A Presentation by Years of Expert Professional Services 1
1. History of Competition Law 2. Objectives of Competition Law 3. Competition Law & Regulations 4. Legislation In India.Competition Act, 2002 2
MRTP Act In India, earlier to have restriction on such Anti competitive practices, the only piece of Legislation was the Monopolistic & Restrictive Trade Practices Act, 1969 ( MRTP Act). Under this Act, a MRTP Commission was established and was vested with powers to direct investigation, on a complaint in respect of any unfair trade Practice, monopolistic trade practice or restrictive Trade Practice. Investigation into the matter was the domain of Director General (Investigation) and he had to submit a report to the Commission for further directions. Restraint orders, compensation etc were the eventual powers of the MRTP Commission 3
MRTP Act Certain Provisions restricted the jurisdiction of the MRTP Commission viz Banking activities. The MRTP Act was not only found to be inadequate but also obsolete in the light of international economic developments relating to Competition. Government of India s initiative to liberalize its economy resulted in enactment of Competition Act, 2002. The objective being to have: (i) Free Market and Trade (ii) creating competitive environment for all (iii) remove monopoly, which controls the price etc. (iv) effective allocation of resources (v) productive efficiency (vi) prohibit trade practices which caused adverse effect on competition 4
In 2002, a High Level Committee on Competition Policy and Law gave its recommendations and thereafter, Competition Act, 2002 was enacted. Subsequently, Competition Commission of India (General) Regulations 2009 were also framed. 5
1. Avoid abuse of dominant position 2. Regulate mergers and takeovers 3. Providing checks and balances in free economy 4. Avoid anti competitive practices 5. Removing controls 6. Allocative efficiency effective allocation of resources 7. Productive efficiency cost of production to be kept minimum 8. Dynamic efficiency promoting innovative practices All these practices, intended to be removed, ultimately result in distortion of market, control pricing, result in monopolistic environment, which is unhealthy for the economy 6
Important Provisions of the Act Anti competitive Agreements The Act provides that no enterprise or association of enterprises or persons or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Such agreements shall be void. Further, it provides that any such agreement which directly or indirectly determines the purchase or sale prices; limits or control production, supply, development, investment; directly or indirectly result is collusive bidding, formation of cartels shall be presumed to have adverse effect on competition. Even exclusive Supply, distribution, refusal to deal, resale price maintenance agreements are also volatile of Section 3 (Refer Section 3 (4). 7
Abuse of dominant position The Act prohibits such abuse and specifically provides that no enterprise of group shall abuse its dominant position. Abuse of dominant position would be imposition of any unfair and discriminatory terms in any agreement ; limiting & restricting producing and pricing etc. Explanation (a) to Section 4(2) defines dominant position to mean the position of strength which is enjoyed by an enterprise, in a trade which enables it to affect its competitors and consumers 8
Combinations Mergers and takeovers between enterprises and its regulations. Any combination which result in defeating the very object of the Act is prohibited. It further requires such enterprises entering into a combination to give notice to the Commission within 30 days of approval of proposal of merger or amalgamation. Combination will come in effect only after 210 days of such notice or orders of commission, whichever is earlier. 9
Establishment of Competition Commission Under the Act, a Competition Commission is established, which is consisted of a Chairperson and minimum two members (Maximum 6 members). These persons are appointed by Central Government. Refer Section 7 to 15 of the Act 10
Appointment of Director General Director General is appointed to assist the Commission in conducting inquiry into any contravention of the provisions of the Act. (Refer Section 16) Section 18 imposes a duty on the Commission to eliminate practices having adverse effect on competition and promote and protect competition, ensure freedom of trade. 11
Section 19: Inquiry into agreements and dominant position of an enterprise. Inquiry by the Commission Own Motion On receipt of Information by any person or consumer group On a reference made by Central Government or a State Govt or any statutory authority For determining any violations, the commission would take various factors into consideration as specified in sub sections of Section 19. 12
Section 26: Procedure for Enquiry 1. Formation of a prima facie opinion by Commission 2. If no case made out, Commission will close the case and send the copy of such order to the maker of the complaint / information provider. 3. If prima facie opinion is positive, direction to DG to cause investigation 4. DG to submit report on his findings. 5. Commission may forward the report to parties concerned 6. If DG reports no contravention, Commission would issue notice to parties for filing objections to such report from parties concerned 7. If after considering objections, Commission agrees with DG, it shall close the case and communicate the same to parties 8. Commission may also direct further investigation by DG 9. If DG reports contravention, and Commission is of the opinion that further enquiry is called for, it shall inquire itself in the matter. 13
Commission for the purposes of discharging its functions are vested with the powers of a civil court Commission can call experts from the field of economics, commerce, accounts, international trade or any other discipline Director General (Investigation) has also same powers as are vested in the Commission for the purposes of inquiring into any contravention of the provisions of the Act 14
Commission is vested with the powers to pass following orders: 1. Direct any person, enterprise etc to discontinue and not to enter into any such agreement and discontinue the abuse of dominant position. 2. Impose penalty, which shall not be more than 10% of the average of the turnover for the last three preceding FY on each of such person or enterprise 3. In cases of cartels, penalty upto 3 times of its profits for each year of continuance of such agreement or ten percent of the turnover for each year of continuance of such agreement, whichever is higher on each person in the cartel viz each producer, marketer, seller, trader, service provider. 4. Direct for modification of such agreements 6. Direct division of any enterprise enjoying dominant position to ensure avoidance of such abuse. (Section 28) 5. Pass other orders as it deem proper 15
Investigation in combinations. (Section 29) 1. Formation of prima facie opinion 2. Issuance of notice to parties to combination to file response within 30 days as to why investigation in respect of such combination be not conducted. 3. After receipt of response, commission may call for report by DG. 4. If prima facie opinion positive, parties are to publish within 10 days the details of the combination and any member of public can be called upon to file objections. 5. Commission then passes order of approval or disapproval of combination under section 31 of the Act 16
Commission can pass following orders for combinations: 1. Direct modification of combination to ensure that it does not have adverse effect on competition 2. May consider any modification by the enterprise or any person and approve or disapprove the same. Agreements outside India Commission has powers to inquire into agreements entered into outside India and having adverse impact on competition in India (Section 32) Powers of Commission to pass interim restraint orders (Section 33) 17
Failure to comply with the directions of the Commission may result in imposition of fine which may extend to Rs.1 Lakh for each day of such non compliance subject to maximum of 10 crores Failure to pay fine so imposed may result in imprisonment extendable to three years or fine (extended to 25 Crores) or both as the Chief Metropolitan Magistrate deem fit. CMM will only take cognizance of such non compliance on a complaint by the Commission or any other authorized officers of the Commission. Non compliance of directions of DG shall result in imposition of fine of Rs. 1 Lakh for each day of such non compliance subject to 1 Crore. Making of false statement results in penalty of minimum of Rs. 50 Laks and maximum of 1 Crore Contravention by Company: every person in charge of and responsible for conduct of business of company is deemed guilty. 18
Establishment of Competition Appellate Tribunal An Appellate Tribunal has been established for hearing appeals against the order of the Commission under specific sections of the Act. This Tribunal is presided by Chairperson ( a former Supreme Court Judge) and two members (experienced persons) This Tribunal has been set up at New Delhi Limitation : Appeal to be filed within 60 days from date of receipt of the directions or order. Belated appeal can be entertained on showing sufficient cause Execution : Orders of the Tribunal to be enforced as a Decree of the Court. Non compliance of Tribunal s order result in imprisonment of maximum three years or fine of Rs.1 Crore or both as determined by CMM, on a complaint by the Tribunal. Jurisdiction of Civil Courts are expressly barred under this Act and no injunction to be granted. 19
2010(10) SCC 744 Steel Authority of India Vs. Competition Commission of India The Supreme court in this case held: Directions issued to DG to investigate is not appealable under Act No notice is required to any party before issuing directions to DG for investigation. Detailed reasons not necessarily to be recorded while issuing directions to DG for investigation. Certain other guidelines were issued by the court to expedite the entire process of forming of opinion and investigation by DG. 20
Years of Expert Professional Services R-26, South Extension, Part-II New Delhi-110049 Phone: 011-46175500 Fax: 011-41551537 Email: info@snguptaco.com 21