COMPETITION POLICY

Competition Policy• Competition Act, 2002 is on ensuring free

and fair competition in the Markets.

• The spirit behind the Competition Act, 2002 is that ‘Firm’ size is no longer the issue but consumer interest should not be hurt.

• Since 2003, this Act has replaced the earlier Monopolies, Restrictive & Unfair Trade Practices Act (MRTP), which had been in place since 1969.

Objectives Prohibition of Anti Competitive Agreements :• Any agreement between enterprise or persons

which –a) directly or indirectly determines purchase or sale pricesb) limits or controls production, supply, investment and technical development.

c) Shares the market by allocation of geographical area of market, and number of customer.

Shall be presumed to have an appreciable adverse effect on competition.

• Prohibition of Abuse of Dominant Position :

• There shall be an abuse of dominant position if :

a)an enterprise directly or indirectly impose unfair or discriminatory condition in sale and purchase of goods and services.

b)an enterprise limits or restricts production of goods and market access by using its dominant position.

• Regulation of Combinations:• As per Competition Act 2002, no person or enterprise

shall enter into a ‘combination’, which cause an appreciable adverse effect on competition within the relevant market of India.

Cases of Combination• Acquisition by large enterprise,

– Acquisition by group– Acquisition of enterprises having similar

good/services – Merger of enterprise.

Competition Commission in India

• Chairman of CCI – An ex High Court Judge or person of 15 yrs experience of international trade, economics or management.

• The commission has maximum strength of 10 members and a chairman .

• The duty of CCI:• to eliminate practices having adverse effect

on competition • to promote and sustain competition in

markets in India

Orders and Actions by CCIfor abuse of dominant position

• In case of abuse of dominant position, CCI

may pass an order directing the enterprise to discontinue and not to re-enter in such agreement.

• It can also impose penalty not exceeding 10 per cent of the average turnover for the last three preceding financial year.

Orders of CCI on certain Combinations

• CCI may issue orders on certain combinations. (Merger & Acquisition)

• If it feels that a combination is not likely to have an adverse effect on competition it can approve otherwise suggest modification or reject .

Contravention of Orders of CCI• If any person contravene any order of CCI or

fail to pay the penalty imposed under the Act, that person shall be liable to be detained in Civil Prison for a term which may extended up to one year.

• Meanwhile CCI may directs his release and he shall also liable to pay penalty not exceeding Rs. 10 Lakh.

Execution of Orders of CCI and Appeal

• Every order passed by the Commission under this Act shall be enforced by the CCI in the same manner as if it is order made by a high court judge .

• CCI gives right of appeal to the aggrieved party against any order of CCI.

• Such an appeal is to be filed in the Supreme court within 60 days from the date of communication of the decision.

Competition (Amendment) Bill 2007• It was introduced and passed in August-

September 2007.

• Amendment Bill 2007, provides constitution of of both CCI and CAT (Competition Appellate

Tribunal).

• CCI is a market regulator to prevent and regulate anti-competitive practice in India.

• CAT would be a three member quasi-judicial body.

• CAT is headed by the person who is or has been a justice of the Supreme Court .

• CAT would hear appeal against any direction given by the commission.

The new Law for Merger and Acquisition

• This new law has sought to make M&A deals more transparent: Companies will have to inform the CCI about deal the within 30 days.

• Otherwise companies could be penalized if they fail to do so.

• If an agreement between companies result in Cartel , they might have to pay hefty financial

penalties up to thrice the value of profit earned.

• This has been done to prevent companies from building dominant market position artificially.

• As per new law , in the case of contravention a penalty of Rs. 25 Crore & three yrs imprisonment.