india ‘s new competition regime: competition in a large emerging economy bharath jairaj citizen...

INDIA ‘S NEW INDIA ‘S NEW COMPETITION COMPETITION

REGIME:REGIME:Competition in a large Competition in a large

emerging economyemerging economy

Bharath Jairaj

Citizen consumer and civic Action Group Chennai, India

www.cag.org.in

7Up2 Meeting, June 27-28, 2006, B7Up2 Meeting, June 27-28, 2006, Bangkok. angkok.

ContentsContents

Where are we today?Where are we today? How did we get here?How did we get here?

– MRTP Act, 1969MRTP Act, 1969– New Economic Policy 1991 – New Economic Policy 1991 –

Amendments to MRTP ActAmendments to MRTP Act– Competition Act 2002Competition Act 2002– Competition Policy 2006-07?Competition Policy 2006-07?


India’s Competition Regime India’s Competition Regime today:today:

New Competition Law:New Competition Law:– The Competition Act , 2002The Competition Act , 2002

The CompetitionThe Competition Commission of India (CCI);Commission of India (CCI); The Competition Appellate Tribunal (CAT)The Competition Appellate Tribunal (CAT)

New Competition Policy:New Competition Policy:– Advisory Committee to prepare draft Advisory Committee to prepare draft

National Competition Policy (December National Competition Policy (December 2005)2005)

– Working group on ‘Competition Policy’ at the Working group on ‘Competition Policy’ at the Planning Commission (for 11Planning Commission (for 11thth Five Year Plan) Five Year Plan)


EVOLUTION- How We Got Here - 1EVOLUTION- How We Got Here - 1

Constitution of India, Art. 39 (c) – “the Constitution of India, Art. 39 (c) – “the operation of the economic system does operation of the economic system does not result in the not result in the concentration of wealth concentration of wealth and means of productionand means of production to the to the common detriment” common detriment”

1947- 1969: Regimented and strict 1947- 1969: Regimented and strict system of government controls system of government controls

1969: Monopolies and Restrictive Trade 1969: Monopolies and Restrictive Trade Practices Act (MRTP Act) legislatedPractices Act (MRTP Act) legislated


Monopolies and Restrictive Trade Monopolies and Restrictive Trade Practices Act , 1969 Practices Act , 1969

OBJECTIVES:OBJECTIVES: Prevention of concentration of Prevention of concentration of

economic power in a few handseconomic power in a few hands Control and regulation of monopolies Control and regulation of monopolies

in certain sectorsin certain sectors Prevention of unfair trade practicesPrevention of unfair trade practices Prevention of restrictive trade Prevention of restrictive trade

practicespractices


THE MRTP COMMISSIONTHE MRTP COMMISSION

A Quasi-Judicial Authority (Chairman (SC/HC A Quasi-Judicial Authority (Chairman (SC/HC Judge) and 2-8 members)Judge) and 2-8 members)

Assisted by Dir Gen of InvestigationAssisted by Dir Gen of Investigation MRTPC vested with powers of a Civil Court: MRTPC vested with powers of a Civil Court:

“cease and desist” orders; injunction; award “cease and desist” orders; injunction; award compensation, etc.compensation, etc.

Can make recommendations to Central Can make recommendations to Central Government on functioning of enterprises, Government on functioning of enterprises, when such functioning was detrimental to when such functioning was detrimental to public interestpublic interest

Suo MotoSuo Moto action possible, though not used action possible, though not used



1991: Widespread economic reforms in 1991: Widespread economic reforms in India – Aimed at Liberalisation, India – Aimed at Liberalisation, Privatisation and GlobalisationPrivatisation and Globalisation

Changes felt necessary in MRTP ActChanges felt necessary in MRTP Act Concentration of economic power to the Concentration of economic power to the

common detriment and control of common detriment and control of monopolies – de-emphasisedmonopolies – de-emphasised

Pre-entry restrictions (prior approval of Pre-entry restrictions (prior approval of government), expanding existing government), expanding existing undertaking, M&A’s, takeovers – deleted undertaking, M&A’s, takeovers – deleted from Actfrom Act



1999: Expert Group on interaction 1999: Expert Group on interaction between Trade and Competition Policy between Trade and Competition Policy recommended new competition law to recommended new competition law to “promote fair competition and control “promote fair competition and control (eliminate) anti-competitive practices” in (eliminate) anti-competitive practices” in the marketthe market

2000: GoI High Level Committee on 2000: GoI High Level Committee on Competition Law and Policy provided a Competition Law and Policy provided a draft Competition law.draft Competition law.

2002:The Competition Act legislated2002:The Competition Act legislated


THE THE COMPETITIONCOMPETITION ACT, 2002 ACT, 2002What and howWhat and how

WHAT?WHAT?Main Focus areas of the Act :Main Focus areas of the Act : Prohibition of Anti Competitive AgreementsProhibition of Anti Competitive Agreements Prohibition of Abuse of DominanceProhibition of Abuse of Dominance Regulation of CombinationsRegulation of Combinations Competition AdvocacyCompetition Advocacy

HOW?HOW?Through establishment of a Competition Through establishment of a Competition

Commission of India (CCI) and Commission of India (CCI) and Competition Appellate Tribunal (CAT)Competition Appellate Tribunal (CAT)


FOCUS AREAS OF 2002 ACT - 1FOCUS AREAS OF 2002 ACT - 1

A. PROHIBITION OF ANTI-COMPETITIVE A. PROHIBITION OF ANTI-COMPETITIVE AGREEMENTSAGREEMENTS

All Anti-competitive agreements are void, i.e., All Anti-competitive agreements are void, i.e., agreements which could restrict competition, agreements which could restrict competition, vertical or horizontalvertical or horizontal

Rule of Reason to be applied for determining Rule of Reason to be applied for determining legality of an agreementlegality of an agreement

Certain agreements between same or similar Certain agreements between same or similar enterprises regarding prices or quantities, on enterprises regarding prices or quantities, on bidding, or to share or divide markets are bidding, or to share or divide markets are per se per se illegalillegal

Leniency provision – for whistleblowers in a Leniency provision – for whistleblowers in a cartel (if disclosure is before prosecution)cartel (if disclosure is before prosecution)



EXCEPTIONS:EXCEPTIONS: Export cartels (problem is somewhere else!)Export cartels (problem is somewhere else!) Agreements permitted in lawAgreements permitted in law Agreements under IPR (not unreasonable Agreements under IPR (not unreasonable

restrictions like patent pooling, price-fixing etc.)restrictions like patent pooling, price-fixing etc.)

RULE OF REASON TO BE APPLIED (factors):RULE OF REASON TO BE APPLIED (factors): Creation of entry barriersCreation of entry barriers Driving existing competitors out of the marketDriving existing competitors out of the market Accrual of benefits to consumersAccrual of benefits to consumers Improvements in goods and servicesImprovements in goods and services Increase in Technical developmentIncrease in Technical development



B. PROHIBITION OF ABUSE OF B. PROHIBITION OF ABUSE OF DOMINANT POSITION:DOMINANT POSITION:

Mere dominance is not an offence, abuse Mere dominance is not an offence, abuse of dominance is prohibitedof dominance is prohibited

Important shift from ‘size’ / ‘structure’ to Important shift from ‘size’ / ‘structure’ to ‘behaviour’ / ‘conduct’‘behaviour’ / ‘conduct’

Instances of unfair, discriminatory or Instances of unfair, discriminatory or predatory pricing; restricting quantities, predatory pricing; restricting quantities, markets or technical development, etc. markets or technical development, etc. will qualifywill qualify



C. REGULATION OF COMBINATIONS:C. REGULATION OF COMBINATIONS: Includes M&A’s, Amalgamations, Acquisitions of Includes M&A’s, Amalgamations, Acquisitions of

control - all above a certain high level threshold control - all above a certain high level threshold (Rs.1000 crore aggregate value of assets or (Rs.1000 crore aggregate value of assets or Rs.3000 crore turnover of combining parties)Rs.3000 crore turnover of combining parties)

Thresholds deliberately high to allow small Indian Thresholds deliberately high to allow small Indian companies to combine to become active companies to combine to become active international playersinternational players

Combinations that cause or are likely to cause an Combinations that cause or are likely to cause an adverse effect on competition are under focus adverse effect on competition are under focus (e.g., horizontal mergers between competitors; (e.g., horizontal mergers between competitors; vertical merger by dominant player with firm in vertical merger by dominant player with firm in adjacent market, etc.)adjacent market, etc.)

Pre-notification voluntaryPre-notification voluntary



D. COMPETITION ADVOCACY:D. COMPETITION ADVOCACY: CCI to create “culture of competition”CCI to create “culture of competition” Empowered to participate in formulation of Empowered to participate in formulation of

country’s economic policiescountry’s economic policies Create awareness and training on Create awareness and training on

competition issuescompetition issues Establishment of “Competition Fund” for Establishment of “Competition Fund” for

aboveabove Recently asked to develop Consultation Recently asked to develop Consultation

Paper on National Competition Policy (to Paper on National Competition Policy (to harmonise various government policies)harmonise various government policies)


COMPETITION COMMISSIONCOMPETITION COMMISSIONOF INDIA (CCI)OF INDIA (CCI)

Adjudicative wing distinct from Investigative Adjudicative wing distinct from Investigative and Prosecution wingand Prosecution wing

Allows appointment of economists, lawyers, Allows appointment of economists, lawyers, other professionals as investigators other professionals as investigators (departure from practice of appointing retd. (departure from practice of appointing retd. bureaucrats)bureaucrats)

UTPs removed from the purview of Act and all UTPs removed from the purview of Act and all pending cases transferred to the Consumer pending cases transferred to the Consumer Protection Act, 1986 (CPA)Protection Act, 1986 (CPA)

Phased introduction of Act – competition Phased introduction of Act – competition advocacy (Y1); Anti-Competitive Practices and advocacy (Y1); Anti-Competitive Practices and Abuse of Dominance (Y2); Combinations (Y3)Abuse of Dominance (Y2); Combinations (Y3)


COMPETITION APPELLATE COMPETITION APPELLATE TRIBUNAL (CAT)TRIBUNAL (CAT)

Established after intervention by Supreme Established after intervention by Supreme Court of India – to retain “judicial powers” Court of India – to retain “judicial powers” within the judicial systemwithin the judicial system

CAT to hear and dispose appeals against CAT to hear and dispose appeals against any direction issued or decision made or any direction issued or decision made or order passed by CCIorder passed by CCI



2004: UPA government elected despite “India 2004: UPA government elected despite “India Shining” beliefShining” belief

NCMP commits to greater effort towards NCMP commits to greater effort towards increasing competition and a competitive increasing competition and a competitive environment – broad basing developmentenvironment – broad basing development

2005: GoI asks CCI to develop consultation 2005: GoI asks CCI to develop consultation paper on National Competition Policypaper on National Competition Policy

2005: CCI establishes Advisory Committee to 2005: CCI establishes Advisory Committee to develop draft National Competition Policydevelop draft National Competition Policy

2006: Planning Commission establishes 2006: Planning Commission establishes Working Group on Competition Policy (for 11Working Group on Competition Policy (for 11thth Plan – 2007-12)Plan – 2007-12)


Competition in India – the road Competition in India – the road mapmap

Shift from “size / structure” focus to “conduct”Shift from “size / structure” focus to “conduct” Shift from discouraging “dominance” to discouraging Shift from discouraging “dominance” to discouraging

“abuse of dominance”“abuse of dominance” Includes “combinations” (previously ignored)Includes “combinations” (previously ignored) Includes strong component on “competition Includes strong component on “competition

advocacy”advocacy” Replaces “Rule of Law” approach with “Rule of Replaces “Rule of Law” approach with “Rule of

Reason” approachReason” approach New Competition law to deliver aboveNew Competition law to deliver above Decision to locate Competition law within broader Decision to locate Competition law within broader

Competition Policy – that harmonises various policiesCompetition Policy – that harmonises various policies


Thank you!Thank you!

india ‘s new competition regime: competition in a large emerging economy bharath jairaj citizen...

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