greetings to delegates at the launch meeting on mekong project hanoi 23-24 apr 2004 1

GREETINGS

TO

DELEGATES AT THE

LAUNCH MEETING ON

MEKONG PROJECT

HANOI

23-24 APR 200423-24 APR 20041

2Copyright - Dr. S. Chakravarthy

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 3

LPG SYNDROMEEARLIER TILL 1991 NOW AFTER 1991

• LICENSING

• PLANNING

• GOVERNMENT

• LIBERALISATION

• PRIVATISATION

• GLOBALISATION


L P G S Y N D R O M EL P G S Y N D R O M E( POST 1991 )( POST 1991 )

RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDERECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:

• DEREGULATION AND SIMPLIFICATION OF LICENSING ANDDEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURESAPPROVAL PROCEDURES

• EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTASAPPROVALS AND QUOTAS

• NEW ECONOMIC ADJUSTMENT MEASURESNEW ECONOMIC ADJUSTMENT MEASURES

• DIVESTITURE AND SALE OF GOVERNMENT ASSETSDIVESTITURE AND SALE OF GOVERNMENT ASSETS

• GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTORSECTOR

• PRIVATISATIONPRIVATISATION

• ENCOURAGING COMPETITIONENCOURAGING COMPETITION


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


COMPETITION POLICY - GOALS

PRESERVATION AND PROMOTION OF THECOMPETITIVE PROCESS

EFFICIENCY IN PRODUCTION ANDALLOCATION OF GOODS AND SERVICES

INNOVATION AND ADJUSTMENT TOTECHNOLOGICAL CHANGE

SUSTAINED ECONOMIC GROWTH


EXTANT COMPETITION LAW OF INDIA

MONOPOLIES AND RESTRICTIVE

TRADE PRACTICES ACT,1969

BROUGHT INTO FORCE IN 1970


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


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)


1991 AMENDMENTS TO MRTP ACT

1. SIZE CONCEPT GIVEN UP2. CURBS ON GROWTH OF MONOPOLY

COMPANIES DELETED3. MERGER CONTROL REMOVED 4. MORE EMPHASIS ON PROHIBITION

OF RTPs, UTPs AND MTPsIN SUM, BIG BECOMING BIGGER IS NO

MORE UGLY


RESTRICTIVE TRADE PRACTICES

REFUSAL TO DEAL TIE-UP SALES FULL LINE FORCING EXCLUSIVE DEALINGS PRICE DISCRIMINATION RE-SALE PRICE MAINTENANCE AREA RESTRICTION


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


MONOPOLISTIC TRADE PRACTICES

1. UNREASONABLE PRICING 2. PREVENTING OR LESSENING

COMPETITION IN SUPPLY/DISTRIBUTION OF GOODS/SERVICES

3. LIMITING TECHNICAL DEVELOPMENT, CAPITAL INVESTMENT OR PRODUCTION/SUPPLY

4. UNREASONABLE PROFITS (PROFITEERING)


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

APPLICABILITY OF THE MRTP ACT


EXPERIENCE IN THE LAST THREE DECADES

NO MENTION OR DEFINITION OF OFFENCES LIKE NO MENTION OR DEFINITION OF OFFENCES LIKE (ILLUSTRATIVE)(ILLUSTRATIVE)

•ABUSE OF DOMINANCE

•CARTELS, COLLUSION AND PRICE FIXING

•BID RIGGING

•BOYCOTTS AND REFUSAL TO DEAL

•PREDATORY PRICING

LARGE NUMBER OF INTERPRETATIONS & CASE LAWS LARGE NUMBER OF INTERPRETATIONS & CASE LAWS AFFECTING THE INTENT/SPIRIT OF THE MRTP ACTAFFECTING THE INTENT/SPIRIT OF THE MRTP ACT

WTO FALL OUT OBLIGATIONSWTO FALL OUT OBLIGATIONS


NEED FOR A NEW WINENEED 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.”


RUBRIC OF THE NEW RUBRIC OF THE NEW COMPETITION LAWCOMPETITION 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


ANTI - COMPETITION AGREEMENTS HORIZONTAL RESTRAINTS : :

CARTELS {FIXING PURCHASE OR SALE PRICES (EXPORT CARTELS EXEMPTED) }

BID-RIGGING (COLLUSIVE TENDERING)

SHARING MARKETS BY TERRITORY, TYPE ETC.

LIMITING PRODUCTION, SUPPLY, TECHNICAL DEVELOPMENT

THE ABOVE ARE “PER SE” ILLEGAL.

VERTICAL RESTRAINTS : :

TIE-IN ARRANGEMENTS

EXCLUSIVE SUPPLIES

EXCLUSIVE DISTRIBUTION

REFUSAL TO DEAL

RESALE PRICE MAINTENANCE

ADJUDICATION BY RULE OF REASON


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 RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC MARKETMARKET


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


COMBINATIONS MERGERS/AMALGAMATIONS

1. REDUCTION IN NUMBER OF PLAYERS

2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH

3. DISCOURAGEMENT OF NEW ENTRANTS

PEJORATIVE EFFECTS

4. DICTATION OF PRICES

5. DOMINANCE

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 MANDATORY3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS ELSE DEEMED APPROVAL

REGULATION ON COMPETITION PERSPECTIVE


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


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


EXEMPTIONSEXEMPTIONS

GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE COMPETITION LAW 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.DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.


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.


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


OLD WINE OR NEW WINE ?OLD WINE OR NEW WINE ?

MRTP ACT

1. BASED ON PRE-1991 LPG

2. PREMISED ON SIZE

3. PROCEDURE ORIENTED

4. NO TEETH (REFORMATORY)

5. OFFENCES DEFINED IMPLICITLY

(CARTELS, BID-RIGGING ETC.)

6. FROWNS ON DOMINANCE

(25% OF MARKET SHARE)

7. A LARGE NO. OF PER SE OFFENCES

(AGAINST PRINCIPLES OF NATURAL JUSTICE)

NEW LAW1. BASED ON POST-1991 LPG

2. PREMISED ON BEHAVIOUR/ CONDUCT

3. RESULT ORIENTED

4. CAN BITE (PUNITIVE )

5. OFFENCES DEFINED EXPLICITLY

6. FROWNS ON ABUSE OF DOMINANCE

(NO PERCENTAGE OF MARKET SHARE)

7. JUST FOUR ARE PER SE OFFENCES

(REST BY RULE OF REASON)


OLD WINE OR NEW WINE ?OLD WINE OR NEW WINE ?MRTP ACT

8. COVERS UNFAIR TRADE PRACTICES (INDIVIDUAL CONSUMER INTEREST)

9. POLITICAL APPOINTMENTS OF

CHAIRPERSON/MEMBERS

10. NO COMPETITION ADVOCACY

ROLE

11. REACTIVE

NEW LAW 8. UNFAIR TRADE PRACTICES

EXCLUDED (COVERED UNDER CONSUMER PROTECTION ACT)

9. APPOINTMENTS BY A COLLEGIUM

10. CCI HAS COMPETITION ADVOCACY ROLE

11. PROACTIVE

NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW


ONE WOULD LIKE TO AVOIDTHE DANGER OF HOLLOW PURISM

THAT HAS MADE SO MUCHOF MODERN ECONOMICSUNFIT FOR ACTUAL USE

AMARTYA SENAMARTYA SENINDIAN NOBEL LAUREATE

THANK YOU

FOR YOUR

KIND ATTENTION

30Copy right Dr. S. Chakravarthy

greetings to delegates at the launch meeting on mekong project hanoi 23-24 apr 2004 1

Documents

economic rivalry

competition act dr

lessening competition

member of committee

india copyright

p e t i t i o

chakravarthyc o

recent policy changes