This document discusses why consumers should be interested in competition law. It explains that competition law aims to protect the competitive process, not competitors, by prohibiting anti-competitive practices. When firms compete through fair means like innovation and efficiency, it benefits consumers through lower prices, better quality and more choice. Competition law establishes a competition authority to investigate anti-competitive conduct like cartels, abuse of dominance, and anti-competitive mergers. Enforcement of competition law promotes consumer welfare.

1. Why should consumers be
interested in a competition law?
Pradeep S. Mehta
National Conference on
"Competition Regime – Benefiting the
Consumer"
20th October 2010, New Delhi

2. What is Competition?
 The process of rivalry between firms striving to
gain sales and make profits
 Motive: self-interest, but outcome mostly
beneficial for the society
 Competition is not just an event, but a process
 It is not automatic – needs to be nurtured
2

3. Types of Competition
 Price Competition: Winning customers by
lowering price
 Non-price Competition: Winning customers by
advertising, offering after-sales-services, using
sale promotion tools, etc.
3

4. Ways of Competition
 Fair Competition: Fair means such as producing
quality goods, becoming cost-efficient, optimising
the use of resources, best technology, research &
Development, etc.
 Unfair Competition: Unfair means such as fixing
price with the rivals, predatory pricing,
disparaging or misleading advertisements, etc.
4

5. Benefits from Competition
 Efficiency
 Innovation
 Check on concentration
 Economic growth (wealth and job creation)
 Consumer welfare gains:
 Lower prices,
 Better quality,
 Freedom of choice and
 Easy access
5

6. Competition Law
 Aims to protect process of competition and not
competitors
 Consist of a set of rules to curb Anti Competitive
Practices (ACPs)
 Sets up the Competition Authority:
 Competition Commission of India (CCI) and
 Competition Appellate Tribunal (COMPAT)
 Over 120 countries have adopted Competition Law
6

7. Myths & Realities
 Myth: Competition policy and law will allow
foreign firms to come in and undermine domestic
firms.
 Reality: Effect of foreign entry depends upon
capabilities of domestic firms. Competition Law
protects domestic firms from ACPs of foreign
firms.
Example: Multinational Vitamin Cartel case.
7

8. Myths & Realities
 Myth: Competition policy and law are the tools for
rich and urban societies.
 Reality: Poor do benefit from action against
competition abuses, if they can access justice.
Example: Rukmini Devi in Rashmi, Chittorgarh
8

9. Myths & Realities
 Myth: Competition law and policy works for the
rich and affluent sections only.
 Reality: Competition law and policy can also
benefit the poor
Example: Tied selling at government ration shops
9

10. Evolution of Competition Law in India
 The first legislation Monopolies and Restrictive
Trade Practices Act, 1969, proved inadequate.
 The Competition Act 2002, was subsequently
enacted due to strong lobbying by the consumer
movement, lead by CUTS in 1990s.
10

11. Action Components of Competition Law
 Anticompetitive practices, such as Cartels
(Section 3)
 Abuse of Dominance (Section 4)
 Mergers and Acquisitions (Section 5 & 6)
 Competition Advocacy (Section 49)
11

12. Collusion and other ACPs (Sec 3)
“Our competitors are our friends, our customers are
the enemy”-Archer Daniels Midland!
 Cartel is an agreement between firms to act in
concert on prices, production levels or territories.
E.g. Cable TV in cities
 Other anti-competitive practices, such as tied
sales
E.g. Gas connection and gas stoves
Razor blades with sugar
School uniforms and stationery
Branded medicines/tests
12

13. Abuse of Dominance (Sec 4)
 Dominance means having authority or control.
 Cause of concern is not dominance but its abuse.
 Abuse of Dominance:
1. Exploitative practices: excessive pricing,
discrimination or tied selling or IPR abuses
Eg. Monsanto-Mahyco pricing of Bt Cotton seeds
2. Exclusionary practices: predatory pricing and
refusal to deal.
Eg. Truck unions not allowing non-member trucks
13

14. Combinations (Sec 5 & 6)
 Combinations include mergers: a fusion between
two or more firms.
 Takeover/acquisition: purchase of all or sufficient
number of shares of other firm(s).
 Cause of concern is not Combinations but its
likelihood to result in monopoly or dominance in
market.
Eg. Recent takeover of Indian pharma companies
without any merger review
14

15. Competition Authority
 Two tier agency created as per the provisions of
the Competition Act, 2002
 Competition Commission of India (CCI)
 Competition Appellate Tribunal (COMPAT)
 CCI assisted by the Director General
 COMPAT hears appeals and can also provide
compensation
 Ultimate appeal at the Supreme Court
15

16. Other functions of CCI
 Perform the function of competition advocacy
effectively and promote competition culture
E.g. RBI favouring public sector banks
 Cooperation with other regulatory agencies
E.g. With sector regulators on competition issues
 Cooperation with other competition agencies
E.g. With competition agencies abroad
16

17. Challenges for India
 Absence of competition culture
 Lack of competent and experienced staff
 Government support is not always assured
 Vested interests (political-economy aspects)
 Lack of clarity on overlap between the
competition authority and sector regulators
 Role of consumers/civil society
 Weakness in dissemination/communication
17

18. 18
Anti Competitive
Practices restricting ACCESS
access
Poor quality
Competition goods/services by a firm QUALITY
abusing dominant
Authority’s position Consumer
Enforcement
Actions Welfare
Tied-selling restricting
consumer choice CHOICE
Anti Competitive
Practices leading to PRICE
excessive prices
Welfare
Competition Enforcement and Consumer

19. Conclusions
 Competition enforcement leads to consumer
welfare directly and indirectly
 Stakeholders need to recognise their role in
promoting competition
 Policymakers/Government need to prioritise
competition reforms
 CCI to remain independent
 CCI to create a public buy in
 Consumer movement: natural allies of a
competition regime
19

20. THANK YOU!
psm@cuts.org
www.ccier-cuts.org
20