INDIA

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INDIA S NEW COMPETITION REGIMECompetition in
a large emerging economy
Bharath Jairaj Citizen consumer and civic Action
Group Chennai, India www.cag.org.in

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Contents

• Where are we today?
• How did we get here?
• MRTP Act, 1969
• New Economic Policy 1991 Amendments to MRTP Act
• Competition Act 2002
• Competition Policy 2006-07?

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Indias Competition Regime today

• New Competition Law
• The Competition Act , 2002
• The Competition Commission of India (CCI)
• The Competition Appellate Tribunal (CAT)
• New Competition Policy
• Advisory Committee to prepare draft National
  Competition Policy (December 2005)
• Working group on Competition Policy at the
  Planning Commission (for 11th Five Year Plan)

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EVOLUTION- How We Got Here - 1

• Constitution of India, Art. 39 (c) the
  operation of the economic system does not result
  in the concentration of wealth and means of
  production to the common detriment
• 1947- 1969 Regimented and strict system of
  government controls
• 1969 Monopolies and Restrictive Trade Practices
  Act (MRTP Act) legislated

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Monopolies and Restrictive Trade Practices Act ,
1969

• OBJECTIVES
• Prevention of concentration of economic power in
  a few hands
• Control and regulation of monopolies in certain
  sectors
• Prevention of unfair trade practices
• Prevention of restrictive trade practices

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THE MRTP COMMISSION

• A Quasi-Judicial Authority (Chairman (SC/HC
  Judge) and 2-8 members)
• Assisted by Dir Gen of Investigation
• MRTPC vested with powers of a Civil Court cease
  and desist orders injunction award
  compensation, etc.
• Can make recommendations to Central Government on
  functioning of enterprises, when such functioning
  was detrimental to public interest
• Suo Moto action possible, though not used

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EVOLUTION- How We Got Here - 2

• 1991 Widespread economic reforms in India
  Aimed at Liberalisation, Privatisation and
  Globalisation
• Changes felt necessary in MRTP Act
• Concentration of economic power to the common
  detriment and control of monopolies
  de-emphasised
• Pre-entry restrictions (prior approval of
  government), expanding existing undertaking,
  MAs, takeovers deleted from Act

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EVOLUTION- How We Got Here - 3

• 1999 Expert Group on interaction between Trade
  and Competition Policy recommended new
  competition law to promote fair competition and
  control (eliminate) anti-competitive practices
  in the market
• 2000 GoI High Level Committee on Competition Law
  and Policy provided a draft Competition law.
• 2002The Competition Act legislated

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THE COMPETITION ACT, 2002What and how

• WHAT?
• Main Focus areas of the Act
• Prohibition of Anti Competitive Agreements
• Prohibition of Abuse of Dominance
• Regulation of Combinations
• Competition Advocacy
• HOW?
• Through establishment of a Competition Commission
  of India (CCI) and Competition Appellate Tribunal
  (CAT)

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FOCUS AREAS OF 2002 ACT - 1

• A. PROHIBITION OF ANTI-COMPETITIVE AGREEMENTS
• All Anti-competitive agreements are void, i.e.,
  agreements which could restrict competition,
  vertical or horizontal
• Rule of Reason to be applied for determining
  legality of an agreement
• Certain agreements between same or similar
  enterprises regarding prices or quantities, on
  bidding, or to share or divide markets are per se
  illegal
• Leniency provision for whistleblowers in a
  cartel (if disclosure is before prosecution)

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FOCUS AREAS OF 2002 ACT - 1

• EXCEPTIONS
• Export cartels (problem is somewhere else!)
• Agreements permitted in law
• Agreements under IPR (not unreasonable
  restrictions like patent pooling, price-fixing
  etc.)
• RULE OF REASON TO BE APPLIED (factors)
• Creation of entry barriers
• Driving existing competitors out of the market
• Accrual of benefits to consumers
• Improvements in goods and services
• Increase in Technical development

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FOCUS AREAS OF 2002 ACT - 2

• B. PROHIBITION OF ABUSE OF DOMINANT POSITION
• Mere dominance is not an offence, abuse of
  dominance is prohibited
• Important shift from size / structure to
  behaviour / conduct
• Instances of unfair, discriminatory or predatory
  pricing restricting quantities, markets or
  technical development, etc. will qualify

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FOCUS AREAS OF 2002 ACT - 3

• C. REGULATION OF COMBINATIONS
• Includes MAs, Amalgamations, Acquisitions of
  control - all above a certain high level
  threshold (Rs.1000 crore aggregate value of
  assets or Rs.3000 crore turnover of combining
  parties)
• Thresholds deliberately high to allow small
  Indian companies to combine to become active
  international players
• Combinations that cause or are likely to cause an
  adverse effect on competition are under focus
  (e.g., horizontal mergers between competitors
  vertical merger by dominant player with firm in
  adjacent market, etc.)
• Pre-notification voluntary

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FOCUS AREAS OF 2002 ACT - 4

• D. COMPETITION ADVOCACY
• CCI to create culture of competition
• Empowered to participate in formulation of
  countrys economic policies
• Create awareness and training on competition
  issues
• Establishment of Competition Fund for above
• Recently asked to develop Consultation Paper on
  National Competition Policy (to harmonise various
  government policies)

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COMPETITION COMMISSIONOF INDIA (CCI)

• Adjudicative wing distinct from Investigative and
  Prosecution wing
• Allows appointment of economists, lawyers, other
  professionals as investigators (departure from
  practice of appointing retd. bureaucrats)
• UTPs removed from the purview of Act and all
  pending cases transferred to the Consumer
  Protection Act, 1986 (CPA)
• Phased introduction of Act competition advocacy
  (Y1) Anti-Competitive Practices and Abuse of
  Dominance (Y2) Combinations (Y3)

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COMPETITION APPELLATE TRIBUNAL (CAT)

• Established after intervention by Supreme Court
  of India to retain judicial powers within the
  judicial system
• CAT to hear and dispose appeals against any
  direction issued or decision made or order passed
  by CCI

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EVOLUTION- How We Got Here - 4

• 2004 UPA government elected despite India
  Shining belief
• NCMP commits to greater effort towards increasing
  competition and a competitive environment broad
  basing development
• 2005 GoI asks CCI to develop consultation paper
  on National Competition Policy
• 2005 CCI establishes Advisory Committee to
  develop draft National Competition Policy
• 2006 Planning Commission establishes Working
  Group on Competition Policy (for 11th Plan
  2007-12)

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Competition in India the road map

• Shift from size / structure focus to conduct
• Shift from discouraging dominance to
  discouraging abuse of dominance
• Includes combinations (previously ignored)
• Includes strong component on competition
  advocacy
• Replaces Rule of Law approach with Rule of
  Reason approach
• New Competition law to deliver above
• Decision to locate Competition law within broader
  Competition Policy that harmonises various
  policies

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• Thank you!