Awareness Programme on

“Competition Policy & Law” For Media & Government Agencies

By

Malaysian Competition Commission (MyCC)

 Kuala Lumpur

June 08 – 09, 2013

April 22, 2023

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CUTS Institute for Regulation & Competition

Competition Policy & Law

- Hariprasad C G, CIRC

April 22, 2023

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The views expressed herein are personal and not purported to reflect those of the CIRC

What is Competition?

Competition occurs when two or more firms are pursuing the same objective at the same time

In a healthy market economy companies compete with each other to gain the purchase of the consumer

Competition then leads to:

Greater efficiency Fair prices Innovation

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Competition…

Is a Dynamic ConceptIs an amalgam factors that stimulate

economic rivalryIs a tool to mount market pressureIs a tool to penalise laggards..And is a tool to reward the enterprising

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Competition Policy vis-à-vis Competition Law

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Goals of Competition Policy

Preservation and promotion of the competitive process

Efficiency in production and allocation of goods and services

Innovation and adjustment to technological change

Sustained economic growthProtection of consumer interests

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Applicability of Competition Law

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

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Rubric of Competition Law

Competition law generally has four compartments :

Anti-competition agreementsAbuse of dominanceMergers, amalgamations, acquisitions and

take-oversFostering competition

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Is Competition Law Required at all..

With globalization, there is likely to be significant restructuring of manufacture, trade and services

Domestic consolidation and entry of foreign entities

Anti-competition practices may surface as a consequence

WTO fall out obligations need to be addressed

Regulatory and advocacy functions need to be posited

Without a cop, trade traffic may prejudice consumer interest

Competition law will be a cop and a friendApril 22, 2023

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World-wide enforcement – More than 130 countries already have competition

laws

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Highest individual UK fine to date

GBP122 million in Aug 2008

(BA, fuel surcharges)

Highest EU cartel fine to date EURO 1.4 billion

in 2008 (Car Glass manufacturer)

Largest recent US cartel fine

USD 700 millionin 2005/06

(DRAM semiconductor memory products)INTEL fine on

abuse of dominanceEURO 1.06 billion

on May 2009

Microsoft fined for bundling

EURO 497 million in Mar 2004 and further EURO 899 million for not paying earlier

fine in Feb 2008

Improves Quality

Decrease in

prices

Econ

omic

Gro

wth C

reates C

hoices

Encourages Innovation

BENEFITS OF COMPETITION

India big market, leaders in growth

Telecom – Tariffs per second or minute have come down drastically

Two Wheelers – from 30 kmpl to 100 kmpl

…and choices lead to consumer achieving better quality at lower prices eg. airtravel

Witnessed across goods, be it electronics, mobiles, automobiles….

Benefits of Competition

These benefits to consumers and producers can take place only if competition in the markets is free and fair.

But the competition in markets is not always fair; there may be distortions to the competition through anti-competitive behavior of the market players.

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Prohibitions regime

Market Behaviour

Section 4Prohibition

Anti – competitiveagreements

Section 10Prohibition

Abuse of dominantposition

Mergers and

Acquisition

S4 Prohibitions - Anti – competitive agreements

• Section 4 of the Competition Act 2010 (Act 712) (“Act”) prohibits horizontal agreements and vertical agreements between enterprises where such agreements have the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services

Section 4Prohibition

Horizontal orvertical

agreementsObject or

effect

Significant prevention,

restriction ordistortion ofcompetition

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Definition of ‘agreements’

Need not be in the form of formal agreement

Contracts, understanding, whether or not legally enforceable

“concerted practices” or "gentleman's handshake"

Decision of associations

Meaning of concerted practice

"a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition"

Main elements:1. Mental consensus - direct or indirect contact/conduct2. Factual based (similar behaviour/circumstantial evidence)3. Differentiate with independent parallel behaviour/oligopoly defence

Horizontal agreement

Traditionally, competition policy regards horizontal agreements as being more objectionable as these agreements are made between competitors.

Some horizontal agreements are considered Hard Core and are absolutely prohibited (S4(2)).

Manufacturer A Manufacturer BHorizontalAgreement

Distributor A Distributor BHorizontalAgreement

Vertical agreement

Manufacturer

Wholesaler

Retailer

Vertical Agreement

Vertical Agreement

Meaning of 'object' or 'effect'

'Object' Type of Agreement

Types of agreement the anti-competitiveness of which can be determined simply from their object

deemed to have the purpose of restraining competition

unnecessary to prove agreement would have an anti competitive effect

subjective intention irrelevant

Meaning of 'object' or 'effect'

'Effect' Type of Agreement

Where it is not possible to say that the object of an agreement is to restrict competition, it is then necessary to conduct an extensive analysis of its effect on competition in the market before it can be found to infringe section 4 CA 2010

Stay Away !!!!

Horizontal agreements:

• to fix prices • to limit/share markets • to limit sales/production • to bid rig • to exchange current or future price information• collective exclusive dealing• perform group boycott

Vertical agreements:

• to fix resale prices to wholesalers/distributors/retailers

The Object Box

04/22/2023

Vertical Restraints...mostly requires effect type analysis

Resale pricemaintenance

(RPM)

• A producer / manufacturer’s contractual requirement that its product be retailed at a fixed or minimum price to consumers

• Specification of a maximum price and/or recommended resale price (RRP) is “usually OK” unless the specified price has the effect of fixing the retail terms of sale or dampening retail price competition.

Exclusivedistribution

• A manufacturer supplies its (branded) product to only one distributor or wholesaler or retailer in a particular territory or geographical area

• It may have the effect of preventing “downstream” market entry and “intra – brand” competition

Selectivedistribution

• A manufacturer supplies its (branded) product to a limited number of dealers who are contractually restricted from selling other brands

• It may foreclose a market to inter – brand competition at the retail level

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Lets decide who will win

Price cartel

Users and Consumers

Entrepreneur A

Entrepreneur B

Entrepreneur C

Entrepreneur D

Decision of selling price

among competitors

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Abuse of Dominance

a) ExploitativeDirectly harm consumers. Ex – Excessive price

b) ExclusionaryIndirectly harm consumers foreclosing competitors and as a result increasing firms’ ability to increase prices to consumers. Ex –

i. Exclusive Dealingii. Tying & Bundlingiii.Predationiv. Refusals to Supply & Margin Squeeze (?) (vertical

foreclosure of downstream rivals) v. Denial of Market Access or Foreclosure of Raw Material

Sources

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Is it fair competition?

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….The result is clear.

Whatever….

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April 22, 2023

Thank You

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