50037397 Competition Act Ppt(1)

7/31/2019 50037397 Competition Act Ppt(1)

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By

KrishnaPrabhu J

Krishna Kumar R

Kannan P

KalaiArasan

Kumaresan A


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Competition-What

A situation in a market, in which sellers independently

strive for buyers patronage to achieve business objectives

such as profits, sales or market share.

It is the foundation of an efficiently working market

system.


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Competition-why The ultimate objective of competition is to secure the interest of

the Consumer - it empowers the consumer, best guarantee for

consumer protection.

It is a means of reducing cost and improving quality.

It also implies an open market where shortages are rapidly

eliminated through the best allocation of resources.

It accelerates growth and development; preserves economic and

political democracy.


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Competition Policy Competition policy is defined as those Government

measures that affect the behavior of enterprises and

structure of the industry. It is to promote efficiency and

maximize welfare. (Sum of consumers. surplus &

producers. surplus and taxes collected by the Government).


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Competition Policy-Goals Preservation and promotion of the competitive process.

Efficiency in production and allocation of goods and

services.

Innovation and adjustment to technological change.

Sustained economic growth.


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The New Law A new law called competition act 2002 has been enacted to

replace the extant law, MRTP act 1969.

The new law was challenged in the supreme court on the

ground that the chairperson should only be from the

judiciary.

The new law has been amended on 10 sep 2007 by the

parliament.


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Competition act-Objective Competition act, 2002 notified in January 2003. Stated objective

in preamble is to provide for Establishment of a Commission.

to prevent practices having appreciable adverse effect on

competition;

to promote and sustain competition in markets;

to protect the interest of consumers

to ensure freedom of trade carried on by other participants in

markets, in India


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Main Features Prohibits Anti Competitive Agreements. (sec 3)

Prohibits Abuse of Dominant Position. (sec 4)

Provides for Regulation of Combinations. (sec 5,6)

Enjoins competition Advocacy. (sec 49)


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Anti-Competitive Agreements

Section 3 of the Act deals with agreements among enterprises or

persons or association of persons, which causes or likely to cause

appreciable adverse effect on competition. Such agreements are

rendered void pursuant to this section.

The Act deals with following kind of agreements.

Horizontal Agreements

Vertical Agreements


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Horizontal Agreements Agreements between enterprises at the same stage of production,

services, etc. and including Cartels.

Examples :

(i) directly or indirectly determines purchase or sale prices;

(ii) limit or control production, supply, technical development etc.

(iii) allocate areas or customers

(iv) Directly or indirectly results in bid rigging or collusive bidding.

Above agreements are presumed to cause appreciable adverse effect on

competition in the markets.


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Vertical Agreements Agreements between enterprises at different stages of production,

distribution, etc.- subject to Rule of Reason; burden of appreciable

adverse effect on competition, they are prohibited.

Examples :

(i) Tie-in arrangement;

(ii) Exclusive supply agreement;

(iii) Exclusive distribution agreement;

(iv) Refusal to deal;

(v) Re-sale price maintenance.


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Abuse of Dominance Unlike MRTP law, the Act does not frown on dominance by

market players. But the abuse of dominance is prohibited

under Section 4 of the Act. Dominance or Dominant

Position means a position of strength, enjoyed by an

enterprise, in the relevant market, in India which enables it

to


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Continue.a. operate independently of competitive forces in the relevant

market; sec .19(7) or

b. affect its competitors or consumers or the relevant market in its

favors sec .19(9)

Dominance is determined by several factors e.g. market share of the

enterprise concerned, market share of competitors, entry barriers,size and resources commanded by the enterprise or competitors,

etc. sec .19(4)


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ContinueExamples of abuse include

Exclusionary practices such as predatory pricing, denying

market access, use of dominance in one market to enter into, or

protect, other relevant market.

Exploitative practices such as discriminatory pricing and

imposing discriminatory conditions of trade, conclusion of main

contract contingent upon accepting supplementary obligations

unrelated to main contract.


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Regulation of Combinations. Section 5 of the Act deals with combinations. Combination includes

acquisition of shares, acquiring of control and mergers and

amalgamations. These combinations can be horizontal, vertical or

conglomerate. It is the horizontal type of combinations that has very

high potential to thwart competition when compared to other two

kinds of combinations.

In line with the market realities, the Act provides for very liberal regime

of combination regulation. The salient features of combination

regulations are


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Continue

a. The Act has set very high threshold limit based on turnover or assets

of the enterprises involved in combination for notification of

combinations.

The objective is to keep smaller combinations outside regulation and

encouraging Indian enterprises to grow in size as well market share in

globalised market.

b. Higher threshold limit is set for combination involving parties

having operation both in India and outside India.

c. The notification of combination to the Commission is voluntary not

mandatory.


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Continued. Such notification has to be disposed off by the Commission within

90 working days, failing which the same is deemed to be approved.

e. The commission also has the suo moto enquiry power.

f. Limited exemption is given to combination involving public financial

institution, foreign institutional investors and venture capital fund.


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Competition Advocacy The Commission shall take suitable measures to:

-Promote competition advocacy.

-create public awareness.

-Impact training about competition issues.

The commission shall opinion on a reference from thecentral government on a policy/ law on competition; not

binding. [sec 49]


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Examples Initiatives by commission in respect of:

-Department of Posts - Indian post office (Amendment

bill), 2006 monopoly of letter mail, USO fee, new

regulator, etc.

-Department of shipping- shipping conference s- traiff

fixing; and shipping trade practices Bill, 2005

-Ministry of civil aviation- price fixing by airline association


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Power of commission Cease and desist order

Penalty up to 10% of average turnover for last three

preceding financial years.

In case of combination- can be approved, approved with

modification, or refused approval.

In case of dominant enterprise- Order for division of

dominant enterprise.


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Continue Approach commission any person; individual, company,

firm, association, statutory corporation, government

company, legal authority, etc.

Consumer means one who buys goods/ avails services for

consideration.

Reference by central/ state government, statutory

authority.


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Documents

50037397 Competition Act Ppt(1)