CUTS Institute for Regulation &

Competition, World Trade Centre, Mumbai

& Institute of Company Secretaries of India
– Centre for Corporate Training &
Research
Presents
Competition Policy and Law in a
Liberalising Economy
by
Prof. H D. Pithawalla, Advocate & Solicitor
Thursday, 7th December 2006
 Competition Law

A myth or a reality in India ?

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 Contents
 Background of the Competition Act
 Unfair Trade Practices
 Restrictive Trade Practices
 Protection of Intellectual Property Rights
 Abuse of Dominance and Combinations
 Case Studies

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 Background

 “Competition” (L – “compete”) is an age-

old phenomenon
 In olden days, competition
 existed amongst cave-men
 is also reflected in the Mahabharat
 In modern times, competition
 has become a global phenomenon
 starts right from Kindergarten & Nursery
classes

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Benefits of Competition….
 Companies : Efficiency, cost-saving
operations, better utilization of
resources, etc.

 The Consumer : Wider choice of goods

at competitive prices

 The Government : Generates revenue

BUT…………………………

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….Benefits of Competition

………all these benefits are lost if

Competition is UNFAIR or NON-
EXISTANT
 Choice of CARS in the olden days
 MTNL Monopoly : The position today
 Airlines : INDIAN AIRLINES : JET :
SAHARA
 Mobiles : Price Wars
 Indian Railways : The monopoly
continues….

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Perfect Competition – A Myth

“PERFECT COMPETITION” is an
ideal situation which exists only on
paper. It implies:
 A large number of Sellers
 A large number of Buyers
 Free entry
 Free exit
 Manufacturers are “price-takers” and
not “price-makers”
 No single manufacturer can influence
the market
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 Evaluation of Country’s
Competition Regime
 Competition Policy & Philosophy of the
Government
 Trade Agreements & Practices which are
RESTRICTIVE
 Trade Agreements & Practices which are
UNFAIR
 Abuse of dominance
 Combines : Mergers, amalgamations and take-
overs
 Competition at the international level : Trade
Blocs
 Consumer activism : NGOs and Consumer
Associations

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Evolution of Competition Law
 Before MRTP Act came into force (1970),
limited provisions existed under :
 The Indian Contract Act
 The Law of Torts
 Directive Principles of State Policy (Non-
enforceable)
 The MRTP Act brought in a four-pronged
thrust :
 Concentration of economic power ( - Repealed
in 1991 - )
 Restrictive Trade Practices
 Monopolistic Trade Practices ( - Almost a dead
letter - )
 Unfair Trade Practices ( - Added in 1984 - )

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 Unfair Trade Practices
 Many competition regimes do NOT consider
this as part of Competition Law
 BUT, it does affect competition – directly or
indirectly
 Consumer protection provisions made for the
first time in India by 1984 Amendments in the
MRTP Act
 The Consumer Protection Act came only 2
years later
 How Consumer Courts were hurriedly
constituted
 After 1986, MRTP Commission and Consumer
Courts had parallel jurisdiction
 Consumer Courts v MRTP Commission : Pros
& Cons

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 Unfair Trade Practices
 HOW UTPs affect competition :
 Warranties not based on lab tests
 After sales guarantees not honoured
 Contests & Competitions
 View of the MRTP Commission
 View of the Supreme Court
 Disparagement of competing products
 Godrej v Kelvinator
 Colgate v Pepsodent
 Rulings in RIDAKE (India) & XENICAL (USA)
 Misleading sales ads
 “ 60% OFF”
UPTO

 Guptaji’s Sales
 Ads of CURRYS (U.K.’s biggest electrical chain)

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 UTPs vis-à-vis Competition Act

Under the Competition Act :

 No provision for Unfair Trade Practices
 Only Consumer Courts will have
jurisdiction
 Pending cases will be continued by
MRTPC for 2 years
 After 2 years :
 All cases (except Disparagement Cases) will
be transferred to National Commission under
CPA
 All Disparagement Cases will be transferred
to Competition Commission
 Q. : After 2 years, WHERE can a
Company file Disparagement Cases ?
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 Restrictive Trade Practices

 Competition Act
 9 “Anti-competitive Agreements”
are declared void
 “Per Se Rule” applied to 4
Horizontal Agreements
 “Rule of Reason” applied to 5
Vertical Agreements

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Anti-competitive Agreements
 Horizontal Agreements

 Persons engaged in identical or similar goods or

services enter into an agreement :
 to determine purchase or sales prices
 to limit / control production, supply, technological
developments, etc.
 to share the market, allocate geographical
markets or number of customers
 for bid rigging or collusive tendering

All the above 4 Agreements “shall be

presumed to have an appreciable adverse
effect on competition”

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Anti-competitive Agreements
 Vertical Agreements

 “Tie-in” Arrangements
 Exclusive Supply Agreements
 Exclusive Distribution Agreements
 Refusal to deal
 Resale price maintenance

Such an Agreement will be contravention

of the Act IF the Agreement causes – or is
likely to cause – an appreciable adverse
effect on competition

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Powers of Competition Commission as
Regards Agreements

 After the inquiry into the Agreement,

Competition Commission can:
 direct parties to discontinue the
agreement
 prohibit parties from re-entering such
agreement
 direct modification of the agreement
 impose penalty upto 10% of average
turnover of the enterprise

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 Abuse of Dominance

 Mandate of the Act : “No enterprise

shall abuse its dominant position.”
 5 categories of “abuse” are listed in
the Act, as for instance, -
 Imposing discriminatory conditions in
purchase or sale of goods
 Predatory pricing
 Limiting production or scientific or
technical development
 Using dominant position in one market
to enter another market, etc.

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 Abuse of Dominance

 “Dominant position” is defined as a

position of strength which enables
the enterprise
 to operate independently of competitive
forces in the market, or
 to affect its competitors or consumers in
its favour.
 No mathematical or statistical
formula is adopted to “measure”
dominance – as under the repealed
provisions of the MRTP Act ( - 25%
of market share - )

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 Abuse of Dominance

 Power of the Competition

Commission
 After inquiry into abuse of
dominant position, the
Competition Commission can
order:
 discontinuance of abuse of dominant
position
 impose a penalty upto 10% of the
average turnover of the enterprise
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 Combinations

 MRTP Act
 Provisions of the MRTP Act regarding
registration of undertakings,
establishment of new undertakings,
take-overs, mergers and amalgamation
were criticized on the ground that they
were based on an impractical and
untenable proposition that “BIG is BAD”
 Ultimately, these provisions were
repealed in 1991

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 Combinations
 Competition Act
 NOW, the Competition Act seeks to regulate
any “acquisition”, “acquiring of control”,
“mergers or amalgamations” if it results in
assets or turnover exceeding specified
monetary limits
 Concept of voluntary notice is introduced. On
receipt of such notice, Competition
Commission can inquire – and
 approve the combination, or
 direct that the combination shall not take effect,
or
 propose modifications
 If no such Order is passed within a time-
bound frame, the combination is DEEMED TO
HAVE BEEN APPROVED.

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 Combinations
 Powers of Competition Commission
 It can :
 issue a Show Cause Notice to the parties
 direct the parties to publish details of the
combination
 invite members of the public to file written
objections
 pass appropriate Orders
 Two questions are worth considering :
 Is this just a back-door entry of earlier
provisions of the MRTP Act ?
 Will monetary limits fixed five years ago
remain relevant five years hence ?

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Thank
You!
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