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SYNOPSIS
1. INTRODUCTION 2. DEFINITIONS 3. ANTI-COMPETITIVE AGREEMENTS 4. ABUSE OF DOMINANCE POSITION 5. REGULATION OF COMBINATIONS 6. COMPETITION COMMISSION OF INDIA
7. MISCELLANEOUS PROVISIONS
8. CONCLUSION
INTRODUCTION
Based on Articles 38 and 39 of the Constitution of India.
Mandates inter alia, that the State shall strive to promote the welfare of the people by securing and protecting as effectively, as it may, a social order in which justice social, economic and political shall inform all the institutions of the national life, and the State shall, in particular, direct its policy towards securing: 1. That the ownership and control of material resources of the community are so distributed as best to sub serve the common good; and 2. That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Introduction ..Contd.
MRTP Act obsolete in the light of the economic developments relating more particularly to competition laws Need was felt to shift the focus from curbing monopolies to promoting competition. Preamble of the Act is to provide, keeping in view of the economic development of the country, (i.) for the establishment of a Commission to prevent practices having adverse effect on competition, (ii.) to promote and sustain competition in markets, (iii.) to protect the interest of consumers and (iv.) to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.
2.
3.
4.
5. 6. 7.
6.
7.
No combinations regulation
Competition Commission appointed by the Government
Distinction ..Contd.
8.
Very little administrative and financial autonomy for the Competition Commission
9. No competition advocacy role for the Competition Commission 10. No penalties for offences 11. Reactive and rigid 12. Unfair trade practices covered
Competition Act comprises of 66 Sections. Competition Act, 2002 has essentially four compartments: 1. Anti - Competition Agreements 2. Abuse of Dominance
3. Combinations Regulation
4. Competition Advocacy
DEFINITIONS Section 2 defines various expressions used in the Act. Important definitions: 1. Cartel: It includes an association of producers, sellers, distributors, traders or service providers who, by arrangement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or trade in goods or provision of services. 2. Commission: Means the Competition Commission of India established under Section 7(1).
Definitions..Contd.
Definitions..Contd.
Definitions..Contd.
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. 5. Relevant Market: means the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets;
Definitions..Contd.
6. 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 neighbouring areas. 7. 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.
ANTI-COMPETITIVE AGREEMENTS
Section 3 provides for prohibition of entering into anticompetitive agreements. 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 likely to cause an appreciable adverse effect on competition within India . Any agreement entered into in contravention of this provision shall be void.
Anti-competitive AgreementContd.
Anti-competitive AgreementContd.
Some Agreements that are void under this Section are: 1. Tie in Agreement Includes an agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods. 2. Exclusive Supply Agreement: Includes any agreement restriciting 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. 3. 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.
Anti-competitive AgreementContd.
4. Refusal to deal: Includes any agreement which restricts, or is likely to restrict, by any method the persons or class of persons to whom goods are sold or from whom goods are bought. 5. Resale Price Maintenance: Includes any agreement to sell goods on condition that the price 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. The provision does not apply to agreements 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.
Anti-competitive AgreementContd.
Vertical agreements that include Tie-in arrangements, Exclusive supply agreements, Exclusive distribution agreements and Resale price maintenance.
Horizontal agreements (in relevant markets) that include Prices, Quantities, Bids, Market sharing and Refusal to deal.
Dominant position is abused when an enterprise imposes unfair or discriminatory conditions in purchase or sale of goods or services or in the price in purchase or sale of goods or services. There is no control whatsoever to prevent enterprises from coming into or acquiring position of dominance. All that the Act prohibits is the abuse of that dominant position. The Act therefore targets the abuse of dominance and not dominance per se.
REGULATION OF COMBINATIONS
Sections 5 & 6 deal with combination of enterprises and persons. Regulates the operation and activities of combinations, a term, which contemplates acquisitions, mergers or amalgamations. Competition Act is not confined to transactions strictly within the boundaries of India but also such transactions involving entities existing and/or established overseas. The Act has made the pre-notification of combinations voluntary for the parties concerned. if the parties to the combination choose not to notify the CCI, as it is not mandatory to notify, they run the risk of a postcombination action by the CCI, if it is discovered subsequently, that the combination has an appreciable adverse effect on competition. Rider to the provision - CCI shall not initiate an inquiry into a combination after the expiry of one year from the date on which the combination has taken effect.
Horizontal/Vertical agreements relating to prices, discounts, output or the sharing of the markets often restrain the competitors and directly or indirectly limit access to market.
Such agreements are prohibited by competition law as per se offences.
COMPETITION COMMISSION
Sections 7-40 deal with the Competition Commission, its composition, powers, duties, jurisdiction, inquiries, procedures for inquiriesetc. Competition Commission of India (CCI) is the apex body vested with the responsibility of: a. eliminating practices having adverse effect on competition b. promoting and sustaining competition c. protecting the interest of the consumers and d. ensuring freedom of trade carried on by other participants in India Successor to the MRTP Commission.
Competition Commission..Contd.
CCI consists of a chairman, who is to be assisted by a minimum of two, and a maximum of ten other members to be appointed by the Central government. Functions of CCI: a. Acts as a law enforcement agency b. actively involved in the formulation of the country's economic policies c. advise the government on competition policy
Competition Commission..Contd.
e. To create awareness and impart training about competition issues. f. The Commission assumes the role of competition advocate g. Section 49 deals exclusively with competition advocacy. h. In formulating a policy on competition (including review of laws related to competition), the Central Government may make a reference to the Commission for its opinion on possible effect of such policy
MISCELLANEOUS PROVISIONS
1. Power to grant interim relief (S.33) 2. Power to award compensation (S.34) 3. Power of Commission to regulate its own procedure(S.36) 4. Constitution of Fund (S.51) (a.) All government grants received by the Commission, monies received as costs and fees received under the Act to constitute fund. (b.) Fund to be applied for meeting salaries and allowances to those employed to the Commission and other administrative expenses. (c.) Fund to be administered by those appointed by the Chairman.
Misc. Provisions..Contd.
5. Penalties: a. Contravention of orders of Commission (S.42) liable to be detained in civil prison for 1 year or penalty upto Rs.Ten Lakhs as the Commission directs. b. Penalty for failure to comply with directions of Commission and Director General (S 43) Penalty of Rs.One lakh for each day of failure. c. Penalty for making false statement or omission to furnish material information (S.44) penalty of not less than Rs. 50 lakh upto Rs. One crore. d. Power to impose lesser penalty (S.46)
CONCLUSION
Vigorous Competition vital to innovation, strong and effective markets, consumer interest and productivity growth in the economy. Liberal trade policy along with sound competition policy by preventing anti-competitive business practices and unnecessary government intervention- essential to achieve maximum economic efficiency. A good competition policy , along with a sound competition law, helps in fostering competition, economic efficiency, consumer welfare and freedom of trade, which should equip the Govts in meeting the challenges of globalization by increasing competition in local and national markets.