Brief Notes on Competition Law in India

Competition laws requires  economics cum legal mind. A lawyer for competition law should have thorough understanding about how the market operates, macro economics and foresightedness for end result of competition in the situation of discussion. A laws was needed in India which ensure the implementation of free economic policies and free flow of  resources which protect the fair competition and restrict the anti-competitive practices.  We have discussed here what is anti-competitive practices are? but in short it can be said that any practices or tactics of business houses to acquire a dominance in market and eliminate the competition  is some thing called anti-competitive.

Competition Act 2002 which further amended by amendment act 2007 and 2009, the modified version on an Act which we earlier use to know by the name of MRTP Act 1969. MRTP Act 1969 is repealed by the virtue of section 66 as amended through the act of 2007. MRTP commission wound up. The cases of unfair trade practices are already covered under consumer protection act, hence, same got transferred to relevant consumer court.  As per section 66 of CA act the MRTP commission shall continue the operations for another period of two years and thereafter all the cases will stand transferred to Appellate tribunal (CAT) constituted under the Act. It is business law which control the fair competition in the market. This law prohibits the practice of price fixing among market players which it termed as enterprise. This law ensure that a dominant player should not abuse its dominant position in the market . It disallow all the agreements with a are anticompetitive in nature. Further it has brought the concept of ‘combination’ where on person who own a competitor enterprise can not get merger/amalgamation in a way which adversely effect the competition. This law constitutes a statutory body competition commission of india (CCI) which is fully functional from May 2009. CCI has vide powers to enter into the matters of the Act even without any application to it.  This act is directly affect to the top management of the company. It assume that the pricing and trade associations are in knowledge of top management. It lays down heavy penalty of the offense under this act.  Appellate tribunal is constituted to file appeal against the order of competition commission.

Competition laws is equally applicable on written as well as oral agreement, arrangements between the enterprises.

Components of competition laws:

Anti-competitive agreement: Section 3 of The Competition Act 2002 deals with the anti-competitive agreements.

An agreement which adversely effect the competition. It includes but not limited to: -

1. Agreement which limit the production.

2. Agreement which limit the supply.

3. Agreement to allocate market.

4. Agreement to fix prices.

5. Agreement to collusive bidding.

6. Conditional purchase (Or tie-in-agreements)

7. Refusal to deal.

8. Exclusive supply agreement.

9. Exclusive distribution agreement.

10. Condition sale agreement to by second products as well compulsorily.

Following are not an Anti competitive agreements:

1. Agreement to Protect IPRs. Viz trademark, copyright or patent.

2. Agreement to protect geographical indications.

3. Agreement to Design Act.

4. Agreement to lay out designs for Act 2000.

5. Agreement to export goods (with certain conditions).

Types of agreement : Competition law indentifies two type of agreement. First Horizontal agreements which are among the enterprises who are or may compete within same business. Second is the vertical agreement  which are among independent enterprise.  Horizontal  agreement is presumed to be illegal agreement but rule of reasons would be applicable for vertical agreements.

Abuse of Dominant Position:

1. It is the misuse of an advantageous position by an enterprise to gain extra benefits but which resultantly damage the consumer interest and make it difficult other players to compete.

2. Section 4 of Competition Act deals with abuse of dominant position.

It includes:- 3. Imposition of unjust conditions.

4. Imposition of unfair pricing.

5. Predatory pricing.

6. Create hindrance in entry of new operators.

7. Abuse of market positing.

Predatory Pricing:

Predatory pricing is some thing called pricing below then the cost of the product. The objective of pricing to elemenate the competition and then create dominant position in the market and put the price so high to recover the earlier losses. It is sort of abuse of dominant position. There are some methods in economics to establish that whether a pricing is predatory pricing or not. Once the predatory pricing is fixed then the CCI can pass a order that enterprise has abuse its dominant position in contravention of the competition act and pass the penal order for it.

Combination under Competition Act.:

Combination is legal concept of analyzing the merger, acquisition,  acquisition of an enterprise by a person having shares/ right to vote with the completion business enterprise. There are threshold limits are defined viz 1500 Cr. For individuals in India. If such combination, merger amalgamation create adverse impact on competition or consumer’s at large  then such combination it is prohibited by the competition law of India.

Notification: The desiring firm shall notify it is approval for combination to CCI within 30 days of such board resolution. CCI shall pass the order within 210 to give effect to such combination else it will deemed as approved after 210 days. In case such combination is not notified to CCI then CCI shall have powers to inquiry such combination within 1 years of merger.  Notification is pre-requisite else there will be risk from legal behavioral aspect and may attract investigation and objection.

Cartel:

Cartel is the group of enterprises which collectively make some agreement which adversely effect the competition. The agreement between the cartel may be explicit or implicit. But it is restricted by the competition law due the reasons of artificial price hike, collusive bidding,  competition law presumes the Cartel as injurious to competition. CCI has vide power to take the cartel in their cognizance and refer it to director general for investigation.  It further provides the penalty provision upto three times of yearly profit to the offenders.

Bid rigging:

Competition law provides on more legal concept and that is Bid rigging. This terms used for any manipulation, conspiracy, infiltration etc which adversely affect the biding. Any agreement or consent among the prospective bidder which affect the bidding process and causes or likely to cause losses to the purchaser, is termed as bid rigging. Competition law prohibits bid rigging and lays down provisions for penalty for such practices.

Rule of reasons:  It is the analysis of any activity under the challenge on the basis of business justification, competitive intent, market impact, impact on competition and on consumer. It is the logic behind the conclusion for any order.

Market Power: It is the power to control market pricing and restrict competition.

Competition Advocacy:

Competition advocacy is one of the most significant feature in the Act. It is the obligation of commission to create the awareness about the competition laws through non-enforcement measures. It also includes training programs, seminar, educational workshops.

Remedies  under the competition laws of India

Competition Commission of India is the statutory body to approach for unfair competition practices. The relevant Act is  Competition Act 2002 and its amendment act 2007. CCI has power to act suo-mot or on the reference from Government. Consumer can directly approach the CCI by filling an application with 5000/- prescribed fees in case of individual/huf/ngos. In case any case is made out then, on receipt of such application, the CCI shall refer it to Director General for opinion. Director General shall submit its report/finding to CCI for proper hearing and trial for the case.

About Fines & Penalty: The competition laws lays down heavy penalty of 10% of total turn over of preceding three years if any enterprises act or infringe the provision of competition act.

Snaps of Cases on  competition Act

1) Competition Commission of India Vs Steeal Authority of India, SC, 2010.

Order of investigation by CCI is not an appealable order under secton 53A(1). Commission has power to refer for investigation under section 26(1) of the Act. It may ask for the requisite details from the party or it may go ahead without asking for the same. It is the matter of discretion of commission.

2) The CCI is looking into the agreements of builders where they put the clause of 18% interest in delay in payments but lesser interest in delivery of possession.

3) The SAIL and Indian railway controversy settled by CCI on the basis of argument that they had previously settled arrangement way back in 2003 that SAIL would be the supplier for Indian railway.

4) CCI has suggested TRAI to consult them at the time of merger and acquisition of telecom service provider to ensure that any service provider should not abuse its market dominance. Same for the M&A for pharmaceutical companies.

5) Similarly the controversy of credit card banker’s acquisition got clearance from CCI due to the reasons that same does not cover under the definition of production, manufacture, distribution etc. defined in the Act.

6) Exclusive rights of a cricket game of a football tournaments to one media house was objected through the competition act in European continent and national court had found that such agreement would impact competition and consumer and thereafter intervened.  

Regards

Ambrish