awareness session on cci (competition commission of …
TRANSCRIPT
AWARENESS SESSION ON CCI
(COMPETITION COMMISSION OF INDIA)
& THE COMPETITION ACT, 2002
CCI Awareness Module 1.0
[I]
[II]
[III]
• The Objective of Competition
Commission of India [CCI]
• Overview of The Competition
Act, 2002
• Composition of CCI
• Cartels.
• Bid-Rigging.
• Combinations.
• Leniency.
[1/18]CCI
• Anti Competitive Agreements.
• Abuse of Dominant Position.
• Inquiry Process.
• Powers of CCI.
• Orders by CCI.
What ??? Why ???
What is Competition Act??
What is Competition Commission??
Scope /Applicability??
Is it applicable to HMSI??
Is it important to HMSI ??
Who are responsible officers ??
How much is the Penalty for non-
compliance??
Risk of negative publicity of company’s
brand image in market..
How to Better it & Outcome?? HMSI Situation ???
Adequate Training in identifying
Potential Risk Areas.
Guiding where there may be doubt of
possible breach of Competition rules.
By linking to Human Resource’s and
Disciplinary policy and applying in the
appraisal cycle for awareness of
existing compliance breaches.
Are associates aware of the
Competition Act regulations??
Are we prepared for future risk of non-
compliance??
Where all we need to be careful of non-
compliance under the Act??
Do we need to re-work on the existing
business practices/polices in related
areas??
Compliant under Competition Regulations, Rules & Act
CCI [2/18]
WHAT ACT SAYS ..??
Fair Competition and Protecting
Market against Anti Competitive Practices.
It prohibits Abuse of Dominant
Position where it cause Appreciable Adverse
Effect on Competition (AAEC).
LET US KNOW THE ACT ...
1. Appreciable Adverse Effect on
Competition;
2. Interests of Consumers;
3. Freedom of Trade;
To Check Actions:-Id
ea
l sit
uati
on
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Overview ObjectiveChapters Fundamentals of CCI
CCI
List of Chapters
/ Key Impact
Relevance
Chapter Title Relevance
I Preliminary Low
IIProhibition of Certain Agreements, Abuse of Dominant Position & Regulation of Combinations
High
III Competition Commission of India Low
IVDuties, Powers and Functions of Commission
High
V Duties of DG (Director-General) Low
VI Penalties High
VII Competition Advocacy Low
VIII Finance, Accounts and Audit Med.
VIII A Competition Appellate Tribunal Med.
IX Miscellaneous Med.CCI-Selection of Chairperson and other members of the commission Rules, 2003
Med.
CCI- Lesser Penalty Regulations, 2009 Med.
CCI-Procedure for engagement of experts and professional rules, 2009
Med.
CCI-Competition Appellate Tribunal Procedure, 2011
Med.
Medium Impact
High Impact
Low Impact
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Overview ObjectiveChapters
CCI
Fundamentals of CCI
1. Predatory Pricing :
A predatory price means a price which is below the cost with a view to reduce
competition / eliminate the competitors.
2. Cartels :
An Association of producers, sellers, distributors, traders, or service providers who, by
agreement Limit, Control, the Production, Distribution or Sale in goods or
Provision of Services.
3. Bid Rigging :
Agreements b/w Competitors or Enterprises engaged in Identical or similar
production or trading of goods or provision of services that have the effect of
eliminating or reducing competition.
Inquiry Into
Practices
The Competition Act Regulates following
areas of Conduct:-
1. Anti Competitive Agtrs. & Cartels
2. Abuse of Dominant Position; and
3. Combinations (Mergers, Acquisitions
& Amalgamations)
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Overview ObjectiveChapters
CCI
Fundamentals of CCI
[6/18]
Quoting of unusually higher rates than previous tenders;
Heightened frequency of calls and SMS exchanged between bidders prior to the bid;
Exchange of sensitive information prior to the bid;
Common mistakes in tender forms such as typographical errors;
Common patterns in the bidders price increase despite different cost of production,
taxes and so on;
Consecutive serial numbers for demand drafts;
1. Price Fixing..2. Creation of entry barriers..3. Discount Control …4. Deliberate Reduction in Output..5. Allocation of Markets..6. Bid-Rigging..7. Tie-in sales..8. Predatory Pricing..9. Geographical Limitation etc…
COMMON ANTI-COMPETITIVE ACTIONS ...
Exploitation of Market in Bidding
Overview ObjectiveChapters
CCI
Fundamentals of CCI
[7/18]
Section 3:- Anti Competitive Agreements :-
No enterprise or association of enterprises or person or association of persons shall enter into any
agreement in respect of Production, Supply, Distribution, Storage, Acquisition or Control of goods or
Provision of Services which may cause AAEC.
3(3) Any agreement between enterprises or associations of persons, including cartels, engaged in identical or similar
trade of goods or provision of services, which :-
a. Directly or indirectly Determines Purchase or Sale Prices b. Limits or controls production, supply, markets, technical development, investment or
provision of services; c. Shares the market or source of production or provision of services by way of allocation
of geographical area of market;
d. Directly or indirectly results in bid rigging or collusive bidding shall be presumed to have AAEC.
3(4) Any agreement amongst enterprises or persons at different stages or
levels of production chain in different markets in respect of
production, supply, distribution, storage, sale or price of, or trade in goods or provision of services including:-
a. Tie-in arrangement;
b. Exclusive Supply Agreement;
c. Exclusive Distribution Agreement;d. Refusal to Deal;e. Resale Price Maintenance
Overview Chapters
Key Chapters
CCI
Objective Fundamentals of CCI
3(2)
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Section 3:- Anti Competitive Agreements :-
No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of
production, supply, distribution, storage, acquisition or control of goods or provision of
services, which causes or is likely to cause AAEC.
Any agreement amongst enterprises or persons at different stages or levels of production chain in different markets in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or provision of services :-
a. Tie-in arrangement;
b. Exclusive Supply Agreement;
c. Exclusive Distribution Agreement;d. Refusal to Deal;e. Resale Price Maintenance
Horizontal Agreements
Price-fixing
Limiting the production / supply
Allocation of market
Bid Rigging
Tie-in Arrangement
Exclusive Distribution Agreement
Exclusive Supply Agreement
Refusal to Deal
Resale Price Maintenance
1
1r
A purchaser is required to purchase any other goods as a condition of purchase;
Restriction on purchaser to deal with the goods of the seller
Restriction on Supply of goods or allocate any area or market for sale of goods;
Fixation of
Any restriction from or to whom goods are bought or sold;
Vertical Agreements
PROHIBITORY AGREEMENTS
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Overview ObjectiveChapters Fundamentals of CCI
CCI
1.2.
S.3(3)
S.3(4)
RPM
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Section 4:-When an enterprise uses itsdominant position in therelevant market in anexclusionary or/and anexploitative manner.
FACTORS DETERMINING DOMINANT POSITION
• The Size and resource of the enterprise.
• Economic Power of the enterprise.
• Dependence of Consumers on the enterprise.
• Extent of Entry & Exit Barriers in the Market.
• Market Structure and size of the Market.
Bajaj Auto Ltd11.88%
H-D Motor Company India Pvt Ltd0.01%
Hero MotoCorp Ltd35.34%
Honda Motorcycle & Scooter India (Pvt) Ltd
27.67%
India Kawasaki MotorsPrivate Ltd0.01%
India Yamaha Motor Pvt Ltd3.40%
Mahindra Two Wheelers Ltd0.00%
Piaggio Vehicles Pvt Ltd0.37%
Royal Enfield (Unit of Eicher Ltd)3.39%
Suzuki Motorcycle India Pvt Ltd3.75%
Triumph Motorcycles (India) Pvt Ltd
0.00%
TVS Motor Company Ltd14.17%
UM Lohia Two Wheelers Pvt Ltd0.00%
Two Wheelers
Overview ObjectiveChapters
CCI
Fundamentals of CCI
[10/18]
Chairperson7 members
Economic Div.
Combination Div.
Anti-Trust Div.
Legal Div.Investigation
Div.Secretariat DG office
ADMINISTRATIVE MACHINERY
Chairperson : By Central Govt. + Selection
Committee Panel
Selection Panel : CJI, Secretary-MCA,
Sec. ML&J+2 Experts in field-Finance,
Accounts
Member Member Member Member Member Member
Overview ObjectiveChapters
CCI
Fundamentals of CCI
[11/18]
Dealership Agreement
GPA
Business Meets
Meeting with Trade
Associations
Common associations –SIAM / FADA
Inter-office Communications through email
etc.
General Discussions on Prices fixation-
Suppliers
Review of existing Business Practices
Review of Business Policies /
SOP’s
Email/ Communicatio
n Check
High Alert when sharing Price sensitive
Info.
Head Evaluations
CCI may call President, Director,
Operating heads, Div. Heads.
CCI may call for related files, Co. BL, P&L A/c
etc. financial records to investigate.
Any statement recorded during
investigating is on oath
The Competition Act does not define the
term ‘Related Company’. The CCI
recognises the single economic entity
doctrine (SEE Doctrine).
ATTENTION POINTS :-CARE FOR ASSOCIATES WHEN DEALING WITH
TRADE ASSOCIATIONS1 Past, current or future prices ?
2 Pricing policy and actual costs of individual enterprise ?
3 Possible increase or decrease in prices ?
4 Bidding prices for project ?
5 Collusive tendering (bid rigging) ?
6 Standardisation of credit and trade terms ?
7 Control of Production ?
8 Division or allocation of markets ?
9 Select customers to deal or not to deal?
10 Control of supply in the market ?
Overview ObjectiveChapters
CCI
Fundamentals of CCI
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PENALTY CLAUSE
S.27 : The commission can impose a penalty of not
more than 10 per cent of Avg. turnover for the last 3
preceding financial years.
In case of Cartel a penalty of 3 times its profits for
each year which ever is higher.
Fx. Enterprise Solutions India Pvt Ltd
and Ors V Hyundai Motor India Ltd – CCI
Penalised Hyundai India for implementing a
Discount Control Mechanism.
Fined Rs.12.5 million
CCI Probes allegations of anti-
competitive conduct by Maruti
Suzuki
RPM : Resale Price
Maintenance
Appeal to National Company Law Appellate Tribunal- U/s 53A.
Overview ObjectiveChapters
CCI
Fundamentals of CCI
[13/18]
Don’t advise or require that members set particular prices or
production targets for their products
Don’t impose terms and conditions on members for selling their
products
Don’t help members in dividing up their sales territories by either
geographic areas, types of customers or types of products or any
other criteria
While collecting information from members, make sure that no
sensitive information, which may affect competition, if being shared
Don’t coordinate or facilitate collusive tendering by members
Don’t organise or support a boycott by members against targeted
businesses or individual
Don’t mandate membership of the Association or a No Objection
Certificate from the Association for Operating / dealing with other
players in the market
Don’t set up rules or codes that restrict or reduce competition among
members.
Overview ObjectiveChapters
CCI
Fundamentals of CCI
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BENEFITS OF COMPLIANCERISK OF NON-COMPLIANCE
Enhancement of Reputation and goodwill
Early Detection of Violation
Helps create a Culture of
Compliance
Liability of Officer Bearers Individually / Personal Liability
Notice to Cease and Desist
Heavy Penalties, Loss of Reputation and High Legal Cost
Overview ObjectiveChapters
CCI
Fundamentals of CCI
Compliance Checklist
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SUMMARY …
a. Determination of selling price jointly..
b. Determination of Discounts..
c. Exchange / sharing of price related
conditions, discounts, future prices, profit
margins..
d. Exclusion conditions of certain
customers..
e. Allocation of markets..
f. Fixation of selling, production quotas,
production plans b/s competitors..
g. Multiple bids for opening..
h. Restriction on competitors to
promote/sell products..
i. Standardisation of contracts with
competitors to restrict new entrants..
j. Exchange of confidential business
information..
CCI
AVOID
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Compliance Checklist
CCI
WRITTEN COMMUNICATIONS.. AVOID
Use of Misleading Language..
Use of exaggerated statements not
meant for actual results..
ABUSE OF DOMINANCE.. AVOID
Use of Unfair / Discriminatory
conditions in purchase / sale;
Condition of Denial of Market access