’s side. iii. Fit for closure under section 26 (2) of the act. • Reasons for Closure : i. Tie in arrangements are not violative of Sec. 3, if it does not cause appreciable adverse effect on competition of India. ii. Market cannot be constricted to EID and Diwali. Market is considered as a whole throughout the year. iii. Sec. 4- domination of market not defined.
  28. 28. Case study : 2 (Relating to the Bid Rigging and Price Fixation) Aluminium Phosphate tablets Manufacturer’s Case - Case no. 02/2011
  29. 29. • Informant: - Food Corporation of India (FCI) • Opposite Parties: - United Phosphorous Limited - Sandhya Organic Chemicals Pvt. Ltd. - Excel Crop Care Limited - Agrosynth Chemicals Limited
  30. 30. • Allegations: - During last 8 years the opposite parties had quoted identical rates and negotiations are also reduced to same rate. - The manufacturers of the ALP tablets have formed a cartel. - One of the manufacturers is using its dominance to compel others to quote at same rates.
  31. 31. • Result of the Case: - CCI decides to impose penalty at a rate of 9% on average of three year turnovers of the three companies. - This works out to Rs 252 crores for UPL, Rs 63 crores for Excel Crop Care and Rs 1.57 crores for Sandhya Organics.
  32. 32. Case study : 3 (Relating to the Cartel Formation and Price manipulation) Advertising Agencies Guild VS Indian Broadcasting Foundation & its members - Case no. 35 of 2013
  33. 33. • Informant: - Advertising Agencies Guild • Opposite Parties: - Indian Broadcasting foundation & its members (IBF)
  34. 34. •Case Highlights - Opposite parties were forcing the advertising agencies to agree to the new mechanism of billing (Gross Billing To Net Billing) - They collectively boycotted and did not broadcast advertisements on their Channels for two days viz. 01.05.2013 & 02.05.2013. - Violation of section 3(3)
  35. 35. Result of Case • Case was dismissed. • IBF wasn't found to be abusing their dominance. • The agreement deadline was increased to one month.
  36. 36. Reasons for Closure • Billing system has no restriction under competition Act. • Competition Act is applicable only to price fixation, market sharing collusive bidding etc.., • The boycotting was pre-mentioned by the so formed committee of IBF.
  37. 37. Case study : 4 (Relating to the Price fixation and cartel formation) Relating Indian Glycols limited and IOCL, BPCL, HPCL, ISMA & three Ministries” - Case no. 14 of 2012
  38. 38. • Informant: - Indian Glycols Ltd. • Opposite Parties: - Indian Oil Corporation Ltd (IOCL). Hindustan Petroleum Corporation Ltd (HPCL). Bharat Petroleum Corporation Ltd (BPCL). Indian Sugar Mills Association (ISMA). And the corresponding ministries.. - -
  39. 39. • THE INFORMANT’S GRIEVANCE : - The fixing of price of Ethanol to Rs27/ltr by Indian Sugar Mills Association (ISMA) with the collaboration of Cabinet Committee of Economic Affairs. - Enforcement of agreement of Cartelization on the government body by the president of ISMA. - The price fixation by the four OMC’s and by various suppliers who are in horizontal relationship with each other. - The chain from ISMA to certain Ministries and then to OMCs were inter related in the fixing the prices. v/s
  40. 40. •CLAIM HIGHLIGHTS - Act of price fixation Section 3 (3) (a), (b) & (c) are violated. Act of abuse of dominant position. Section 4 (2) (a) & (e) are violated.
  41. 41. •Results I. Case was dismissed. II. The Commission did not find any violation in the section 3 and 4 of the act. III. The order was given under section 26 (2) of the competition act, 2002. IV. All the opposite parties came out clean in the case. •Reasons I. The price fixed by the Cabinet Committee of Economic Affairs (CCEA), for the procurement of Ethanol cannot be considered as anti competitive in nature as it is set up to encourage the farmers to produce more sugarcane as ethanol comes from molasses in sugarcane. II. The Formation of cartelization was not found. III. Sec. 4- domination of market not defined.
  42. 42. Case study : 5 (Relating to Predatory pricing by use of Dominance) TESPL (Transparent Energy Systems Pvt. Ltd.) v/s TECPRO Systems Ltd. - Case no. /2012
  43. 43. • Informant: - M/s Transparent Energy Systems Pvt. Ltd.(TESPL) • Opposite Parties: - TECPRO Systems Ltd. •Allegations under section 4 of Competition Act,2002:1. 2. Quoted all bids at prices as low as Raw Material Cost (RMC) TECPRO was Dominant Player with 50% market share in WHR market of India
  44. 44. •Further allegations were: - Opposite party(OP) had large economic strength compared to Informant. - OP was a renowned player in coal, ash handling etc. - OP also catered to various sectors like cement, steel etc. - Low prices quoted by OP could not be justified as per the standard norms of working out cost. - OP abused its dominance in collaboration with major chinese company NTK. - OP also indulged in non-price predatory behaviour by hiring its key managerial staff.
  45. 45. Commission’s verdict • Question of Dominance: - There were five players in the relevant market and OP only entered the WHR market in 2011.From one year data given by the informant, it cannot be concluded that OP was dominant player. - The dominance of OP in other markets cannot be a ground to consider OP as dominant in WHR market. - OP has not completed successfully any projects till date. Therefore it cannot be considered a successful player
  46. 46. • Question of Predatory Pricing : The Act was enacted with the intention to promote and sustain competition, to protect interest of consumers and provide freedom of trade. It doesn’t envisage the protection of any competitor from stiff competition • Under section 4 (b) explanation, predatory price is defined as : “Predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulation, of production of the goods or provisions of services, with a view to reduce competition or eliminate the competitors.”
  47. 47. • In predatory pricing, there is always a significant planning to recover the losses once the competitors have been forced out. • But OP not being Dominant company, cannot have inclination and resources to finance such a strategy. • The commission cannot consider the prices quoted by the OP as Predatory only because the bidder continuously got many projects. • It is only a case of competitive bidding by the competitor which is not a case of Predatory Pricing. • Thus the case was considered fit to be closed.
  48. 48. Sources :