GROUP 10 Moona Savela

Isha Gupta Veena Swaminathan

Rahul Kumar Vivek Raju N

INTERNATIONAL COMPETITION NETWORK INDIA AND THE BRICS ASPECT

EMLYON Business School European Competition Policy

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Table of Contents

1. INRODUCTION .......................................................................................................... 3

2. INTERNATIONAL COMPETITION NETWORK ................................................................ 3 2.1. ICN – A PRIMER ............................................................................................................ 3 2.2. WHAT DOES ICN DO? ................................................................................................... 5

2.2.1 MWG and CWG ..................................................................................................................... 5 2.3. IS ICN EFFECTIVE OR NOT? ............................................................................................ 5 2.4. PATH AHEAD – FUTURE ROLE ....................................................................................... 6

3. THE BRICS ASPECT ..................................................................................................... 6 3.1. BRAZIL ......................................................................................................................... 7 3.2. RUSSIA ........................................................................................................................ 8 3.3. INDIA ........................................................................................................................... 8 3.4. CHINA .......................................................................................................................... 8 3.5. SOUTH AFRICA ............................................................................................................. 9 3.6. CONCLUSION ............................................................................................................. 10

4. ANTI TRUST LAW IN INDIA....................................................................................... 10 4.1. COMPETITION COMMISSION OF INDIA – AN INTRODUCTION ...................................... 10 4.2. INTERNATIONAL ACTIVITIES OF CCI ............................................................................ 11 4.3. CCI – MAIN ELEMENTS ............................................................................................... 13

4.3.1 Cartels & Bid-Rigging ........................................................................................................... 13 4.3.2 Abuse of Dominance ........................................................................................................... 13 4.3.3 Combinations, merger control & amalgamations ........................................................... 14 4.3.4 Leniency Programme ...................................................................................................... 15 4.3.5 Inquiry & Penalty ................................................................................................................. 15

4.4. CASES OF ANTITRUST HANDLED BY THE CCI ................................................................ 16 4.4.1 The RCCI Multiplex Association vs. UPDF ............................................................................ 16 4.4.2 The Case against 7 regional film associations ..................................................................... 16 4.4.3 The LPG bid rigging case ...................................................................................................... 17 4.4.4 Aluminum Phosphide Tablets case ..................................................................................... 17

4.5. HOW TO FILE INFORMATION WITH THE CCI ................................................................ 17 4.6. INDIA vs CHINA – A COMPARATIVE STUDY.................................................................. 18

5. CONCLUSION .......................................................................................................... 19

6. Bibliography ........................................................................................................... 20

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1. INRODUCTION Competition policy is becoming more and more an international affair as markets are

globalizing. However, national competition laws have developed through different historical

circumstances and different countries may have different goals and incentives in developing

their competition policies. Especially BRICS countries are gaining economic size and

international influence, and their perspective on competition policy is important to consider

in order to create a coherent picture of the international stage of competition law.

International Competition Network is an example of an effort to enable international dialogue

and collaboration in the domain of competition law, and it is a relevant topic to focus on when

trying to understand the international situation of competition law and the perspective that

BRICS countries bring to it. In this paper we first examine International Competition Network:

what it is, what it does, what is its role and potential in enhancing international co-operation

and discussion between national antitrust agencies across the globe. We also discuss the

perspectives of BRICS countries and especially India on competition policy: how has it

developed, what are its national characteristics and differences and where it is headed.

2. INTERNATIONAL COMPETITION NETWORK 2.1. ICN – A PRIMER

In order to understand the significance of International Competition Network, it is important

to understand the historical setting in the world during the 20th century. During the post-

world war II period, there was a special sensitivity towards foreign attitudes. At this time, U.S.

was more advanced than most countries in the antitrust law, however, it was still struggling

with the extra-territorial application of its laws to foreign countries. It was seeking the

commitment of other countries, since it wanted them to align with its ideologies rather than

the Soviet Union’s. While the U.S. wanted to assume a teaching role on the world stage, other

countries saw this effort as overreaching and an attempt to overturn the domestic economic

policies of its trading partners. With such insecurities playing out, the world has come a long

way since that period. Fast forward half a century and we have competition authorities of the

world coming together in an effort to align their antitrust laws, thus giving birth to the

International Competition Network.

International Competition Network (ICN) is an organization that aims to provide competition

authorities with an informal but specialized network to help them communicate globally and

address practical competition policy principles. It is the only international organization

focused purely on competition law enforcement and its members are national and

multinational competition authorities – not entire governments. The purpose of ICN is to

enable dynamic dialogue and address global antitrust problems and “greater convergence of

competition law and analysis, common understanding, and common culture”. In a nutshell,

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the goal is to make worldwide co-operation between competition law authorities easier.

(International Competition Network, 2015)

ICN was founded in 2001 by fourteen antitrust agencies (Australia, European Union, Canada,

France, Germany, Israel, Italy, Japan, Korea, Mexico, South Africa, United Kingdom, United

States, and Zambia). ICN is a voluntary and informal network and does not have any legal

authority to generate binding rules. It provides recommendations and recommends best

practices, but individual competition authorities make their own decisions independently. ICN

is a virtual network and does not have physical offices and works through Internet, telephone,

teleseminars and webinars and it also holds annual conferences and workshops.

(International Competition Network, 2015)

In 2015, ICN has member organizations in all continents, e.g. 68 member organizations in Asia,

including Competition Appellate Tribunal (India), Competition Commission of India and Hong

Kong Competition Commission. ICN claims it is the most important network of competition

authorities worldwide and has 132 competition agencies as members from 110 jurisdictions

and that it is a key driver for constant development in competition law and policy.

However, Ministry of Commerce of the People's Republic of China (MOFCOM) from China is

not currently a member. According to Hollman and Kovacic, the participation of China is an

important factor in the future success of ICN. (Hollman & Kovacic, 2011)

In 2011 Hollman and Kovacic evaluate the first decade of ICN and its future prospects, and

argued that ICN may prove to be a successful way to achieve greater global co-operation in

the field of competition policy. According to them, previous attempts had failed due to being

premature as only minority of economies had been heavily market-based, but growing

acceptance of competition policy and continuing acceptance of ICNs and changing and less

suspicious attitudes in the developing world could support ICN to achieve its goals and

widespread co-operation. They also count as a potential success factor for ICN that its

members are agencies rather than governments and that it has an emphasis on practically

oriented projects to identify generally agreed best practices. They also see ICN as a potential

first stepping-stone as it is voluntary and as a starting point for further co-operation in other

levels that could later lead to also binding contracts. However, they also point out that as the

ICN’s recommendations are entirely voluntary and no country is obliged to adopt any

recommendations, it is often unclear how much different countries are actually complying to

the recommendations. ICN has tried to establish voluntary peer reviews, but Hollman and

Kovacic suggest that encouragement through peer pressure and reputation and ranking could

be more effective. Another challenge they identify is the limited resources ICN has and if it

will be able to reach its ambitious goals. (Hollman & Kovacic, 2011)

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2.2. WHAT DOES ICN DO? ICN engages in projects that seek:

1. increase understanding of individual competition systems, including similarities and

differences among them

2. identify and build consensus about superior practices

3. encourage individual jurisdictions to opt in to superior techniques

Its work product consists of recommended best practices, case-handling and enforcement

manuals, reports, legislation & rule templates, database, toolkits and workshops. Individual

jurisdictions introduce reforms as per the Best Recommended Practices of ICN, gain

experience, and assess results, Successful implementation induces other jurisdictions to

emulate the reforms.

2.2.1 MWG and CWG It is interesting to note that ICN was initiated by competition jurisdictions of the western

powers only and legal entities. These two parties seem to possess specific interest in mind

while pursuing this initiative. While the western powers were looking at expansion plans of

their corporates into potential markets in the developing nations, the legal entities were just

looking to make money from the ensuing legal battles once the developing nations also

concretized their antitrust laws. Thus, the major work of the ICN in the early years was

focused around Mergers & Acquisitions and Cartels.

ICN set up Mergers Working Group (MWG) and started building upon a foundation of existing

work. This group started compiling Recommended Practices (RPs) on subjects ranging from

confidentiality and transparency to remedies and agency powers. In a similar manner, ICN

anti-cartel enforcement project was also built upon a foundation of existing work. In 2004, at

the 3rd ICN annual conference in Seoul, the ICN created a Cartel Working Group (CWG). Its

work product was The Anti-Cartel Enforcement Manual which compiles members’

investigative and enforcement techniques. The Manual, which is frequently updated with

new experiences, is used as a reference source and as a method of benchmarking agency

practices.

2.3. IS ICN EFFECTIVE OR NOT? ICN’s membership has grown from 14 to 132 in just 14 years. Its efforts have yielded

important contributions to the development of widely accepted international competition

policy norms. Its annual gathering has become the single most important annual gathering of

competition agency leaders. However, since the recommendations of the ICN are not binding

on the competition agencies, it is difficult to gauge how many agencies are really adhering to

the Best Practices published by the ICN. Since this seems like an important metric, we do not

get a clear indication of the effectiveness of the ICN.

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2.4. PATH AHEAD – FUTURE ROLE 1. Measurement mechanism: As stated above, in order to understand the effectiveness

of ICN, it would be necessary to develop a measurement mechanism. An objective set

of evaluations to understand the extent to which jurisdictions are converging. A

possible solution could be a ranking mechanism according to their adherence level to

ICN’s norms. This would put a sort of peer pressure on the agencies and encourage

adoption.

2. Since OECD and UNCTAD are also working in this direction, it would make sense to

collaborate with them and improve collective effectiveness

3. Especially given the virtual nature of ICN, it is important to examine its operational

framework and determine whether its structure & operational forms are adequate to

support its current and future programs.

3. THE BRICS ASPECT BRICS, represents the rapidly growing country Brazil, Russia, India, China, and South Africa.

The whole idea of forming the BRICS (formerly BRIC, South Africa was joined to the group in

the year 2008) group was to further enhance the cooperation among the states and show a

strong face to the developed world trying to maintain its superiority.

As these countries are growing rapidly, they are becoming more and more important to the

world dynamics both politically as well as economically. Companies from all over the world

are flocking towards these nations at the same time companies from these countries are also

competing against the established companies from the developed world. As these economies

are growing progressively they felt the need to implement antitrust provision in their

constitution for the companies operating on their soil or having impact on their economy.

Developed world also came forward to guide them on developing their antitrust bodies and

regulation. Whatever short history of antirust we have on BRICS countries, we can say that

they are treading cautiously, so that multinational companies do not take advantage of the

same antitrust regulation to uproot their well established state run enterprises. While

developed nations are trying to pressurize them through various avenues to come up with

regulations of their standard. In the following section we will mainly focus on the

development of regulations and its implementation for cartels and merger of companies

existing in BRICS countries.

IMPORTANT TERMINOLOGY AND EXPLANATION

Standstill Period: Time period (in case of suspensory regime for merger) when companies

involved in merger has to wait for the clearance from the regulatory body.

Clawback: It is a provision which allows competition authority to review transactions that fall

below the notification threshold within one year after transaction closing.

Double jeopardy: The rule of law states that someone can not be punished twice for the same

offence, while this rule holds good once you are restricted to only one jurisdiction, in case of

cartel and merger concerning two or more countries companies can be penalized separately.

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Limitation Period: A period in criminal law proceeding which states the duration and validity

of sanctions/penalty imposed.

Bid Rigging: putting price up or down and maintaining price of goods or services.

Leniency Programme: It’s a program to encourage company or individual involved in a

crime/infringement to come up to the law enforcement and inform about the infringement

to avail leniency in the penalty for the crime they have committed.

Dawn Raid: Raid by the law enforcing authority in case of any law infringement activity to

collect evidence.

Merger Threshold: The minimum amount of revenue or sales or joint revenue of participating

company above which merger has to be notified to respective competition commission or

similar body of the state.

Broad Consideration: The consideration of greater good (e.g. employment generation, other

public interest aspect) as the outcome of some activity, may it be illegal for general purpose.

REGULATORY DEVELOPMENT AND ISSUES RELATED TO MERGERS & CARTELS

Globally mergers and acquisitions day by day is becoming more related to BRICS, as the

multinational organizations always have some interest or business in these countries. BRICS

countries also understand the potential impact of these activities on their economy and have

developed the regulatory framework and institution to safeguard them from it. While we

have seen many examples of the implementation of regulation on merger control, in some

cases we can see the consideration of broader economic aspect such as employment

generation, developing national company who can give competition to the MNC’s from all

over the world.

3.1. BRAZIL After 2012, along with other BRICS nations, Brazil also became the country implementing

suspensory regulation on merger control. All merger activities have to be notified in advance

and remains suspended until given clearance from the regulatory authority. The Brazilian

Competition Policy has three bodies (CADE) namely “Conselho Administrtivo de Defensa

Economica” (CADE) which is part of Justice Ministry of Brazil, Secretaria de Direito Economico

(SDE) which is the administrative council and part of Justice Ministry, and Secretaria de

Acompanhamento (SAEA) , which is the part of Finance Ministry.

SAEA is an investigative government body whose major responsibility is to investigative and

advise under Brazil anti-competitive law. Other two agencies focus on implementation part

of anti competition laws. Brazil has also criminalized the involvement of managers of the

companies involved in such activities and they can be fined up to 10- 50% of the fines imposed

on the company. Brazil has a Clawback period of one year for mergers not falling in the

threshold of consideration. Till early 1990’s Brazilian economy was centralized and price was

regulated by government (Sasha-Lee Afrika, 2011), but after opening up the economy and

allowing private companies to compete, Brazil has seen all forms of cartelization. Through

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various laws and regulations, Brazil also curtails the formation of cartels. Brazil also signed

cooperation agreements with different countries’ competition agencies. These include, inter

alia, agreements with Canada, The United States, Chile, the European Union, and Russia1.

3.2. RUSSIA Russia operates with a relatively complex pre and post- closing merger control system and is

monitored and enforced by the Federal Antimonopoly Service (FAS) of Russia. It includes both

merger and certain type of joint ventures under the purview of anticompetitive legislation,

and it has mandated suspensory regulation to merger pending clearance (Rakhmanina, 2015)

Though Russia has a system in place, substantive test for clearance is unclear and is still

evolving, even though FAS releases broad interpretations of the law but doesn’t gives any

rationale behind it’s decision.

While prohibition of cartels in Russia is still in its nascent phase, it has very well defined the

scope and legislation and is almost similar to the EU anti cartel policy in terms of definition

and stands very close to OECD recommendation also. Limitation period varies depending

upon the severity and duration of infringement. Russia has two types of leniency programmes

related to cartel offences namely administrative and criminal (Khokhlov, 2015). Participation

of managers in Cartel activity is also criminalized. Most contrasting feature is that even in the

absence of definition of buyers’ cartel FAS still has penalized companies involved. Unlike

merger, cartels are very hard to prove. In case of lack of data, the FAS presumes the existence

of an oral agreement between competitors. Given the absence of direct evidence for this

claim, FAS tends to treat the information exchange as indirect evidence. FSA officials are also

allowed to conduct raid but their scope is limited to non criminal investigators, i.e. they can’t

seize anything. In case of final proof of infringement penalty is turnover based and may range

from 1-15% of turnover achieved by the infringer. According to the Competition Law, Russian

antitrust rules have extraterritorial application. This means that restrictions related to cartels

are applicable to any foreign arrangements that influence or may influence the state of

competition in Russia.

3.3. INDIA We will separately discuss the Indian aspect in detail in next section of the report.

3.4. CHINA Anti-Monopoly Law (AML) in China is very new and came to force in the year 2008. Ministry

of Finance and Commerce (MOFCOM) is the regulatory implementer of the AML and in quick

succession of 7 years’ period it has reviewed more than 1000 cases. The new regime is still

evolving but Anti-Monopoly Bureau (AMB) the administrator body of AML has the right to

issue guidelines on merger control (Davies, 2015). Any merger/concentration falling above

the certain turnover threshold must be informed be it domestic or international and remains

suspended until clearance. Even though China doesn’t have any laid down control rules for

joint ventures creation, in various cases like Henkel-Taiande JV, GE-Shenhua joint ventures,

1 http://www.mj.gov.br/sde

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the AML gave conditional clearance and cleared the confusion. Unlike in the EU, a joint

venture does not need to be "full-functional" to be notifiable in China. If parties do not notify

a significant transaction, or parties close a transaction before MOFCOM approves it, a fine of

up to RMB 500,000 can be imposed and MOFCOM may order the parties to stop the

transaction. It may also impose any measures it deems appropriate to restore the pre-

transaction market conditions. In China, even today most of the enterprises are state owned,

however it has not stopped AMB from imposing penalties of 300,000 RMB on Tsignghua

Unigroup (public sector Company) in the case of acquisition of RDA Microelectronics.

However, the AML requires the parties to obtain clearance from MOFCOM, or for the review

period to expire without objection or request for further information, before the parties can

implement the transaction. But review period in this case was 180 days and otherwise also it

takes more than 30 days to get approval.

Coming to the laws concerning cartel agreement, China has built it up on the Anti-Monopoly

Law (AML), and enforcement of cartel is done by State Administration for Industry and

Commerce (SAIC), while it gets help from the National Development and Reform Commission

(NDRC). The NDRC and the SAIC have distinct but often overlapping enforcement authority

over different forms of anti-competitive conduct under the AML. More specifically, the NDRC

has enforcement authority over price-related anti-competitive agreements such as horizontal

price fixing and RPM. The SAIC is responsible for enforcement related to non-price restraints

such as market allocation, output restrictions and vertical restraints other than RPM (John

Eichlin, 2015). While most of the horizontal agreements are banned, under Article 15 of AML,

China has given a non-exhaustive list of exempted circumstances in which monopoly

agreement may be exempted.

As cartel enforcement is gaining experience and becoming more active, big fines are being

slapped on MNC’s. Fines imposed can be anywhere in between 1-10% of preceding year

revenue and the agencies are also allowed to confiscate the alleged unlawful gains. China also

had its own version of leniency programme, and assumes the party taking part in leniency

program as the act to rectify the anti-competitive conduct.

3.5. SOUTH AFRICA South Africa is the relatively new to the BRICS group and was added more for the strategic

reason than the economic reason. South Africa has great influence on its neighboring

countries hence it was brought to the group in 2008. Antitrust Law in South Africa is also very

nascent, till 2014 they didn’t have anyone looking for anti cartel activity.

Coming to the merger control regulation, it is enforced by the Competition Commission of

South Africa (CCSA). It has very clear laid down descriptions of the merger threshold, both for

large and small mergers. Like China, South Africa also follows broad considerations for the

evaluation and clearance of a merger. In case of CCSA not giving any decision within the

consideration period, deal is deemed to be approved. The consideration period is 40 days in

case of small deals and infinite in case of large deals (Webber Wentzel, 2015). While there is

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no criminal offence for managers involved in an illegal merger, an administrative penalty of

up to 10% of turnover of both companies may be imposed in the case of infringement.

Coming to cartel prohibition regulation in South Africa, it is not so strong and till 2014 they

had no one heading the Cartel Division of CCSA separately. The Competition Act of 1998

prohibits firms from entering into agreements or becoming involved in concerted conduct

that amounts to price fixing, market allocation or collusive tendering (bid rigging)

Till 2014 they haven’t conducted any Dawn Raid (Oxenham, 2015). Since the utilizing powers

of search and seizure and market inquiries, the Commission has demonstrated a far more

proactive and robust enforcement of the cartel provisions in the Act. The principal tool

employed by the Commission to uncover and prosecute cartels is the Corporate Leniency

Policy (CLP). In terms of the CLP, a successful leniency applicant can avoid prosecution for its

participation in a cartel in lieu for providing information to the Commission about the cartel,

cooperating with the Commission during the investigation and assisting the Commission and

the Tribunal in the prosecution of other members of the cartel.

3.6. CONCLUSION The influence of BRICS in the emerging global power equation and reforming global

institutions will become a decisive issue for a future effective global governance system. And

for that these countries need to have strong legal system and also need to implement it

efficiently. They can always take help from ICN, WTO, UNCTAD and other agencies in

obtaining guidance on the development of antitrust regulations. As mentioned earlier, these

countries has become important but they should not forget that they are still developing and

always be vigilant about the each and every step and suggestion coming from the developed

world. Having said that, this no longer underestimates the importance of the Antitrust regime

in BRICS nations, because cartels are like termites which makes a country hollow from inside

and mergers can distort the market so much that may spiral out of control in the developing

economies. A multilateral agreement was signed by the ICC with its Brazil, China, Russia, and

South African counterparts called “Delhi” to strengthen relationships in the antitrust aspect

in November 2013. Steps like these are always a good sign and may be beneficial to all the

member states involved, and who knows this nascent group may go on to become the teacher

to the world on principles and practices of antitrust laws.

4. ANTI TRUST LAW IN INDIA

4.1. COMPETITION COMMISSION OF INDIA – AN INTRODUCTION

India’s anti trust law is the Competition Act passed in 2001. It was amended by the

Competition (Amendment) Act, 2007 and draws its essence from modern competition law. It

came into force on May 20, 2009.

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To help achieve the objectives of the aforementioned act, the Central Government, on 14

October 2003, set up the Competition Commission of India, the apex institute in charge of

enforcing competition law in the country. The CCI consists of a chairperson and 6 members

appointed by the central government. It was duly constituted on 1 March 2009.

The CCI is mandated to eliminate practices that adversely impact free competition in the

economy, advocate free and fair competition, create awareness and impart training about

competition issues, protect the interests of the consumer, and support freedom of trade. As

mentioned earlier, the focus and structure of the CCI conforms with modern competition

legislations globally. CCI has three core objectives, namely:

1. Prohibition of anti competitive agreements

2. Prohibition of the abuse of a dominant position

3. Regulation of mergers

The provisions of the CCI are inspired from the ‘effects doctrine’ which allows the CCI to study

the conduct of the market participant and the structural changes of the industry using the

Appreciable Adverse Effect on Competition (AAEC) test. Basically, this means the CCI can

undertake an ex post analysis of the conduct of the market participant while it can also

perform an ex ante analysis on the structural changes in a given industry.

Pre-cursor to modern competition law in India

The newly independent India in the 1950s began to tread on an economic policy rooted in

socialism. Foreign multinationals were not allowed to start business with in the geographical

boundaries of India. Domestic businessmen had to acquire a license from the concerned

government authority to start a commercial venture giving this regime, infamous in the

business world, the name ‘License Raj’. Most big companies were state owned which meant

they were monopolized naturally.

The then existing anti trust law in India was Monopolies and Restrictive Trade Practices Act

(MRTP) of 1969. The MRTP Act primarily focused on curbing monopolies regardless of its

effect on the economy.

With the 1990s came the liberalization of the Indian economy. With its now outward looking

policy, India needed a more robust and up to date competition law. The MRTP Act, firmly

planted in socialism was clearly not effective in curbing anti competitive practices in the new

economy. A high level committee was set up in 1999 to advise the government on a modern

legislative framework for competition law in India which led to the enactment of the

Competition Act and the establishment of the Competition Commission of India.

4.2. INTERNATIONAL ACTIVITIES OF CCI CCI has been an active member of the International Competition Network (ICN). It has strived

to develop a legal framework that conforms with global practice. It has exchanged and signed

numerous memorandums of understanding and bilateral or multilateral agreements in an

effort to achieve effective antitrust law implementation.

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Here is a list of the agreements India has entered in to over the last few years.

Anti trust Authority Scope of MoU Date

Commissioner of Competition Bureau, Canada

Cooperation in the application of competition laws and strengthen the ability to address competition enforcement matters that cross borders

1 December 2014

The Administrative Council for Economic Defense, Brazil

Delhi Accord in third BRICS International Competition Conference at New Delhi; exchange of views on technical cooperation; promotion of competition advocacy

22 November 2013

The Federal Antimonopoly Service (FAS), Russia

The State Administration for Industry and Commerce, China

The Competition Commission of South Africa

The Directorate General for Competition of the European Commission

Exchange of non-confidential information; bilateral enforcementas per applicable antitrust law

21 November 2013

The Australian Competition and Consumer Commission

Sharing of information; technical cooperation with respective antitrust agencies

3 June 2013

The US Federal Trade Commission and the US Department of Justice, Antitrust Division

Cooperate on antitrust investigations; share information on investigations and consult on enforcement and policy issues

27 September 2012

FAS, Russia Enhanced cooperation 16 December 2011

India hosted the 3rd BRICS International Conference on Competition at New Delhi in

November 2013 where the multilateral agreement was signed by the BRICS nations (see

above table) and the setting up of an effective enforcement organization was discussed. This

agreement is called “Delhi”.

Apart from the CCI, the ICN has another Indian member which is the Competition Appellate

Tribunal (COMPAT). The Competition Appellate Tribunal reviews appeals against the orders

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of the CCI filed before them. If the COMPAT doesn’t overturn the CCI’s orders, the final appeal

can be brought before the Supreme Court of India alone.

4.3. CCI – MAIN ELEMENTS There are four main elements of the Anti-competition law that the CCI focuses on. They are:

4.3.1 Cartels & Bid-Rigging: According to section 2, clause © of the Competition Act (2002) –

A “Cartel” is defined as “an association of producers, sellers, distributors, traders or service

providers who, by agreement amongst themselves, limit, control or attempt to control the

production, distribution, sale or price of, or trade in goods or provision of services” 2(Provisions

Relating to Cartels – Advocacy series 2, Competition Act, 2002)

Any horizontal agreements between firms, persons, organizations or associations who

operate in the same business sector or vertical agreements between different persons or

firms at different levels of production in the supply chain in different markets is deemed to

have an adverse effect on competition. Hence these horizontal and vertical agreements

between firms is termed as cartelization and is thus prohibited by the CCI.

According to sub-section (3) of Section 3, Competition Act, “Bid Rigging” is defined as “any

agreement, between enterprises or persons referred to in sub-section (3) engaged in identical

or similar production or trading of goods or provision of services, which has the effect of

eliminating or reducing competition for bids or adversely affecting or manipulating the

process for bidding”3 (Provisions Relating to Bid Rigging – Advocacy Series 3, Competition Act,

2002)

When firms collude to keep the bid at a pre-determined fixed level, it is termed as bid rigging

and is considered to have an appreciable adverse effect on the competition in the industry.

This manipulation also affects the firm/person inviting the bidders for a healthy competitive

bid and puts him at a financial disadvantage as he now has no other option but to agree to

the pre-determined bid price.

4.3.2 Abuse of Dominance: According to section 4 of the Act, Dominant position or monopoly

position is defined by two actions4:

i. “operate independently of the competitive forces prevailing in the

relevant market”

ii. “affect its competitors or consumers or the relevant market in its favor”

(Provisions Relating to Abuse of Dominance – Advocacy Series 4, Competition Act, 2002)

2 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf 3 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Bid%20Rigging.pdf 4 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf

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A dominant position in the market irrespective of the workings of the market forces

demonstrates the firm’s/person’s ability to manipulate and act in a way that is profitable by

controlling the market factors. For example, increasing the barriers to entry in a monopoly

market to prevent new players from entering the market.

Dominance is anti-competition only when the relevant market in reference to products or

geographies can be identified. Also dominance does not have appreciable adverse effect on

competition but the abuse of dominance does. Abuse of Dominance is defined by the Act as

“a situation when an enterprise or a group of enterprises uses its dominant position in the

relevant market in an exclusionary (such as denial of market access) or/and an exploitative

manner (such as excessive pricing/predatory pricing)”5 (Provisions Relating to Abuse of

Dominance – Advocacy Series 4, Competition Act, 2002) Hence the law, prohibits the use of

monopoly position in a way that distorts market forces and has an adverse effect on

competition.

4.3.3 Combinations, merger control & amalgamations:

According to Section 6 of the Competition Act, 2002, a combination is defined as “a means of

acquisition of control, shares, voting rights or assets, acquisition of control by a person over

an enterprise where such person has direct or indirect control over another enterprise engaged

in competing businesses and mergers and amalgamations between or amongst enterprises

when the combining parties exceed the thresholds set in the Act”6 (Provisions Relating to

Combinations, Advocacy Series 5, Competition Act, 2002). The threshold for a merger or an

acquisition to be deemed as anti-competition is as follows7:

Type Value of the combined

assets more than

Turnover of the combined

enterprise more than

Individual in India INR 1500 crores INR 4500 crores

Individual in & outside India USD 750 Million & atleast

INR 750 crores in India

USD 2250 Million & at least

INR 2250 crores in India

Group in India INR 6000 crores INR 18000 crores

Group in & outside India USD 3 Billion & atleast INR

750 crores in India

USD 9 billion & atleast INR

2250 crores in India

Also any acquisition or merger that leads one firm to gain more than 26% voting rights or right

to appoint more than 50% of the directors on the management board is termed as void as it

is anti-competitive.

5 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf 6 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf 7 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf

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The turnover value is computed by taking into account value of assets (brand value, good will,

IP rights, and intangible value considering reductions for depreciation wherever necessary)

and the value of the goods sold and the services provided. Always the book value of the assets

mentioned in the book of assets is used to calculate the value of the combined enterprise to

determine whether the combination is anti-competitive or not in nature.

4.3.4 Leniency Programme:

The leniency programme is a form of protection provided to whistle-blowers who inform the

CCI about any anti-competitive behavior happening in the industry (ex: Info about a cartel).

These programmes have been formed to incentivize the firms involved in cartelization to

come to the CCI with concrete evidence, facts & documents about violations of the

competition law in exchange for immunity or a less stringent action. Section 46 of the Act

provides that:

“The Commission may, if it is satisfied that any producer, seller, distributor, trader or service

provider included in any cartel, which is alleged to have violated section 3, has made a full and

true disclosure in respect of the alleged violations and such disclosure is vital, impose upon

such producer, seller, distributor, trader or service provider a lesser penalty as it may deem fit,

than leviable under this Act or the rules or the regulations”8 (Leniency Programme, Advocacy

Series 8, Competition Act, 2002)

Some of the conditions for application of leniency provisions are9:

- The informant must have come forth before the receipt of the investigation report by

the Director General

- Should stop participating in the cartel unless otherwise asked by the CCI

- Disclose all relevant documents, proof, and information as asked by the CCI

- Co-operate fully, continuously throughout the investigation

- Should not destroy, tamper with, conceal or provide false evidence

The penalty can be written off upto 100% depending on whether he was instrumental in

helping the CCI in forming a prima-facie opinion regarding the presence of the cartel.

4.3.5 Inquiry & Penalty: Under section 19 of the Act, the CCI is granted with complete power

to inquire into any alleged violation of the provisions of the Anti-competition Act. The

commission if convinced of a prima facie case of cartel, can ask the Director General to

investigate the case of cartels and produce a report. The CCI has full power vested in it by the

Civil Court to summon any official, person or examine him under oath to collect evidence on

cartelization. The Director General has full power to conduct a ‘search & seizure’ while

investigating the firms.

8 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf 9 http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf

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If the firms are found colluding, then the CCI has the power to impose on each associated

member of the cartel, a penalty/fine upto 3 times the profit it earned during each year since

the cartel was formed, or upto 10% of its turnover for each year the cartel existed, whichever

is higher. The CCI can also demand the firms involved in the cartel to discontinue the

arrangement and to not re-enter it. For establishing existence of abuse of dominant position,

the CCI considers the market share of the firm, the size, the resources, the competitors,

barriers to entry in the market, dependence on consumers and the relevant market in terms

of product or geography. If a firm is found to be abusing its monopolistic position, then the

CCI can impose a penalty of up to 10% of the average turnover for last three financial years

in which the firm was involved in bid price fixing, or collusive behavior or found to be

manipulating the market using its dominant position.

4.4. CASES OF ANTITRUST HANDLED BY THE CCI

4.4.1 The RCCI Multiplex Association vs. UPDF: The first ever case handled by the CCI, was in the movie industry. Investigations were

conducted by the CCI in this industry in 2009, and on September 16, 2011 its first order was

rolled out in the dispute between RCCI Multiplex Association and the UPDF. The producers

and the distributors of Hindi films decided to boycott the multiplexes by not allowing

screening of any Hindi movies on these screens till the multiplexes agreed to share a sizeable

portion of their revenues. This conduct was deemed anti-competitive in nature as the CCI

declared that the film distributors had acted in collusion to limit the supply of Hindi movies

which in turn led to the increase of ticket prices which ended up hurting the consumers.

4.4.2 The Case against 7 regional film associations: In another case, seven regional movie associations were fined as they were found to be

controlling the number of screens that would show non-regional films, thus demanding

unrealistic and unreasonable contract terms from movie producers. The associations even

demanded mandatory registration of the films with the association and they refused to deal

with non-members who weren’t registered with the organization. The CCI, declared that the

association was again restricting supply of films and thus limiting healthy competition

between members and non-members. Given the prima facie evidence regarding anti-

competitive behaviour, the CCI imposed the maximum fine possible on all the seven

associations – penalty of 10% of average annual turnover of last three years. The CCI also

declared that the movies no longer needed to be registered with the regional film

associations.10

10 http://anne-tercinet.blog.em-lyon.com/inde-une-jurisprudence-sans-complaisance/

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4.4.3 The LPG bid rigging case: The LPG (Liquid Petroleum Gas) market is a huge growth market in India with large players.

On Feb 24, 2012, the CCI imposed a fine of 7% of the total turnover on 48 makers of LPG

cylinders for being involved in bid rigging by holding meetings a day before the tender and

fixing the price of the bid, irrespective of the costs involved. This hugely impacted the new

players and the major clients of this industry like the India Oil Corporation. Thus the interest

of the consumers were seriously damaged by these LPG makers who quoted identical rates,

by manipulating the tenders for an entire year. 11

4.4.4 Aluminum Phosphide Tablets case: Another interesting case that transpired was in the food industry where the Food Corporation

of India (FCI) lodged a complaint against 3 out of 4 manufacturers of Aluminum Phosphide

tablets in India. These tablets are used for the preservation of foodgrains. In this case, the

manufacturers quoted the same rates in the tenders to the FCI, and they even reduced the

bid by the same margins when in negotiations with the FCI. This carried on for 8 years, and in

the period between 2007 and 2009, the price of these aluminum tablets nearly doubled. The

fourth producer never participated in the tenders of the FCI. The three firms, Excel Crop Care

Ltd., United Phosphorus Ltd. And Sandhya Roganics Chemicals Pvt. Ltd, were declared to have

been involved in cartelization and bid rigging by the CCI and a penalty of 9% of the average

annual turnover of the last three years was levied on them. The CCI also ordered them to

‘cease and desist’ from acting in a manner that manipulated the tender prices.

4.5. HOW TO FILE INFORMATION WITH THE CCI12 The CCI has two types of Forms that need to be filled out - Form 1 & Form 2.

Form 1 is a short form that does not require a lot of information. But Form 2 is a long form

which is extensive and detailed in the information it requires. So as per the latest revision of

the Competition Act, all mergers involving fees of more than 1,000,000 Rs are required to file

Form 1 with the CCI and all mergers that involve a fees of more than 4,000,000 Rs being paid

out require the filing of Form 2 notices with the CCI.

What is not considered antitrust by the CCI? The companies do not need to file information with the CCI in the following cases (Mayer

Brown, Antitrust & Competition):

- “Acquisitions that do not lead to the acquirer holding 25% or more of the total shares

or voting rights of the target while not acquiring control”

11 http://anne-tercinet.blog.em-lyon.com/inde-une-jurisprudence-sans-complaisance/ 12http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/How%20to%20file%20Info.pdf

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- “Acquisition of shares and voting rights pursuant to buy-backs and subscriptions to

rights or shares if they do not lead to acquisition of control”

- “Certain intra-group mergers (in particular involving subsidiaries wholly owned by the

holding company or by companies of the same group)”

4.6. INDIA vs CHINA – A COMPARATIVE STUDY Now that we have understood in detail the Anti – Competition laws in both India and China, here are some differences that can be drawn between the two:13

India China

A competition tribunal has been set up where

the undertakings concerned if dissatisfied

with the decision of the Anti - Monopoly

Enforcement Authority can apply for

administrative reconsideration

China though does not provide a competition

tribunal and both the adjudicatory and

advisory powers are in the hands of the Anti-

monopoly Enforcement Authority

The Indian Competition Law is applicable to

monopolistic behaviour, which are a direct

violation of the Indian Competition Act (i.e.

prohibition of horizontal and vertical

agreements which is termed as cartelization,

abuse of dominant position and merger

control).

Chinese Competition law targets one

particular type of monopoly - “Administrative

Monopoly” which is a specific feature due to

the Communist Regime in China.

Administrative monopoly refers to

monopolistic behaviour of State owned

companies in China.

The Indian Competition Law applies to all

cartel agreements entered into within and

outside India. It concentrates - in either cases

- on the presence of AAEC (Appreciable

Adverse effect on Competition).

The Chinese Competition Law is applicable to

monopolistic conduct in economic activities

within the territory of China (i.e. domestic

conduct). For, outside the territory of China,

the law is applicable to monopolistic conduct,

provided that such a conduct eliminates or

has restrictive effects on competition in the

domestic Chinese market (i.e. extraterritorial

conduct)14

13 http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=giulia_piombi 14 http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=giulia_piombi

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The Indian Competition Law introduces a

presumption of antitrust behavior only in case

of horizontal agreements while for the

establishment of existence of vertical

agreements evidence is required.

Whereas most of the Antitrust Cases in China

are on vertical agreements because of most of

the companies being state owned and hence

participating in cartelization while being at

different levels in the production chain

5. CONCLUSION After having thoroughly analyzed the antitrust laws in all of the BRICS nations, and the

contrast between EU, India and China it can be concluded that the main aim behind the

formation of the ICN by the developed nations has been to help standardize the anti-

competition laws in the developing countries for ease of operation of their (developed

nations’) MNC’s in these developing countries. They want the antitrust laws to be as close to

that of the EU and the United States so that the amount of paperwork that needs to be done

is lesser and the time spent doing this paperwork is less for the MNC’s while competing in

these BRICS nations. This way they end up not having to spend on resources, (lawyers) if the

laws were drastically different from that of EU or US. ICN though informal in nature is playing

a crucial part in shaping the antitrust laws in few of these BRICS nations and hence they need

to be more cautious about the recommendations coming their way to ensure that misuse of

this delicate power of the ICN by the MNC’s of the developed nations for their own interests

does not happen.

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6. Bibliography ICN - Statement of Achievements - http://www.internationalcompetitionnetwork.org/uploads/library/doc757.pdf Djelic, Marie-Laure, and Thibaut Kleiner. "The international competition network: Moving towards transnational governance." Transnational Governance: Institutional Dynamics of Regulation (2006): 287 – 307. http://s3.amazonaws.com/academia.edu.documents/30730445/chapter_14_djelickleiner.pdf?AWSAccessKeyId=AKIAJ56TQJRTWSMTNPEA&Expires=1448456163&Signature=zBmY83X65mfflSBFLMTVTcf5uHQ%3D&response-content-disposition=inline%3B%20filename%3DThe_international_competition_network_Mo.pdf Budzinski, Oliver. "Toward an International Governance of Transborder Mergers-Competition Networks and Institutions between Centralism and Decentralism." NYUJ Int'l. L. & Pol. 36 (2003): 1. http://heinonline.org/HOL/LandingPage?handle=hein.journals/nyuilp36&div=7&id=&page= Evenett, Simon J., Margaret C. Levenstein, and Valerie Y. Suslow. "International cartel enforcement: lessons from the 1990s." The World Economy24.9 (2001): 1221-1245. http://onlinelibrary.wiley.com/doi/10.1111/1467-9701.00408/abstract Hollman, Hugh and Kovacic, William E., The International Competition Network: Its Past, Current, and Future Role (December 2, 2011). Minnesota Journal of International Law, Vol. 20, p. 274, 2011; GWU Legal Studies Research Paper No. 595; GWU Law School Public Law Research Paper No. 595. Available at SSRN: http://ssrn.com/abstract=1967705 The International Competition Network Website http://www.internationalcompetitionnetwork.org John, Iang and Gray, Joshua B., The International Competition Network: A Decennial Retrospective (2012) Antitrust, Vol. 26, No. 2, Spring 2012. https://www.skadden.com/sites/default/files/publications/Publications2707_0.pdf The International Competition Network – Moving Towards Transnational Governance Marie-Laure Djelic and Thibaut Kleiner http://s3.amazonaws.com/academia.edu.documents/30730445/chapter_14_djelickleiner.pdf?AWSAccessKeyId=AKIAJ56TQJRTWSMTNPEA&Expires=1448929740&Signature=lm5kqKDK2F72cjTPvPE464K6h14%3D&response-content-disposition=inline%3B%20filename%3DThe_international_competition_network_Mo.pdf CADE. (n.d.). THE BRAZILIAN SYSTEM OF COMPETITION POLICY. Retrieved from CADE: http://www.cade.gov.br/ upload/WTOgenevaSBDCtradepolicy2.pd

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Sasha-Lee Afrika, S.-D. B. (2011). Cartel Regulation in Three emerging Economies - Cartel and Competition Policy in South AFrica, Brazil and India - A Comparative Overview. The Internatinal Lawyer , 45 (4), 102. CADE. (n.d.). THE BRAZILIAN SYSTEM OF COMPETITION POLICY. Retrieved from http://www.cade.gov.br/ upload/WTOgenevaSBDCtradepolicy2.pdf: http://www.cade.gov.br/ upload/WTOgenevaSBDCtradepolicy2.pd Rakhmanina, E. (2015, March 26). International Financial Law Review. Retrieved from www.ilfr.com: http://www.iflr.com/Article/3440165/2015-Mergers-Control-Survey-Russia.html Khokhlov, E. (2015, July). Global Investigation Review . Retrieved from www.globalinvestigationreview.com : http://globalinvestigationsreview.com/insight/chapter/31/russia-cartel-investigations Davies, E. (2015, January). Clifford Chance. Retrieved from www.cliffordchance.com: http://www.cliffordchance.com/briefings/2014/03/a_practical_guidetochinesemergercontrol.html John Eichlin, X. L. (2015). Global Competition Review. (T. A.-P. Review, Producer) Retrieved from www.globalcompetitionreview.com: http://globalcompetitionreview.com/reviews/69/sections/235/chapters/2741/china-cartels/ Webber Wentzel. (2015, december). Competitio- Merger Control in South AFrica. Retrieved from http://www.webberwentzel.com/: http://www.webberwentzel.com/wwb/content/en/ww-merger-control Oxenham, J. (2015). South Africa: Development in Cartel Enforcement . Retrieved from http://globalcompetitionreview.com/: http://globalcompetitionreview.com/reviews/68/sections/234/chapters/2727/south-africa-developments-cartel-enforcement/ India: Trade Issues and Antitrust http://globalcompetitionreview.com/reviews/69/sections/235/chapters/2752/india-trade-issues-antitrust/ BRICS: The Indian Competition Commission’s new cooperation http://anne-tercinet.blog.em-lyon.com/en/?s=india All about the Competition Commission of India http://www.cci.gov.in/about-cci Provisions Relating to Cartels, Advocacy Series 2, Competition Commission of India. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf

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Provisions Relating to Bid Rigging, Advocacy Series 3, Competition Commission of India. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Bid%20Rigging.pdf Provisions Relating to Abuse of Dominance, Advocacy Series 4, Competition Commission of India. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf Provisions Relating to Combinations, Advocacy Series 5, Competition Commission of India. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/combination.pdf Leniency Programmes, Advocacy Series 8, Competition Commission of India. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf How to File Information with the CCI. Retrieved from: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/How%20to%20file%20Info.pdf China and India Competition Laws: a comparison, From the Selected Works of GiuliaPiombi Retrieved from: http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=giulia_piombi