Transcript No Slide Title

GREETINGS
TO
DELEGATES AT THE
LAUNCH MEETING ON
MEKONG PROJECT
HANOI
23-24 APR 2004
1
MRTP ACT METAMORPHOSES INTO
COMPETITION ACT
Dr.S.CHAKRAVARTHY
(Profession : Civil Servant)
Formerly, Member, Monopolies and Restrictive Trade
Practices Commission, Member, High Level Committee on
Competition Policy and Law And Member of Committee for
Drafting the Law.
Presently, Adviser/Consultant
Competition Policy and Law
HYDERABAD, INDIA
Copyright - Dr. S. Chakravarthy
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LPG SYNDROME
EARLIER TILL 1991
NOW AFTER 1991
• LICENSING
• LIBERALISATION
• PLANNING
• PRIVATISATION
• GOVERNMENT
• GLOBALISATION
Copyright - Dr. S. Chakravarthy
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LPG SYN DR OM E
( POST 1991 )
RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:
•
DEREGULATION AND SIMPLIFICATION OF LICENSING AND
APPROVAL PROCEDURES
• EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES,
APPROVALS AND QUOTAS
• NEW ECONOMIC ADJUSTMENT MEASURES
• DIVESTITURE AND SALE OF GOVERNMENT ASSETS
• GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC
SECTOR
• PRIVATISATION
• ENCOURAGING COMPETITION
Copyright - Dr. S. Chakravarthy
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C O M P E T I T I O N…….
• IS A DYNAMIC CONCEPT
• IS AN AMALGAM OF FACTORS THAT
STIMULATE ECONOMIC RIVALRY
• IS A TOOL TO MOUNT MARKET PRESSURE
TO PENALISE LAGGARDS AND TO REWARD
THE ENTERPRISING
Copyright - Dr. S. Chakravarthy
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COMPETITION
POLICY - GOALS
PRESERVATION AND PROMOTION OF THE
COMPETITIVE PROCESS
EFFICIENCY IN PRODUCTION AND
ALLOCATION OF GOODS AND SERVICES
INNOVATION AND ADJUSTMENT TO
TECHNOLOGICAL CHANGE
SUSTAINED ECONOMIC GROWTH
Copyright - Dr. S. Chakravarthy
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EXTANT COMPETITION LAW OF INDIA
MONOPOLIES AND
RESTRICTIVE
TRADE PRACTICES ACT,1969
BROUGHT INTO FORCE IN 1970
Copyright - Dr. S. Chakravarthy
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MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ACT, 1969
A
LODE STAR
• CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF
STATE POLICY
B
PRINCIPLES
• SOCIAL JUSTICE WITH ECONOMIC GROWTH
• WELFARE STATE
• REGULATING CONCENTRATION OF ECONOMIC POWER TO
THE COMMON DETRIMENT
• CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE
TRADE PRACTICES
Copyright - Dr. S. Chakravarthy
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OBJECTIVES OF THE MRTP ACT
PREVENTION OF CONCENTRATION OF
ECONOMIC POWER TO THE COMMON
DETRIMENT;
 CONTROL OF MONOPOLIES
 PROHIBITION OF MONOPOLISTIC TRADE
PRACTICES (MTP)
 PROHIBITION OF RESTRICTIVE TRADE
PRACTICES (RTP)
 PROHIBITION OF UNFAIR TRADE PRACTICES
(UTP)

Copyright - Dr. S. Chakravarthy
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1991 AMENDMENTS TO MRTP ACT
SIZE CONCEPT GIVEN UP
2. CURBS ON GROWTH OF MONOPOLY
COMPANIES DELETED
3. MERGER CONTROL REMOVED
4. MORE EMPHASIS ON PROHIBITION
OF RTPs, UTPs AND MTPs
IN SUM, BIG BECOMING BIGGER IS NO
MORE UGLY
1.
Copyright - Dr. S. Chakravarthy
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RESTRICTIVE TRADE PRACTICES
REFUSAL TO DEAL
 TIE-UP SALES
 FULL LINE FORCING
 EXCLUSIVE DEALINGS
 PRICE DISCRIMINATION
 RE-SALE PRICE MAINTENANCE
 AREA RESTRICTION

Copyright - Dr. S. Chakravarthy
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UNFAIR TRADE PRACTICES
MISLEADING ADVERTISEMENT AND FALSE
REPRESENTATION
 BARGAIN SALE, BAIT AND SWITCH
SELLING
 OFFERING OF GIFTS OR PRIZES WITH THE
INTENTION OF NOT PROVIDING THEM
AND CONDUCTING PROMOTIONAL
CONTESTS
 PRODUCT SAFETY STANDARDS
 HOARDING OR DESTRUCTION OF GOODS

Copyright - Dr. S. Chakravarthy
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MONOPOLISTIC TRADE
PRACTICES
1.
2.
3.
4.
UNREASONABLE PRICING
PREVENTING OR LESSENING
COMPETITION IN SUPPLY/DISTRIBUTION
OF GOODS/SERVICES
LIMITING TECHNICAL DEVELOPMENT,
CAPITAL INVESTMENT OR
PRODUCTION/SUPPLY
UNREASONABLE PROFITS
(PROFITEERING)
Copyright - Dr. S. Chakravarthy
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APPLICABILITY OF THE MRTP ACT
 ALL UNDERTAKINGS ENGAGED IN MANUFACTURE, SUPPLY
AND DISTRIBUTION IN THE PRIVATE SECTOR
 PUBLIC SECTOR UNDERTAKINGS OWNED BY THE GOVERNMENT
OR GOVERNMENT UNDERTAKINGS
 STATUTORY CORPORATIONS
 UNDERTAKINGS UNDER THE MANAGEMENT OF CONTROLLERS
APPOINTED BY LAW
 COOPERATIVE SOCIETIES
 FINANCIAL INSTITUTIONS, BANKS
Copyright - Dr. S. Chakravarthy
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EXPERIENCE IN THE LAST
THREE DECADES
NO MENTION OR DEFINITION OF OFFENCES LIKE
(ILLUSTRATIVE)
•ABUSE OF DOMINANCE
•CARTELS, COLLUSION AND PRICE FIXING
•BID RIGGING
•BOYCOTTS AND REFUSAL TO DEAL
•PREDATORY PRICING
LARGE NUMBER OF INTERPRETATIONS & CASE LAWS
AFFECTING THE INTENT/SPIRIT OF THE MRTP ACT
WTO FALL OUT OBLIGATIONS
Copyright - Dr. S. Chakravarthy
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NEED FOR A NEW WINE
NEED FOR A NEW LAW HAS ITS ORIGIN IN FINANCE
MINISTER’S BUDGET SPEECH IN FEBRUARY,1999 :
“ THE MRTP ACT HAS BECOME OBSOLETE IN CERTAIN
AREAS IN THE LIGHT OF INTERNATIONAL ECONOMIC
DEVELOPMENTS RELATING TO COMPETITION LAWS.
WE NEED TO SHIFT OUR FOCUS FROM CURBING
MONOPOLIES TO PROMOTING COMPETITION. THE
GOVERNMENT HAS DECIDED TO APPOINT A
COMMITTEE TO EXAMINE THIS RANGE OF ISSUES AND
PROPOSE A MODERN COMPETITION LAW SUITABLE
FOR OUR CONDITIONS.”
Copyright - Dr. S. Chakravarthy
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RUBRIC OF THE NEW
COMPETITION LAW
THE NEW LAW, COMPETITION ACT, 2002
WILL REPEAL THE MRTP ACT
FOUR COMPARTMENTS OF NEW LAW:

ANTI-COMPETITION AGREEMENTS

ABUSE OF DOMINANCE

MERGERS, AMALGAMATIONS,
ACQUISITIONS AND TAKE-OVERS

FOSTERING COMPETITION
Copyright - Dr. S. Chakravarthy
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ANTI - COMPETITION AGREEMENTS
HORIZONTAL RESTRAINTS :
VERTICAL RESTRAINTS :
CARTELS {FIXING PURCHASE OR
SALE PRICES (EXPORT CARTELS
EXEMPTED) }
 TIE-IN ARRANGEMENTS
 EXCLUSIVE SUPPLIES
 BID-RIGGING (COLLUSIVE
TENDERING)
 EXCLUSIVE DISTRIBUTION
 SHARING MARKETS BY TERRITORY,
TYPE ETC.
 REFUSAL TO DEAL
 RESALE PRICE MAINTENANCE
 LIMITING PRODUCTION,
TECHNICAL DEVELOPMENT
SUPPLY,
THE ABOVE ARE “PER SE” ILLEGAL.
ADJUDICATION BY RULE OF
REASON
Copyright - Dr. S. Chakravarthy
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ABUSE OF DOMINANCE
DOMINANCE NOT LINKED TO ANY ARITHMETIC FIGURE OF MARKET SHARE
DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO
OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY
AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS.
ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE
• IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING
PREDATORY PRICES)
• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT
• DENIES MARKET ACCESS
• CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION
WITH THE SUBJECT OF THE CONTRACTS.
• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS
RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC
MARKET
Copyright - Dr. S. Chakravarthy
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DOES DOMINANCE REQUIRE AN
ARITHMETIC FIGURE?





SOME SUGGEST AN ARITHMETIC FIGURE OF MARKET
SHARE TO ASCERTAIN DOMINANCE
EXISTING MRTP ACT STIPULATES 25% MARKET SHARE
NEW LAW DISTINGUISHES DOMINANCE FROM ITS ABUSE
AND ESCHEWS ARITHMETIC FIGURE
LOGIC IS AGAINST A THRESHOLD AS IT MAY HARASS A
GOOD COMPETING ENTITY AND ALLOW AN OFFENDING
ENTITY TO ESCAPE
AS LONG AS DOMINANCE IS NOT TO BE FROWNED UPON,
A GENERIC DEFINITION IS BETTER THAN MARKET
SHARE THRESHOLD DEFINITION
Copyright - Dr. S. Chakravarthy
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COMBINATIONS
MERGERS/AMALGAMATIONS
PEJORATIVE EFFECTS
1.
2.
3.
4.
5.
REDUCTION IN NUMBER OF PLAYERS
ACQUISITION OF ENORMOUS ECONOMIC STRENGTH
DISCOURAGEMENT OF NEW ENTRANTS
DICTATION OF PRICES
DOMINANCE
REGULATION ON COMPETITION PERSPECTIVE
1. COMPETITION LAW TO HAVE SURVEILLANCE OVER
COMBINATIONS BEYOND A THRESHOLD LIMIT
[Assets > Rs.1000 Crores (about US $ 220 m) or
Turnover > Rs.3000 Crores (about US $ 660 m)]
2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND
NOT MANDATORY
3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS
ELSE DEEMED APPROVAL
Copyright - Dr. S. Chakravarthy
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IS COMBINATION CONTROL
REQUIRED AT ALL?












SCAN OF 72 COMPETITION LAWS IN THE WORLD SHOWS THEY HAVE MERGER
CONTROL
51 OF THOSE HAVE MANDATORY PRE MERGER NOTIFICATION REQUIREMENT
ANOTHER 12 ALSO HAVE MANDATORY NOTIFICATION REQUIREMENT BUT AT A
SLIGHTLY LATER STAGE, NAMELY, POSTCLOSING STAGE
REMAINING 9 HAVE VOLUNTARY NOTIFICATION REQUIREMENT
THIS IS NOT THE ONLY REASON WHY INDIAN LAW SHOULD HAVE MERGER
CONTROL
OTHER REASONS : POSSIBLE ABUSE OF DOMINANCE, LESS CHOICE AND
BARRIERS TO NEW ENTRANTS ETC
THE NEW LAW IS VERY BENIGN ON MERGER CONTROL
NOTIFICATION IS VOLUNTARY
HIGH THRESHOLD LIMIT
DEEMED APPROVAL AFTER 90 WORKING DAYS
VERTICAL AND CONGLOMERATE MERGERS WILL GENERALLY BE ALLOWED TO
PASS
ONLY HORIZONTAL MERGERS WILL BE SCREENED ON COMPETITION
PERSPECTIVE
Copyright - Dr. S. Chakravarthy
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COMPETITION ADVOCACY



THE COMPETITION COMMISSION OF INDIA
IS ENABLED TO PARTICIPATE IN THE
FORMULATION OF POLICIES AND REVIEWING
OF POLICIES RELATING TO COMPETITION AT
THE INSTANCE OF THE GOVERNMENT
IS REQUIRED TO CREATE COMPETITION
CULTURE
IS REQUIRED TO ACT AS COMPETITION
ADVOCATE
Copyright - Dr. S. Chakravarthy
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EXEMPTIONS
GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE
COMPETITION LAW
A
ANY CLASS OF ENTERPRISES IN THE INTEREST OF
NATIONAL SECURITY/PUBLIC INTEREST.
B.
ANY PRACTICE/AGREEMENT ARISING OUT OF
INTERNATIONAL TREATY/AGREEMENT
C.
ANY ENTERPRISE PERFORMING A SOVEREIGN
FUNCTION ON BEHALF OF GOVERNMENT
DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.
Copyright - Dr. S. Chakravarthy
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COMPETITION COMMISSION OF INDIA
COMPRISES :
CHAIRPERSON
• MEMBERS
SELECTION BY :
A COLLEGIUM OR SEARCH COMMITTEE APPOINTED BY THE
GOVERNMENT.
SELECTION ON:
MERIT BASED ON QUALIFICATIONS, EXPERIENCE, RELEVANT
KNOWLEDGE AND INTEGRITY.
Copyright - Dr. S. Chakravarthy
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DEPOLITICISATION AND
CASTING NET WIDE

RATIONALE FOR THE COLLEGIUM APPROACH IS TO
MINIMISE POLITICISATION OF APPOINTMENTS

CHAIRPERSON NEED NOT BE FROM THE JUDICIARY

CHAIRPERSON AND MEMBERS FROM FIELDS –
JUDICIARY, ECONOMICS, LAW, INTERNATIONAL TRADE,
BUSINESS,
COMMERCE,
INDUSTRY,
FINANCE,
ACCOUTANCY, MANAGEMENT, PUBLIC AFFAIRS, AND
ADMINISTRATION

EVERY BENCH WILL HAVE A JUDICIAL MEMBER
Copyright - Dr. S. Chakravarthy
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OLD WINE OR NEW WINE ?
MRTP ACT
1.
NEW LAW
BASED ON PRE-1991 LPG
1. BASED ON POST-1991 LPG
2. PREMISED ON BEHAVIOUR/
CONDUCT
2. PREMISED ON SIZE
3. PROCEDURE ORIENTED
3. RESULT ORIENTED
4. NO TEETH (REFORMATORY)
5. OFFENCES DEFINED IMPLICITLY
(CARTELS, BID-RIGGING ETC.)
6. FROWNS ON DOMINANCE
(25% OF MARKET SHARE)
4. CAN BITE (PUNITIVE )
5. OFFENCES DEFINED
EXPLICITLY
6. FROWNS ON ABUSE OF
DOMINANCE
7. A LARGE NO. OF PER SE
OFFENCES
(NO PERCENTAGE OF MARKET
SHARE)
(AGAINST PRINCIPLES OF
NATURAL JUSTICE)
7. JUST FOUR ARE PER SE
OFFENCES
(REST BY RULE OF REASON)
Copyright - Dr. S. Chakravarthy
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OLD WINE OR NEW WINE ?
MRTP ACT
NEW LAW
8. COVERS UNFAIR TRADE
PRACTICES (INDIVIDUAL
CONSUMER INTEREST)
9. POLITICAL APPOINTMENTS OF
8. UNFAIR TRADE PRACTICES
EXCLUDED (COVERED UNDER
CONSUMER PROTECTION ACT)
9. APPOINTMENTS BY A COLLEGIUM
CHAIRPERSON/MEMBERS
10. NO COMPETITION ADVOCACY
ROLE
11. REACTIVE
10. CCI HAS COMPETITION ADVOCACY
ROLE
11. PROACTIVE
NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW
Copyright - Dr. S. Chakravarthy
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ONE WOULD LIKE TO AVOID
THE DANGER OF HOLLOW PURISM
THAT HAS MADE SO MUCH
OF MODERN ECONOMICS
UNFIT FOR ACTUAL USE
AMARTYA SEN
INDIAN NOBEL LAUREATE
Copyright - Dr. S. Chakravarthy
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THANK YOU
FOR YOUR
KIND ATTENTION
Copy right Dr. S. Chakravarthy
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