PART II
3. COMPETITION ACT AND ITS APPLICABILITY:
The Monopoly and Restrictive Trade
Practice Act 1969 became obsolete in the present
world of throat cutting competition. The MRTP Act prevent the expansion
of the companies whose assets was 100 crore, because these companies need to
take government permission to expand their business.
So,
there was a desperate need to shift our focus from the monopoly to the
competition. Hence a new law has been
enacted and published in the gazette of India on 14 January 2003 for bringing competition in the Indian market.
Objectives of the competition Act 2002 are;
1.
To protect the
interests of the consumers by providing them good products and services at reasonable prices
2.
To promote
healthy competition in the Indian
market.
3.
To prevent the
interests of the smaller companies or prevent the abuse of dominant position in the market.
4.
To prevent
those practices which
have adverse impact
on competition in the Indian
markets.
5.
To ensure
freedom of trade in Indian
markets.
6.
To regulate
the operation and activities of combinations (acquisitions, mergers and amalgamation).
3.1. DIFFERENT ASPECTS
OF COMPETITION ACT;
Following are different aspects of the Competition
Act 2000, which was not there previously in the earlier
MRTP act. They are as follows-
1.
Prohibition of anti-competitive agreements:
section three of the competition Act 2002 deals
with the prohibition of
anti-competitive agreements in the following ways-
No
enterprise or associations Anti-competitive agreements. According to clause one
of section three- 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.
Again
subsection 2 of section 3 of Competition Act says that- Any agreement entered into in
contravention of the provisions contained in subsection (1) shall be void.
According
to section (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.
According to Explanation of section 3
—For the purposes of this sub-section, “bid rigging”
means any agreement, between enterprises or persons referred to in sub-section 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
According
to Subsection (4) of Section 3 Of the Competition Act- 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.
Section
3 (5) Of the Competition Act provides for exception of the general Rules as
provided in the Section 3 of the
Competition Act — (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 (b)the Patents Act, 1970
b.
the Trade and Merchandise Marks Act, 1958
c.
the Geographical Indications of Goods (e)the Designs Act, 2000
d.
the
Semi-conductor Integrated Circuits Layout-Design Act,
2. Prohibition of abuse
of dominance:
Under the present System of
Competition Law of India, the Dominance
per se is not bad what is bad is
the abuse of Dominant position.
Section 4 of the Competition Act,2002 deals with the Abuse of Dominant
Position. according to section 4 of the
Competition Act,
(1 (1) No enterprise or group shall abuse its
dominant position.
According to section (2) There shall be an abuse of dominant position,
if any one of the following conditions is satisfied-
(a) (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.
As per the Explanation Of subsection 2 of section 4
is concern — 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) (b) limits or restricts—
i. production of goods or provision of services or market therefor;
or
ii. technical or scientific development relating to goods
or services to the prejudice of consumers; or
(c) (c) indulges in practice or practices resulting in denial of market access
(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.
Again, Explanation two of subsection two —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 favor.
(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.
3. REGULATION OF COMBINATION (ACQUISITION, MERGERS, AND AMALGAMATION OF CERTAIN SIZE):
Section 5 of the Competition Act,2002
regulate the Combinations- According to Section 5 -(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 inn 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 thou sand 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,
In “Sun-Ranbaxy Merger case”, as per section 6 of the competition Act, 2002 provides
that a company need to take
prior approval from the CCI for any merger if the Combined assets of two entities are more than Rs 1,500 Cores
or sale amount more than 4,500 cores . in 2014 Sun- Pharma agreed to buy
Rainbaxy at 3.2 billion in stick.
In
this present case after two phrase investigations, CCI approved the merger, but
the condition is to divest seven drugs. Where market
value goes 95 percent.
In
PVR-DT case the legal issue in this case is relating to section 5 of the
Competition Act.2000. where it is
says that – parties or enterprises whose assets value is more than one thousand
cores must give a notice to the
commission prior to the combinations. No persons or associations can enter into a combination which has an
adverse impact in the market, The CCI has held that the proposed
combination has an appreciable adverse impact in the market.
Again, in Amit Mittal vs DLF Limited and others, the fact of the case is that the opposite party is a public limited company involves in a
business for development of residential and commercial properties. A project by DHDL was wholly owned by the opposite party. the information alleged that the agreement between
OP1 and OP2 is violation
of section 4(2)(a)(1) of the competition Act, 2000. The Competition
Commission of India after analyzing the fa t and report held that there was no contravention of section 4 of the competition
Act ,2000.
4. Power and functions of the
competition commission of India:
Section 18, 19 and 20 0f the Competition Act deals with the powers of completion commission In India
Duties of Commission. Subject to the provisions of this Act, it shall be the duty of
the Commission to eliminate practices having adverse effect on competition, promote
and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India: Provided that the Commission may, for the purpose of discharging its duties or performing its
functions under
this Act, enter
into any memorandum or arrangement with the prior approval
of the Central Government, with any agency of any foreign country.
Inquiry into certain agreements and dominant position of enterprise.
(1) The Commission may
inquire into any alleged contravention of the provisions contained in
subsection (1) of section 3 or sub-section (1) of section 4 either on its own
motion or on—
(a) receipt of any
information, in such manner and accompanied by such fee as may be determined by
regulations, from any person, consumer or their association or trade
association; or
(b) a reference made to
it by the Central Government or a State Government or a statutory authority.
(2) Without prejudice
to the provisions contained in sub-section (1), the powers and functions of the
Commission shall include the powers and functions specified in sub-sections (3)
to (7).
(3) The Commission
shall, while determining whether an agreement has an appreciable adverse effect
on competition under section 3, have due regard to 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; or
(f) promotion of
technical, scientific and economic development by means of production or
distribution of goods or provision of services.
(4) The Commission
shall, while inquiring whether an enterprise enjoys a dominant position or not
under section 4, have due regard to all or any of the following factors,
namely:—
(a) market share of the
enterprise;
(b) size and resources
of the enterprise;
(c) size and importance
of the competitors;
(d) economic power of
the enterprise including commercial advantages over competitors;
(e) vertical
integration of the enterprises or sale or service network of such enterprises;
(f) dependence of
consumers on the enterprise;
(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;
(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;
(i) countervailing
buying power;
(j) market structure
and size of market;
(k) social obligations
and social costs;
(I) 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;
(m) any other factor
which the Commission may consider relevant for the inquiry.
(5) For determining
whether a market constitutes a “relevant market” for the purposes of this Act,
the Commission shall have due regard to the “relevant geographic market’’ and
“relevant product market”.
(6) The Commission
shall, while determining the “relevant geographic market”, have due regard to
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.
(7) The Commission
shall, while determining the “relevant product market”, have due regard to 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.
3.2. ADVERSE IMPACT
IN COMPETITIONS;
1.
Anti-competitive agreement (vertical agreement, horizontal agreement)
2.
Abuse of dominant
position; enjoying a dominant position will not be crime but its abuse will be a crime
3.
Elimination/reduction
of competitors in the market achieved through
acquisition, mergers, and amalgamation
In
the recent years we have observed the
CCI has imposed huge penalties on many companies for mis- using their dominant position in the market. Some years
back CII imposed penalty on a big cement company for making cartel in deciding the price of the cement in India.
CCI
has imposed penalties on some airlines in India for forming cartel to decide
the fare charge of the air
travel.
In
the conclusion it is worth to say that the CCI is doing great job in protecting
the rights of the consumers by increasing healthy
competition in the Indian market which is the need of
the hour.
There
is a growing recognition that a flexible, dynamic and competitive private
sector is essential to fostering
sustained economic development. Promoting competition offers greater choice of higher quality products at lower price.
Competition also helps for greater accountability and transparency, reduces corruption and lobbying. Competition being
an efficient system of markets working encourages enterprise and widens choice. Economic
theory suggests that in a competitive
market, prices and quantities equilibrate to levels that generate efficient
outcomes. Less mature markets tend to
be vulnerable to anticompetitive practices. Competition Law and policy does not kill competition but encourages competition by penalizing anti-competitive behavior like anti-competitive agreements and abuse of dominance
situations.
Competition in any field is considered to be a
healthy practice for nourishing the opportunities and working as a motivating factor, provided it is followed
in a legitimate manner. Perfect competition can be defined as a market outcome in which all firms sell a
homogeneous and perfectly divisible product,
all producers and consumers are price takers, all firms have a relatively small
market share, buyers and sellers have
all the relevant information about the market including the price and quality of the product, the industry
is categorized by freedom of entry and exit and there are no externalities. It is the foundation on
which market system works and economy grows. The Competition laws of most of the countries seek to increase
consumer welfare, ensure fair trading, increase
economic efficiency and prevent abuse of market power (Dominant Position). The
three areas of enforcement that are provided for in most competition
laws are:
i. Anti-competitive agreements including Cartels
ii. Abuse of dominance,
and
iii.
Mergers which have
potential for anti-competitive effect.
3.3. OVERALL IMPACT
OF COMPETITION ACT:
The Competition Act was enacted in the year 2002 and
it came into force on 13th January 2003. The
objectives of the act have been set forth in its preamble which states that the
act would provide for establishment
of a Commission (i.e., Competition Commission of India) to prevent anti-competitive practices, to promote and
sustain competition in the market, to protect the consumers and to ensure freedom of trade carried on by the other
participants of the market. The Act
regulates three Anticompetitive practices namely Anti-competitive agreements,
Abuse of Dominant Position and
Mergers & Acquisitions (Combinations). The main criteria used for the regulation of anti-competitive practices
are that such practices should not cause an appreciable adverse effect on competition within India. Section 3 of the Act
explains as to what agreements are
anti-competitive in nature and it classifies
such agreements into two categories namely Horizontal
agreements and vertical agreements. It states that all the anticompetitive
agreements which can cause an
appreciable adverse effect on competition in India shall be void subject to certain
exceptions as provided under section 3(5). Section 4 deals with issues of abuse of dominant position, it gives a list of acts which may amount to abuse
of dominant position.
Further section 5 and 6 explains aspects
of combinations and also prescribe certain norms to regulate combinations.
4. DIFFERENCES BETWEEN
COMPETITION ACT AND MRTP
ACT:
There are certain
changes in the Competition Act
which was not there in the previous
MRTP Act. Under the MRTP Act big enterprises
were taken as against the purview of
law. After the recommendation of various committees appointed by the central government and the legal
changes of the country due to
enactment of the Consumer Protection Act, it was necessary to have a change in The MRTP Act, necessary the competition Act was passed by the
Indian parliament in the
year of 2002.
There are many differences between the MRTP Act and the competition act some of the important
differences between these two
Acts are discussed under-
1.
With regards to size; there are differences between the MRTP Act and the
competition Act with regard to size,
under the MRTP Act size was the factor to regulate the competition. As per the preamble of the MRTP Act the
fundamental objective behind the MRTP Act was to remove the Concentration of powers.
On
the other hand, under the Competition Act conduct is the factor. Size is not
irrelevant under the competition Act.
As a fair competition is always good for the consumers the Act mainly concern with the abuse of the dominant positions.
2. MRTP Act was mainly
procedure oriented. Because the Act
analysis the procedure how the agreement
came into force, certain cases the procedure itself declares certain
enterprises illegal. Because the MRTP Act was based on the
principle of Rule of Law approach.
On the other hand, competition Act is conduct
oriented. In many cases it has been proved that until and unless any agreement has adverse impact on the
relevant market a mere agreement will not
declare as anti-competitive, in BHARITI
AIRTEL LIMITED VS RELIANCE JIO COMPANY, the cci has held that the agreement between the reliance company will not amount to anti-competitive because they had no any
dominant position in the market.
3. the MRTP Act was mainly in reformist
and behavioral approach. The objective behind the MRTP Act was not to
punish the law breakers, but to prevent the offences.
On
the other hand, Competition Act is mainly on punitive approach. The word
punitive means when the offences already taken place then the further
actions by the authority.
4. Under MRTP Act
offences were implicit and not defined expressly, as already stated that objective behind the MRTP Act is to
prevent the Commission of the Crimes. Not to punish the Wrong Doers but to
prevent the commission of the crimes.
On
the other hand under the new competition act offences are explained and
defined. The Competition Act mainly
deals with both the aspects prevention as well as punishment wen the offences
already taken place.
5. Under the MRTP Act unfair trade
practices was included. Because MRTP Act the concept was prior to the enactment of Consumer Protection Act , so the
unfair trade practices was included in the MRTP Act.
On
the other hand, under the new Competition Act unfair trade practices are not included
because the unfair trade practices have been taken away under the consumer
protection Act.
6. MRTP
Act was frown upon dominance. Because the Objective
behind the MRTP Act was to prevent
the Concentration of powers among the
few.
On the other hand, under the competition act frown upon abuse of dominance. Until and unless
there is abuse of dominance it cannot amount to illegal.
7. MRTP
Act was mainly rule of Law Approach. The determining factor was the procedure as laid down by the Act.
On the other hand, Competition mainly Rule of reason Approach.
The appropriate authority
after investigation it will come to a conclusion that whether there is a adverse impact or
not.
8. MRTP
Act was mainly
a municipal law where the Act has extra territorial jurisdiction. The Act was
mainly concern with those
enterprises whose exiting in India.
9.
On the other hands the Competition Act 2002 has some extra territorial
jurisdiction also. Any unfair
practices beyond the territory also have the jurisdiction under the competition
act if it has some ad ers e
impact in the relevant market
in India.
10.
MRTP Act has no combination regulation.
Under The present
Competition act there
is existing of combination
regulation.
11. under the MRTP Act there was no penalties for offences.
But in the competition act thee is penalties for offences.
12.
No competition advisory
rule under the MRTP Act
But there is competition
advisory rule under the cci in the
new act
5.
CONCLUSION:
So, it is very much clear from the above discussion
that the Competition act 2002 playing its appropriate
rule in purchasing its objective which is to regulate the competition in India.
The
competition Commission has also played very vital role in deciding the cases.
the top most cases in the country
have been decided
by the competition commission. In many cases the Competition Commission also succeed to
settle the disputes and spread the awareness about the anti-competitive
activates.
With
compare with the previous MRTP Act the Competition Act is more efficient to achieve its goal which is regulate the competition in India.
With
the development of the legal frame work of the country it is necessary that
such an act which also in preventive
as well as in punitive in nature. The Competition Act proved the such it has-been prove d
that the Competition Act playing its appropriate
rule in achieving its goal which
is regulation of competition in India.
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