Transcript Presentation

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
What is Competition?
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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
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Types of Competition
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Price Competition: Winning customers by
lowering price
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Non-price Competition: Winning customers by
advertising, offering after-sales-services, using
sale promotion tools, etc.
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Ways of Competition
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Fair Competition: Fair means such as producing
quality goods, becoming cost-efficient, optimising
the use of resources, best technology, research &
Development, etc.
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Unfair Competition: Unfair means such as fixing
price with the rivals, predatory pricing,
disparaging or misleading advertisements, etc.
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Benefits from Competition
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Efficiency
Innovation
Check on concentration
Economic growth (wealth and job creation)
Consumer welfare gains:
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Lower prices,
Better quality,
Freedom of choice and
Easy access
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Competition Law
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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:
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Competition Commission of India (CCI) and
Competition Appellate Tribunal (COMPAT)
Over 120 countries have adopted Competition Law
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Myths & Realities
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Myth: Competition policy and law will allow
foreign firms to come in and undermine domestic
firms.
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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.
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Myths & Realities
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Myth: Competition policy and law are the tools for
rich and urban societies.
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Reality: Poor do benefit from action against
competition abuses, if they can access justice.
Example: Rukmini Devi in Rashmi, Chittorgarh
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Myths & Realities
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Myth: Competition law and policy works for the
rich and affluent sections only.
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Reality: Competition law and policy can also
benefit the poor
Example: Tied selling at government ration shops
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Evolution of Competition Law in India
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The first legislation Monopolies and Restrictive
Trade Practices Act, 1969, proved inadequate.
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The Competition Act 2002, was subsequently
enacted due to strong lobbying by the consumer
movement, lead by CUTS in 1990s.
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Action Components of Competition Law
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Anticompetitive practices, such as Cartels
(Section 3)
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Abuse of Dominance (Section 4)
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Mergers and Acquisitions (Section 5 & 6)
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Competition Advocacy (Section 49)
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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
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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
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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
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Competition Authority
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Two tier agency created as per the provisions of
the Competition Act, 2002
 Competition Commission of India (CCI)
 Competition Appellate Tribunal (COMPAT)
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CCI assisted by the Director General
COMPAT hears appeals and can also provide
compensation
Ultimate appeal at the Supreme Court
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Other functions of CCI
Perform the function of competition advocacy
effectively and promote competition culture
E.g. RBI favouring public sector banks
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Cooperation with other regulatory agencies
E.g. With sector regulators on competition issues
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Cooperation with other competition agencies
E.g. With competition agencies abroad
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Challenges for India
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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
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Competition Enforcement and Consumer
Welfare
Anti Competitive
Practices restricting
access
Competition
Authority’s
Enforcement
Actions
Poor quality
goods/services by a firm
abusing dominant
position
Tied-selling restricting
consumer choice
Anti Competitive
Practices leading to
excessive prices
ACCESS
QUALITY
Consumer
Welfare
CHOICE
PRICE
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Conclusions
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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
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THANK YOU!
[email protected]
www.ccier-cuts.org
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