Overview of Competition Laws in India & Professional Opportunities for CAs

Overview of Competition Laws in India & Professional Opportunities for CAs
© Rajkumar S. Adukia
09820061049
rajkumarfca@gmail.com
Index
1. Introduction
2. Historical background of Competition Law
3. Competition Law Theory
4. Evolution of Competition law in India
5. Monopolies and Restrictive Trade Practices Act, 1969 – An overview
a. Comparison between the MRTP Act and Competition Act
6. The Consumer Protection Act, 1986
7. Competition Policy
8. Competition Act, 2002 – An overview
9. Analysis of key concepts and issues of competitive law
a. Anti-Competitive Agreements
b. Abuse of Dominant Position
c. Regulation of Combinations
d. Competition Advocacy
10. Competition Law compliance
11. Competition Law and Intellectual Property Rights
12. Competition Commission of India (CCI)
13. Penalties
14. Important Cases
15. Opportunities for Chartered Accountants
16. Competition legislations in other countries
17. List of Competition Regulators across the world
18. Important addresses and websites
19. Annexure
a. Competition Act, 2002
b. Important Notifications
c. Raghavan Committee Report
d. Consumer Protection Act, 1986
e. CCI (Cost of Production) Regulations, 2009
f. CCI (General) Regulations, 2009
1. INTRODUCTION

Competition can be defined as a process wherein cost efficient production is achieved in a structure having reasonable number of players (producers and consumers) with simple entry and exit procedures and where exists a close substitution between products of different players in a given industry.
Competition refers to a market situation in which sellers independently strive for buyer's patronage in order to achieve the business objectives of profit, sales turnover and market share. In other words, it is the act of competing by an enterprise against other business enterprises for the purpose of achieving dominance in the market or attaining a reward or goal. It is the foundation on which a market system works. For market economy to function effectively, this competition has to be free and fair. Such a competition stimulates innovation and productivity and thus leads to the optimum allocation of resources in the economy; guarantees the protection of consumer interests; reduces costs and improves quality; accelerates growth and development and preserves economic and political democracy.
In the absence of adequate safeguards, enterprises may undermine the market by resorting to unfair practices for their short term gains. As a result, market-distortionary practices and anti-competitive forces may restrict the working of healthy competition in an economy. Thus, there arises the need to have a proper regulatory environment which can ensure a healthy competition so that all business enterprises can grow and expand and stimulate economic development of the country. Legislation of an effective competition law should contain short term and long term policy options that can regulate the competition leverage to run the economy on a safe track with sustaining speed. Indian competition law addresses these issues to a large extent and provides direction to other developing countries, which are in the process of evolving globalization.
Most competition laws seek to increase economic efficiency, enhance consumer welfare, ensure fair trading, and prevent abuse of market power. The three areas of enforcement that are provided for in most competition laws are–
(i) Anti-competitive agreements
(ii) Abuse of dominance, and
(iii) Mergers which have potential for anti-competitive effect.

The reasons for adoption of competition laws vary across countries; these are usually on account of concerns about high level of market concentration, formation of cartels, state monopolies, privatization and deregulation, meeting with the requirements of bilateral and plurilateral trade agreements and in addition, to take care of cross border competition dimensions and concerns.

Need for competition
· The ultimate objective of competition is to secure the interest of the Consumer - it empowers the consumer and offers 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.
Competition and Growth
There is a positive association between GDP growth and level or degree of competition. Several studies suggest that competition enhances productivity at industry level, generates more employment and lowers consumer prices.
Competition and Democracy
The basic tenets of democracy and of market competition are ingrained in the same value system - freedom of individual choice, abhorrence of concentration of power, decentralized decision making and adherence to the rule of law. The common goal of both democracy and market competition is the same- to ensure public welfare. While the nature of market mechanism is judged by its ‘allocative efficiency’, the democratic institutions are judged by the degree of equity they create. A democratic government will be more concerned that the market produces certain desirable results and restrains it from bringing any undesirable outcome so as to protect the interests of public. Competitive markets and democratic governments are, therefore, considered complementary and need to interact in a manner that maximizes the larger public interest. The modern view of liberal democracy is not that of simply having an elected government ‘by the people, of the people and for the people’ but having a whole gamut of democratic institutions (government as one of them) with adequate checks and balances to achieve the greater good of greater numbers. Similarly, the present economic thinkers do not blindly believe in the self-correcting virtues of the invisible hand of market mechanism; but a system of institutional regulations and guarded interventions to keep the market on the right track for the common good. Thus both democracy and competition are seen to strengthen each other with the mechanism of corrective action.

BENEFITS OF COMPETITION
FOR BUSINESS
§ Availability of inputs at competitive price,
§ Level playing field,
§ Redressal against denial of market access and other anti-competitive agreements.



FOR CONSUMERS
§ Lower prices
§ Improved quality
§ Better services
§ Wider choices
IN THE MARKET
§ Promotes efficiency
§ Leads to higher productivity
§ Punishes the laggards
§ Enhances choice, improves quality
§ Reduces costs
§ Facilitates better governance









Competition Policy and Globalization
· The national laws on competition are limited to the territory of the country that makes them. However as the borders of the country are becoming permeable, the co-operation and mutual trust among the nations is quite needed especially to ensure sound management of competition in markets.
· In the absence of equitable competition rules, there is every possibility that the large business enterprises may take good advantage of exercising the dominant market power, to control the markets by nefarious means which ultimately will affect the interests of the business organizations.
· The competition policy has to stimulate greater efficiency and enable production of a variety of low priced products and services, which finally lead to the economic growth and result in benefits to the consumers in that country.
· The thrust of competition policy is to control and regulate the restrictive business practices that tend to dissuade the new investors and abuse market power by dominance of some powerful business enterprises.
· Globalization has resulted in de-regulation of access to the markets, liberalization of prices, privatization of business, elimination of trade barriers and global spread of trade and investment. Therefore any comprehensive economic reforms undertaken by the countries due to the effect of globalization will have to necessarily include the competition law and policy that are suitable to the nature and extent of the economic liberalization of that country.
· The enactment of a powerful competition law is felt inevitable to curtail the monopoly trends of big business enterprises that are created due to the free and liberalized access to the international markets.
Competition Law in India
The market principles stipulating that enterprises must be prevented from abusing their dominance in the marketplace is an old one, recognized from the times of the rise of the great capitalist economies of the West. Along with this realization came laws prohibiting unfair business practices in order to encourage competition in the interests of the general public as well as smaller businesses. John D. Rockefeller’s Standard Oil Co. in the early 1900s and Bill Gates’ Microsoft Corp. towards the turn of the millennium are among the famous players whose activities were questioned and penalized under various laws relating to competition.
India has had its own version of such a law through the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). But an updated new legislation formulated for the liberalized and booming Indian economy, the Indian Competition Act was passed in 2002.
While the Act was passed in 2002, it has been put into force in stages. In a significant development, the government on 15th May, 2009 issued notifications giving effect from 20th May, 2009 to, among others, the provisions dealing with anti-competitive agreements (section 3) and abuse of dominance (section 4) in the Act. These sections regulate all types of agreements which, among other things, deal with production, supply, distribution, storage and control of goods or services and regulate the abuse of dominance by an enterprise or group.
Sections 5 and 6 (dealing with combination, mergers and acquisitions) is yet to be notified and brought into force.
The Competition Commission of India (CCI) will have the power to initiate cases against enterprises (i) where the “enterprise” is involved in anti-competitive agreements; and (ii) where the “enterprise” is indulging in abusing its/their dominance in the relevant market.
The important components of the Competition Act, 2002 are:
· Anti-competitive agreements
· Abuse of dominance
· Regulation of combinations
· Competition Advocacy

The Competition Act provides that an anti-competitive agreement shall be void and prohibits an enterprise or a person from entering 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 in India.

Abuse of dominant position has been defined in the Competition Act to include directly or indirectly imposing unfair or discriminatory conditions or prices in purchase or sale of goods or services; restricting or limiting production of goods/services or market or limiting technical or scientific development relating to goods or services to the prejudice of consumers; indulging in practices resulting in denial of market access; using dominance in one market to move into or protect other markets.

The Competition Act seeks to regulate ‘combinations’ which include acquisitions or mergers or amalgamations of enterprises. Acquisition of one or more enterprise by one or more persons or merger or amalgamation of enterprises is a combination if it meets the jurisdictional thresholds based on total value of assets or turnover. Higher thresholds of assets or turnover have been prescribed when parties to combination belong to ‘group’ or have assets or turnover outside India.

The Competition Commission of India undertakes promotion of competition advocacy and creation of awareness about competition issues in India and abroad by programmes, activities etc. in this regard, by constituting Advocacy Advisory Committee(s), by developing and disseminating advocacy literature, by undertaking studies and market research for this purpose and also by encouraging academic and professional institutions to include competition law and policy in the curricula administered by them.


2. HISTORICAL BACKGROUND OF COMPETITION LAW
Law governing competition is found in over two millennia of history. Roman Emperors and Medieval monarchs alike used tariffs to stabilize prices or support local production. The formal study of "competition” began in earnest during the 18th century with such works as Adam Smith's The Wealth of Nations. Different terms were used to describe this area of the law, including "restrictive practices", "the law of monopolies", "combination acts" and the "restraint of trade”.
An early example of competition law is the Lex Julia de Annona, enacted during the Roman Republic around 50 BC. To protect the grain trade, heavy fines were imposed on anyone directly, deliberately and insidiously stopping supply ships. Under Diocletian in 301 AD an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday goods.
More legislation came under the Constitution of Zeno of 483 AD, which can be traced into Florentine Municipal laws of 1322 and 1325. This provided for confiscation of property and banishment for any trade combination or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights. Justinian I subsequently introduced legislation to pay officials to manage state monopolies. As Europe slipped into the dark ages, so did the records of law making until the Middle Ages brought greater expansion of trade in the time of Lex mercatoria.
Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest. The Domesday Book of 1086 recorded that "foresteel" (i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England. But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 1266 to fix bread and ale prices in correspondence with corn prices laid down by the assizes. A fourteenth century statute labeled forestallers as "oppressors of the poor and the community at large and enemies of the whole country." Under King Edward III the Statute of Laborers of 1349 fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received.
The English law of restraint of trade is the direct predecessor to modern competition law. Its current use is small, given modern and economically oriented statutes in most common law countries. Its approach was based on the two concepts of prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade. For example, in Nordenfelt v. Maxim, Nordenfelt Gun Co. a Swedish arm inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way”.
The common law has evolved to reflect changing business conditions. So in the 1613 case of Rogers v. Parry a court held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held that a man cannot bind himself to not use his trade generally by Chief Justice Coke. This was followed in Broad v. Jolyffe and Mitchell v. Reynold where Lord Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications, commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v. Roussillon Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promise's protection. So in the Nordenfelt case Lord McNaughton ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v. The Provident Supply and Clothing Co.
Modern competition law begins with the competition law enacted by Canada in 1889 followed by the United States legislation of the Sherman Act of 1890 and the Clayton Act of 1914. While other, particularly European, countries also had some form of regulation on monopolies and cartels, the US codification of the common law position on restraint of trade had a widespread effect on subsequent competition law development. Both after World War II and after the fall of the Berlin wall competition law has gone through phases of renewed attention and legislative updates around the world.
The number of countries with Competition laws increased phenomenally in the past 25 years from 32 in 1980 to 105 in 2008. Many more countries are in the process of enacting competition laws and the numbers are slated to increase further in the coming few years.

3. COMPETITION LAW THEORY
Competition law theory covers the strands of thought relating to competition law or antitrust policy.
A. Classical perspective
The classical perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual liberty of trade people carry on for their livelihoods. Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances. Hence the courts found specific categories of agreements, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of market power. Earlier theorists like Adam Smith rejected any monopoly power on this basis.
"A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate”. (Adam Smith)
In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate legal measures to combat them. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary”. Smith also rejected the very existence of, not just dominant and abusive corporations, but corporations at all.
John Stuart Mill's approach was laid down in his treatise On Liberty (1859). "Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society... both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil...".
B. Neo-Classical synthesis
After Mill, there was a shift in economic theory, which emphasized a more precise and theoretical model of competition. A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare. This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry. By this term economists mean something very specific, that competitive free markets deliver allocative, productive and dynamic efficiency. Allocative efficiency is also known as Pareto efficiency after the Italian economist Vilfredo Pareto and means that resources in an economy over the long run will go precisely to those who are willing and able to pay for them. Because rational producers will keep producing and selling, and buyers will keep buying up to the last marginal unit of possible output - or alternatively rational producers will reduce their output to the margin at which buyers will buy the same amount as produced - there is no waste. The greatest number of wants of the greatest number of people become satisfied and utility is perfected because resources can no longer be reallocated to make anyone better off without making someone else worse off; society achieves allocative efficiency. Productive efficiency simply means that society is making as much as it can. Free markets are meant to reward those who work hard and therefore those who will put society's resources towards the frontier of its possible production succeed. Dynamic efficiency refers to the idea that business which constantly competes must research, create and innovate to retain its share of consumers. This traces to Austrian-American political scientist Joseph Schumpeter's notion that a "perennial gale of creative destruction" is ever sweeping through capitalist economies, driving enterprise at the market's mercy.
Contrasting with the allocatively, productively and dynamically efficient market models are monopolies, oligopolies, and cartels. When only one or a few firms exist in the market, and there is no credible threat of the entry of competing firms, prices rise above the competitive level, to either a monopolistic or oligopolistic equilibrium price. Production is also decreased, further decreasing social welfare by creating a deadweight loss. Sources of this market power are said to include the existence of externalities, barriers to entry of the market, and the free rider problem. Markets may fail to be efficient for a variety of reasons, so the exception of competition law's intervention to the rule of laissez faire is justified. (Laissez faire is a French phrase literally meaning "let do" or "leave it to be". In economics, it has become a doctrine that holds that the state should seldom or never intervene in the marketplace). Orthodox economists fully acknowledge that perfect competition is seldom observed in the real world, and so aim for what is called "workable competition". This follows the theory that if one cannot achieve the ideal then go for the second best option by using the law to tame market operation where it can.
C. Chicago School
A group of economists and lawyers, who are largely associated with the University of Chicago, advocate an approach to competition law guided by the proposition that some actions that were originally considered to be anticompetitive could actually promote competition. The US Supreme Court has used the Chicago School approach in several recent cases. One view of the Chicago School approach to antitrust is found in United States Circuit Court of Appeals Judge Richard Posner's books Antitrust Law and Economic Analysis of Law. Posner once worked in the Department of Justice's antitrust division, has long been a professor at the University of Chicago Law School, and is likely the most widely cited antitrust scholar and jurist in the United States.
Robert Bork was highly critical of court decisions on United States antitrust law in a series of law review articles and his book The Antitrust Paradox. Bork argued that both the original intention of antitrust laws and economic efficiency was a pursuit only of consumer welfare, the protection of competition rather than competitors. Furthermore, only a few acts should be prohibited, namely cartels that fix prices and divide markets, mergers that create monopolies, and dominant firms pricing predatorily, while allowing such practices as vertical agreements and price discrimination on the grounds that it did not harm consumers. Running through the different critiques of US antitrust policy is the common theme that government interference in the operation of free markets does more harm than good. "The only cure for bad theory", writes Bork "is better theory". The late Harvard Law School Professor Phillip Areeda, who favours more aggressive antitrust policy, in at least one Supreme Court case challenged Robert Bork's preference for non intervention.
4. EVOLUTION OF COMPETITION LAW IN INDIA
Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These Articles are a part of the Directive Principles of State Policy.
· That the ownership and control of material resources of the community are so distributed as best to subserve the common good; and
· That the operation of the economic system does not result in the concentration of wealth and means of production to common detriment.

In 1964, when the Indian democracy was in its nascent stage, barely 17 years old, the Government of India appointed the Monopolies Inquiry Commission to inquire into the extent and effect of concentration of economic power in private hands and the prevalence of monopolistic and restrictive trade practices in important sectors of economic activity other than agriculture. The Commission submitted its report along with The Monopolies and Restrictive Trade Practices Bill, 1965, which was later passed by both the Houses of Parliament and received the assent of the President on December 27, 1969. It came into force on June 1st, 1970 as the Monopolies and Restrictive Trade Practices Act, 1969. The object and reasons of the Act was to provide that the operation of the economic system did not result in the concentration of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade practices and for matters connected therewith and incidental thereto.
Since 1970, the Act had been amended several times to suit to the changing circumstances. However, of late, particularly after the economic reforms of early 1990s, it was felt that the MRTP Act had become obsolete in certain respects in the light of international economic developments relating more particularly to competition laws and there was a need to shift focus from curbing monopolies to promoting competition.
On 27 February, 1999, Yashwant Sinha, Finance minister, made the following announcement in his budget speech:
“The Monopolies and Restrictive Trade Practices Act has become obsolete in certain areas in the light of international economic developments relating to competition laws. We need to shift our focus from curbing monopolies to promoting competition. Government has decided to appoint a Committee to examine this range of issues and propose a modern Competition Law suitable for our conditions”.
In October 1999, the Government of India appointed a High Level Committee (Raghavan Committee) on Competition Policy and Competition Law to advise a modern competition law for the country in line with international developments and to suggest a legislative framework, which may entail a new law or appropriate amendments to the MRTP Act. The Committee presented its Competition Policy report to the Government in May 2000 and gave the following recommendations:
· The MRTP Act was beyond repair and could not serve the purpose of the new competitive environment.
· The Industries (Development and Regulation) Act, 1951 was no longer necessary except for location (avoidance of urban-centric location), for environmental protection and for monuments and National heritage protection considerations etc.
· All trade policies should be open, non-discriminatory and rule-bound. They should fall within the contours of the competition principles.
· All State monopolies and public enterprises will be under the surveillance of Competition Policy to prevent monopolistic, restrictive and unfair trade practices on their part. Any form of discrimination in favour of the public sector and Government commercial enterprises except where they relate to security concerns must be removed.
· The Industrial Disputes Act, 1947 and the connected statutes need to be amended to provide for an easy exit to the non-viable, ill-managed and inefficient units subject to their legal obligations in respect of their liabilities.
· A new (Indian Competition Act) may be enacted, the MRTP Act may be repealed and the MRTP Commission wound up.
· Certain anti-competitive practices should be presumed to be illegal.
· Dominance needs to be appropriately defined in the Competition Law in terms of “the position of strength enjoyed by an undertaking which enables it to operate independently of competitive pressure in the relevant market and also to appreciably affect the relevant market, competitors and consumers by its actions”.
· Mergers need to be discouraged, if they reduce or harm competition. Mergers beyond a threshold limit in terms of assets should require pre-notification.
· The provisions relating to unfair trade practices (UTP) need not figure in the Indian Competition Act as they were covered by the Consumer Protection Act, 1986.
· The pending cases in the MRTP Commission may be transferred to the concerned consumer courts under the Consumer Protection Act, 1986.
· The pending MTP (Monopolies and Restrictive Practices) and RTP (Restrictive Trade Practices) cases in the MRTP Commission may be taken up for adjudication by the Competition Commission of India (CCI) from the stages they were in.
· The Competition Commission should be a multi-member body comprised of eminent and erudite persons of integrity and objectivity from the fields of Judiciary, Economics, Law, International Trade, Commerce, Industry, Accountancy, Public Affairs and Administration. The investigative, prosecutorial and adjudicative functions should be separate.
The Competition Act, 2002 received assent of the President of India on January 13, 2003 and was published in the Gazette of India dated January 14, 2003.
Pursuant to the Act, the Competition Commission of India was established and one Chairperson as also an Administrative Member of the Commission was appointed on 14th October, 2003. However, before the Chairperson could enter office, public interest litigation was filed before the Supreme Court of India on 30th October, 2003 inter alia challenging the appointment on the grounds, amongst others, that since:
(a) The proposed Commission, to be headed by a bureaucrat, would replace the MRTP Commission which had all along been headed by a Judicial Member;
(b) Commission had adjudicatory functions which warranted that the Chairperson must be a Judicial Member.
The matter was finally disposed of by the Supreme Court of India in January 2005 noting that the Government of India was introducing an amendment to the law to constitute a judicial appellate authority while leaving the expert regulatory space to the Commission without answering the challenge.
In this backdrop, the Act was amended in September 2007 providing for setting up of a Competition Appellate Tribunal ("the Appellate Tribunal") headed by a Judicial Member to adjudicate appeals and the compensation claims arising out of the decisions of Commission. Ever since its enactment in 2002, the provisions of the Act have selectively been brought into effect. Some of the sections of the Act were brought into force on March 31, 2003 and majority of other sections on June 19, 2003. Section 3 dealing with anti-competitive agreements and Section 4 dealing with abuse of dominance was notified on 15th May 2009 and came into force on 20th May 2009.
The substantive provisions relating to combinations are yet to be notified and enforced.
The Government has appointed the Chairperson and other Members of the Commission, who have assumed office. The Commission and Appellate Tribunal have become fully operational with effect from 20.05.2009.
Historical background of the Act in a nutshell
1948 - The First Industrial Policy Resolution announced
1951- Implementation Of The Industrial (Development And Regulation) Act, 1951
1955 - Hazari Committee Report on Industrial Licensing Procedure - Working of the licensing system has resulted in disproportionate growth of some big houses
1964 - Mahalanobis Committee Report on Distribution And Levels Of Income- Committee gave a finding that top 10 % of the population cornered 40 % of income and big business houses were emerging because of planned economy model
1965 - Monopolies Inquiry Commission Report of Das Gupta, Government of India appointed this Inquiry Commission “to inquire into the existence and effect of concentration of economic power in private hands.” Reported that there was concentration of economic power and a few industrial houses were controlling a large number of companies and there existed large scale RTP & MTP
1969 - Monopolies & Restrictive Trade Practices Act was enacted
1984 – MRTP - Major addition relating to Unfair Trade Practices
1991 – MRTP - Provisions in respect of Concentration of Economic Power were deleted by omitting Part A of Chapter III of the Act w.e.f. 27.09.1991
In October 1999, the Government of India appointed a High Level Committee on Competition Policy and Competition Law under Chairmanship of S.V.S.Raghavan (former Union Commerce Secretary)
The Committee presented its Competition Policy report to the Government on May 22, 2000
The Competition Bill, 2002 introduced in Lok Sabha on 6th August 2001 and passed on 16th December 2002
The Competition Bill, 2002 passed by Rajya Sabha on 12th December 2002
The Competition Bill, 2002 received President’s assent on 13th December 2002
The Competition (Amendment) Bill, 2006 was introduced in the Lok Sabha on March 9, 2006.
June,5, 2006 - Planning Commission constituted a Working Group on Competition Policy
The Parliamentary Standing Committee on Finance [Chairperson: Maj. Gen. (Retd.) Bhuwan Chandra Khanduri] submitted its report on December 12, 2006.
The Competition Amendment Bill, 2006 was withdrawn and replaced by the Competition Amendment Bill, 2007 on Aug 29, 2007
The Competition Amendment Bill, 2007 was passed by Lok Sabha on 6th September, 2007
The Competition Amendment Bill, 2007 was passed by Rajya Sabha on 10th September, 2007
The Bill was passed by the President on 24th September 2007
There are 50 amendments by Competition (Amendment) Act 2007
15th May, 2009 – Government issued notifications giving effect from 20th May, 2009 to, among others, the provisions dealing with anti-competitive agreements (section 3) and abuse of dominance (section 4) in the Competition Act.

List of Rules and Regulations under the Competition Act, 2002
Sl.No.
Rule / Regulation
1
The Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009
2
The Competition Commission of India (General) Regulations, 2009
3
The Competition Commission of India (Meeting for Transaction of Business) Regulations, 2009
4
The Competition Commission of India (Lesser Penalty) Regulations, 2009
5
The Competition Commission of India (Determination of Cost of Production) Regulations, 2009
6
Competition Commission of India (Salary, Allowances and other Terms and Conditions of Service of Chairperson and other Members) Rules, 2003
7
Competition Commission of India (Oath of Office and of Secrecy for Chairperson and other Members) Rules, 2003
8
Competition Commission of India (Term of the Selection Committee and the Manner of Selection of Panel of Names) Rules, 2008
9
Competition Commission of India (Return on Measures for the promotion of Competition Advocacy, awareness and training on Competition Issues) Rules, 2008
10
Competition Commission of India (Form and Time of Preparation of Annual Report) Rules, 2008
11
Competition Appellate Tribunal (Term of the Selection Committee and the Manner of Selection of Panel of Names) Rules, 2008
12
Competition Appellate Tribunal (Salaries and Allowances and other Terms and Conditions of Service of the Chairperson and Other Members) Rules, 2009
13
Competition Commission of India (Number of Additional, Joint, deputy of Assistant Director-General other officers and employees, their manner of appointment, qualification, salary, allowances and other terms and conditions of service) Rules, 2009
14
Competition Commission of India (Form of Annual Statement of Accounts) Rules, 2009

5. MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 – AN OVERVIEW
The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) is an Act that provides that the operation of the economic system does not result in the concentration of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade practices and for matters connected therewith or incidental thereto.
The MRTP Act has been amended repeatedly in 1974, 1980, 1982, 1984, 1985, 1986, 1988 and 1991. The effect of these amendments has been to render the provisions governing monopolies virtually inoperative, but bring unfair trade practices within the purview of the Act. The Act was `restructured' in 1991 by omitting Sections 20 to 26 and shifting the provisions contained in Chapter IIIA regarding restrictions, acquisition and transfer of shares to the Companies Act, 1956.
Areas focused under the MRTP Act
Prevention of concentration of economic power to the common detriment
Control of monopolies
Prohibition of monopolistic trade practices (MTP)
Prohibition of restrictive trade practices (RTP)
Prohibition of unfair trade practices (UTP)

Objectives of MRTP Act
The principal objectives sought to be achieved through the MRTP Act are:
(a) Prevention of concentration of economic power to the common detriment;
(b) Control of monopolies;
(c) Prohibition of monopolistic trade practices;
(d) Prohibition of restrictive trade practices;
(e) Prohibition of unfair trade practices.
Out of these five, the first two have been de-emphasized, after the 1991 amendment to the Act. The emphasis has not only shifted to the last three mentioned objectives but they have been re-emphasized to the extent that monopolies tend to bring about monopolistic trade practices and the Act provides for their surveillance. Briefly, the Act is designed to guard against different aspects of market imperfections. For instance, a merger, which can increase the dominance of the combine or has resulted in a large share in the market, can be looked at in terms of the provisions of the Act and the objectives governing them.
Restrictive Trade Practices (RTPs)
A restrictive trade practice is generally one which has the effect of preventing, distorting or restricting competition. In particular, a practice which tends to obstruct the flow of capital or resources into the stream of production is an RTP. Likewise, manipulation of prices, conditions of delivery or flow of supply in the market which may have the effect of imposing on the consumer unjustified costs or restrictions are regarded as restrictive trade practices.
Certain common types of restrictive trade practices enumerated in the Act which do not have an element of competition are:
a) Refusal to deal;
b) Tie-up sales;
c) Full line forcing;
d) Exclusive dealings;
e) Concert or collusion-cartel;
f) Price discrimination;
g) Re-sale price maintenance;
h) Area restriction;
i) Predatory pricing.
All restrictive trade practices under the Act as mentioned above are deemed legally to be prejudicial to public interest. The onus is, therefore, on the entity, body or undertaking charged with the perpetration of the restrictive trade practice to plead for the exceptions provided in the Act itself. For instance in the following circumstances exception can be pleaded (Sec.38 of MRTP Act):
1) That the restriction is reasonably necessary, having regard to the character of the goods to which it applies, to protect the public against injury (whether to persons or to premises) in connection with the consumption, installation or use of those goods;
2) that the removal of the restriction would deny to the public, as purchasers, consumers or users of any goods, other specific and substantial benefits of advantages enjoyed or likely to be enjoyed by them as such whether by virtue of the restriction itself or of any arrangements or operations resulting there from;
3) that the restriction is reasonably necessary to counteract measures taken by any one person not party to the agreement with a view to preventing or restricting competition in or in relation to the trade or business in which the persons party thereto are engaged;
4) that the restriction is reasonably necessary to enable the persons party to the agreement to negotiate fair terms for the supply of goods to, or the acquisition of goods from, any one person not party thereto who controls a preponderant part of the trade or business or acquiring or supplying such goods, or for the supply of goods to any person not party to the agreement and not carrying on such a trade or business who, either alone or in combination with any other such persons, controls a preponderant part of the market for such goods;
5) that, having regard to the conditions actually obtaining, or reasonably foreseen at the time of the application, the removal of the restriction would be likely to have a serious and persistent adverse effect on the general level of employment in an area taken together, in which a substantial proportion of the trade, or industry to which the agreement relates is situated;
6) that, having regard to the conditions actually obtaining, or reasonably foreseen at the time of the application, the removal of the restriction would be likely to cause a reduction in the volume or earnings to the whole export business of India or in relation to the whole business (including export business) of the said trade or industry;
7) that the restriction is reasonably required for purposes in connection with the maintenance of any other restriction accepted by the parties, whether under the same agreement or under any other agreement between them, being a restriction which is found by the Commission not to be contrary to the public interest upon grounds other than those specified in this paragraph, or has been so found in previous proceedings before the Commission;
8) that the restriction does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so;
9) that such restriction has been expressly authorized and approved by the Central Government;
10) that such restriction is necessary to meet the requirements of the defence of India or any part thereof, or for the security of the State; or
11) that the restriction is necessary to ensure the maintenance of supply of goods and services essential to the community.
If the circumstances are satisfactory to the MRTP Commission and if it is further satisfied that the restriction is not unreasonable having regard to the balance between those circumstances and any detriment to the public interest or consumers likely to result from the operation of the restriction, the Commission may arrive at the conclusion that the Restrictive Trade Practice is not prejudicial to public interest and discharge the enquiry against the charged party.
Furthermore, if a trade practice is expressly authorized by any law for the time being in force, the MRTP Commission is barred from passing any order against the charged party.
Unfair Trade Practices (UTPs)
Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service adopts any unfair method or unfair or deceptive practice. (Section 36A of MRTP Act)
Essentially unfair trade practices fall under the following categories:
a) Misleading advertisement and false representation;
b) Bargain sale, bait and switch selling;
c) Offering of gifts or prizes with the intention of not providing them and conducting promotional contests;
d) False representation of the product’s safety standards;
e) Hoarding or destruction of goods.
Making false or misleading representation of facts disparaging the goods, services or trade of another person is also an unfair trade practice under MRTP Act.
Monopolistic Trade Practices (MTPs)
Monopolistic Trade Practice is a trade practice which has or is likely to have the effect of:
i. maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or otherwise controlling the production, supply or distribution of goods or the supply of any services or in any other manner;
ii. unreasonably preventing or lessening competition in the production, supply or distribution of any goods or in the supply of any services;
iii. limiting technical development or capital investment to the common detriment or allowing the quality of any goods produced, supplied or distributed, or any services rendered, in India to deteriorate;
iv. increasing unreasonably:
a. the cost of production of any goods; or
b. charges for the provision, or maintenance of any services;
v. Increasing unreasonably:
a. the prices at which goods are, or may be, sold or re-sold, or the charges at which the services are, or may be, provided; or
b. the profits which are, or may be, derived by the production, supply or distribution (including the sale or purchase) of any goods or in the provision or maintenance of any goods or by the provision of any services;
vi. preventing or lessening competition in the production, supply or distribution of any goods or in the provision or maintenance of any services by the adoption of unfair methods or unfair or deceptive practices.
Merger and amalgamation
The concentration of economic power may result from a merger, an amalgamation or take-over. The MRTP Act does not prohibit mergers, amalgamations or takeovers but seeks to ensure that the arrangement serves the public interest. Before the 1991 amendment, the Act frowned upon expansion of giant undertakings so as not to permit them to acquire power to put a stranglehold both on the market as well as on consumers and further industrial expansion of the country. After the 1991 amendment, the Act has been restructured and pre-entry restrictions with regard to prior approval of the Government for amalgamation, merger or take-over have been removed. But in relation to concentration of economic power, the law retains provisions relating to the power of the Government to direct division of an undertaking and severance of interconnection between undertakings if the working of an undertaking is prejudicial to public interest or is likely to lead to the adoption of any monopolistic or restrictive trade practices. While the power to conduct an enquiry in this regard is vested with the MRTP Commission, the order for division of undertaking or severance of interconnection can be passed only by the Government. Thus, the role of the Commission is advisory.
MRTP Commission
For enforcement of the provisions of the MRTP Act, the Monopolies and Restrictive Trade Practices Commission was established. It consisted of a Chairman and not less than two and not more than eight members, appointed by the Central Government. The Chairman is always a person who is or has been qualified to be a judge of the Supreme Court or of a High Court. The members of the Commission are persons of ability, integrity and standing who have adequate knowledge or experience of, or have shown capacity in dealing with, problems relating to economics, law, commerce, accountancy, industry, public affairs or administration. Every member could hold office for a period not exceeding five years and were eligible for reappointment.
The Commission is assisted by the Director General of Investigation & Registration (DG) and as many Additional, Joint, Deputy or Assistant Director General of Investigation and Registration for carrying out investigations or maintaining a register of agreements and for undertaking carriage of proceedings during the enquiry before the MRTP Commission. The powers of the Commission include the power vested in a Civil Court and include further power:
i. to direct an errant undertaking to discontinue a trade practice and not to repeat the same;
ii. to pass a cease and desist order;
iii. to grant temporary injunction, restraining an errant undertaking from continuing an alleged trade practice;
iv. to award compensation for loss suffered or injury sustained on account of Restrictive Trade Practice, Unfair Trade Practice or Monopolistic Trade Practice;
v. to direct parties to agreements containing restrictive clauses to modify the same;
vi. to direct parties to issue corrective advertisements;
vii. to recommend to the Central Government division of undertakings or severance of interconnection between undertakings if their working is prejudicial to public interest or has led or is leading to Monopolistic Trade Practice or Restrictive Trade Practice.
Investigation and enquiries
The MRTP Commission can be approached with a complaint on restrictive or unfair trade practices by:
· an individual consumer;
· a registered association of consumers; and
· a trade association.
The Commission can be moved by an application from the Director General (DG) or by a reference by the Central or State Government. The law provides for suo motu action on the part of the Commission, if it receives information from any source or on its own knowledge.
The procedure followed by the Commission is that, on receipt of a complaint, the matter is in many cases referred to the DG for investigation and report. More often than not, the person complained against is called upon to give his/her comments on the complaints received. Experience shows that in a large number of cases the issue of letter of investigation or enquiry by the DG or the Commission results in the relief being provided to complainant. This has been noticed in cases relating to refunds in respect of repair or replacement of refrigerators, TV sets, replacement of defective parts during the warranty period and the like. Similarly, there have been cases of successful interventions relating to property disputes. The law provides for a temporary injunction against the continuance of alleged monopolistic, restrictive or unfair trade practices pending enquiry by the Commission.
A salutary provision in the Act is the power of the Commission to award compensation for loss or damage suffered by a consumer, trader and class of traders or government as a result of any monopolistic/restrictive/unfair trade practice indulged in by any undertaking or person.
Comparison between the MRTP Act and the Competition Act
S.No

MRP Act

Competition Act
1
Arrangement and language of the MRTP Act is more complex.

The language and arrangement of sections in the Competition Act is simple and clear.

2
Registration of agreements is compulsory.

There is no requirement for registration of agreements under the Competition Act.

3
There is no regulation of combinations under the MRTP Act.

Combinations are regulated beyond a threshold limit under the Competition Act.

4
The Commission is appointed by the Government under the MRTP Act.

The Competition Commission is selected by a Search Committee.

5
No competition advocacy role for the MRTP Commission.

Competition Commission has been entrusted with the function of competition advocacy.

6
Unfair trade practices are covered under the MRTP Act.

Unfair trade practices are not covered under the Competition Act. Henceforth it will be covered under the Consumer Protection Act, 1986.


6. CONSUMER PROTECTION ACT, 1986
The Consumer Protection Act 1986 is a social welfare legislation which was enacted as a result of widespread consumer protection movement. It was enacted to provide a simpler and quicker access to redressal of consumer grievances. The main object of the Act is to provide for the better protection of the interests of the consumer and to make provisions for establishment of consumer councils and other authorities for settlement of consumer disputes and matter therewith connected.
The Consumer Protection Act, 1986, applies to all goods and services, excluding goods for resale or for commercial purpose and services rendered free of charge and under a contract for personal service. The provisions of the Act are compensatory in nature. It covers public, private, joint and cooperative sectors.
The Act enshrines the rights of the consumer such as right to safety, right to be informed, right to be heard, and right to choose, right to seek redressal and right to consumer education.
Important terms under the Consumer Protection Act -
Consumer: According to Section 2(d) of the Consumer Protection Act, 1986, consumer means any person who - (i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approv­al of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or (ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly prom­ised, or under any system of deferred payment, and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred pay­ment, when such services are availed of with the approval of the first mentioned person;
Explanation — For the purposes of the sub-clause (i), “commercial purpose” does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his liveli­hood, by means of self-employment.
According to this definition, a person to be a consumer of goods should satisfy that –
o The goods are bought for consideration.
o Any person who uses the goods with the approval of the buyer is a consumer.
o Any person who obtains the goods for resale or commercial purposes is not a consumer.
o Person buying goods for self employment is a consumer.
A person is a consumer of services if –
o The services are hired or availed of.
o Consideration must be paid or payable.
o Beneficiary of services is also a consumer.
Goods: Goods mean any movable property and also include shares, but do not include any actionable claims.
Service: Service means service of any description which is made avail­able to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service. (Sec.2 (1) (o))
Defect: Defect means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods. (Sec.2 (1) (f))
Deficiency: Deficiency means any fault, imperfection, shortcoming or inade­quacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.
Nature of complaint that can be made under the Consumer Protection Act, 1986
· Any unfair trade practice or restrictive trade practice adopted by the trader
· Defective goods
· Deficiency in service
· Excess price charged by the trader
· Unlawful goods sale, which is hazardous to life and safety when used.
Relief that can be granted under the Consumer Protection Act, 1986
(a) Repair of defective goods
(b) Replacement of defective goods
(c) Refund of the price paid for defective goods or service
(d) Removal of deficiency in service
(e) Refund of extra money charged
(f) Withdrawal of goods hazardous to life and safety
(g) Discontinue the unfair trade practice or the restrictive trade practice or not repeat it
(g) Compensation for the loss or injury suffered by the consumer due to negligence of the opposite party
(h) Adequate cost of filing and pursuing the complaint
Unfair Trade Practice and Restrictive Trade Practice under the Consumer Protection Act, 1986
According to Section 2(1)(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely;—
(1) the practice of making any statement, whether orally or in writing or by visible representation which,—
(i) falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
(ii) falsely represents that the services are of a particular standard, quality or grade;
(iii) falsely represents any re-built, second-hand, reno­vated, reconditioned or old goods as new goods;
(iv) represents that the goods or services have sponsor­ship, approval, performance, characteristics, accesso­ries, uses or benefits which such goods or services do not have;
(v) represents that the seller or the supplier has a spon­sorship or approval or affiliation which such seller or supplier does not have;
(vi) makes a false or misleading representation concern­ing the need for, or the usefulness of, any goods or services;
(vii) gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof; Provided that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
(viii) makes to the public a representation in a form that purports to be—
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or prom­ise is materially misleading or if there is no reasonable prospect that such warranty, guaran­tee or promise will be carried out;
(ix) materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
(x) gives false or misleading facts disparaging the goods, services or trade of another person.
Explanation. - For the purposes of clause (1), a statement that is—
(a) expressed on an article offered or displayed for sale, or on its wrapper or container; or
(b) expressed on anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display or sale; or
(c) contained in or on anything that is sold, sent, delivered, transmit­ted or in any other manner whatsoever made available to a member of the public,
shall be deemed to be a statement made to the public by, and only by, the person who had caused the statement to be so expressed, made or contained;
(2) permits the publication of any advertisement whether in any news­paper or otherwise, for the sale or supply at a bargain price, of goods or services that are not intended to be offered for sale or supply at the bargain price, or for a period that is, and in quantities that are, reasonable, having regard to the nature of the market in which the business is carried on, the nature and size of business, and the nature of the advertisement.
Explanation.—For the purpose of clause (2), "bargaining price" means—
(a) a price that is stated in any advertisement to be a bargain price, by reference to an ordinary price or otherwise, or
(b) a price that a person who reads, hears or sees the advertisement, would reasonably understand to be a bargain price having regard to the prices at which the product advertised or like products are ordinarily sold;
(3) permits—
(a) the offering of gifts, prizes or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole;
(b) the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest;
(3A) withholding from the participants of any scheme offering gifts, prizes or other items free of charge, on its closure the information about final results of the scheme.
Explanation. — For the purposes of this sub-clause, the participants of a scheme shall be deemed to have been informed of the final results of the scheme where such results are within a reasonable time, published, prominently in the same newspapers in which the scheme was originally advertised;
(4) permits the sale or supply of goods intended to be used, or are of a kind likely to be used, by consumers, knowing or having reason to believe that the goods do not comply with the standards prescribed by competent authority relating to performance, composition, contents, design, constructions, fin­ishing or packaging as are necessary to prevent or reduce the risk of injury to the person using the goods;
(5) permits the hoarding or destruction of goods, or refuses to sell the goods or to make them available for sale or to provide any service, if such hoarding or destruction or refusal raises or tends to raise or is intended to raise, the cost of those or other similar goods or services.
(6) manufacture of spurious goods or offering such goods for sale or adopts deceptive practices in the provision of services.
According to Section 2(1) (nnn) of the Consumer Protection Act, 1986, “restrictive trade practice” means a trade practice which tends to bring about manipulation of price or conditions of delivery or to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs or restrictions and shall include—
(a) delay beyond the period agreed to by a trader in supply of such goods or in providing the services which has led or is likely to lead to rise in the price;
(b) any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as condition precedent to buying, hiring or availing of other goods or services;
On analysis of the above definition, it can be understood that where sale or purchase of a product or service is made conditional on the sale or purchase of one or more other products and services, it amounts to restrictive trade practice.
Technically, this type of arrangement is called ‘tie-up sales’ or ‘tying arrangement’. The effect of such an arrangement is that a purchaser is forced to buy some goods or services which he may not require along with the goods or services which he wants to buy. Thus where a buyer agrees to purchase product ‘X’ upon a condition that he will also purchase product ‘Y’ from the seller, the sale of product ‘Y’ (tied product) is tied to the sale of product ‘X’ (tying product).
The buyer has to forego his free choice between competing products. This results in neutralizing healthy competition in the ‘tied’ market.
For example: A, a gas distributor insisted his customers to buy gas stove as a condition to give gas connection. It was held that it was a restrictive trade practice - Re. Anand Gas RTPE 43/1983 (MRTPC).
However when there is no such precondition and the buyer is free to take either product, no tying arrangement could be alleged event though the seller may offer both the products as a single unit at a composite price.
For example: A is a furniture dealer. He is selling Sofa at Rs. 20,000 and Bed at Rs. 15,000. He has an offer that whoever will buy Sofa and Bed both, he will charge Rs. 30,000 only. Here the choice is open to the customer to buy the products single or composite. This is not a restrictive trade practice.
Consumer Courts
The Consumer Protection Act, 1986 provides for a three tier approach in resolving consumer disputes. There are 3 levels of consumer courts namely:
a) National Consumer Dispute Redressal Commission or National Commission: Value of claims above Rs. 20 lakh
b) State Consumer Dispute Redressal Commission or State Commission: Value of claims from Rs 5 to 20 lakh.
c) District Consumer Disputes Redressal Forum or District Forum: Value of claims upto Rs 5 Lakh
District Forum and State Commission are formed by States with the permission of the Central Government while the National Commis­sion is formed by the Central Government.
Complaint
A complaint, hand written or typed, can be filed by a consumer, a registered consumer organisation, central or state Government and one or more consumers, where there are numerous consumers having the same interest. The complaint should be filed with the appropriate Commission depending upon the value of the claim. No stamp or court fee is required. The nature of complaint must be clearly mentioned as well as the relief sought by the consumer. It must be in quadruplicate in district forum or state commission.
Normally, complaints should be decided within 90 days from the date of notice issued to the opposite party. Where a sample of any goods is required to be tested, a complaint is required to be disposed of within 150 days; although it may take more time due to practical problems.
Consumer Protection Councils
Councils have been setup in all states and at the center to promote and protect the rights and interest of consumers. These councils are advisory in nature and can play important role in recommending consumer oriented policies to the state and central Government.

7. COMPETITION POLICY
Competition Policy is defined as those government measures that affect the behavior of enterprises and structure of the industry with a view to promoting efficiency and maximizing welfare. (It is the sum of consumers’ surplus & producers’ surplus and taxes collected by the Government).

Competition policy is a critical component of any overall economic policy framework. Competition Policy is intended to promote efficiency and to maximize consumer/social welfare. It also helps to promote creation of a business environment which improves static and dynamic efficiencies, leads to efficient resource allocation and in which abuse of market power is prevented / curbed.

There are two components of a comprehensive Competition Policy. The first component involves putting in place a set of policies that enhance competition or competitive outcomes in the markets, such as relaxed industrial policy, liberalized trade policy, convenient entry and exit conditions, reduced controls and greater reliance on market forces. The other component of Competition Policy is a law and its effective implementation to prohibit anti-competitive behaviour by businesses, to prohibit abusive conduct by dominant enterprise, to regulate potentially anticompetitive mergers and to minimize unwarranted government / regulatory controls.
It includes Reforms in certain Policy areas to make these more pro-competition:-
Industrial policy- Industrial Policy has to address and reform licensing requirements, restrictions on capacities, or on foreign technology tie ups, guidelines on location of industries, reservations for small scale industry, etc. These adversely affect free competition in the market.
Trade policy- Trade policy has important implications for development of competition in the markets. Measures for liberalization of trade promote greater competition e.g. reducing tariffs, removal of: quotas/physical controls, investment controls, conditions relating to local content etc.
Privatization/Disinvestment- Empirical research has found that state-owned enterprises generally tend to be less efficient than private owned firms, for reasons such as manager compensation, low incentives, lack of direct accountability, hard budget constraints for managers, etc. State owned enterprises are generally insulated from market forces and receive protection/benefits such as government imposed barriers to entry, price regulation and subsidies. Thus privatization of state owned enterprises is an important element of competition policy. However, in privatization/ disinvestment process, care is to be taken that state monopoly is not replaced by private monopoly.
Economic Regulation- New legislation and regulations to promote competition and to bring about restructuring of major industrial sectors is essential. Legislation to aim at separating natural monopoly elements from potentially competitive activities, and the regulatory functions from commercial functions, and also create several competing entities through restructuring of essential competition activities and to create a competitive environment in following sectors. For e.g. -
Electricity sector
Telecommunications sector
Ports
State aids- Several state aids create unequal operating conditions for businesses. For e.g. -
– Subsidies
– Tax rebates
– Preferential loans
– Capital injection
– Public procurement
Experience suggests that such policy measures rarely have successful results and destroy incentives for firms to become efficient. Temporary specific state- aid for well stated public purpose can be justified.

Labour policy
Other such policies

To strengthen the forces of competition in the market, both competition law and competition policy are required. The two complement each other. Competition law prohibits and penalizes anti-competitive practices by enterprises functioning in the market; that is, it addresses market failure. The aim of competition policy is to create a framework of policies and regulations that will facilitate competitive outcomes in the market.
A well laid competition policy thus helps in establishing a predictable environment for investors and consumers of markets and in preventing artificial barriers in the markets. The legislative approach also helps in setting ‘conduct benchmark’ for market players to avoid potential conflict with the policies of the state. Ultimately, regulatory objectives of competition policy are intended to serve the:
ü Safety and stability of domestic markets
ü Transparency of business practices
ü Prevention of abusive practices
ü Institutionalization of supervision over barriers to fair competition
ü Sustained benefits to consumers
Principles of Competition Policy
The Competition Policy should endeavor to give effect to the principles set herein below which should be applicable across all sectors of the economy:
(i) The Competition Act, 2002 prohibits anti- competitive agreements and combinations which have or are likely to have appreciable adverse effect on Competition. It also seeks to prohibit abuse of dominant position by an enterprise. There should be effective control of anticompetitive conduct which causes or is likely to cause appreciable adverse effect on competition in the markets within India. The Act establishes the Competition Commission of India as the sole national body to enforce the provisions of the Act.
(ii) Competitive neutrality requires treatment of all alike; any discrimination or preferential treatment on the basis of ownership or otherwise goes against the spirit of fair competition. Every policy should be competitively neutral amongst all players, whether these are private enterprises, public sector enterprises or government departments engaged in non- sovereign commercial activity.
(iii) Procedures should be rule bound, transparent, fair and nondiscriminatory.
(iv) There should be institutional separation between policy making, operations and regulation.
(v) Where a separate regulatory arrangement is set up the functioning of the regulator should be consistent with the principles of competition as far as possible.
(vi) Control over essential facilities by dominant enterprises undermines competition by denying access to new entrants. Third party access to essential facilities on reasonable fair terms will ensure effective competition and, therefore, should be provided in law. However, what constitutes an essential facility may differ on a case to case basis.


8. COMPETITION ACT, 2002 – AN OVERVIEW
As the Indian economy moved from a regulated regime towards an open market regime, there was an urgent requirement to enact legislation for fostering competition and preventing anti-competition activities. In line with the international trend and to cope up with the changing realities, the existing Monopolies and Restrictive Trade Practices Act, 1969 was repealed and the Competition Act, 2002 was enacted. Subsequently certain amendments were made to the Act in 2007 by The Competition (Amendment) Act, 2007.
The objective of Competition Act, 2002 is to position the competition policy with pragmatic options to promote the spirit of competition and harmonize the conflicts caused by the volatility of globalised markets. The Act provides for a regulatory framework of rules covering the critical areas of competition namely:
§ Anti competitive agreements among enterprises
§ Abuse of dominant position in the market
§ Combinations / mergers between enterprises
Competition Act, 2002 aims at promoting free and fair competition in India and to protect the interests of consumers. The act provides for the establishment of a regulatory body called the “Competition Commission of India” with the basic functions of administration and enforcement of law and competition advocacy.
Competition Act, 2002 is a comprehensive enactment addressing contemporary concerns of competition and future possibilities that impact the sustainable economic development. The Act consists of 66 sections dealt with fewer than nine chapters covering the following areas:
I. Preliminary (Sections 1 & 2)
II. Prohibition of certain agreements, abuse of dominant position and regulation of combinations (Sections 3 to 6)
III. Competition Commission of India (Sections 7 to 17)
IV. Duties, Powers and Functions of Commission (Sections 18 to 40)
V. Duties of Director General (Section 41)
VI. Penalties for contravention of orders of Commission and non-compliance with its directions (Sections 42 to 48)
VII. Competition advocacy (Section 49)
VIII. Finance, Accounts and Audit (Sections 50 to 53)
VIIIA Competition Appellate Tribunal (Sections 53A to 53U)
IX. Miscellaneous (Sections 54 to 66)
Apart from dealing with the competition misconduct, the Act also envisages a promotional role. The Competition Commission of India has an advocacy role in advising Government and creating awareness and imparting training on competition issues.
Important definitions
"Acquisition" means, directly or indirectly, acquiring or agreeing to acquire— (i) shares, voting rights or assets of any enterprise; or (ii) control over management or control over assets of any enterprise. (Sec.2 (a))

"Agreement" includes any arrangement or understanding or action in concert,—
(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings. (Sec.2 (b))

“Cartel" includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services. (Sec.2 (c))

"Consumer" means any person who—
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, whether such purchase of goods is for resale or for any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such
services are availed of with the approval of the first-mentioned person whether such hiring or availing of services is for any commercial purpose or for personal use. (Sec.2 (f))

"Enterprise" means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space. (Sec.2 (h))

Explanation.-—For the purposes of this clause,—
(a) "activity" includes profession or occupation;
(b) "article" includes a new article and "service" includes a new service;
(c) "unit" or "division", in relation to an enterprise, includes—
(i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods;
(ii) any branch or office established for the provision of any service.

"Goods" means goods as defined in the Sale of Goods Act, 1930 (3 of 1930) and includes—
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in India, goods imported into India. (Sec.2 (i))

"Person" includes—
(i) an individual;
(ii) a Hindu undivided family;
(iii) a company;
(iv) a firm;
(v) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(vi) any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(vii) Any Body corporate incorporated by or under the laws of a country outside India;
(viii) a co-operative society registered under any law relating to cooperative societies;
(ix) a local authority;
(x) every artificial juridical person, not falling within any of the preceding sub-clauses; (Sec.2 (l))

"Practice" includes any practice relating to the carrying on of any trade by a person or an enterprise. (Sec.2 (m))

"Price", in relation to the sale of any goods or to the performance of any services, includes every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates to the sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing. (Sec.2 (o))

"Service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. (Sec.2 (u))

"Trade" means any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any services. (Sec.2 (x))

"Turnover" includes value of sale of goods or services. (Sec.2 (y))

Important provisions under the Competition Act, 2002

Prohibition of Anti-Competitive Agreements
The Act assertively prohibits agreements which cause or are likely to cause an appreciable adverse effect on competition within India. Anti competitive agreements fall under two major categories namely Horizontal Agreements and Vertical Agreements.
1. Horizontal Agreements
Horizontal agreements are agreements among competitors which are at the same stage of production and in the same market. The following acts come under Horizontal agreements:
· Price fixing
· Limited production, supply
· Bid rigging / collusive bidding
· Market Sharing
· Refusal to deal
2. Vertical Agreements
Vertical agreements on the other hand, denote an actual or potential relationship of buying or selling to each other which are at different stages or levels of production chain and therefore in different markets. It is not necessary that agreements in question should be a formal or written agreement. Proof of circumstantial evidence is sufficient. The following is a list of Vertical agreements:
· Tie-in-agreements – requiring the purchaser of goods to purchase different goods not required by the purchaser. (Sec.3.4(a))
· Exclusive supply agreements – restraining any dealing in goods other than those of seller. (Sec.3.4(b))
· Exclusive distribution agreements – limits or restricts output or supply of goods, allocation of area or market (Sec.3.4( c))
· Refusal to deal – restricts the classes of customer or sellers (Sec.3.4(d))
· Resale price maintenance – price stipulated by seller to the purchaser on onward resale. (Sec.3.4(e))
3. Cartels
Cartels are bad per se and pose grave threat to competition by distorting free trade. Cartels affect the developing countries more as favorable conditions exist when there are few competitors; products are uniform and leave little scope for competition; existence of communication chances between members; market is hit by either excess capacity or general recession.
Sec.2(c) of the Competition Act, 2002 defines Cartel as – “an association of producers, sellers, distributors, traders or service providers who by agreement among themselves limit, control or attempt to control production, distribution sale or price of trade in goods or provision of services.”
Anti competitive agreements among cartels engaged in identical or similar trade of goods or provision of services in the following areas are prohibited. (Sec.3 (3))
· Determining purchase or sale prices (Sec.3(3a))
· Limiting or controlling production / supply markets technical development, investment or provision of services (Sec.3(3b))
· Sharing of market / sharing of source of production by allocation of geographical areas, number of customer or types of goods or services (Sec.3(3c)
· Resorting to bid rigging or collusive bidding (Sec.3(3d))
Prohibition of abuse of dominant position
Abuse of dominant position refers to the market power of an enterprise to exercise leverage through exploitative and protective business practices. If an enterprise indulges in maneuvers of imposing unfair or discriminatory pricing and imposes barriers for new entrants into relevant market, it attracts the penal provisions of the Act. Sec.4 of the Act explicitly prohibits the abuse of dominant position. There will be an abuse of dominant position, if an enterprise or group acts in the following manner:
i. Conditioning purchase or sale of goods or service; (Sec.4(2)(a)(i))
ii. Predatory pricing of goods or services; (Sec.4(2)(a)(ii))
iii. Restricting production of goods or provision of services or market there for;
iv. Restricting technical or scientific development relating to goods or services to the prejudice of consumers;
v. Indulging in practice or practices resulting in denial of market access;
vi. Concluding contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts;
vii. Using its dominant position in one relevant market to enter into, or protect, other relevant market.

"Dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to -
(i) Operate independently of competitive forces prevailing in the relevant market; or
(ii) Affect its competitors or consumers or the relevant market in its favour.
Predatory price means the sale of goods or provision of services at a price which is below the cost, as may be determined by regulations, of production of goods or provision of services, with a view to reduce competition or eliminate the competitors.
"Group" means two or more enterprises which, directly or indirectly, are in a position to - (i) exercise twenty-six per cent. Or more of the voting rights in the other enterprise; or
(ii) appoint more than fifty per cent. of the members of the board of directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;

Regulation of combinations
Sec.5 of Competition Act, 2002 provides for pre-empting the potential abuse of dominance. A combination is required to be notified to the Competition Commission of India for its approval. For this purpose, the combinations are classified into two groups.
i. Acquisition of one or more enterprises
ii. Merger or amalgamation
The test of validity of acquisition is based on the size of assets and turnover of the parties:
Group I – Parties to the acquisition have assets of more than rupees one thousand crores or turnover more than rupees three thousand crores, (Sec.5 (a) (i) (A), or assets of the value of more than Five hundred million US dollars, including at least Rupees Five hundred crores in India or turnover more than fifteen hundred million US dollars, including at least Rupees fifteen hundred crores in India. (Sec.5 (a) (i) (B).
Group II - Assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores (Sec.5 (a) (ii) (A), or, assets of the value of more than two billion US dollars, including at least Rupees five hundred crores in India or turnover more than six billion US dollars, including at least Rupees fifteen hundred crores in India. (Sec.5 (a) (ii) (B).

The test of validity of merger is based on the size of assets and turnover of the parties:
Group I – Acquisition value of assets of more than rupees one thousand crores or turnover more than rupees three thousand crores after acquisition, (Sec.5(c) (i) (A), or, after acquisition jointly owned assets of five hundred million US dollars, including at least Rupees five hundred crores in India or turnover more than fifteen hundred million US dollars, including at least Rupees fifteen hundred crores in India, (Sec.5(c) (i) (B).
Group II – Assets of value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores, (Sec.5(c) (ii) (A), or, assets of value more than two billion US dollars including at least Rupees five hundred crores in India or turnover more than six billion US dollars including at least Rupees fifteen hundred crores in India, (Sec.5(c) (ii) (B).

Overview of Rules and Regulations under the Competition Act, 2002

1. The Competition Commission of India (General) Regulations, 2009
This Regulation deals with the procedure to be followed by the Competition Commission. The contents of the information or reference to the Commission and the procedure for filing the same are enumerated in the General Regulations. Powers and functions of the Secretary of the Commission are given in detail. The procedure for investigation by the Director General and inquiry by the Commission is also mentioned under the regulations. Procedure for taking evidence and other powers of the Commission have been enumerated in detail. Procedure for imposition of penalty is also mentioned.

2. The Competition Commission of India (Determination of Cost of Production) Regulations, 2009
This Regulation deals with determination of cost of production to derive about anti-competitiveness of an agreement, dominant position of an enterprise and combinations.

3. The Competition Commission of India (Lesser Penalty) Regulations, 2009
This Regulation deals with conditions for lesser penalty, grant of lesser penalty and procedure for grant of lesser penalty in case of cartels.

4. The Competition Commission of India (Meeting for Transaction of Business) Regulations, 2009
Meetings of the Commission for transaction of business and their procedure have been dealt with under this Regulation.

5. The Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009
The Commission can engage experts and professionals in the fields of economics, law, business or other disciplines related to competition. The functions, qualification, experience, classification, remuneration and procedure for selection of experts and professionals have been enumerated in the regulations.

6. Competition Commission of India (Salary, Allowances and other Terms and Conditions of Service of the Chairperson and other Members) Rules, 2003
Salary, allowances and other terms and conditions of service like leave, travel allowance, medical facilities etc. of the Chairperson and other Members of the Competition Commission are dealt with under this Rule.

7. Competition Commission of India (Oath of Office and of Secrecy for Chairperson and other Members) Rules, 2003
This Rule deals with the procedure for oath of office and secrecy of the Chairperson and Members of the Competition Commission.

8. Competition Commission of India (Term of the Selection Committee and the Manner of Selection of Panel of Names) Rules, 2008
This Rule deals with the term of the Selection Committee, manner of selection and the functions of the Committee.

9. Competition Commission of India (Return on Measures for the promotion of Competition Advocacy, awareness and training on Competition Issues) Rules, 2008
On completion of every year, return and statements containing details of measures taken for competition advocacy, creating awareness and capacity building in competition matters should be submitted to the Central Government.

10. Competition Commission of India (Form and Time of Preparation of Annual Report) Rules, 2008
The Commission should submit once in every year an annual report to the Central Government. The annual report should contain details of investigations and inquiries conducted by the Commission, orders passed by the Commission, execution of orders, appeals, matters received regarding combinations, references by Central or State Governments, competition advocacy and administration and establishment matters.

11. Competition Appellate Tribunal (Term of the Selection Committee and the Manner of Selection of Panel of Names) Rules, 2008
This Rule deals with the term of the Selection Committee, manner of selection and the functions of the Committee.

12. Competition Appellate Tribunal (Salaries and Allowances and other Terms and Conditions of Service of the Chairperson and Other Members) Rules, 2009
Salary, allowances and other terms and conditions of service like leave, travel allowance, medical facilities etc. of the Chairperson and other Members of the Competition Appellate Tribunal are dealt with under this Rule.

13. Competition Commission of India (Number of Additional, Joint, deputy of Assistant Director-General other officers and employees, their manner of appointment, qualification, salary, allowances and other terms and conditions of service) Rules, 2009
Salary and allowances of the Director General, Additional, Joint, Deputy or Assistant Director-General and officers and other employees of the office of Director General, their conditions of service, official visits abroad, procedure for recruitment, qualifications etc have been detailed in this Rule.

14. Competition Commission of India (Form of Annual Statement of Accounts) Rules, 2009
The Commission should prepare the annual statement of accounts containing the balance sheet, income and expenditure account and receipt and payment account. The same should be forwarded to the Comptroller and Auditor General of India for the purpose of audit.

9. ANALYSIS OF KEY CONCEPTS AND ISSUES OF COMPETITION LAW
The Competition Act, 2002 deals with four major concepts namely:
· Anti - Competitive Agreements
· Abuse of Dominant position
· Regulation of Combinations
· Competition Advocacy

I. ANTI-COMPETITIVE AGREEMENTS
Firms enter into agreements, which may have the potential of restricting competition. Agreements which cause or are likely to cause appreciable adverse effect on competition are anti-competitive agreements. Anti-competitive agreements are prohibited under the Competition Act, 2002.
Before we go into detail about anti competitive agreements, we need to understand the meaning of agreement. An agreement includes any arrangement or understanding or action in concert which need not be formal or in writing and where such an arrangement is intended to be enforceable by legal proceedings or not. (Sec.2 (b) of Competition Act, 2002)
Further the provisions relating to anti-competitive agreements apply to all enterprises. "Enterprise" means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space. (Sec.2 (h))
Explanation.-— for the purposes of this clause,—
(a) "activity" includes profession or occupation;
(b) "article" includes a new article and "service" includes a new service;
(c) "unit" or "division", in relation to an enterprise, includes—
(i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of any article or goods;
(ii) any branch or office established for the provision of any service.

Anti-competitive agreements fall under two major categories namely Horizontal Agreements and Vertical Agreements. Horizontal agreements are those among competitors while vertical agreements are those relating to an actual or potential relationship of purchasing or selling to each other. Anti-competitive agreements i.e. prohibition of certain agreements is dealt with under Section 3 of the Competition Act, 2002.
Anti-Competitive Agreements

Vertical agreements Horizontal Agreements
Tie-in arrangements Prices
Exclusive supply agreements Quantities
Exclusive distribution agreements Bids
Resale maintenance Market sharing

Section 3 of the Competition Act, 2002 reads as follows:
“(1) No enterprise or association of enterprises or person 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.
(2) Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void.
(3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition:
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
Explanation.— For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding;
(4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance;
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.
Explanation. — For the purposes of this sub-section,—
(a) "Tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
(b) "Exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person;
(c) "Exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods;
(d) "Refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought;
(e) "Resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.
(5) Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) The Copyright Act, 1957 (14 of 1957);
(b) The Patents Act, 1970 (39 of 1970);
(c) The Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) The Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) The Designs Act, 2000 (16 of 2000);
(f) The Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
(ii) The right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.”

Horizontal Agreements
Agreements between two or more enterprises that are at the same stage of the production chain and in the same market constitute the horizontal variety. An example of such agreement is the one between enterprises dealing in the same product or products. If parties to the agreement are both producers or retailers (or wholesalers) they will be deemed to be at the same stage of the production chain.
The main goal of Competition Law is the prevention of economic agents from distorting the competitive process either through agreements with other companies or through unilateral actions designed to exclude actual or potential competitors. It needs to control agreements among competing enterprises (horizontal agreements) on prices or other important aspects of their competitive interaction.
The Competition Act presumes that the following four types of agreements between enterprises, involved in the same or similar manufacturing or trading of goods or provision of services have an appreciable adverse effect on competition :
· Agreements regarding prices - These include all agreements that directly or indirectly fix the purchase or sale price. This is also known as Price-fixing.
"Price" in relation to the sale of any goods or to the performance of any services, includes every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates to the sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing.
The term price fixing can be defined as a understanding or agreement between two or more persons on what prices or range of prices would be paid by others for return of goods or services. The prices can be fixed by buyers or sellers. The term price includes many components of price consisting of discounts, rebates, delivery charges, special fees etc. So an agreement concerned with any of these components of price amounts to price fixing.
Price fixing requires a conspiracy between two or more sellers or buyers; the purpose is to coordinate pricing for mutual benefit of the traders. Sellers might agree to sell at a common target price; set a common minimum price; buy the product from a supplier at a specified maximum price; adhere to a price book or list price; engage in cooperative price advertising; standardize financial credit terms offered to purchasers; use uniform trade-in allowances; limit discounts; discontinue a free service or fix the price of one component of an overall service; adhere uniformly to previously-announced prices and terms of sale; establish uniform costs and markups; impose mandatory surcharges; purposefully reduce output or sales in order to charge higher prices; or purposefully share or pool markets, territories, or customers.

· Agreements regarding quantities - These include agreements aimed at limiting or controlling production, supply, markets, technical development, investment or provision of services.
An agreement to restrict production or output is illegal because reducing the supply of a product will ultimately result in increase in its price.

· Agreements regarding market sharing - These include agreements for sharing of markets or sources of production or provision of services by way of allocation of geographical area of market or type of goods or services or number of customers in the market or any other similar way.
Competitors in order to make more benefits, agree with each other to divide the markets by territory or on the basis of the customers. Such agreements between competitors are illegal by nature. For example – agreement between cable television companies not to enter each other’s territory.

· Agreements regarding bids (collusive bidding or bid rigging) - These include tenders submitted as a result of any joint activity or agreement.

However there is an exception that the presumption would not apply to a joint venture agreement which increases efficiencies in production, supply, distribution, storage, acquisition or control of goods or provisions of services.
Bid Rigging
Bid rigging is defined as any agreement between enterprises or persons engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding. (Explanation to Section 3(3))
Bid rigging takes place when bidders collude and keep the bid amount at a pre-determined level. Such pre-determination is by way of intentional manipulation by the members of the bidding group. Bidders could be actual or potential ones, but they collude and act in concert.
In simple words, bid rigging is a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance, several other parties also present bids. The bids end up suiting a single player. Besides affecting the end-consumer’s interest, these anti-competitive practices take a toll on the public exchequer as public money is flushed out to wrong hands.
Bid rigging can be difficult to detect. Collusive agreements are usually reached in secrecy with only the participants privy to the scheme of conspiracy. However, suspicions may be aroused by unusual bidding or something a bidder says or does. Certain patterns of bidding would seem to be at odds with a competitive market and suggest the possibility of collusion.
Certain patterns in bids can give rise to suspicion of collusion. Situations of suspicious behavior include the following:
· The bid offers by different bidders contain same or similar errors and irregularities (spelling, grammatical and calculation). This may indicate that the designated bid winner has prepared all other bids (of the losers) as well.
· Bid documents contain the same corrections and alterations indicating last minute changes.
· A bidder seeks a bid package for himself/herself and also for the competitor.
· A bidder submits his/her bid and also the competitor's.
· Multiple bids are brought to a bid opening.
· A bidder makes a statement indicating advance knowledge of the offers of the competitors.
· A bidder makes a statement that a bid is a 'complementary', 'token' or 'cover' bid.
· A bidder makes a statement that the bidders have discussed prices and reached an understanding.
Cartels
Cartel as defined under Section 2(c) of the Competition Act, 2002 includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services.
Cartels are created by anti-competitive horizontal agreements among business enterprises. They pose a great threat to competition and ultimately tend to destroy the free trade. In fact cartels are secret agreements between business firms with the sole objective of fixing prices or sharing markets between them.
The important characteristics that constitute a Cartel are:
· an agreement which includes arrangement or understanding;
· agreement is amongst producers, sellers, distributors, traders or service providers i.e. parties are engaged in identical or similar trade of goods or provision of service, and
· agreement aims to limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services
In DGIR vs. Modi Alkali (2002) 51 CLA 93 (MRTPC), it was observed that, three essential ingredients of Cartel are – (1) Parity of prices; (2) Agreement by way of concerted action suggesting conspiracy and (3) Gain monopoly or restrict or eliminate competition.
Cartels are perceived to be productive structures which exploit consumers and reduce the consumer welfare surplus. The damage caused by Cartels is enormous and is supposed to have damaged economies to a great extent. Japan, United Kingdom, United States of America, Sweden and Finland are some of the countries that have been affected by Cartels. Even in India cartels are found in various sectors, namely cement, steel, tyres, trucking, family planning device (Copper T) etc. India is also believed to be a victim of overseas cartel in soda ash, bulk vitamins, petrol etc. All these tend to raise the price or reduce the choice of consumers. The business houses are affected most by cartels as the cost of procuring inputs is enhanced or choice is restricted making them uncompetitive, unviable or be satisfied with less profits.
Some of the conditions that are conducive to formation of cartels are:
· few competitors
· high entry and exit barriers
· similar products
· similar production costs
· excess capacity
· high dependence of the consumers on the product
· history of collusion
There are various types of cartels. Some of them are:
a) Customer cartels – Such cartels allocate customers or suppliers to certain producers.
b) Territorial Cartels - Territorial cartels divide market share by allocating the area geographically.
c) Price Cartels – Price is agreed upon among the members.
d) Quota Cartels - Quota Cartels limit the production output of participating members and thus artificially create supply constraint.
e) Specialization Cartels - Here members of the cartel assign lines of commerce/product or production techniques among themselves. This is basically a non-price oriented strategy involving division of labour.

Vertical agreements
Vertical agreements are those agreements between enterprises at different stages of the production chain. For example, an agreement between the manufacturer and a distributor is a vertical agreement. It is not necessary that the agreement should be a formal or written agreement. Proof of circumstantial evidence is sufficient. The question whether the vertical agreement is causing appreciable adverse effect on competition is to be determined by rule of reason, which essentially means that the positive as well as the negative impact of such agreement on competition will have to be taken into account before coming to any conclusion.
The various types of Vertical agreements envisaged under the Competition Act, 2002 are:
a) Tie-in-arrangement
This arrangement includes any agreement that requires the purchaser of the goods to purchase different goods that is not required by the purchaser. Its objective is to pressurize or force the customer to buy a particular product or lease a product or service and if he is not interested to threaten him by withholding any other product or service. A tie-in arrangement will become illegal when an enterprise uses its market power that it has on a particular product and by taking advantage does not sell or lease that product to the customer until and unless he agrees to buy another product that the enterprise wants him to buy.
The typical harmful or anticompetitive scenario associated with tying is a leveraging scenario involving market power in the tying good. The concern is that a manufacturer with strong market power in product A (tying good) will tie it to product B (tied good), in which the manufacturer has no market power, thereby leveraging market power from product A to product B. If this leveraging effect is significant it may shut out or "foreclose" otherwise viable competition in B, resulting in higher prices and consumer harm.
For example, there is a medical shop in a remote place and it puts a condition that whoever wants to buy medicines from that shop should also buy two litres of orange juice. Under such circumstances, the customer is forced to buy the orange juice although he might not require the juice. Therefore the medical shop has used its market influence to force the sale of an entirely different product along with the product that is required.
Some examples of tie-in-arrangement which was held as restrictive by the MRTP Commission are given hereunder:
i. Forcing customers to enter into service contracts while buying goods.
ii. School making it compulsory to buy uniforms and books only from its own shop.
iii. Forcing customers to buy gas stoves or pressure cookers while giving gas connection.
iv. Compelling the customer who is buying a television to also buy a voltage stabilizer from the seller.
b) Exclusive supply agreement
Any agreement that restricts the purchaser in the course of his trade from acquiring or dealing in any goods other than those of the seller or any other person is considered as an Exclusive supply agreement. Such agreements result in major harm to the competition as the competitors of the seller are not in a position to compete in the market. Generally, requirements and arrangements referring to quality, specifications, quality control, raw materials, packing materials, quantities, terms of delivery, etc., may be made. However, if either the buyer or the seller has significant market share then entering into a long-term exclusive supply agreement may cause competition concerns.
For example, buyer asking the manufacturer not to manufacture identical goods for any other buyer without the consent of the buyer is considered to be restrictive.
c) Exclusive distribution agreement
Any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods is considered as an Exclusive distribution agreement.
In an exclusive distributor agreement, the supplier and wholesaler-distributor agree that the wholesaler-distributor will deal exclusively with the supplier for certain products. Such agreements foreclose the supplier's competitors from accessing the marketplace through the exclusive distribution network. Such arrangements will violate the competition law if their effect substantially lessens or tends to create a monopoly in any line of commerce. An analysis of certain factors will reveal the following:
· Whether the supplier has substantial market power to unreasonably restrain trade in the relevant market (i.e., the power to raise prices significantly above the competitive level without losing all of one's business);
· The effects of the restrictions on interbrand competition; and
· The justification for imposing the restrictions.
Some examples of exclusive dealing arrangement which was prohibited by the MRTP Commission are given hereunder:
i. Exclusive dealership clause was not permitted when it was found that machines are not very sophisticated or technically complex to warrant exclusivity in distributorship. (DGIR vs. Mahindra & Mahindra Ltd. (1999) 33CA 66 (MRTPC)
ii. Agreement that distributor will purchase goods only from the manufacturer or from other as may be nominated by him. (DGIR vs. Mundipharma AG (1995) 18 CLA 272 (MRTPC)
iii. Exclusive dealing will not be permitted unless it is shown that it is in public interest. (DGIR vs. Kothari Electronics (1997) 25 CLA 249 (MRTPC DB)
d) Refusal to deal
Refusal to deal includes any agreement which restricts or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought.
There is no absolute right to be supplied, and though in general businesses have the freedom to determine who to deal with, there are circumstances where a refusal to deal will be illegal. Competitors may agree not to deal with others or to do so only on collectively determined terms, with the intention of significantly damaging these businesses or reducing the competition in the market.
In 1984, a case came before the MRTP Commission as the Retail and Dispensing Chemists Association, Bombay, directed all the wholesalers and retailers to boycott a Nestle product, till the company met its demands. The Commission observed that the impact of the chemists’ boycott could, by no stretch of imagination, be considered negligible. The boycott represents an attempt to deny the consumers certain products, which they are used to and, therefore, the hardship to such consumers is indisputable. The Commission accordingly passed a ‘cease and desist’ order. (RTP Enquiry No. 10/1984).
Even before that, in 1983, the All India Organisation of Chemists & Druggists (AIOCD) had to face a similar stricture in a similar case. It issued a circular to various pharmaceutical companies, threatening that if they dealt with the State cooperative organisations and appointed them as Stockists, granting them sale rights, it would expose the companies to a boycott by its members. The case was decided in 1993, and the Commission observed this to be the restrictive trade practice of refusal to deal (RTP Enquiry No. 37/1983, decided on 25-6-1993).
Nevertheless, undeterred, AIOCD decided to boycott the “Septran” range of products, manufactured by Burroughs Wellcome (India) Ltd. When the case came up before the Commission, AIOCD pleaded that it did not issue any such circular to the dealers, threatening to boycott the products. However, the Commission observed that a boycott could be conducted by way of an understanding among those perpetrating it, or by word of mouth among them. Merely because of the absence of a circular, calling upon the sellers to boycott, it could not be said that there was no boycott (1996, 21 CLA 322).
In another case, the MRTP commission again issued a cease and desist order against a boycott. In this case the material published in the bulletin of Retail and Dispensing Chemists Association read in one part as ‘it is necessary that all retailers suspend dealing in Wander (pharmaceutical company) and ensure no retailer sells even the other products of Wander Ltd.’. The Commission held that a boycott of such nature might go against public interest by not making available an essential commodity. [1999 CTJ 436 (MRTP)].

e) Resale price maintenance
Resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.
In other words, resale price maintenance refers to any attempt by an upstream supplier to control or maintain the minimum price at which the product is resold by its customer. This prevents the resellers from competing too fiercely and thereby drives down its profits. Insisting that a product be resold at a specific margin, or limiting the discounts that a reseller may offer, in essence restricts the reseller’s ability to set a price and is accordingly prohibited.
In a leading case abroad (Leegin’s case), the Court held that resale price maintenance could be used for anti-competitive purposes to harm consumer welfare in the following manner:
· Manufacturers with market power could use Resale Price Maintenance to discourage retailers from selling or promoting competing products by smaller rivals. Further retailers with market power could use Resale Price Maintenance agreements to forestall innovation in distribution that decreases costs.
· Resale Price Maintenance could be used to facilitate a horizontal cartel at the manufacturer level by making it easier to detect “cheating” because prices at the retail level are more transparent than prices at the wholesale level). It could also be used to facilitate a retailer cartel, and therefore, Resale Price Maintenance arrangements that are requested by retailers would raise concerns.
· Resale Price Maintenance agreements may be anticompetitive if they are used by a majority of firms in a market. Under such circumstances, the Resale Price Maintenance agreements could deprive consumers of a meaningful choice between high-service and low-service outlets.

In Dunlop Pneumatic Tyre Co Ltd v. Selfridge & Co Ltd [1915] AC 847, an English contract law case, the House of Lords held that Dunlop Tyres (a tyre manufacturer) could not enforce an agreement between a tyre dealer and a tyre buyer to pay a £5 penalty if the tyres were sold below its floor price. The decision was based on privity of contract.
Association of lorry owners fixing freight rates and not allowing members of association to charge price lower than that fixed by association is restrictive. (Calcutta Goods Transport Association vs. Truck Operators Union – 1984(3) CLJ 265).
f) Others
Other forms of Vertical Agreements will include Franchise agreement, technical transfer and Intellectual Property licence agreement, Selective distribution agreement, Exclusive purchase obligation agreement, competitors entering into cross supply/licence etc. Whether these agreements are violative of the competition law will depend on the terms and conditions of each agreement.

Agreements not anti-competitive
Agreements permitted by law are not anti-competitive. The Act gives due recognition to intellectual property rights, wherein the prohibition against anticompetitive agreements will not restrict the right of any person to restrain any infringement of, or to impose reasonable conditions as may be necessary for protecting, any rights under the following legislations:
a. The Copyright Act 1957,
b. The Patents Act 1970
c. The Trade and Merchandise Marks Act, 1958
d. The Geographical Indications of Goods (Registration and Protection) Act, 1999
e. The Designs Act, 2000
f. The Semi-conductor Integrated Circuits Layout-Design Act, 2000

Thus any agreement for the purpose of restraining infringement of such Intellectual Property Rights or for imposing reasonable conditions for protecting such rights will not be subject to the prohibition against anticompetitive agreements. (Section 3(5)(i) of Competition Act, 2002).
Similarly, exports enjoy exemptions from such prohibition, which will not apply to the right of any person to export goods from India to the extent to which the agreement relates exclusively to the export of goods or services. (Section 3(5)(ii) of Competition Act, 2002).
Inquiry by Competition Commission into anti-competitive agreements
Section 19 empowers the Commission to inquire in to any alleged contravention of the prohibition of anti-competitive agreements under section 3 of the Competition Act, 2002. It can do on its own motion or on receipt of a complaint from any person, consumer or their association or trade association; or a reference made to it by the Central Government or a State Government or a statutory authority.
While determining whether an agreement has an appreciable adverse effect on competition, the Commission will take into consideration all or any of the following factors, namely:—
a. creation of barriers to new entrants in the market;
b. driving existing competitors out of the market;
c. foreclosure of competition by hindering entry into the market;
d. accrual of benefits to consumers;
e. improvements in production or distribution of goods or provision of services;
f. promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.
Section 26 provides for the procedure for inquiry relating to an apprehended anti-competitive agreement. Accordingly, the Commission, if it is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation made in to the matter. The Director General shall, on receipt of such direction from the Commission, submit a report of his findings within such period as may be specified by the Commission. On the other hand, on receipt of a compliant, if the Commission is of the opinion that there exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of costs, if necessary. After the Director General submits his report of investigation, the Commission shall forward a copy of the report to the parties concerned or to the Central Government or to the State Government or to the statutory authority, as the case may be. If the report of the Director General relates to a complaint and such report recommends that there is no contravention of section 3 (1), the Commission shall give the complainant an opportunity to rebut the findings of the Director General. If after hearing the complainant, the Commission agrees with the recommendations of the Director General, it shall dismiss the complaint. If after hearing the complainant, the Commission is of the opinion that further inquiry is called for, it shall direct the complainant to proceed with the complaint. If the report of the Director General relates to a reference made by a Government or statutory authority and recommends that there is no contravention of the prohibition under section 3(1), the Commission shall invite comments of the Government concerned or of the statutory authority on the report. On receipt of such comments, the Commission shall return the reference if there is no prima facie case or proceed with the reference as a complaint if there is a prima facie case. If the report of the Director General recommends that there is a contravention of section 3 (1), and also if the Commission is of the opinion that further inquiry is called for, it shall inquire in to such contravention.
Where after inquiry the Commission finds that any agreement is in contravention of section 3, it may pass all or any of the following orders, namely:—
(a) direct any enterprise or association of enterprises or person or association of persons, as the case may be involved in such agreement to discontinue and not to re-enter such agreement;
(b) impose such penalty, as it may deem fit which shall not be more than ten per cent of the average annual turnover of the last three preceding financial years, up on each such person or enterprises which are parties to such agreement.
(c) Direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order of the Commission;
(d) Direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;
(e) Pass such orders as it may deem fit.
In case any agreement under section 3 has been entered into by any cartel, the Commission shall impose upon each producer, seller, distributor, trader, or service provider included in that cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or ten per cent of the average of the turnover of the cartel for the last preceding three financial years, whichever is higher.

II. ABUSE OF DOMINANT POSITION
Abuse of dominant position is a serious violation under the Competition Act, 2002. Section 4 of the Act specifically states that no enterprise should abuse its dominant position. It also states that there will be an abuse of dominant position if an enterprise imposes unfair or discriminatory conditions or prices in the purchase or sale of goods or provision of services or if it limits or restricts production of goods or provision of services or technical and scientific development or it denies market access, etc.
The Competition Act does not frown on dominance as such. An enterprise is free to grow as large as it pleases or achieve as big a market share as it can. The problem arises only when there is an abuse of dominance.
Abuse of a dominant position occurs when a dominant firm in a market, or a dominant group of firms, engages in conduct that is intended to eliminate or discipline a competitor or to deter future entry by new competitors, with the result that competition is prevented or lessened substantially.
Recently, a fine of 1.06 billion Euros was imposed on the world’s biggest chipmaker Intel by the European Commission, for abuse of dominance after the Commission found that Intel had engaged in a behaviour aimed at squeezing out its main rival, AMD, through illegal secret rebates so that computer makers mostly use Intel chips.
The recent case of the Belgium’s dominant telecom operator is another example of abuse of dominance. The Belgian Competition Council levied a record fine to date of 66.3 million Euros ($92.6 million). Between 2004 and 2005, the group’s mobile phone arm, Proximus, charged its end-user prices that were lower than the wholesale prices it charged to competitors to use its network, thus ensuring that they would make losses or be forced out of business.
In the Microsoft case, for example, the allegation was that Microsoft which was dominant (having 95% share) in the operating software market abused its position to gain advantages in the market for applications software viz. Internet browser and MP3 player.
In the famous United Brands case in Europe, it was alleged that the company abused its dominance by refusing to supply to a long-standing distributor and indulged in discriminatory prices by charging excessively in Denmark where it was dominant while it charged much less in Ireland where it faced effective competition.
Abuse of dominance cases are particularly common in infrastructure sectors since these sectors have natural monopoly or network features such as ports, airports, highways, electricity transmission or distribution and gas pipelines.
Section 4 of the Competition Act, 2002 reads as follows:
“(1) No enterprise or group shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group —-
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
Explanation — For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or
(b) limits or restricts—
(i) production of goods or provision of services or market there for; or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access in any manner; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.
Explanation.—For the purposes of this section, the expression—
(a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.
(b) "predatory price" means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.
(c)“group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.”

How to determine abuse of dominance?
Determination of abuse of dominance by an enterprise or group involves three stages:
· Determination of the relevant market which is assessed on the basis of relevant product or geographical market.
· Determination of dominance in that relevant market.
· Determination of an "abuse" of that dominant position.

Dominant position means a position of strength enjoyed by an enterprise, in the relevant market, in India, which enable it to –
i. Operate independently of competitive forces prevailing in the relevant market; or
ii. Affect its competitors or consumers or the relevant market in its favour.
Therefore the two elements of dominance that need to be proved together are the position of strength of an enterprise and the behaviour that affects the competitors or consumer or market.
"Relevant market" means the market which may be determined with reference to the relevant product market or the relevant geographic market or with reference to both the markets.
“Relevant geographic market" means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas.
“Relevant product market" means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use.

Predatory pricing
Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly, and hypothetically could then raise prices above what the market would otherwise bear.

According to Explanation to Section 4 of the Competition Act, 2002, predatory price means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

The Competition Commission of India (Determination of Cost of Production) Regulations, 2009 has been enacted to determine the cost in predatory pricing. According to Regulation 3(1), cost will generally be taken as average variable cost, as a proxy for marginal cost. But in specific cases, the Commission may, depending on the nature of the industry, market and technology used, consider any other relevant cost concept such as avoidable cost, long run average incremental cost, market value etc. Meanings of important terms under the regulations are given hereunder:
a. Average variable cost means the total variable cost divided by total output during the referred period.
b. Total variable cost means the total cost minus the fixed cost and share of fixed overheads, if any, during the referred period.
c. Total cost means the actual cost of production including items, such as cost of material consumed, direct wages and salaries, direct expenses, work overheads, quality control cost, research and development cost, packaging cost, finance and administrative overheads attributable to the product during the referred period.
d. Total avoidable cost means the cost that could have been avoided if the enterprise had not produced the quantity of extra output during the referred period.
e. Long run average incremental cost is the increment to long run average cost on account of an additional unit of product, where long run cost includes both capital and operating costs.
f. Market value means the consideration which the customer pays or agrees to pay for a product which is sold or provided or can be sold or provided, as the case may be.
g. Marginal cost is the change in total cost that arises when the quantity produced changes by one unit.

The Competition Commission has adopted the Average Variable Cost as the appropriate measure of cost to determine the predatory price. There is a general presumption that where the enterprise sets its sale price below its Average Variable Cost, then it has engaged in predatory pricing.

Factors to be considered while deciding abuse of dominance
Section 19(4) of the Competition Act, 2002 stipulates that the Competition Commission while inquiring whether an enterprise enjoys a dominant position or not should considered all or any of the following factors, namely:—
a) Market share of the enterprise -
The market share of the enterprise will depend upon the nature of sector and issue under investigation. For example, the market share of an airline could be measured on the basis of number of flights, number of aircrafts; number of passenger's carrying capacity, the city pairs etc. and each parameter may give different results.

b) Size and resources of the enterprise –
Large size and superior financial position or resources may be a contributing factor to a dominant market position.
In India, the cash rich BCCI with virtual strangle-hold over cricket has not accorded recognition to the ICL as a league, and has denied access to cricket grounds and prevented ICL players and coaches from participating in BCCI sponsored activities. The financial clout and other resources at the command of BCCI enabled it to promote its own sponsored IPL by excluding the ICL formed by Essel Group in May, 2007. The presence of two cricket leagues namely the IPL and ICL would have led to increased competition to the benefit of cricket fans, cricketers and market as a whole. (News item in Economic Times of 28th April, 2009 under the caption “Cricket and the Competition Law”)

c) Size and importance of the competitors -
The competitor’s size and importance need to be determined while checking for abuse of dominance. Market share of one competitor in the market will determine the competition constrain on the other player. For example both Pepsi and Coke enjoy a major share in the soft drink market which reflects that one has ability to exercise competitive pressure on another and therefore, neither of them ought to be determined as dominant in the relevant market.

d) Economic power of the enterprise including commercial advantages over competitors-
Superior market position or resources may be a causative factor to a dominant market position. Life Insurance Corporation of India has the benefit of prior entry and that of sovereign guarantee in the personal insurance market and thereby has commercial advantage over new entrants.

e) Vertical integration of the enterprises or sale or service network of such enterprises –
The vertical integration and benefit of well-established distribution system may also act as a barrier to entry as it can discourage or impede access for a potential entrant to the market.
Sales network may also be a relevant factor and have a commercial advantage over its rivals.

f) Dependence of consumers on the enterprise –
In public utilities, the dependence of the consumers is quite high. For example – Most of the electricity boards are state owned with very few private companies in this sector. Likewise the LPG market is mostly state owned.

g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise –
Public sector undertakings do have an edge over new private sector entrants. For example in India, Shell and Reliance ventured into marketing of oil in a big way but had to close their oil dispensing outlets due to absence of competitive neutrality between public sector and private sector by confining the subsidy only to public sector oil companies.

h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers –
Barriers to entry, exit or expansion and durability to market power are important factors in the assessment of dominance. The substantial entry barriers shield existing competitors from competition and foster market power. The barriers could be structural, regulatory or strategic one. The structural barriers could be on account of peculiar nature of industry e.g. cost advantages for the incumbent, supplier-customer relationship, switching cost, sunk cost, economies of scale and scope, technological knowhow etc. An idle capacity of a player in industry could discourage a prospective entrant to enter the market. The regulatory barriers are those which are created by the State in the form of laws, regulations and administrative practice e.g. tariff and non-tariff barriers. The strategic barriers are those which are created by the incumbent in a market which have the effect of deterring entry e.g. long term supply contracts, exclusivity contracts, over investment in capacity or advertising, exclusive dealing or tying etc.
i) Countervailing buying power –
An enterprise may be constrained not only by actual and potential competitors but also by its customers. If there are competitors with adequate capacities to meet demand, a buyer's threat to switch to another supplier may have a considerable disciplinary effect on a supplier that sells a major part of its production to a single buyer.

j) Market structure and size of market –
Market structure which is characterized by a sole supplier of goods/services either on standalone basis or by virtue of common ownership makes conditions conducive to exercise market power affecting competition, consumers or market. The UK Competition Authority has recently noted that common ownership of seven airports of British Airport Authority (BAA) is preventing the development of competition and also obstructs the scope for inter se competition and has therefore, directed the BAA to sell off London Gatwick, London Stansted and either Edinburgh or Glasgow airports to a buyer approved by it within a period of two years. (Press Release dated 19th March, 2009 by the UK Competition Commission).

k) Social obligations and social costs –
Social obligations performed by an enterprise should be given consideration by the Commission. For example, while considering the dominance of the Indian Railways, its important role in ensuring connectivity between various places in the country at affordable fares should be taken into consideration.
l) Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition –
An enterprise’ contribution to economic development should also be taken into consideration while determining the dominant position of the enterprise.

m) Any other factor which the Commission may consider relevant for the inquiry.

Factors to be considered while determining relevant market
For determining whether a market constitutes a relevant market, the Commission should give due regard to the ‘relevant geographic market’ and ‘relevant product market’.
Section 19(6) of the Competition Act, 2002 stipulates that the Competition Commission while determining the relevant geographic market should consider all or any of the following factors, namely:-
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales services.

Section 19(7) of the Competition Act, 2002 stipulates that the Competition Commission while determining the relevant product market should consider all or any of the following factors, namely:-
(a) physical characteristics or end-use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialized producers;
(f) classification of industrial products.

Inquiry by Competition Commission into abuse of dominant position
Section 19 empowers the Commission to inquire in to any alleged contravention of abuse of dominant position under section 4 of the Competition Act, 2002. It can do on its own motion or on receipt of a complaint from any person, consumer or their association or trade association; or a reference made to it by the Central Government or a State Government or a statutory authority.
Section 26 provides for the procedure for inquiry relating to abuse of dominant position. Accordingly, the Commission, if it is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation in to the matter. The Director General shall, on receipt of such direction from the Commission, submit a report of his findings within such period as may be specified by the Commission. On the other hand, on receipt of a compliant, if the Commission is of the opinion that there exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of costs, if necessary. After the Director General submits his report of investigation, the Commission shall forward a copy of the report to the parties concerned or to the Central Government or to the State Government or to the statutory authority, as the case may be. If the report of the Director General relates to a complaint and such report recommends that there is no contravention of section 4, the Commission shall give the complainant an opportunity to rebut the findings of the Director General. If after hearing the complainant, the Commission agrees with the recommendations of the Director General, it shall dismiss the complaint. If after hearing the complainant, the Commission is of the opinion that further inquiry is called for, it shall direct the complainant to proceed with the complaint. If the report of the Director General relates to a reference made by a Government or statutory authority and recommends that there is no contravention under section 4, the Commission shall invite comments of the Government concerned or of the statutory authority on the report. On receipt of such comments, the Commission shall return the reference if there is no prima facie case or proceed with the reference as a complaint if there is a prima facie case. If the report of the Director General recommends that there is a contravention of section 4, and also if the Commission is of the opinion that further inquiry is called for, it shall inquire in to such contravention.
Where after inquiry the Commission finds that action of an enterprise in a dominant position is in contravention of section 4, it may pass all or any of the following orders, namely:—
(a) Direct any enterprise or association of enterprises or person or association of persons, as the case may be involved in abuse of dominant position to discontinue such abuse of dominant position.
(b) Impose such penalty, as it may deem fit which shall not be more than ten per cent of the average annual turnover of the last three preceding financial years, up on each such person or enterprises which are parties to such abuse.
(c) Direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any.
(d) Pass such orders as it may deem fit.

Division of enterprise enjoying dominant position
Section 28 empowers the Commission to direct division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its dominant position.
The Order for division of enterprise by the Commission may provide for all or any of the following matters namely:-
a) the transfer or vesting of property, rights, liabilities or obligations;
b) the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise;
c) the creation, allotment, surrender or cancellation of any shares, stocks or securities;
d) the formation or winding up of an enterprise or the amendment of the memorandum of association or articles of association or any other instruments regulating the business of any enterprise;
e) the extent to which, and the circumstances in which, provisions of the order affecting an enterprise may be altered by the enterprise and the registration thereof;
f) any other matter which may be necessary to give effect to the division of the enterprise.

Notwithstanding anything contained in any other law for the time being in force or in any contract or in any memorandum or articles of association, an officer of a company who ceases to hold office as such in consequence of the division of an enterprise will not be entitled to claim any compensation for such cesser.


III. REGULATION OF COMBINATIONS

The Competition Act, 2002 provides for regulation of combinations. Combination includes acquisition of shares, control, voting rights or assets, mergers and amalgamations. Only those combinations where the total value of the assets or the turnover of the combining parties exceeds the threshold limits prescribed are regulated by the Act. However the provisions of the Competition Act, 2002 relating to regulation of combinations i.e. Section 5 and 6 have not yet come into force as the same has not yet been notified.

Section 5 of the Competition Act, 2002 reads as follows:
“The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if—
(a) any acquisition where—
(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have,—
(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being acquired, would belong after the acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or

(B)in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India; or]
(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, if—
(i) the enterprise over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control jointly have,—
(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India; or]
(c) any merger or amalgamation in which—
(i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case may be, have,—
(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,—
(A) either in India, the assets of the value of more than rupees four-thousand crores or turnover more than rupees twelve thousand crores; or
(B)in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India;]
Explanation — for the purposes of this section,—
(a) "Control" includes controlling the affairs or management by—
(i) one or more enterprises, either jointly or singly, over another enterprise or group;
(ii) one or more groups, either jointly or singly, over another group or enterprise;
(b) "Group" means two or more enterprises which, directly or indirectly, are in a position to —
(i) exercise twenty-six per cent. or more of the voting rights in the other enterprise; or
(ii) appoint more than fifty per cent of the members of the board of directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;
(c) The value of assets shall be determined by taking the book value of the assets as shown, in the audited books of account of the enterprise, in the financial year immediately preceding the financial year in which the date of proposed merger falls, as reduced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout design or similar other commercial rights, if any, referred to in sub-section (5) of section 3.”

Section 6 of the Competition Act, 2002 reads as follows:
“(1) No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void.
(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission, in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within thirty days of—
(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of that section.
(2A)No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission under sub-section(2) or the Commission has passed orders under section 31,whichever is earlier.
(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in accordance with the provisions contained in sections 29, 30 and 31.
(4) The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.
(5) The public financial institution, foreign institutional investor, bank or venture capital fund, referred to in sub-section (4), shall, within seven days from the date of the acquisition, file, in the form as may be specified by regulations, with the Commission the details of the acquisition including the details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement, as the case may be.
Explanation—For the purposes of this section, the expression—
(a) "foreign institutional investor" has the same meaning as assigned to it in clause (a) of the Explanation to section 115AD of the Income-tax Act, 1961(43 of 1961);
(b) "venture capital fund" has the same meaning as assigned to it in clause (b) of the Explanation to clause (23 FB) of section 10 of the Income-tax Act, 1961(43 of 1961).”

Thresholds for Combinations
In case of small size combinations there is less likelihood of appreciable adverse effect on competition in markets in India. Hence the Act provides for sufficiently high thresholds in terms of assets/turnover for mandatory notification to the Commission.
Broad overview of combinations is presented in the form a table below:

Type of combination
Assets / turnover in India
Assets / turnover in or outside India
Acquisition by an acquirer
Joint assets over Rs.1, 000 crores or turnover over Rs.3, 000 crores.
Joint assets over US$500 million including at least Rs.500 crores in India or turnover over US$1,500 million including at least Rs.1500 crores in India.
Acquisition by a group
Group asset over Rs.4, 000 crores or turnover over Rs.12, 000 crores.
Group assets over US$ 2 billion including at least Rs.500 crores in India or turnover over US$6 billion including at least Rs.1500 crores in India.
Acquisition by a single acquirer with similar or identical or substitutable goods or services
Joint assets over Rs.1000 crores or turnover over Rs.3000 crores.
Joint assets over US $ 500 million or turnover over US$ 1500 million including at least Rs.1500 crores in India.
Acquisition by a group with similar or identical or substitutable goods or services
Group assets over Rs.4000 crores or turnover over Rs.12, 000 crores.
Group assets over US$ 2 billion or turnover over US$ 6 billion including at least Rs.1500 crores in India.
Merger or amalgamation of two enterprises
Combined assets over Rs.1000 crores or turnover over Rs.3000 crores.
Combined assets over US$ 500 million or turnover over US$ 1500 million including at least Rs.1500 crores in India.
Merger or amalgamation in a group
Combined assets over Rs.4000 crores or turnover over Rs.12, 000 crores.
Combined assets over US$ 2 billion or turnover over US$ 6 billion including at least Rs.1500 crores in India.

Determination of value of assets
The value of assets will be determined by taking the book value of the assets as shown, in the audited books of account of the enterprise, in the financial year immediately preceding the financial year in which the date of proposed merger falls, as reduced by any depreciation, and the value of assets will include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout design or similar other commercial rights.

Exceptions
Share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund made pursuant to any covenant of a loan agreement or investment agreement will fall outside the combination provisions of the Competition Act, 2002. But these investment institutions should notify the details of the acquisition including the details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement etc. within seven days from the date of acquisition to the Competition Commission.

Compulsory Notice to the Commission
Any person or enterprise that proposes to enter into a combination should give notice to the Competition Commission of India along with prescribed fee within thirty days of:
· Board’s approval in case of merger/amalgamation; or
· Execution of any agreement or document for acquisition.

Combination to take effect
The proposed combination cannot take effect for a period of 210 days from the date it notifies the Commission or till the Commission passes an order, whichever is earlier. If the Commission does not pass an order during the period of 210 days, the combination will be deemed to have been approved.

Factors to be considered while inquiring into Combinations
Section 20(4) of the Competition Act, 2002 stipulates that the Competition Commission while inquiring whether a combination would have an appreciable adverse effect on competition in the relevant market should consider all or any of the following factors, namely:—
(a) actual and potential level of competition through imports in the market;
(b) extent of barriers to entry into the market;
(c) level of combination in the market;
(d) degree of countervailing power in the market;
(e) likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
(f) extent of effective competition likely to sustain in a market;
(g) extent to which substitutes are available or arc likely to be available in the market;
(h) market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
(i) likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
(j) nature and extent of vertical integration in the market;
(k) possibility of a failing business;
(/) nature and extent of innovation;
(m) relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition;
(n) whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Inquiry and Investigation into Combination
Section 20 empowers the Commission to inquire into any combination which has caused or is likely to cause an appreciable adverse effect on competition in India. It can do on its own motion or on receipt of a complaint from any person, consumer or their association or trade association; or a reference made to it by the Central Government or a State Government or a statutory authority. But the Commission should not initiate any inquiry after the expiry of one year from the date on which such combination has taken effect.
Section 29 provides for the procedure for investigation of combination.
· The Commission will issue a show cause notice to the parties to the combination to respond within 30 days of the receipt of the notice as to why investigation in respect of such combination should not be conducted.
· After receipt of the response of the parties to the combination the Commission may call for a report from the Director General and such report should be submitted by the Director General within such time as the Commission may direct.
· If the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall, within seven working days from the date of receipt of the response of the parties to the combination, or receipt of report from the Director General, whichever is later direct the parties to the said combination to publish details of the combination within ten working days of such direction, in such manner, as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination.
· The Commission may invite any person or member of the public, affected or likely to be affected by the said combination, to file his written objections, if any, before the Commission within fifteen working days from the date on which the details of the combination were published.
· The Commission may, within fifteen working days from the expiry of the period mentioned above call for such additional or other information as it may deem fit from the parties to the said combination.
· The additional or other information called for by the Commission should be furnished by the parties to the Combination within fifteen days from the expiry of the period mentioned above.
· After receipt of all information and within a period of forty-five working days from the expiry of the period mentioned above, the Commission shall pass appropriate orders.
Orders of Commission on certain combinations
After completion of investigation into any combination, any of the following orders may be passed by the Commission (Section 31):
1) Where the Commission is of the opinion that any combination does not, or is not likely to, have an appreciable adverse effect on competition, it shall, by order, approve that combination.
2) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall direct that the combination shall not take effect.
3) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition but such adverse effect can be eliminated by suitable modification to such combination, it may propose appropriate modification to the combination, to the parties to such combination.
4) The parties, who accept the modification proposed by the Commission, should carry out such modification within the period specified by the Commission.
5) If the parties to the combination, who have accepted the modification fail to carry out the modification within the period specified by the Commission, such combination will be deemed to have an appreciable adverse effect on competition and the Commission can deal with such combination in accordance with the provisions of the Competition Act.
6) If the parties to the combination do not accept the modification proposed by the Commission, such parties may, within thirty working days of the modification proposed by the Commission, submit amendment to the modification proposed by the Commission.
7) If the Commission agrees with the amendment submitted by the parties it shall, by order, approve the combination.
8) If the Commission does not accept the amendment submitted, then the parties will be allowed a further period of thirty working days within which such parties should accept the modification proposed by the Commission.
9) If the parties fail to accept the modification proposed by the Commission within thirty working days referred to in sub-section (6) or within a further period of thirty working days referred to in sub-section (8), the combination will be deemed to have an appreciable adverse effect on competition and be dealt with in accordance with the provisions of this Act.
10) Where the Commission has directed that the combination should take effect or the combination is deemed to have an appreciable adverse effect on competition, then without prejudice to any penalty or any prosecution which may be initiated, the Commission may order that the acquisition or acquiring of control or the merger or amalgamation should not be given effect to. The Commission may also frame a scheme to implement its order.
11) If the Commission does not on expiry of the period of two hundred and ten days from the date of notice given to the Commission of the proposed combination, pass an order or issue direction, then the combination will be deemed to have been approved by the Commission. While determining the period of 210 days, the period of 30 days mentioned in sub-section (6) and (8) will be excluded.
12) Where any extension of time is sought by the parties to the combination, the period of ninety working days shall be reckoned after deducting the extended time granted at the request of the parties.

IV. COMPETITION ADVOCACY
Competition Advocacy is defined as the ability of the competition office to provide advice, influence and participate in government economic and regulatory policies in order to promote more competitive industry structure, firm behavior and market performance. (World Bank)
The International Competition Network (ICN) defines competition advocacy as under:
Competition advocacy “refers to those activities conducted by a competition authority related to the promotion of a competitive economic environment by means of non-enforcement mechanisms, mainly through its relationship with other Governmental entities and by increasing public awareness of the benefits of competition.”
There is a direct relationship between competition advocacy and enforcement of a competition law and this connection is especially strong in transition and developing economies where an appropriate understanding or appreciation of the merits of competitive market economic systems is often lacking.

Section 49 of the Competition Act, 2002, empowers the Competition Commission of India (CCI) to undertake 'competition advocacy'. Advocacy role takes the Commission beyond being merely an 'enforcing authority' to be 'an advocate of competition' and to take suitable non-enforceable measures with an aim to create and strengthen awareness of the role of competition among market players and stakeholders, thereby encouraging compliance and reducing the need for enforcement action on erring enterprises.
Section 49 reads as follows:
“(1) The Central Government may, in formulating a policy on competition (including review
Of laws related to competition) or any other matter, and a State Government may, in formulating a policy on competition or on any other matter, as the case may be, make a reference to the Commission for its opinion on possible effect of such policy on competition and on the receipt of such a reference, the Commission shall, within sixty days of making such reference, give its opinion to the Central Government, or the State Government, as the case may be, which may thereafter take further action as it deems fit.
(2) The opinion given by the Commission under sub-section (1) shall not be binding upon the Central Government or the State Government, as the case may be in formulating such policy.
(3) The Commission shall take suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues.”

Section 49 of the Competition Act, 2002 gives a definite advocacy role to the Competition Commission. It provides that the government may make a reference to the Commission for its opinion on the possible effect on competition of a policy or law, and the Commission is required to give its opinion, which is not binding on the Government. It also states that the Commission shall take suitable measures, as may be prescribed, for the promotion of competition advocacy, creating awareness and imparting training on competition issues.
Advocacy Role of Competition Commission
The Commission has, taken up competition advocacy efforts simultaneously at the three levels of the governments in India viz. central, state, and municipal governments, besides undertaking advocacy with the other stakeholders such as the business chambers, consumer activists and statutory bodies of professionals such as lawyers, chartered accountants, cost accountants and company secretaries.
As part of its advocacy efforts with the Central Government, the Commission has forwarded its comments on competition issues in draft legislations in some sectors such as posts and telegraph, shipping trade practices, broadcasting, petroleum and natural gas and warehousing. The Commission has also approached the University Grants Commission (UGC) and the National Council for Education, Research and Training (NCERT) to include study on competition law and policy in the curriculum of colleges and schools respectively at appropriate stages. The Commission also undertakes market studies/research projects. The Planning Commission has set up a Working Group on Competition for the Eleventh five Year Plan chaired by the Member, CCI. The Working Group has recently presented its report to the Planning Commission. The Commission has also examined competition issues in the model concessional agreements (MCA) being prepared in the infrastructure sector by the Planning Commission, as part of the Private Public Participation (PPP) projects, particularly in the highway and port sectors and has given its views to the Planning Commission. Comments have been forwarded to the Planning Commission on the Model Concessional Agreements (MCAs) on national highways, state highways, and ports and on Maintenance Operation and Toll (MOT). The Commission has also examined the proposed Warehousing (Development and Regulation) Bill, 2005 and The Carriage by Road Bill, 2005 and the Broadcasting Services Regulation Bill, 2006, from competition point of view. The Commission recently took cognizance of the media reports suggesting possibility of cartelization in the airlines industries on fixing prices by the Federation of Indian Airlines and forwarded its comments to the Ministry of Civil Aviation.


10. COMPETITION LAW COMPLIANCE
Compliance with competition law is akin to good corporate governance. Corporate governance, as normally understood, is ethical conduct within the internal environment of the company. Similarly, compliance with competition law is akin to ethical conduct in the external environment of the company, principally in the market place.
Compliance with competition law is necessary as the consequences of non-compliance may be serious for companies in terms of investigation by competition authorities, penalties, non-enforcement of agreements, loss of reputation and goodwill and other penal damages.
Need for Competition Compliance policy in an enterprise
A Competition Compliance Policy is essential for every enterprise as it ensures that the enterprise complies with the competition law. The Policy will help in predetermining the risk involved in case of infringement of the competition law. Elaborate measures can be taken to prevent such risks. By giving adequate training to the employees, awareness is created in the organisation and the enterprise may prevent drafting of anti-competitive agreements and also avoid violation of other provisions of the Competition Act. Great amount of legal costs can be prevented if an adequate Compliance Policy is in place. World over, compliance of competition law is considered as an important management tool for good business practice that can lead to success and profitability.
Recognizing the need for and usefulness thereof, in the wake of high profile crackdown on cartels and modernization of competition jurisdictions worldwide, the “Enterprises” and their Advisors globally have either launched or are contemplating to initiate ‘competition compliance programmes’ to minimize the risks, and the enormous costs involved, of breaching the law. Needless to state that fines and penalties provided in other competition regimes are either same, similar or even more than what are envisaged under the Competition Act, 2002. It is amply proved by a recent order dated 24.03.2004 handed down by European Competition Commission against Microsoft, the world’s largest software company, guilty of abusing its dominant position in the market for personal computer operating system and for tying Windows Media Player (WMP) with its software “Window 2000”, by imposing a record fine of Euro 497 million (US $ 612 million equivalent to approximately Rs.2630 Crores). In US, the fine imposed is US $ 900 million against Vitamins Cartel and German National Authority has imposed was fine of US $ 725 million against Cement Cartel. Needless to say that imposition of such huge penalties can put financial planning/working of any “Enterprise” into disarray.

Competition Compliance Policy
ü First and foremost, the competition compliance policy should impart awareness and training to employees who have been engaged or exposed to anti-competitive conducts.
ü The policy should have provision for identifying possible violations so as to take pro-active, corrective and remedial steps.
ü Continuous review of the compliance policy is mandatory.
ü Adequate feedback from the senior management should be given and steps should be taken to enforce it.
ü Professionals practising Law, Company Secretaries, Chartered Accountants, Costs & Works Accountants, and Marketing & Financial Analyst should take advantage of the Competition compliance policy.
ü There could be a separate department or the legal / secretarial department of the enterprise can be in charge of the completion compliance policy.
ü The competition compliance policy may vary from one enterprise to another depending on the nature of business; hence the competition compliance policy may vary for different types of business of the same enterprise also.
ü An audit of the competition policy can be conducted by an external agency to strengthen the compliance programme of the enterprise.


11. COMPETITION LAW AND INTELLECTUAL PROPERTY RIGHTS
Intellectual property rights (IPR), very broadly, means the legal rights, which result from intellectual activity in the industrial, scientific, literary and artistic fields. Intellectual property rights includes rights relating to performances of performing artists, phonograms, and broadcasts, inventions in all fields of human endeavor, scientific discoveries, industrial designs and integrated circuits, patents, trademarks, service marks, and commercial names and designations, geographical indications, protection against unfair competition and all other rights resulting from intellectual activity in the above fields.
The main reason why an Intellectual Property Right is granted is to give an incentive for innovation, research and investment. In the absence of IPR protection, other firms would be able to take a free ride on the R&D investment made by the inventor firm. In a sense, IPRs also create competition in innovation. But there is always tension between IPR and competition law because IPRs create market power, even monopolies, depending upon the extent of availability of substitute products. Hence, competition law frowns upon the unreasonable exercise of market power or the abuse of dominant position obtained as a result of the IPR.
Intellectual property Rights and Market Power
Intellectual Property Rights provide exclusive rights to the holders to perform a productive or commercial activity. But this does not automatically include the right to exert restrictive or monopoly power in a market. An Intellectual Property Right generates market power. The potential negative character of the power may be unjustifiably great because of public policies like the encouragement of inventions. On the other hand, if investment of resources to produce ideas or to convey information is left unprotected, the competitors may take advantage and benefit by not being obliged to pay anything for what they utilize. This may result in lack of incentives to invest in ideas or information and the consumer may be correspondingly poorer. What is called for is a balance between abuse of market power and protection of the property holders' rights.

Intellectual Property Rights under the Competition Act
Section 3 deals with prohibition of anti-competitive agreements. There is an express provision under Section 3(5) wherein reasonable conditions imposed in an agreement to restrain the infringement of Intellectual Property Rights or protecting it is not restricted. Therefore any reasonable conditions given in the agreement will not constitute an anti-competitive agreement.

Section 3(5) reads as follows:
“Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);”

Reasonable conditions
Section 3 sub section (5) of the Act declares that "reasonable conditions as may be necessary for protecting" any IPR will not attract section 3. The expression "reasonable conditions" has not been defined or explained in the Act. However, by implication, unreasonable conditions that attach to an IPR will attract section 3. In other words, licensing arrangements likely to affect adversely the prices, quantities, quality or varieties of goods and services will fall within the contours of competition law as long as they are not reasonable with reference to the bundle of rights that go with IPRs.
For example, a licensing arrangement may include restraints that adversely affect competition in markets by dividing the markets among firms that would have competed using different technologies. Similarly, an arrangement that effectively merges the Research and Development activities of two or only a few entities that could plausibly engage in R&D in the relevant field might harm competition for development of new goods and services.
Examples of such arrangements are given hereunder:
· Patent pooling is a restrictive practice. This happens when the firms in a manufacturing industry decide to pool their patents and agree not to grant licenses to third parties, at the same time fixing quotas and prices. They may earn supra-normal profits and keep new entrants out of the market.
· Tie-in arrangement is yet another such restrictive practice. A licensee may be required to acquire particular goods (unpatented materials e.g. raw materials) solely from the patentee, thus foreclosing the opportunities of other producers.
· There may be a condition not to challenge the validity of IPR in question.
· Imposing a trade mark use requirement on the licensee may be prejudicial to competition, as it could restrict a licensee's freedom to select a trade mark.
· A condition imposing quality control on the licensed patented product beyond those necessary for guaranteeing the effectiveness of the licensed patent may be an anti-competitive practice.
· An agreement that provides that royalty should continue to be paid even after the patent has expired or that royalties should be paid in respect of unpatented know-how as well as the subject matter of the patent may be considered as an anti-competitive practice.
· A clause which prohibits a licensee to use rival technology.
· A licensor may fix the prices at which the licensee should sell.
· A condition imposed on the licensee to employ or use staff designated by the licensor is likely to be regarded as anticompetitive.
· Undue restriction on licensee's business could be anticompetitive.
· Restricting the right of the licensee to sell the product of the licensed know-how to persons other than those designated by the licensor may be violative of competition.
· The licensee may be restricted territorially or according to categories of customers.

The Commission is empowered to inquire into any unreasonable conditions attached to the IPR agreements and can impose penalty upon each of such right holder or enterprises which are parties to such agreements or abuse, which shall be not more than ten percent of the average turnover for the last three preceding financial years. In case an enterprise is a 'company' its directors/officials who are guilty are liable to be proceeded against and punished.

Case Study
In 2003, the South African Competition Commission admitted a complaint based on their duty to protect consumer interest, based on Section 8 of SA Competition Act (excessive price bearing no relation to the economic value of the good) leading to exclusion and anti-competition.
Decision of the Commission – Pharma co. practices have violated Competition Act prohibitions of excessive pricing and exclusionary acts that have anti-competitive effect. The Commission recommended licences to market generic versions of the patented ARV drugs in return for the payment of reasonable royalty to be decided by the Competition Tribunal.

12. COMPETITION COMMISSION OF INDIA
Competition Commission Of India has been established as autonomous body charged with the responsibility to prevent practices having adverse affect on competition, to promote and sustain competition in markets, to protect interests of consumers and to ensure freedom of trade carried on by other participants in markets in India and for matters connected therewith or incidental thereto.
The basic functions of the Competition Commission are:
a) Administration and enforcement of competition law and competition policy to foster economic efficiency and consumer welfare.
b) Involve proactively in Governmental policy formulation to ensure that markets remain fair, free, open, flexible and adaptable.

The Competition Commission of India is being guided by the following principles in its approach to its work:
To be in sync with markets; have good understanding of market forces.
To minimize cost of compliance by enterprises, and cost of enforcement by Commission.
To maintain confidentiality of business information; to maintain transparency in Commission's own operations.
To be a professional body, equipped with requisite skills.
To maintain a consultative approach.
Chapter III of the Competition Act, 2002 deals with the establishment, composition of commission, term of office etc; Chapter IV deals with the duties, powers and functions of the Commission and Chapter V deals with the duties of the Director General.


Composition of the Commission
The Commission will consist of a Chairperson and not less than two and not more than six other members. The Chairperson and Members of the Commission will be appointed by the Central Government by a Selection Committee procedure. The Chairperson and every other Member should be a person of ability, integrity and standing and who has special knowledge of, and such professional experience of not less than fifteen years in, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters, including competition law and policy, which in the opinion of the Central Government, may be useful to the Commission.
Term of office
The Chairperson and every other Member should hold office for a term of five years from the date on which he enters upon his office and will be eligible for re-appointment. But the Chairperson or members will not be allowed to continue in office if he has attained the age of sixty five years.
Resignation, removal and suspension
On submission of resignation in writing to the Central Government, the Chairperson or member will be allowed to hold office for a period of three months from the date of submission of resignation or until a person has been appointed as his successor or until the expiry of his term of office, whichever is earlier.
The Central Government can remove the Chairperson or any other Member from his office, if such Chairperson or member –
(a) is, or at any time has been, adjudged as an insolvent; or
(b) has engaged at any time, during his term of office, in any paid employment; or
(c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member; or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest; or
(f) has become physically or mentally incapable of acting as a Member.
Central Government may appoint Director General or Additional, Joint, Deputy or Assistant Directors General or such officers or other employees in the office of Director General for the purposes of assisting the Commission (Section 16). Further Commission may appoint a Secretary and such officers and other employees as it considers necessary for the efficient performance of its functions (Section 17). Competition Commission of India on 15th May,2009, published an regulation called ‘ The Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009’,for this purpose. As per clause e of section 2(1) of the act, an “expert or professional” for the purpose of these regulations means a person of integrity and outstanding ability having special knowledge of, and experience in, economics, law, business or such other discipline related to competition as the Commission deems necessary to assist it in discharge of its functions under the Act. These experts shall discharge such functions as directed by the Chairperson, in assisting the Commission. The details regarding their qualification, experience and classifications has been specified in the schedule I and their categorization in Schedule II of the regulation. The remuneration has been specified in the schedule III.
The performances of the experts would be reviewed from time to time.

Procedure of selection of experts and professionals. –

· The experts and professionals shall ordinarily be engaged by the Commission on contractual basis for not less than three months and not more than three years.

· The Commission may decide, from time to time, the number of the experts and professionals to be engaged.

· After the number of the experts and professionals to be engaged is decided, the Secretary shall publish the number of the experts and professionals to be engaged with details of qualifications, experience needed and the remuneration payable on the official website of the Commission and invite applications for each category and level of expert and professional giving a stipulated last date for the receipt of the applications for each category and level
· The Commission shall constitute a selection board for each category of expert and professional. The Commission may invite eminent experts having special knowledge and experience in the relevant field to join the selection boards.
· The Secretary shall scrutinize the applications in accordance with these regulations and prepare lists of eligible candidates for each category to be called for interview and submit a report to the Commission.

· The selection boards shall be convened with the approval of the Chairperson for each category and the Secretary shall notify the date and the venue of the interview to the short listed eligible candidates sufficiently in advance.

· The recommendations of each selection board regarding engagement for each category shall be placed by the Secretary before the Commission for decision.

· On approval of the engagements by the Commission the Secretary shall inform each candidate in writing by an offer letter of engagement giving not less than ten days time to accept the offer of engagement.

· After receipt of acceptance from the selected candidates the Secretary shall issue letter of engagement to each candidate giving not less than thirty days time to join. However, the time may be expended.

· The Secretary shall inform the number of selected candidates who have joined in the next meeting of the Commission and obtain approval of the Commission to restart the process of selection to fill up the shortfalls, if any, in the total number of experts and professionals decided to be engaged.
The expert and professionals on having accepted the offer of engagement, shall enter into a contract, also having the confidentiality clause, with the Secretary, acting on behalf of the Commission, detailing the terms and conditions which may be altered in future if so desired, before being assigned any work .

:
Provided that the Secretary may also invite the applications by suitable public notice, for each category and level of expert and professional.
(4)
(5)

·



Administrative powers
The Chairperson has the powers of general superintendence, direction and control in respect of all administrative matters of the Commission. The Chairperson can also delegate such of his powers relating to administrative matters of the Commission, as he may think fit, to any other Member or officer of the Commission.
Vacancy not to invalidate proceedings of the Commission
No act or proceeding of the Commission will be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Commission; or
(b) any defect in the appointment of a person acting as a Chairperson or as a
Member; or
(c) any irregularity in the procedure of the Commission not affecting the merits of the case.

Inquiry by the Commission
The Commission may initiate inquiry into anti-competitive agreements or abuse of dominance:
ü On its own on the basis of information and knowledge in its possession; or
ü On receipt of an information; or
ü On receipt of a reference from the Central Government or a State Government or a statutory authority.
On receipt of information or reference or on its own, if the Commission is satisfied that there is prima facie case, it can direct the Director General to investigate the matter and report his findings to the Commission. On receipt of the investigation report from the Director General, the Commission will determine whether the behaviour under inquiry is anti-competitive, after hearing the concerned parties and pass appropriate orders.
Information to the Commission
Any person, consumer, consumer association or trade association can provide information relating to anti-competitive agreements and abuse of dominant position. The Central Government or State Government or an authority established under any law can make a reference for an inquiry. “Person” includes an individual, HUF, firm, company, local authority, cooperative or any artificial juridical person.
The information can be filed on the issues like anti-competitive agreements and abuse of dominant position or a combination.
Competition Commission of India (General) Regulations, 2009 deals with the procedure for submitting information or reference to the Commission. Information or reference or responses to the Commission should be sent to the Secretary, in person or by registered post or courier service or facsimile transmission addressed to the Secretary or to the authorized officer. However, any separate or additional document(s) that is relied upon in support of the information, or reference should be filed in the form of a “Paper Book”, at least seven days prior to the date of the ordinary meeting, after serving the copies of the said document(s) on the other parties to the proceedings, with documentary proof of such service. Such documents need to be serially numbered, prefaced by an index and should be supported by a verification.

All information(s) or references or responses or other documents which are required to be filed before the Commission should be typed in Arial 12 fonts on one side of A4 size (210 x 297mm or 8.27”x11.69”) white bond paper in double space with 2” margin on the left and 1” margin on all other sides. Only neat and legible photocopies or scanned documents duly certified as true copies shoud be filed as exhibits or annexes.

The reference to the Commission should contain the following details:
· The information should be in the form of statement of facts, containing details of the alleged contraventions of the Act. A complete list enlisting all documents, affidavits and evidence, as the case may be, in support of each of the alleged contraventions may also be furnished. A brief narrative in support of the alleged contraventions will help the commission to examine the case expeditiously and in its right perspective.
· Relief or interim relief that is sought from the Commission should be mentioned.
· the information along with the appendices and attachments should be complete and duly verified by before submitting to the Commission.
· The information filed should be signed by the individual himself/ herself, including a sole proprietor of a proprietorship firm, the Karta in the case of a Hindu Undivided Family (HUF), the Managing Director and in his or her absence, any Director, duly authorized by the board of directors in the case of a company, etc.
· The counsel may also append his or her signature to the information or reference as the case may be.

Investigation
At the apex level of the investigative wing, there is an official who has been designated as Director General (DG). The Director General will not have suo motu powers of investigation. He will only look into the complaints received from the CCI and submit his findings to it. Investigators will be solely responsible for making enquiries, for examining documents, for making investigations into complaints and for effecting interface with other investigative agencies of the Government including Ministries and Departments. The DG has been vested under the Act with powers, which are conferred on the Commission, namely, summoning of witnesses, examining them on oath, requiring the discovery and production of documents, receiving evidence on affidavits, issuing commissions for the examination of witnesses etc.
Depending on the load of work on the Commission, Additional, Joint, Deputy or Assistant Directors General or such officers or other employees in the office of Director General will be appointed by the Central Government.

Acts taking place outside India but having an effect on competition in India

The Commission has power to inquire in accordance with the provisions contained in Sections 19, 20, 26, 29 and 30 of the Competition Act, 2002 into any agreement or abuse of dominant position or combination if it has or is likely to have an appreciable adverse effect on competition in the relevant market in India and pass appropriate orders although –
a) An agreement has been entered into outside India;
b) Any party to such agreement is outside India; or
c) Any enterprise abusing the dominant position is outside India; or
d) A combination has taken place outside India; or
e) Any party to combination is outside India; or
f) Any other matter or practice or action arising out of such agreement or dominant position or combination is outside India.

Power to issue interim orders
Section 33 of the Competition Act, 2002 empowers the Competition Commission to issue interim orders. If during an inquiry, the Commission is satisfied that an act in contravention of Section 3 (Anti-competitive agreements) or Section 4 (Abuse of dominant position) or Section 6 (Regulation of combinations) has been committed and continues to be committed or that act is to be committed, the Commission can temporarily restrain any party from carrying on such act until the conclusion of such inquiry or until further orders. The order can be passed even without giving notice to the party if deemed necessary.
Commission’s powers to issue Orders
The Commission can direct any enterprise or person or their associations to discontinue with anti-competitive practice, which is also known as ‘cease and desist’ order. The Commission can impose penalty up to 10% of the turnover, which can go up to the higher of three times of the profit or 10 per cent of the turnover for each year of cartelization. The Commission has the power to modify any agreement or direct an enterprise to abide by its orders. The Commission is also empowered to order division of an enterprise which enjoys dominant position in order to prevent abuse of such position.
Rectification of Orders
The Commission is empowered to amend any Order passed by it to rectify any mistake apparent from the record of the case. The Commission may make an amendment on its own motion or if the mistake has been brought to the notice of the Commission by any party to the Order. While rectifying the mistake the Commission is not allowed to amend any substantive part of the Order.
Execution of orders of Commission
In case where the Commission is of the opinion that it would be expedient to recover the penalty imposed under the Competition Act, 2002 in accordance with the provisions of the Income-tax Act, 1961, it may make a reference to this effect to the concerned income-tax authority under that Act for recovery of the penalty as tax due under the said Act.

Appearances before the Commission
A person or an enterprise or the Director General may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its case before the Commission.

Advisory Committees
To seek the opinion of the best available intellectual capital on competition matters, the Commission has constituted a number of expert advisory committees that comprise eminent experts from the legal profession, economics, industry, academia, consumer representatives and others. As of now there are four advisory committees.
· Advocacy
· Infrastructure
· Market studies
· Regulations

COMPETITION APPELLATE TRIBUNAL
The Competition Appellate Tribunal is a statutory organization established under the provisions of the Competition Act, 2002 to hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India under section 26 (2) and (6), section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of the Competition Act, 2002. The Appellate Tribunal shall also adjudicate on claim for compensation that may arise from the findings of the Competition Commission of India or the orders of the Appellate Tribunal in an appeal against any findings of the Competition Commission of India or under section 42A or under section 53Q (2) of the Act and pass orders for the recovery of compensation under section 53N of the Act.
The Central Government has set up the Appellate Tribunal on 19th October, 2009 having its Headquarters at New Delhi. Hon’ble Dr. Justice Arijit Pasayat, former Judge of Supreme Court, has been appointed as the First Chairperson of the Appellate Tribunal. Besides, the Chairperson, the Appellate Tribunal will consist of not more than two Members to be appointed by the Central Government. The Chairperson of the Appellate Tribunal will be a person, who is, or has been a Judge of the Supreme Court or the Chief Justice of a High Court. A Member of the Appellate Tribunal should be a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty-five years in, competition matters, including competition law and policy, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which in the opinion of the Central Government, may be useful to the Appellate Tribunal. The Chairperson or a Member of the Appellate Tribunal will hold office for a term of five years and can be eligible for re-appointment provided that no Chairperson or other Member of the Appellate Tribunal can hold office after he has attained the age of sixty-eight years or sixty-five years respectively.
Every appeal should be filed within a period of 60 days from the date on which a copy of the direction or decision or order made by the Competition Commission of India is received and it should be in the prescribed form and be accompanied by the prescribed fees. The Appellate Tribunal may entertain an appeal after the expiry of the period of 60 days if it is satisfied that there was sufficient cause for not filing it within that period.
The Appellate Tribunal will not be bound by the procedure laid down in the Code of Civil Procedure, 1908 but will be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules made by the Central Government. The Appellate Tribunal will have, for the purposes of discharging its functions under the Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908). Every order made by the Appellate Tribunal will be enforced by it in the same manner as if it were a decree made by a court in a suit pending therein. If any person contravenes, without any reasonable ground, any order of the Appellate Tribunal, he will be liable for a penalty of not exceeding rupees one crore or imprisonment for a term up to three years or with both.


13. PENALTIES

Chapter VI of the Competition Act, 2002 deals with imposition of penalties by the Competition Commission.

Sl. No
Contravention
Penalty / Compensation
Section
1
Orders of Competition Commission of India
Rupees One Lakh for each day of contravention subject to a maximum of Rupees Ten crore
42(2)
2
Orders of Competition Commission of India under Section 42(2)
Imprisonment for a term upto three years or with fine upto Rupees Twenty five crore or with both.
42(3)
3
Orders of Competition Commission of India
Make application to the Appellate Tribunal and claim compensation for any loss or damage suffered.
42A
4
Failure to comply with directions of Competition Commission of India / Director General
Rupees One Lakh for each day of contravention subject to a maximum of Rupees One crore.
43
5
Non furnishing of information on combinations
Penalty upto one percent of total turnover or the assets whichever is higher of such combination.
43A
6
Making false statement or omission to furnish material information with regard to Combination
Minimum – Rupees Fifty LakhsMaximum – Rupees One crore
44
7
Offences in relation to furnishing information
Up to Rupees One crore
45


Provision for lesser penalties
Leniency provision is incorporated under Section 46 of the Competition Act, 2002. If the requirements of section 46 are met, Competition Commission is empowered to impose lesser penalty in cartel cases.
Section 46 provides that, if any producer, seller, distributor, trader or service provider included in any cartel, which is alleged to have violated section 3, has made a full and true disclosure in respect of alleged violations and such a disclosure is vital, the Commission may impose upon him a lesser penalty than as prescribed under the Act or rules or regulations. However, lesser penalty will not be levied where before making such disclosure, the report of investigation directed under section 26 has been received. Further, lesser penalty will be imposed only in respect of the producer, seller, distributor, trader or service provider included in the cartel, who has made full, true and vital disclosures.
The provision for lesser penalty under section 46 will cease to operate if the person making the disclosure does not continue to cooperate with the Commission till the completion of proceedings before the Commission. Section 46 further provides that any producer, seller, trader or service provider included in the cartel will also be liable to imposition of penalty, if in the course of proceedings, he had – (i) not complied with the condition on which the lesser penalty was imposed by the Commission; or (ii) given false evidence; or (iii) the disclosure made is not vital.
On 13th August 2009 the Competition Commission of India notified the Competition Commission of India (Lesser Penalty) Regulations, 2009. The regulation prescribes the Conditions for lesser penalty. According to the regulation an applicant, seeking the benefit of lesser penalty under section 46 of the Act, shall –
· cease to have further participation in the cartel from the time of its disclosure unless otherwise directed by the Commission;
· provide vital disclosure in respect of violation under sub-section (3) of section 3 of the Act;
· provide all relevant information, documents and evidence as may be required by the Commission ;
· co-operate genuinely, fully, continuously and expeditiously throughout the investigation and other proceedings before the Commission; and
· not conceal, destroy, manipulate or remove the relevant documents in any manner, that may contribute to the establishment of a cartel
Where an applicant fails to comply with these conditions, the Commission shall be free to use the information and evidence submitted by the applicant, in accordance with the provisions of section 46 of the Act. The Commission may also subject the applicant to further restrictions or conditions, as it may deem fit, after considering the facts and circumstances of the case.The discretion of the Commission, in regard to reduction in monetary penalty under these regulations, shall be exercised having due regard to –
· the stage at which the applicant comes forward with the disclosure;
· the evidence already in possession of the Commission;
· the quality of the information provided by the applicant; and
· the entire facts and circumstances of the case
The applicant may be granted benefit of reduction in penalty upto or equal to one hundred percent, if the applicant is the first to make a vital disclosure by submitting evidence of a cartel, enabling the Commission to form a prima-facie opinion regarding the existence of a cartel which is alleged to have violated section 3 of the Act and the
Commission did not, at the time of application, have sufficient evidence to form such an opinion. However, the Commission may also grant benefit of reduction in penalty upto or equal to one hundred percent, if the applicant is the first to make a vital disclosure by submitting such evidence which establishes the contravention of section 3 of the Act in a matter under investigation and the Commission, or the Director General did not, at the time of application, have sufficient evidence to establish such a contravention:
The application for the benefit of reduction in penalty upto or equal to one hundred percent will only be considered, if at the time of the application, no other applicant has been granted such benefit by the Commission.
The applicants who are subsequent to the first applicant may also be granted benefit of reduction in penalty on making a disclosure by submitting evidence, which in the opinion of the Commission, may provide significant added value to the evidence already in possession of the Commission or the Director General, as the case may be, to establish the existence of the cartel, which is alleged to have violated section 3 of the Act. However the applicant marked second the reduction would be upto or equal to fifty percent of the full penalty leviable; and the applicant(s) marked as third in the priority status may be granted reduction of penalty upto or equal to thirty percent of the full penalty leviable.

Procedure for grant of lesser penalty. –

The regulation prescribes the procedure for lesser penalty which is reproduced below:
(1) For the purpose of grant of lesser penalty, the applicant or its authorized representative may make an application containing all the material information as specified in the Schedule, or may contact, orally or through e-mail or fax, the designated authority for furnishing the information and evidence relating to the existence of a cartel. The designated authority shall, thereafter, within three working days, put up the matter before the Commission for its consideration.
(2) The Commission shall thereupon mark the priority status of the applicant/ and the designated authority shall convey the same to the applicant either on telephone, or through e-mail or fax. If the information received under sub-regulation (1) is oral or through e-mail or fax, the Commission shall direct the applicant to submit a written application containing all the material information as specified in the Schedule within a period not exceeding fifteen days.
(3) The date and time of receipt of the application by the Commission shall be the date and time as recorded by the designated authority or as recorded on the server or the facsimile transmission machine of the designated authority.
(4) Where the application, along with the necessary documents, is not received within a period of fifteen days of the first contact or during the further period as may be extended by the Commission, the applicant may forfeit its claim for priority status and consequently for the benefit of grant of lesser penalty.
(5) The Commission, through its designated authority, shall provide written acknowledgement on the receipt of the application informing the priority status of the application but merely on that basis, it shall not entitle the applicant for grant of lesser penalty.
(6) Unless the evidence submitted by the first applicant has been evaluated, the next applicant shall not be considered by the Commission.
(7) Where the Commission is of the opinion that the applicant or its authorized representative, seeking the benefit of lesser penalty or priority status, has not provided full and true disclosure of the information and evidence as referred and described in the Schedule or as required by the Commission from time to time, the Commission may take a decision after considering the facts and circumstances of the case for rejecting the application of the applicant, but before doing so the Commission shall provide an opportunity of hearing to such applicant.
(8) Where the benefit of the priority status is not granted to the first applicant, the subsequent applicants shall move up in order of priority for grant of priority status by the Commission and the procedure prescribed above, as in the case of first applicant, shall apply mutatis mutandis.
(9) The decision of the Commission of granting or rejecting the application for lesser penalty shall be communicated to the applicant.
Procedure for imposing penalty
The procedure for imposition of penalty under the Competition Act, 2002 is mentioned in Regulation 48 of the Competition Commission of India (General) Regulations, 2009. Accordingly no order or direction imposing a penalty under the Act should be made unless the person or the enterprise or a party to the proceeding, during an ordinary meeting of the Commission, has been given a show cause notice and reasonable opportunity to represent his or her or its case before the Commission. In case the Commission decides to issue show cause notice to any person or enterprise or a party to the proceedings, as the case may be, the Secretary should issue a show cause notice giving not less than fifteen days asking for submission of the explanation in writing within the period stipulated in the notice. The Commission on receipt of the explanation, and after oral hearing if granted, proceed to decide the matter of imposition of penalty on the facts and circumstances of the case.

Crediting sums realised by way of penalties
All sums realised by way of penalties under the Competition Act should be credited to the Consolidated Fund of India.

Contravention by companies
Where a person committing contravention of any of the provisions of the Competition Act, 2002 or of any rule, regulation, order made or direction issued there under is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, will be deemed to be guilty of the contravention and will be liable to be proceeded against and punished accordingly. But such person will not be liable to any punishment if he proves that the contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such contravention.
Where a contravention of any of the provisions of the Competition Act, 2002 or of any rule, regulation, order made or direction issued there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer will also be deemed to be guilty of that contravention and will be liable to be proceeded against and punished accordingly.
"Company" means a body corporate and includes a firm or other association of individuals.
"Director", in relation to a firm, means a partner in the firm.


14. IMPORTANT CASES

1. Vitamin Cartel Case
In April 2003, the Korea Fair Trade Commission (KFTC) decided to issue corrective order and impose surcharge on six vitamin producers belonging to Switzerland, Germany, France, Japan and the Netherlands, who participated in the vitamin international cartel. The amount of surcharge aggregated more than USD 3 million in total.
These six companies, accounting for 90 per cent market share in the world bulk vitamin market, agreed to allocate the sales volume and coordinate price of bulk vitamins such as vitamin A, E, B5, D3, and Beta Carotene in the global market. Vitamins A, E and beta-carotene are important inputs for the production of foods, medicine, cosmetics and animal feed. Bulk vitamin is used in manufacturing animal feeds, medicine, foods and cosmetics. The concerned industries in Korea were learnt to have imported bulk vitamin of about US$185 million during the above period from the six companies. As the conspiracy affected the Korean economy throughout the 1990s, the behavior of these firms affected all Korean citizens, who were prevented from benefiting from the price reductions that would have resulted from a competitive market.
2. Boeing and McDonnell - Douglas
Proposed combination of Boeing and McDonnell - Douglas relating to aircraft industry was allowed by US Anti-trust Authorities, but was refused by European Commission.

3. General Electric and Honeywell
Combination of General Electric and Honeywell relating to Jet Engines was allowed by US Anti-trust Authorities but refused by European Commission.

4. Microsoft Case
In a recent landmark decision that received wide publicity, the European Union Competition Commissioner found Microsoft, the world’s largest software company, guilty of abusing its dominant position in the market for the personal computer operating system, and violating, the EU Treaty’s Competition Rules. The European Commission imposed on Microsoft a record fine of Euro 497 million (US $ 612 million equivalent to approximately Rs. 2630 crores). The EU ruling is the latest in a series of brushes that Microsoft has been having with competition regulators for the last several years.
According to European Union’s press release, the case had arisen out of a complaint filed in December 1998 by Sun Micro- Systems, a U.S. company and a competitor to Microsoft, alleging that Microsoft had refused to provide interface information which is necessary for Sun to develop products that could “talk” properly with the ubiquitous Windows PCs, and as a result they are not able to compete on an equal footing in the market for Work Group Server Operating Systems (WGSOS). The European Competition Commissioner investigated the matter and concluded that it was a market strategy designed by Microsoft to shut competitors out of the market. An overwhelming majority of customers informed the Commission that the non-disclosure of the interface to competitors alters their choice in favour of Microsoft’s server products. Survey responses submitted by Microsoft itself confirmed the link between the inter-operability advantage that Microsoft reserved for itself and its growing market share.
In 2000, the Commission enlarged its investigation, on its own initiative, to study the effects of the tying of Microsoft’s Windows Media Player (WMP) with the company’s windows 2000 PC operating system. This part of the investigation concluded that the ubiquity which was immediately afforded to WMP as a result of it being tied with the Windows PC OS artificially reduces the incentives of music, film and other media companies, as well software developers and content providers, to develop their offering to competing media players. As a result, Microsoft’s tying of its media player product has the effect of foreclosing the market to competitors, and hence ultimately reducing consumer choice, since competing products are set at a disadvantage which is not related to their price or quality.
Microsoft had fought the case hard and there were extended negotiations between the Commission and the company but no mutual settlement could be reached. Microsoft had reportedly offered to include its competitors’ programmes in Windows Operating System but this was not found adequate by the Commission. Microsoft’s contention was that software development is a complex and dynamic business which is undergoing continuous changes and therefore, any single set of rules of unbundling is impracticable.
The company contended that any case relating to any particular programme had to be treated individually. The Commission felt that this would simply allow Microsoft to continue with what it regarded as its anti-competitive behaviour, and since each case takes years to decide through the courts, this enables Microsoft to reap unreasonable profits. Microsoft has reportedly decided to appeal against the EU decision to the European Court of First Appeal.
Thus, the European Competition Commission’s enquiry was in respect of two issues namely, non-disclosure of interface information to Microsoft’s rivals and tying by Microsoft of its Windows Media Player with the Windows PC Operating System. The investigation was carried on for a period of over 5 years. After finding Microsoft guilty in both cases, the Commission imposed the following remedies:-
a) As regards tying of WMP, Microsoft is required, within 90 days, to offer to PC manufacturers a version of its Windows client PC operating system without WMP. The un-tying remedy does not mean that consumers will obtain PCs and operating systems without media players. Most consumers purchase a PC from a PC manufacturer which has already put together on their behalf a bundle of an operating system and a media player. As a result of the Commission’s remedy, the configuration of such bundles will reflect what consumers want, and not what Microsoft imposes.
b) As regards interoperability, Microsoft is required, within 120 days, to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers. This will enable rival vendors to develop products that can compete on a level playing field in the work group server operating system market. The disclosed information will have to be updated each time Microsoft brings to the market new versions of its relevant products.
c) Microsoft argued that the disclosure of interface information required by EU infringed its intellectual property rights. However, the Commission was of the view that it was not seeking disclosure of Microsoft’s source code as this was not necessary to achieve the development of interoperable products. The Commission “does not exclude that the information that the Decision obliges Microsoft to disclose might be protected by intellectual property rights in the EU.” To the extent that it is, “the exceptional circumstances of the case (Microsoft’s overwhelming dominance, indispensability of the interface information, risk of elimination of competition in the market) would mandate such disclosure.” Further to the extent that any of the information in question is protected by intellectual property rights in the European Economic Area, Microsoft is entitled to reasonable remuneration.
d) For the above said abuses which, according to the Commission had been on going for five and a half years, the Commission imposed a fine of Euro 497.2 million.
e) The Commission observed that the remedies ordered by it will bring antitrust violations to an end, that they are proportionate, and that they establish clear principles for the future conduct of the company.
f) To ensure effective and timely compliance with its decision, the Commission would appoint a Monitoring Trustee, which will, inter alia, oversee that Microsoft’s interface disclosures are complete and accurate, and that the two versions of Windows are equivalent in terms of performance.
6. It would be recalled that earlier Microsoft was involved in a major battle in the US for alleged violation of fair competition rules. Following prosecution by the US authorities, the trial court found Microsoft guilty and inter alia ordered Microsoft broken into an operating systems business and an applications business, holding that such a structural remedy was necessary. Microsoft appealed against the case.
7. The appellate court’s per curium opinion vacated the trial court’s final judgement on remedy and remanded to a different trial judge, sternly rebuking the trial judge for ex parte contacts during and after the trial. The Court affirmed in part and reversed in part the judgement of monopoly maintenance in the operating system market, reversed on attempted monopolization of the browser market, and remanded on unlawful tying of the browser to the operating system. Finally, the US competition authorities and Microsoft arrived at a mutual settlement which was approved by the Court with minor modifications. The approved settlement requires Microsoft to disclose some sensitive technology to its rivals. The settlement would prevent Microsoft from participating in deals that could hurt competitors; require uniform contract terms for computer manufacturers; allow manufacturers and customers to remove icons for some Microsoft features; and require that the company release some technical data so software developers can write programmes for Windows that works as well as Microsoft products do.

5. Seamless Steel Tubes Case
8 companies (4 European and 4 Japanese) were fined by European Commission in 1999 for an illegal market sharing cartel. The companies are British Steel Ltd; Vallourec SA; Dalmine SpA; Salzgitter Mannesmann GmbH (4 European companies) and Nippon Steel Corp; Sumitomo Metal Industries Ltd; Kawasaki Steel Corp; NKK Corp (4 Japanese companies). Total fines of € 99 million imposed on these companies. The Europe -Japan Club required that the domestic markets of the different producers should be respected. Commission found it to be a very serious infringement of Art 81 (1) of EU Treaty. 7 of these 8 companies appealed to the Court of First Instance, which upheld Commission’s decision in substance, but reduced fees by 13 million on appealing companies as Commission had not produced sufficient evidence covering the entire duration of the infringement.

6. Brazilian case of price fixing in flat rolled steel products
Until 1992 steel products were subject to price controls, which were administered in part by SEAE. In July 1996 representatives of the Brazilian Steel Institute met with officials of SEAE and informed them that its members intended to increase their prices on these products by certain specified amounts on a specific day. On the day after the meeting SEAE informed the Institute by fax that such an agreement was a violation of competition law and illegal. Nevertheless, the three producers each increased price of these products in early August that year. The increases were approximately as those given to SEAE by the Steel Institute. Aside from the presentation to the SEAE by the Institute there was no direct evidence of concerted action.
CADE’s decision that parties were guilty was based on the “parallelism plus” theory, because in addition to the economic evidence, some circumstantial event was associated to the price parallelism. The first issue taken into account was the fact that price increase of the companies at similar rates and dates could not be explained just by referring to it as oligopoly’s interdependence. Although CADE did not consider the meeting as direct evidence of collusion, the Commissioners understood that it constituted a strong indication that there had been previous meeting among the companies to discuss matters before actually taking them to the government

7. Soda Ash Cartel case
In September, 1996, American Natural Soda Ash Corporation (ANSAC) comprising of six American producers of soda ash attempted to ship a consignment of soda ash at cartelized price to India. - Based on the ANSAC membership agreement, the M.R.T.P. Commission held it as a prima facie cartel and granted interim injunction in exercise of its powers in terms of Section 14 of the M.R.T.P. Act. The Supreme Court, however, overturned the order of the Commission inter alia, on the ground that it did not have authority to prohibit imports.

8. Trucking Cartel case
Eliminating competition in the market by fixing the freight rates without liberty to the members of the truck operator union to negotiate freight rates individually is common in the trucking industry. The M.R.T.P. Commission passed ‘Cease & Desist’ order against Bharatpur Truck Operators Union, Goods Truck Operators Union, Faridabad, and Rohtak Public Goods Motor Union. In the absence of any penalty provision, however, no fines could be imposed.

9. Bayer AG case
Bayer AG was a major global supplier of insecticides except in USA. It developed a new unique and potent active ingredient for insecticides for household use and secured a patent for the technology. It licensed the new technology to S C Johnson & Sons, a dominant market leader in pesticides market, the market Johnson’s market share was 50-60%. The DOJ challenged this licensing arrangement which reduced incentives of Bayer to compete with Johnson in manufacture and sale of household insecticides and which further helped Johnson to increase its dominance in the US market. The Court decided that Bayer should offer the patented ingredients to other manufacturers and also those that Bayer may introduce later. Through this decision, the court sought the maintenance of competitive markets while protecting the IPR.
10. Price-fixing in the petrol sector
According to OECD Annual Report on Competition Policy Developments in Brazil (2002), the Administrative Council of Economic Defense (CADE) has fined Sindiposto, an association of petrol stations, and its President a total of approximately US$ 105,000 after Sindiposto was found to have engaged in price-fixing by having advised its members to set prices and profit margin for fuel sales, as well as concerted price increases. According to a CADE official, cartelization attempts of the petrol sector in Brazil has been a subject of more than 30 investigations by the Brazilian competition authorities out of a total of about 260 cartel investigations. According to information released by the Secretariat of Economic Law, 56 per cent of cartel complaints relate to the petrol sector.
11. Cement Cartel
In Argentina, five cement companies were prosecuted for operating a cartel that lasted for 18-years from 1981 to 1999 and the Argentine authority imposed a total fine of US$ 107 million, which is more than three times the highest fine assessed by Argentine authority in any previous case. Romania also fined total EUR 28,500,000 on its three cement companies for their participation in a cement cartel and the fine represented 6 per cent of the companies’ annual turnover.
12. Boaters Cartel
Siem Reap in Cambodia is a very popular tourist town, which houses the famous Angkor Vat temples. There are three means of transportation from Phnom Penh to Siem Reap – boat, road and air. The competition between boat companies has been intense and the prices came down from US $ 10 to US $ 5. The boaters discussed among themselves and resolved that they will charge US $ 10 from Khmer nationals and US $ 20-25 from foreigners. They further agreed that they would not compete with each other and would share their departure schedules. There was no written agreement and only an understanding and it constitutes a cartel agreement.

13. Airlines Cartel
The Competition Commission in South Africa referred to its Competition Tribunal, a case alleging that four airline companies had conspired to simultaneously announce in May, 2004 a fuel surcharge in identical amounts. After the investigation, prompted by news reports of the price increase, an airline applied to the Commission for leniency under the Commission’s Corporate Leniency Policy. The applicant cooperated with the Commission and was not cited as a respondent and the Commission recommended a fine up to 10% of the turnover of each of the respondent.

15. OPPORTUNITIES FOR CHARTERED ACCOUNTANTS IN RELATION TO COMPETITION ACT

1. Appearance before Commission

Section 35 of competition act, 2002 specifically allows chartered accountants to represent a complainant, defendant or the director general to present a case before the competition commission of India. This implies that the accountants can represent a party in cases relating to anti-competitive agreements, abuse of dominance and combination (mergers etc.) and regulation cases. Therefore, chartered accountants should acquaint themselves on Competition Act, 2002 and other regulations and notifications relating to it. Chartered Accountants can appear on the behalf of the enterprise in the following cases:

· Chartered accountants may appear for parties before the CCI in cases relating to abuse of dominance as unfair and discriminatory purchase and price levels, predatory pricing, conclusion of contracts with obligations having no connection with the subject of contracts etc have high accounting overtones and dimensions. Therefore, chartered accountants with their expertise in accountancy and related subjects can contribute substantially.
· Chartered accountants may appear for parties before the CCI in cases relating to combinations regulation. The knowledge and expertise of Chartered Accountants are needed for
o threshold analysis
o value of assets determination
o value of turnover determination
o market share analysis
o level of competition analysis
o group impact
o control impact
o failing business costing and impact
o weighing benefits of combination against adverse impact of combination
Chartered Accountants can do valuation of assets and turnover of an enterprise which is acquired or merged with other enterprise to determine whether the threshold limit under section 5 are attracted or not. The assets are to be valued at book value as shown in the audited books of accounts under section 5 of the Competition Act.

2. Devising Competition Compliance Programme (CCP) for the enterprise
Compliance involves the active efforts on the part of an enterprise to comply with the provisions of the Act. When the enterprise takes certain necessary and concrete steps to ensure that knowingly or unknowingly it does not infringe the provisions of the Act, it can be stated to maintain a Competition Compliance Programme. A Chartered Accountant can play an important role in devising a CCP.
Objective of CCP:
The Competition Compliance Programme should have the following three main objectives:
(i) Prevent violation of law, i.e. the Competition Act 2002 and all Rules, Regulations & Orders made there-under.
(ii) Promote a culture of compliance, and
(iii) Encourage good corporate citizenship

Advantages of CCP
· Inculcates a culture of compliance throughout the organization which in turn can be a business enhancer offering positive benefits to business.
· Provides enterprises with a competitive advantage by enabling them to detect any violation at an early stage and take corrective measures to their advantage.
· Assists enterprises to enhance reputation and build goodwill. Enterprises that contravene the provisions of the Act may suffer damage to their reputation, damaging years of careful marketing and brand development.
· Obviates or reduces the costs and negative effects of litigation and regulatory intervention.
· Establishes enterprises as having social conscience, economic ethics and national interest at heart.
· The existence of a strong Compliance Programme reflecting the eagerness of the management to comply may temper the severity of the punishment that may be meted out for violation.

Features of CCP
A well formulated and adequate compliance programme should address the business realities faced by the enterprise concerned. It should have following essential features-
· Explicit statement of the commitment of senior management to the Compliance Programme
· Availability of an Enterprise’s Compliance Policy
· Training and education of employees
· Compliance manual
· The main principles of the compliance policy should be set out in simple and plain language that is easily understandable.
· An effective Compliance Policy may include seeking a written undertaking from employees to conduct their business dealings within the compliance framework and taking disciplinary action against employees whose actions result in an infringement of the law.
· The relevant procedures should enable the employees to seek advice on whether a particular transaction complies with competition law and report activities that they suspect infringe the law. These practices should be included in the “best practices” norms of every enterprise.
The enterprises may consider the following as essential elements for devising an effective Compliance Policy:
· An overarching commitment to comply with the Competition Act and regulations, orders and directions issued by the Government and Competition Commission of India.
· Placing a duty on all employees and directors to conduct their business dealings within this overarching policy and seeking a written undertaking from them to this effect.
· A commitment to take disciplinary action against employees/ CEOs /directors/ proprietors/ partners for intentionally or negligently involving the company in an infringement of the provisions of the Act.

3. Training officers and employees

An enterprise should consider having an active training programme that includes instruction by knowledgeable professionals having expertise and experience in corporate compliances. Chartered Accountants being experts in corporate compliances can play a vital role here. The training should be as practical as possible, including case studies drawn from the enterprise’s actual experiences. It should also highlight the consequences of violations. The objective is to enable all officers and employees to develop capabilities to recognize and identify law-violating activity related to their business. Compliance education must contain sufficient practical explanation/examples on difficult legal concepts and issues. It is, therefore, advisable that enterprises integrate compliance education as part of overall training and education programme of the enterprise.

4. Act as a Compliance Officer
In order to ensure effectiveness of compliance programme, it is desirable that a Compliance Officer with appropriate delegation of authority be appointed to enforce the Compliance Programme. A chartered Accountant with its expertise and knowledge can fit in this role. A Chartered Accountant in the role of the Compliance Officer should preferably be an independent professional with expertise and core competency in compliance and compliance management. He should be a focal point and in charge of designing a program, motivating officers and employees, managing any accompanying administrative/ organizational issue, preparing compliance manual, and auditing compliance.

5. Drafting Compliance Manual
To facilitate compliance, the enterprises should develop a Compliance Manual and distribute it to their officers and employees as detailed guidelines for compliance with the provisions of the Act. The Chartered Accountants with their drafting skills and knowledge of the laws pertaining to corporate compliances are best suited for drafting such documents.
The Compliance Manual must have the following features:
· The manual should incorporate the features set in CPP and contain up-to-date information regarding its business(es), its operational environment, and relevant competition regimes.
· It is necessary that the manual incorporates full, relevant and correct information and is properly distributed.
· The Compliance Manual should be developed, distributed and implemented under the overall supervision of Compliance Officer.
· In-charge(s) of Departments/Divisions should be put under obligation to inform the Compliance Officer of any changes in the business environment and market scenario that may have bearing on compliance, including the opinion of subordinates concerning the Compliance Manual.
· The Enterprises are advised to constitute a Compliance Committee comprising senior management, with ultimate responsibility of overseeing the Compliance Programme, including conducting periodic review of its effectiveness.
6. Internal Audit
To ensure effective compliance of completion laws a system of audit may be required. Therefore, at the time of the start of the compliance programme an internal audit of procedures and documents, including email, may be introduced. This may be repeated at intervals to ascertain if the policy is working. The nature of such audit will have to be tailored to the nature of the enterprise concerned.
While auditing the procedures, documents and emails of each and every employee may be a herculean task it would be always possible to identify those individuals who are most at risk and to conduct an audit of a “snap shot” of their e-mails on a given day. External legal advisers could be employed to do such auditing to avoid embarrassment to the employees concerned while auditing their correspondence/e-mail.
Chartered Accountants with their auditing skills and knowledge of business and regulatory environment are best suited for the job.

Getting Prepared

As we have seen above Chartered Accountants can play a vital role in compliance of Competition Laws. However, certain expert knowledge can be acquired to excel in the performance. To create expertise of Members of ICAI in Competition law, ICAI has already launched a Post Qualification Course in International Trade Laws and WTO with Competition laws and Policies as a separate Paper covering:
· Emerging Competition Laws in India
· Competition Law and policies in the European Union
· Competition Law and policies in the United States and NAFTA countries
· Competition Law and policies in the transition economies
· WTO Rules and Competition Policy
Besides ICAI is also conducting a course on Valuation which can also be helpful for the CAs in valuing assets as required in Section 5.


16. COMPETITION LEGISLATION IN OTHER COUNTRIES
About 90 countries in the world have enacted their own competition laws to restrict the unhealthy and immoral competition by the traders and also with an aim of safeguarding the interests of the consumers in those countries.
1. United States –
Anti-trust policy of US owes its origin to industrial revolution which was marked by the shift of economic wealth and political power to industrial empires. It brought a new breed of business culture that led to building of giants through alliances. It was during this time around the 20th century that anti-trust policies were legislated. These policies generally were based on distrust of a big business and rarely aimed at promoting competition. The fundamental anti-trust statutes are as follows:
Sherman Act, 1890: Section 1of Sherman Act, 15 U.S.C.1, sets forth the basic antitrust prohibition against contracts, combinations and conspiracies “in restraint of trade or commerce among the several States or with foreign nations”. Section 2 of the Act, prohibits monopolization, attempts to monopolize and conspiracies to monopolize “any part of trade or commerce among the several States or with foreign nations”. Section 6a of the Act, defines the jurisdictional reach of the Act with respect to non-import foreign commerce.
Clayton Act, 1914: It enlarged the scope of anti-trust policy by including price discrimination, exclusive dealings and mergers. Section 7 of the Clayton Act, 15 U.S.C.18, prohibits any merger or acquisition of stocks or assets “wherein any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition or to tend to create a monopoly”.
Federal Trade Commissions Act, 1914: It broadened the scope of anti-trust Acts and established a commission known as the Federal Trade Commission which was empowered to deal with major anti-trust practices and entities.
National Cooperative Research and Production Act: It promotes research and development by providing a special antitrust regime for research and development joint ventures.
Export Trading Company Act, 1982: This act has been formulated to increase US export of goods and services. It promotes a better provision of export trade services to US producers and suppliers by minimizing restrictions on trade financing provided by financial institutions.
The Wilson Tariff Act, 1984: This Act “prohibits every combination, conspiracy, trust, agreement or contract” made by or between two or more persons or corporations, either of whom is engaged in importing any article from a foreign country into United States, where the agreement is intended to restrain trade or increase the market price in any part of the United States of the imported articles, or of “any manufacture into which such imported article enters or is intended to enter”.

2. Australia –
Australia has embarked upon a new legal initiative combining consumer protection rights with anti-competition measures. The Trade Practices Act, 1974 has facilitated the establishment and empowerment of Australian competition and consumer commission to ensure a transparent administration of trade practices. The Act expressly prohibits anti-competitive agreements, which include price fixing and primary / secondary market boycott.
3. Canada –
In Canada, the Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace. Its purpose is to maintain and encourage competition in Canada in order to –
· Promote the efficiency and adaptability of the Canadian economy
· Expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada
· Ensure that small and medium sized enterprises have an equitable opportunity to participate in the Canadian economy
· Provide consumers with competitive prices and product choices.
4. China –
The idea of a comprehensive Anti monopoly Law for the People's Republic of China surfaced in 1987, in response to the diverse and incoherent existing laws such as Anti-Unfair Competition Law, Price Law, Foreign Trade Law. Representatives from various agencies and academic institutions began drafting the new Law in 1994. However, the initial drafts often reflected divergent and inconsistent goals among its various agencies. The final version of the law was finally adopted by the People's Congress on 30 August 2007 and took effect on 1st August 2008. The main aim of the law is to –
· Advance consumer interests
· Promote economic efficiency
· Protect economic security, which includes subjecting foreign acquisitions of Chinese corporations to national security review.
5. Russia –
The Law on the Protection of Competition came into effect in the Russian Federation on 26th October 2006. The stated aim for establishing the law was to bring the Russian Federation to be in line with the general trend of competition regulation in Europe. Beyond western European competition laws against dominance, the Competition Law in Russia expressly presumes existence of dominance by defining thresholds –
· A company is in dominance if it dominates more than 50% of market share.
· A company with less than 35% of market share, unless in exceptional case, is not considered dominant.
· A collective dominance exists when up to three companies hold a combined market share exceeding 50%.
· A collective dominance exists when up to five companies hold a combined market share exceeding 75%.
· A safe harbor margin of up to 20% market share per company for agreements between companies of different segments of a supply chain.
The law also places restrictions on aids from, and public procurement policies of, federal, provincial or municipal governments that otherwise would encourage anti-competition. The law is enforced by the Federal Anti-Monopoly Service (FAS). The law also gives the FAS authority over approval of company mergers stipulating various combinations of thresholds of assets of merging companies, an excess of which would require prior approval from the FAS. The scope of regulation of the FAS is focused on the commodity market and financial services with mandates over operations and transactions not just within the Russian Federation but also those taking place outside the boundaries of Russia which would have anti-competitive effects on the Russian market place. In addition to a distinct competition law, the Code of Administrative Offences has also been amended to increase liability of anti-competitive practices. Punitive measures against anti-competitive practices are meted out in terms of percentages of revenues of a company.
6. United Kingdom –
The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. However if the effect of a business' conduct would reach across borders, the European Union has competence to deal with the problems, and exclusively EU law would apply. Like all competition law, that in the UK has three main tasks –
· Prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels;
· Banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others;
· Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to remedies such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.
The Office of Fair Trading (OFT) and the Competition Commission are the two primary regulatory bodies for competition law enforcement in United Kingdom.
7. European Union –
European Community competition law regulates the exercise of market power by large companies, governments or other economic entities. In the European Union, it is an important part of ensuring the completion of the internal market, meaning the free flow of working people, goods, services and capital in a borderless Europe. Four main policy areas include –
· Cartels, or control of collusion and other anti-competitive practices which has an effect on the EU. This is covered under Articles 81 of the Treaty of the European Community (TEC).
· Monopolies or preventing the abuse of firms' dominant market positions. This is governed by Article 82 of TEC.
· Mergers, control of proposed mergers, acquisitions and joint ventures involving companies which have a certain, defined amount of turnover in the EU. This is governed by the Council Regulation 139/2004 EC (the Merger Regulation also known as ECMR).
· State aid, control of direct and indirect aid given by Member States of the European Union to companies. This is covered under Article 87 EC (ex Article 92).
Primary competence for applying EU competition law rests with European Commission and its Directorate General for Competition, although state aids in some sectors, such as transport, are handled by other Directorates General. On 1 May 2004 a decentralized regime for antitrust came into force which is intended to increase the application of EU competition law by national competition authorities and national courts.


17. COMPETITION REGULATORS
A Competition regulator is a government agency which regulates and enforces competition laws and also sometimes enforces consumer protection laws. Competition regulators may also regulate certain aspects of mergers and acquisitions and business alliances and regulate or prohibit cartels and monopolies.
List of competition regulators around the world
Sl.No.
Country
Name of regulator
Website
1
Australia
Australian Competition and Consumer Commission and National Competition Council
www.accc.gov.au/

2
Brazil
Conselho Administrativo de Defesa Economica
www.cade.gov.br

3
Canada
Competition Bureau/Bureau de la concurrence
http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/home

4
China
Ministry of Commerce
http://english.mofcom.gov.cn/
5
Denmark
Konkurrencestyrelsen
http://www.konkurrencestyrelsen.dk/english/
6
Finland
Finnish Competition Authority (Kilpailuvirasto)
http://www.kilpailuvirasto.fi/cgi-bin/english.cgi
7
France
Conseil de la concurrence
http://www.autoritedelaconcurrence.fr

8
Germany
Bundeskartellamt
http://www.bundeskartellamt.de/wEnglisch/index.php
9
Indonesia
Commission for Supervision of Business Competition, (Komisi Pengawas Persaingan Usaha),
http://www.kppu.go.id/

10
Ireland
The Competition Authority, (TCA),
http://www.tca.ie/
11
Italy
Autorità Garante Della Concorrenza e del Mercato (AGCM)
http://www.agcm.it/eng/index.htm

12
Japan
Japan Fair Trade Commission (JFTC)
http://www.jftc.go.jp/e-page/index.html
13
Mexico
Mexico Federal Competition Commission
www.cfc.gob.mx

14
New Zealand
Ministry of Commerce: Competition and Enterprise Branch and New Zealand Commerce Commission
http://www.comcom.govt.nz/

15
Pakistan
Competition Commission of Pakistan
http://www.cc.gov.pk/

16
Russia
Federal Antimonopoly Service of Russia
http://www.fas.gov.ru/english/

17
South Africa
Competition Commission of South Africa, South African Competition Tribunal
http://www.compcom.co.za/

18
Spain
Tribunal de Defensa de la Competencia (TDC)
http://www.cncompetencia.es/

19
Sweden
Konkurrensverket
http://www.kkv.se/eng/eng_index.shtm
20
Switzerland
The Competition Council en Switzerland Swiss Competition Commission
http://www.weko.admin.ch/index.html?lang=en

21
United Kingdom
Office of Fair Trading and Competition Commission
http://www.oft.gov.uk/
http://www.competition-commission.org.uk/

22
United States
Federal Trade Commission and U.S. Department of Justice Antitrust Division
http://www.ftc.gov/
http://www.justice.gov/atr/


18. IMPORTANT WEBSITES

1
Competition Commission of India
www.cci.gov.in
2
Competition Appellate Tribunal
http://compat.nic.in/
3
Federal Trade Commission (United States)
www.ftc.gov/
4
Federal Trade Commission Bureau of Consumer Protection
www.ftc.gov/bcp/consumer.shtm
5
OECD
www.oecd.org
6
World Trade Organization
http://www.wto.org/
7
UNCTAD
http://www.unctad.org/competition
8
Global Competition Forum
www.globalcompetitionforum.org
9
International Competition Network (ICN)
www.internationalcompetitionnetwork.org
10
EUROPA - European Commission – Competition
www.ec.europa.eu

11
Centre on Regulation and Competition U.K (CRC)
www.competition-regulation.org.uk
12
WTO - Interaction between Trade and Competition Policy
http://www.wto.org/english/tratop_e/comp_e/comp_e.htm
13
International Consumer Protection and Enforcement Network (ICPEN)
www.icpen.org

14
APEC Competition Policy & Law Database
www.apeccp.org.tw

15
The Office of Fair Trading - U.K consumer and competition authority
www.oft.gov.uk
16
Competition Commission U.K
www.competition-commission.org.uk
17
American Antitrust Institute
www.antitrustinstitute.org

18
The Competition Authority- The Chief Regulatory Agency in Ireland
www.tca.ie

19
American Bar Association's Section of Antitrust
www.abanet.org/antitrust/

20
Australian Competition and Consumer Commission (ACCC)
www.accc.gov.au
21
CUTS International (Consumer Unity & Trust Society)
www.cuts-international.org