Competition act

19 Jan 2014

Contenu connexe


Competition act

  2. Competition-What   A situation in a market, in which sellers independently strive for buyers patronage to achieve business objectives such as profits, sales or market share. It is the foundation of an efficiently working market system.
  3. Competition-why  The ultimate objective of competition is to secure the interest of the Consumer -it empowers the consumer, 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
  4. Competition Policy  Competition policy is defined as those Government measures that affect the behavior of enterprises and structure of the industry. It is to promote efficiency and maximize welfare. (Sum of consumers. surplus &producers. surplus and taxes collected by the Government)
  5. Competition Policy-Goals  Preservation and promotion of the competitive process.  Efficiency in production and allocation of goods and services.  Innovation and adjustment to technological change.  Sustained economic growth.
  6. The New Law  A new law called competition act 2002 has been enacted to replace the extant law, MRTP act 1969.  The new law was challenged in the supreme court on the ground that the chairperson should only be from the judiciary.  The new law has been amended on 10 sep 2007 by the parliament.
  7. Competition act-Objective  Competition act, 2002 notified in January 2003. Stated objective in preamble is to provide “for Establishment of a Commission”.  to prevent practices having appreciable adverse effect on competition;  to promote and sustain competition in markets;  to protect the interest of consumers  to ensure freedom of trade carried on by other participants in markets, in India
  8. Main Features  Prohibits Anti-Competitive Agreements. (sec 3)  Prohibits Abuse of Dominant Position. (sec 4)  Provides for Regulation of Combinations. (sec 5,6)
  9. Anti-Competitive Agreements  Section 3 of the Act deals with agreements among enterprises or persons or association of persons, which causes or likely to cause appreciable adverse effect on competition. Such agreements are rendered void pursuant to this section.  The Act deals with following kind of agreements. 1. Horizontal Agreements 2. Vertical Agreements
  10. Horizontal Agreements  Agreements between enterprises at the same stage of production, services, etc. and including Cartels. Examples : (i) directly or indirectly determines purchase or sale prices; (ii) limit or control production, supply, technical development etc. (iii) allocate areas or customers (iv) Directly or indirectly results in bid rigging or collusive bidding.  Above agreements are presumed to cause appreciable adverse effect on competition in the markets.
  11. Vertical Agreements  Agreements between enterprises at different stages of production, distribution, etc.-subject to Rule of Reason; burden of appreciable adverse effect on competition, they are prohibited. Examples : (i) Tie-in arrangement; (ii) Exclusive supply agreement; (iii) Exclusive distribution agreement; (iv) Refusal to deal; (v) Re-sale price maintenance.
  12. Abuse of Dominance  Unlike MRTP law, the Act does not frown on dominance by market players. But the abuse of dominance is prohibited under Section 4 of the Act. „Dominance‟ or „Dominant Position‟ means a position of strength, enjoyed by an enterprise, in the relevant market, in India which enables it to --
  13. Continued.. a. operate independently of competitive forces in the relevant market; sec .19(7) or b. affect its competitors or consumers or the relevant market in its favours sec .19(9) Dominance is determined by several factors e.g. market share of the enterprise concerned, market share of competitors, entry barriers, size and resources commanded by the enterprise or competitors, etc. sec .19(4)
  14. Continued..  Examples of abuse include –  Exclusionary practices such as predatory pricing, denying market access, use of dominance in one market to enter into, or protect, other relevant market.  Exploitative practices such as discriminatory pricing and imposing discriminatory conditions of trade, conclusion of main contract contingent upon accepting supplementary obligations unrelated to main contract.
  15. Regulation of Combinations  Section 5 of the Act deals with combinations. Combination includes acquisition of shares, acquiring of control and mergers and amalgamations. These combinations can be horizontal, vertical or conglomerate. It is the horizontal type of combinations that has very high potential to thwart competition when compared to other two kinds of combinations.  In line with the market realities, the Act provides for very liberal regime of combination regulation. The salient features of combination regulations are -
  16. Continued.. a. The Act has set very high threshold limit based on turnover or assets of the enterprises involved in combination for notification of combinations. The objective is to keep smaller combinations outside regulation and encouraging Indian enterprises to grow in size as well market share in globalised market. b. Higher threshold limit is set for combination involving parties having operation both in India and outside India. c. The notification of combination to the Commission is voluntary not mandatory.
  17. Continued.. d. Such notification has to be disposed off by the Commission within90 working days, failing which the same is deemed to be approved. e. The commission also has the suo moto enquiry power.  f. Limited exemption is given to combination involving public financial institution, foreign institutional investors and venture capital fund.
  18. THANKS!!