Transcript No Slide Title

EVOLUTION OF COMPETITION
LAW IN INDIA
Pradeep S Mehta
CUTS International
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EXTANT COMPETITION LAW OF INDIA
MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ACT,1969
BROUGHT INTO FORCE IN 1970
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ROOTS OF THE MRTP ACT
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
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THREE STUDIES SHAPE THE
MRTP ACT
 HAZARI COMMITTEE REPORT ON
INDUSTRIAL LICENSING PROCEDURE, 1955
 MAHALANOBIS COMMITTEE REPORT ON
DISTRIBUTION AND LEVELS OF INCOME, 1964
 MONOPOLIES INQUIRY COMMISSION
REPORT OF DAS GUPTA, 1965
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OBJECTIVES OF THE MRTP ACT
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CONTROL OF MONOPOLIES
PROHIBITION OF MONOPOLISTIC TRADE
PRACTICES (MTP)
PROHIBITION OF RESTRICTIVE TRADE
PRACTICES (RTP)
PREVENTION OF CONCENTRATION OF
ECONOMIC POWER TO THE COMMON
DETRIMENT
PROHIBITION OF UNFAIR TRADE
PRACTICES (UTP)
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1984 AMENDMENTS TO THE
MRTP ACT
 HIGH-POWERED EXPERT COMMITTEE REPORT OF
JUSTICE SACHAR
 THE REPORT RECOMMENDED THAT A SEPARATE
CHAPTER SHOULD BE ADDED TO THE MRTP ACT
DEFINING UTPs ESSENTIALLY IN THE INTERESTS
OF CONSUMERS.
 ADVERTISEMENT AND REPRESENTATION TO
CONSUMERS SHOULD NOT BECOME DECEPTIVE
BUT SHOULD BE TRANSPARENT.
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RESTRICTIVE TRADE
PRACTICES
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

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REFUSAL TO DEAL
TIE-UP SALES
FULL LINE FORCING
EXCLUSIVE DEALINGS
PRICE DISCRIMINATION
RE-SALE PRICE MAINTENANCE
AREA RESTRICTION
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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 CONTEST

PRODUCT SAFETY STANDARDS

HOARDING OR DESTRUCTION OF GOODS
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MONOPOLISTIC TRADE
PRACTICES

UNREASONABLE PRICING

PREVENTING OR LESSENING COMPETITION IN
SUPPLY/DISTRIBUTION OF GOODS/ SERVICES

LIMITING TECHNICAL DEVELOPMENT,CAPITAL
INVESTMENT OR PRODUCTION/ SUPPLY

UNREASONABLE PROFITS (PROFITEERING)
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1991 REFORMS AND SINCE
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/DISINVESTMENT
 ENCOURAGING COMPETITION
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1991 AMENDMENTS TO MRTP ACT

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SIZE CONCEPT GIVEN UP
CURBS ON GROWTH OF MONOPOLY
COMPANIES DELETED
MERGER CONTROL REMOVED
MORE EMPHASIS ON PROHIBITION OF RTPs,
UTPs AND MTPs
BIG, NO MORE UGLY
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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
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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 TERNATIONAL
ECONOMIC
DEVELOPMENTS
RELATING
TO
COMPETITION LAWS. WE NEED TO SHIFT OUR
FOCUS
FROM
CURBING
MONOPOLIES
TOPROMOTING 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.”
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HIGH LEVEL COMMITTEE
 GOVERNMENT APPOINTED A HIGH LEVEL
COMMITTEE
TO
ADVISE
A
MODERN
COMPETITION LAW FOR INDIA IN LINE WITH
INTERNATIONAL DEVELOPMENTS AND TO
SUGGEST A LEGISLATIVE FRAME WORK.
 THE COMMITTEE INCLUDED COMPETITION
EXPERTS, REPRESENTATIVES OF INDUSTRY
AND CONSUMERS, ECONOMISTS, CHARTERED
ACCOUNTANT, LAWYERS ETC.
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TRIGGER FOR METAMORPHOSIS
FROM MRTP ACT TO COMPETITION
ACT
 RECOMMENDATIONS OF EXPERT GROUP
 RECOMMENDATIONS OF HIGH LEVEL COMMITTEE
 RECOMMENDATIONS OF STANDING COMMITTEE OF
PARLIAMENT
 UNANIMITY TO REPEAL MRTP ACT AND TO ENACT A
NEW LAW
 APPRECIATION THAT THE MRTP ACT WAS MORE
CONCERNED WITH CURBING MONOPOLIES RATHER
THAN WITH PROMOTING COMPETITION
 APPRECIATION THAT PRE-1991 LPG HAS CHANGED
TO POST-1991 LPG
 RECOGNITION THAT INDIAN ENTERPRISES ARE
SMALL IN SIZE AND NEED TO GROW TO BECOME
GLOBALLY COMPETITIVE
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OLD WINE OR NEW WINE ?
MRTP ACT
1.
BASED ON PRE-1991 control regime
NEW LAW
1. BASED ON POST-1991 reforms
2. PREMISED ON SIZE
2. PREMISED ON CONDUCT
3. PROCEDURE ORIENTED
3. RESULT ORIENTED
4. NO TEETH (REFORMATORY)
4. CAN BITE (PUNITIVE )
5. OFFENCES DEFINED IMPLICITLY
5. OFFENCES DEFINED
EXPLICITLY
(CARTELS, BID-RIGGING ETC.)
6. FROWNS ON DOMINANCE
6. FROWNS ON ABUSE OF
DOMINANCE
(25% OF MARKET SHARE)
7. UNFAIR TRADE PRACTICES
COVERED
7.UNFAIR TRADE PRACTICES
OMITTED
8. RULE OF LAW APPROACH
8. RULE OF REASON APPROACH
9. NO COMPETITION ADVOCACY
ROLE FOR MRTPC
9. CCI HAS COMPETITION
ADVOCACY ROLE
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FOUR COMPARTMENTS
 ANTI-COMPETITION AGREEMENTS
 ABUSE OF DOMINANCE
 MERGERS, AMALGAMATIONS, ACQUISITIONS
AND TAKE-OVERS
 COMPETITION ADVOCACY
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ANTI - COMPETITION AGREEENTS
HORIZONTAL
RESTRAINTS :
CARTELS {FIXING PURCHASE OR
SALE PRICES (EXPORT CARTELS
EXEMPTED) }
VERTICAL
RESTRAINTS
:
TIE-IN ARRANGEMENTS
EXCLUSIVE SUPPLIES
BID-RIGGING (COLLUSIVE
TENDERING)
SHARING MARKETS BY
TERRITORY, TYPE ETC.
LIMITING PRODUCTION, SUPPLY,
TECHNICAL DEVELOPMENT
EXCLUSIVE DISTRIBUTION
REFUSAL TO DEAL
RESALE PRICE MAINTENANCE
ADJUDICATION BY RULE OF
REASON
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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
(INCLUDING
/DISCRIMINATORY
PURCHASE
OR
SALE
PRICES
PREDATORY PRICES)
• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT
• DENIES MARKET ACCESS
• CONCLUDES
CONNECTION
CONTRACTS
SUBJECT
TO
OBLIGATIONS
HAVING
NO
WITH THE SUBJECT OF THE CONTRACTS.
• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS
RELEVANT MARKET =
GEOGRAPHIC MARKET
RELEVANT
PRODUCT
MARKET
+
RELEVANT
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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 FROM COMPETITION PERSPECTIVE
1. COMPETITION LAW TO HAVE SURVEILLANCE OVER
COMBINATIONS BEYOND A THRESHOLD LIMIT
(Assets > Rs.1000 Crores or Turnover > Rs.3000 Crores )
2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND
NOT MANDATORY
3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS
ELSE DEEMED APPROVAL
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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
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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.
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COMPETITION NEEDS TO BE
INCORPORATED IN
INDUSTRIAL POLICY
RESERVATIONS FOR SSI
TRADE POLICY (TARIFFS, SUBSIDIES ETC)
STATE POLICIES
LABOUR POLICY
REFORMS POLICY (PRIVATISATION ETC)
COMPETITION LAW CAN NOT OPERATE IN A
VACUUM UNLESS PRE-REQUISITES OF
COMPETITION POLICY ARE ALSO IN PLACE
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IS A COMPETITION LAW
REQUIRED AT ALL?
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WITH GLOBALISATION, THERE IS LIKELY TO BE SIGNIFICANT
RESTRUCTURING OF MANUFACTURE, TRADE AND SERVICES
DOMESTIC CONSOLIDATION AND ENTRY OF FOREIGN
ENTITIES
ANTI-COMPETITION PRACTICES MAY SURFACE AS A
CONSEQUENCE
WTO FALL OUT OBLIGATIONS NEED TO BE ADDRESSED
REGULATORY AND ADVOCACY FUNCTIONS NEED TO BE
POSITED
EXISTING MRTP ACT IS INADEQUATE
NEW COMPETITION LAW WILL SUPPLANT MRTP ACT
WITHOUT A COP, TRADE TRAFFIC MAY PREJUDICE CONSUMER
INTEREST
COMPETITION LAW WILL BE A COP AND A FRIEND
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