| Introduction | | | | combination in case of appreciable adverse effect on |
| In common parlance, competition in the market | | | | competitiono May propose suitable modification as |
| means sellers striving independently for buyers' | | | | accepted by parties |
| patronage to maximize profit (or other business | | | | The Commission has fixed the threshold limits of such |
| objectives).A buyer prefers to buy a product at a | | | | combinations .In case of combination the threshold |
| price that maximizes his benefits whereas the seller | | | | limits are- |
| prefers to sell the product at a price that maximizes | | | | For acquisition -o Combined assets of the firms more |
| his profit. Competition makes enterprises more | | | | than Rs 1000 cr or turnover more than Rs 3000 cr |
| efficient and offers wider choice to consumers at | | | | (these limits are US$ 500 millions and 1500 millions in |
| lower prices. This ensures optimum utilization of | | | | case one of the firms is situated outside India).o The |
| available resources. It also enhances consumer | | | | limits are more than Rs 4000 cr or Rs 12000 cr and |
| welfare since consumers can buy more of better | | | | US$ 2 billion and 6 billions in case acquirer is a group in |
| quality products at lower prices. | | | | India or outside India respectively. |
| Fair competition is beneficial for the consumers, | | | | For merger/amalgamation -o Assets of the merged |
| producers / sellers and finally for the whole society | | | | amalgamated entity more than Rs 1000 cr or |
| since it induces economic growth. Whereas, the unfair | | | | turnover more than Rs 3000 cr (these limits are US$ |
| competition means adoption of practices such as | | | | 500 millions and 1500 millions in case one of the firms |
| collusive price fixing, deliberate reduction in output in | | | | is situated outside India).o The limits are more than |
| order to increase prices, creation of barriers to entry, | | | | Rs 4000 cr or Rs 12000 cr and US$ 2 billion and 6 |
| allocation of markets, tie-up sale , predatory pricing | | | | billions in case merged/amalgamated entity belongs to |
| and discriminatory pricing. | | | | a group in India or outside India respectively |
| India has been very conscious about the competition | | | | Implementation |
| in the market place and has been vigilant to frame | | | | The Commission may initiate enquiry into |
| laws curtailing monopolies and restrictive trade | | | | anti-competitive agreements/abuse of dominance?o |
| practices The Monopolies & Restrictive Trade | | | | On its own on the basis of information and |
| Practices Act, 1969 is the first enactment to deal | | | | knowledge in its possession, oro On receipt of a |
| with competition issues and came into effect on 1st | | | | complaint, oro On receipt of a reference |
| June 1970. | | | | Complaint procedureo Any person, consumer, |
| With the advent of liberalization in the economic | | | | consumer association or trade association can make a |
| policy and growth in the market, the Government of | | | | complaint against anti-competitive agreements and |
| India reviewed the implementation of Monopolies | | | | abuse of dominant position. Here a person includes an |
| & Restrictive Trade Practices Act, 1969 and | | | | individual, Hindu Undivided Family (HUF), company, |
| finding it lacking in grip and teeth it formulated | | | | firm, association of persons (AOP), body of individuals |
| Competition Policy. Competition policy is defined as | | | | (BOI), statutory corporation, statutory authority, |
| those Government measures that affect the | | | | artificial juridical person, local authority and body |
| behavior of enterprises and structure of the industry | | | | incorporated outside India. A consumer is also a |
| with the view to promote efficiency and maximize | | | | person who buys for personal use or for other |
| welfare. | | | | purposes.o The Central Government or a State |
| There are two elements of competition policy: First, a | | | | government or an authority established under any |
| set of policies, such as liberalized trade policy, relaxed | | | | law may make a reference for an enquiry.o |
| FDI policy, de-regulation, etc., that enhance | | | | Commission can initiate enquiry on its own on the |
| competition in the markets. Second, legislation to | | | | basis of information or knowledge in its possessiono |
| prevent anti-competitive practices with minimal | | | | On its own, or receipt of complaint/ reference, if the |
| government intervention | | | | Commission is of the opinion that there is a prima |
| The Government had appointed a committee in | | | | facie case, it shall direct the Director General, |
| October 1999 to examine the existing MRTP Act for | | | | appointed under the Act, to investigate the matter |
| shifting the focus of the law from curbing monopolies | | | | and report his findingso After receipt of the |
| to promoting competition and to suggest a modern | | | | investigation report from the Director General, the |
| competition law. Pursuant to the recommendations of | | | | Commission shall adjudicate the matter after hearing |
| this committee, the Competition Act, 2002, was | | | | the parties and pass orders as deemed fit.o During |
| enacted on 13th January 2003. The objectives of the | | | | the course of enquiry, the Commission can grant |
| Competition Act are to prevent anti-competitive | | | | interim relief restraining a party from continuing with |
| practices, promote and sustain competition, protect | | | | anti competitive agreement or abuse of dominant |
| the interests of the consumers and ensure freedom | | | | positiono After the enquiry, the Commission may |
| of trade. This Act provides for different notifications | | | | direct a delinquent enterprise to discontinue and not |
| for making different provisions of the Act effective | | | | to re-enter anti-competitive agreement or abuse the |
| including repeal of MRTP Act and dissolution of the | | | | dominant positiono To award compensationo To |
| MRTP Commission | | | | modify agreemento To recommend to the Central |
| The objective of the Act is to eliminate the abuse of | | | | Govt. for division of enterprise in case it enjoys |
| dominance through an anti competitive trade | | | | dominant position.o The parties in person or through |
| agreements. Here dominance refers to a position of | | | | authorized representative or through a legal |
| strength which enables a dominant firm to operate | | | | practitioner or a practicing Company Secretary |
| independently of competitive forces or to affect its | | | | Chartered Accountant/Cost and Works Accountant.o |
| competitors or consumers or the market in its favor. | | | | The Commission can also pass orders in case of |
| Abuse of dominant position impedes fair competition | | | | anti-competitive agreements and abuse of |
| between firms, exploits consumers and makes it | | | | dominance.o During the course of any proceeding |
| difficult for the other players to compete with the | | | | before it, a Statutory Authority may make a |
| dominant undertaking on merit. Abuse of dominant | | | | reference for opinion if any party raises an issue that |
| position includes imposing unfair conditions or price, | | | | the decision of the authority is likely to be contrary |
| predatory pricing, limiting production/market, creating | | | | to the provisions of the Competition Act. |
| barriers to entry and applying dissimilar conditions to | | | | Penaltieso The Commission can impose a penalty of |
| similar transactions. An agreement includes any | | | | not more than 10% of turn-over of the enterprises |
| arrangement, understanding or concerted action | | | | and in case of cartel - 3 times of the amount of |
| entered into between parties. It need not be in | | | | profit made out of cartel or 10% of turnover of all |
| writing or formal or intended to be enforceable in law. | | | | the enterprises whichever is higher |
| An anti-competitive agreement is an agreement | | | | The Act has so far become operative only partly and |
| having appreciable adverse effect on competition. | | | | the Competition Commission of India has not yet |
| Anti-competitive agreements include,o agreement to | | | | been operational fully. The actual impact of the Act |
| fix priceo bid rigging or collusive biddingo conditional | | | | will be known only after its substantive provisions viz. |
| purchase/sale (tie-in arrangement)o exclusive supply | | | | sections 3 to 6, come into force. However, the Act |
| distribution arrangemento agreement to limit | | | | still manifests certain lacunas. An examination of the |
| production & supplyo agreement to allocate | | | | powers of the CCI would suggest that the |
| marketso resale price maintenanceo refusal to deal | | | | commission is fully equipped to counter and set right |
| The objectives of the Act are sought to be achieved | | | | the vagaries of the market place. However, while |
| through the instrumentality of the Competition | | | | seemingly enjoying carte blanche, there appear to be |
| Commission of India (CCI) which has been established | | | | certain glaring lacunae which would militate against the |
| by the Central Government with effect from 14th | | | | efficacy of the provisions of the Competition Act it |
| October, 2003. | | | | would be remembered that the Commission would |
| Any arrangement of combination of trading firms is | | | | initiate action upon complaints of anti-competitive |
| regulated under the Act .A Combination includes | | | | agreements abuse of dominant position either suo |
| acquisition of shares, acquisition of control by the | | | | moto, or on the voluntary motion of a person |
| enterprise over another and amalgamation between | | | | seeking an opinion of the Commission. Here, two |
| or amongst enterprises. Further any combination, that | | | | aspects may be kept in mind --- the lack of a |
| exceeds the threshold limits specified in the Act in | | | | mandatory provision compelling persons or entities, |
| terms of assets or turnover, which causes or is likely | | | | whether public or private, to approach the |
| to cause an appreciable adverse effect on | | | | Commission and the corresponding logistical limitations |
| competition within the relevant market in India, can | | | | of the Commission to be able to take cognizance on |
| be scrutinized by the Commission. A firm proposing | | | | its own motion of every malpractice in the economy. |
| to enter into a combination, may, at its option, notify | | | | If there is no inbuilt principle that statutory authorities |
| the Commission in the specified form disclosing the | | | | and private persons are required to approach the |
| details of the proposed combination within 7 days of | | | | Commission to determine whether an |
| such proposal. If the Commission is of the opinion | | | | anti-competitive agreement is in force, or whether |
| that a combination is likely to cause or has caused | | | | there is an abuse of dominant position or whether a |
| adverse effect on competition, it shall issue a notice | | | | combination is detrimental to public interest, can we |
| to show cause the parties as to why investigation in | | | | actually rely upon the parties to approach the |
| respect of such combination should not be | | | | Commission of their own accord? The Central |
| conducted. On receipt of the response, if Commission | | | | Government also enjoys unbridled power in the |
| is of the prima facie opinion that the combination has | | | | matters of policy framing and issues direction on |
| or is likely to have appreciable adverse effect on | | | | questions of policy which shall be binding on the CCI . |
| competition, it may direct publication of details inviting | | | | The government also has the power to supersede |
| objections of public and hear them, if considered | | | | the CCI, against which the CCI can make a |
| appropriate. It may invite any person, likely to be | | | | representation to the government. Such provisions |
| affected by the combination, to file his objections. | | | | seriously affect the independence and efficacy of |
| The Commission may also enquire whether the | | | | the CCI. In fact consultation by the Central |
| disclosure made in the notice is correct and | | | | Government in evolving competition policy with the |
| combination is likely to have an adverse effect on | | | | CCI should be made mandatory, instead of |
| competition. The commission can also pass orders in | | | | discretionary, as contemplated in the Act. Moreover, |
| case of combinations to the following effecto It shall | | | | the Act does not address the abuses of Intellectual |
| approve the combination if no appreciable adverse | | | | Property Rights, which are monopoly rights for limited |
| effect on competition is foundo It shall disapprove of | | | | period of time. |