Competition LAW: GENERAL OVERVIEW - PowerPoint Presentation

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Competition LAW: GENERAL OVERVIEW(Fair Competition For Greater Good)Ranchi 28.01.2018

Presented by

Manoj

Pandey

AdvisEr

(LAW)

Competition commission of

india

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Agenda for discussionBrief Background of Competition Law in India Broad Framework3. Provisions regarding Anti- Competitive Agreements 4. Provisions regarding Abuse of Dominance 5. Provisions regarding Combinations 6. Provisions regarding Inquiry & Investigation 7. Penal Provisions8. Appellate Forum9. Competition Regulations 10. Competition Law Issues decided by Supreme Court11. Leniency provisionsSlide3

1. Brief Background of Competition Law in India

Competition Act was passed by Parliament in 2002 to replace Monopolies and Restrictive Trade Practices (MRTP Act),1969.

Competition Act passed in the year 2002 received the assent of the President of India in January 2003.

It was subsequently amended by the Competition (Amendment) Act, 2007.

Substantive provisions of the Act were notified

w.e.f

20.05.2009

(relating to prohibition of anti-competitive agreements and abuse of dominance) and

w.e.f

01.06.2011

(relating to regulation of combinations).Slide4

Brief Background - contd. Act provides for

Commission having one Chairperson and six other members.

Secretary and Professional Staff to assist the Commission

Director General (DG)

to conduct investigation having powers of search and seizure

Preamble to the Competition Act, 2002

“An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to

prevent

practices having adverse effect on competition, to

promote and sustain

competition in markets, to

protect

the 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

.” Slide5

2. broad legal framework 2.1 Competition Act, 2002 Prohibits Anti-Competitive Agreements (Sec 3)Prohibits Abuse of Dominant Position (Sec 4)Regulates Combinations - Acquisition, Control and Mergers (S. 5&6 )Mandates Competition Advocacy (Sec 49)Provides for extra territorial jurisdiction for Acts taking place outside India but having an effect on competition in India (Sec.32) Contains Lesser Penalty provisions in case member of a cartel seeks Leniency or Lesser Penalty (section 46) Considers aspects of static, production and dynamic efficiency in the market in its enforcement provisions. Slide6

3. pROVISIONS REGARDING Anti - Competitive Agreements3.1 Provisions of Section 3 No enterprise or person shall enter into any agreement w.r.t. 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 - S. 3(1).Anti-Competitive Agreements: Horizontal Agreements - Section 3(3)

Vertical Agreements - Section 3(4)Slide7

Agreement: Defined in Section 2(b) of Act and includes any :Arrangement or, Understanding or, Action in concert Whether or not is formal or in writing; or, is intended to be legally enforceable

Anti - Competitive Agreements - CONTD.Slide8

Enterprise: Defined under Section 2(h) of the ActIncludes:Person or Department of Government Engaged in production, storage, supply, distribution, acquisition, or control of articles or goods or provision of services, of any kind or in investment or n the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, etc. Excludes:Sovereign Functions of Government including Central Government department's activities dealing with atomic energy, currency, defence and space. Anti - Competitive Agreements - CONTD.Slide9

Cases wherein COMPAT held that a department of government falls within the definition of the term ‘enterprise’ under sec 2(h) of the Act. Wing Cdr. (Retd.) Dr. Biswanath Prasad Singh Vs. Director General of Health Services (DGHS) Rajat Verma v. Haryana Public Works (B&R) Department Prem Prakash v. The Principal Secretary and Others

Anti - Competitive Agreements - CONTD. Slide10

Anti - Competitive Agreements- CONTD.3.2 Horizontal Agreements: S. 3(3)Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprises or practice carried on, or decisions taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, shall be presumed to have appreciable adverse effect on competition and therefore void if it :directly or indirectly determines purchase or sales prices.

limits or controls production, supply, markets, technical development, investment or provision of services.Slide11

Anti - Competitive Agreements- CONTD.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.directly or indirectly results in bid rigging or collusive bidding.However section 3(3) does not apply to any agreement entered into by the Joint Ventures leading to increase in the efficiency. Burden of proof is on the person or enterprise.Presumption of AAEC: ‘Shall presume’ rule applies to Horizontal Agreements.Slide12

SOME Cases OF HORIZONTAL ANTI-COMPETITIVE AGREEMENTS WHERE PENALTIES HAVE BEEN IMPOSED Some cases wherein findings of CCI have been confirmed by Appellate TribunalLPG CYLINDER CASE ALP TABLET SUPPLY CASE INSURANCE CASE TRAVEL AGENTS CASE FICCI MULTIPLEX CASESome cases of Anti-Competitive Agreements wherein Penalties have been imposed recently by CCICEMENT CASES CHEMIST AND DRUGGIST ASSOCIATION CASES CARTELISATION IN SUPPLY OF BRUSHLESS DC FANS TO INDIAN RAILWAYSFILM ASSOCIATION CASES SUPPLY OF SPARES TO INDIAN RAILWAYS Slide13

Anti - Competitive Agreements- CONTD.3.3 Vertical Agreements - S. 3(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, includingTie-in agreementExclusive supply agreementExclusive distribution agreementRefusal to dealResale price maintenanceshall be anti-competitive if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. [Rule of Reason Approach ]Slide14

Anti - Competitive Agreements- CONTD.3.4 According to S. 3(5) of the Act, S. 3 shall not 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:The Copyright Act, 1957 The Patents Act, 1970 The Trade and Merchandise Marks Act, 1958 The Trade Marks Act, 1999 The Geographical Indications of Goods Act, 1999 The Designs Act, 2000 The Semi-conductor Integrated Circuits Layout-Design Act, 2000ii) 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.Slide15

3. Provisions regarding abuse of dominance4.1 DominanceAs per S.4(1) of the Act, no enterprise or group shall abuse its dominant position.The Act defines dominant position as a position of strength , enjoyed by an enterprise, in the relevant market in India , which enables it to; Operate independently of the competitive forces prevailing in the relevant market orAffect its competitors or consumers or the relevant market in its favour. Slide16

abuse of dominance- contd. Relevant Market Section 2(r) and section 19(5) Means the determination of the market with reference to either/or both relevant geographic market and relevant product market

Relevant Geographic Market

Section 2(s) and

section 19(6)

Means a market comprising the area in which conditions of competition for supply or demand of goods/services are distinctly homogenous and can be distinguished from conditions prevailing in other areas

Relevant Product Market

Section 2(t) and

section 19(7)

Means a market comprising all products/services which are interchangeable or substitutable by the consumer by reason of their characteristics, intended use and prices. Slide17

abuse of dominance- contd. 4.2 Abuse of Dominance: Dominance per se is not bad. However, its abuse has been considered bad. Abuse of Dominant Position - Section 4 (2) There shall be an abuse of dominant position if an enterprise or a group indulges in any of the following :Imposing, directly or indirectly, unfair or discriminatory condition in purchase or sale of goods or services or price in purchase or sale (including predator price ) of goods or service; or,Limiting or restricting production of goods or services or market or technical or scientific development relating to the goods or services to the prejudice of customers; or,

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Indulges in practice or practices resulting in denial of market access in any manner; or,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,uses its dominant position in one relevant market to enter into, or protect, other relevant market.abuse of dominance- contd.Slide19

SOME CASES OF ABUSE OF DOMINANCE Wherein Findings Confirmed by Appellate Tribunal DLF Case Coal India Case Car Manufacturers case Slide20

5. Regulation of combinationSection 5 & 6 deals with Regulation of Combinations.CCI regulates combinations if turnover and asset thresholds are met.All combinations meeting the threshold limits prescribed in the Act need prior approval of CCI..Slide21

S. 5 - THRESHOLDS CriteriaAssets

Turnover

Only within

India

No

Group

>INR 2,000 crore

>INR 6,000 crore

Group

>INR 8,000 crore

>INR 24,000 crore

Within and

outside

India

No

Group

Total

Total

Minimum Indian Component

Total

Total Minimum Indian Component

>US $ 1 billion

with at least INR 1000 crore in India

1000 crore

>US $ 3 billion

with at least INR 3,000 crore (in India

3000 crore

Group

>US $ 4 billion

with at least INR 1000 crore in India

1000 crore

>US

$ 12 billion

with at least INR 3,000 crore in India

3000 croreSlide22

Regulation of combination- CONTD.

DE-MINIMUS EXEMPTION

Acquisitions where enterprises whose control, shares, voting rights or assets are being acquired have assets of not more that

Rs

. 350 crore in India or turnover of not more than

Rs

. 1000 crore in India, are exempt from S.5 of the Act for a period of 5 years.

THRESHOLDS FOR AVAILING OF DE MINIMIS

EXEMPTION FOR ACQUISITIONS

Assets

Turnover

Target Enterprise

In India

≤ INR 350 crore or ≤ INR 1,000 croreSlide23

Regulation of combination- CONTD.

NOTIFICATION DATED 27.03.2017 REGARDING CALCULATION OF TURNOVER AND ASSETS OF THE TARGET COMPANY

Prior

to the 2017 Notification, unless specifically exempted, CCI was required to be notified for all combinations and prior approval was required before effectuating the combination.

The

2017 Notification further clarifies that the asset value and turnover of only that segment/portion of enterprise, division or business which is being transferred shall be considered for calculating the thresholds under Section 5 of the Act, instead of taking the transferor’s total assets and turnover into

consideration.

Furthermore

, the 2017 Notification provides the method of computation of asset value and turnover for the purposes of availing this exemption.Slide24

Regulation of combination- CONTD.

SCHEDULE

1 of

(Procedure in regard to the transaction of Business relating to Combinations) Regulations,

2011

As

the categories of combinations mentioned in Schedule I read with Regulation 4 are ordinarily not likely to cause an appreciable adverse effect on competition in India, notice need not normally be filed. Slide25

Regulation of combination - CONTD

.

5.2 Section 6 of the Act deals with Regulation of Combinations

.

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

.

Vide notification dated

29.06.2017,

the parties are no more required to notify the Commission regarding execution of the trigger document within 30 calendar days; however the parties need to notify the Commission about the proposed combination before part consummation or consummation of the said combination. Slide26

Regulation of combination- CONTD.5.3 Timeline of Combinations: 30 working days for the Commission to form a prima facie opinion Most of the cases ( more than 95% cases) have been approved within 30 working days – Phase 1.

210 days from the date of notice to take a final decision on a combination in case of a detailed inquiry – Phase II.

On expiry of the prescribed period of 210 days, if no order is passed, the combination is deemed to be approved.Slide27

Regulation of combination- CONTD.5.4 Forms and Fees The parties to the combination shall give notice in Form I or Form II, as the case may beFee for filing Form I is 15 Lac

Form II is a detailed form and the fee for filing is 50 LacSlide28

REGULATIONS OF COMBINATIONS - CONTD. 5.5 Orders in case of Combinations causing or likely to cause AAECIf after inquiry the Commission is of the opinion that any combination has caused or is likely to cause AAEC then the Commission may pass the following orders under S. 31 of the Act:Not approve the combination; Approve with suitable modifications to combination, eliminating such effectsCases where combinations approved with remedy Sun Pharma-Ranbaxy CaseHolcim-Lafarge Case PVR-DT Cinema Case Slide29

6. INQUIRY & INVESTIGATION6.1 According to S. 19 (3), the Commission shall consider the following factors, while determining whether an agreement has an appreciable adverse effect on the competitionCreation of barriers to new entrants in the marketDriving existing competitors out of the market

Foreclosure of competition by hindering entry into the market

Accrual of benefits to consumers

Improvements in production or distribution of goods or provision of services

Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of servicesSlide30

INQUIRY & INVESTIGATION- CONTD.6.2 According to S. 19 (4), the Commission shall consider the following factors

, while inquiring whether an enterprise enjoys a dominant position

Market share of the enterprise

Size and resources of the enterprise

Size and importance of the competitors

Economic power and commercial advantages over competitors

Vertical integration of the enterprises

Dependence of consumers on the enterpriseSlide31

INQUIRY & INVESTIGATION- CONTD.

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.

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.

Countervailing buying powerSlide32

INQUIRY & INVESTIGATION- CONTD.Market structure and size of marketSocial obligations and social costsRelative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have appreciable adverse effect on competition;Any other factor which the Commission may consider relevant for the inquiry.Slide33

INQUIRY & INVESTIGATION- CONTD.6.3 According to S. 20(4), the Commission shall consider the following factors, while inquiring whether a combination would have an appreciable adverse effect on competition: Actual and potential level of competition through imports in the marketExtent of barriers to entry into the marketLevel of combination in the marketDegree of countervailing power in the marketExtent of effective competition likely to sustain in a marketSlide34

INQUIRY & INVESTIGATION- CONTD.Likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margin.Extent of effective competition likely to sustain in a marketExtent to which substitutes are available or are likely to be available in the marketMarket share, in the relevant market, of the persons or enterprise in a combination, individually and as a combinationSlide35

INQUIRY & INVESTIGATION- CONTD.Likelihood that the combination would result in the removal of a vigorous and effective competitor in the marketNature and extent of vertical integration in the market;Possibility of a failing business;Nature and extent of innovation;Relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition;Whether the benefits of the combination outweigh the adverse impact of the combination, if any.Slide36

INQUIRY & INVESTIGATION - Process Flow - sec.3 and 4 Case Initiation (Section 19)Information Received Under Section 19(1)(a) from any person, consumer or their association or trade associations

Reference Received from Central or State Government

Section or Statutory Authority 19(1)(b)

Suo

Moto

Investigation

(on its own)

(Section 19(1)

( Prima facie view u/s 26(1) Slide37

INQUIRY & INVESTIGATION- CONTD.Prima facie view u/s 26(1)Prima Facie Case Made Out (no appeal lies )

Prima Facie Not Made out

Case Closed – s. 26(2)

(Appeal lies )

Sent to DG for Investigation

In case of contravention, final order u/s 27 of the Act

In case of no contravention, case is closed.

DG’S Inv. ReportSlide38

7. PENAL PROVISIONS7.1 Orders in case of Anti- Competitive conduct and Abuse of Dominance If after inquiry the Commission finds that there is contravention of S.3 or S. 4 of the Act then the Commission may pass the following orders under S. 27 and 28 of the Act:Orders under Section 27Direct to discontinue and not to re-enter such agreements or discontinue such abuse of dominant position, as the case may beModification of anti-competitive agreementsImpose penalty upto 10% of average turnover for last three preceding financial yearsIn case of cartels, impose penalty upto 10% of turnover or three times of profit for each year of continuance of such agreement, whichever is higherAny other order it may deem fitSlide39

Orders under Section 28Division of Enterprise 7.2 Chapter VI of the Act provides for; Penalties for non-compliance with orders, directions of the Competition Commission of IndiaPenalties for non-reporting of combination Penalties for incorrect information Provisions for compensation by the Competition Appellate Tribunal (COMPAT) in case of contravention of orders of the Commission.

PENAL

PROVISIONS -

CONTD. Slide40

PENAL PROVISIONS - CONTD. PENALTY UNDER CHAPTER VI

Section 42

Contravention of orders of Commission

42(2) : Penalty for non-compliance with orders, directions passed by the Commission under sections 27, 28, 31, 32, 33, 42A and 43A of the Act

:

Fine

upto

Rs

. 1 lakh per day, subject to a maximum of

Rs

. 10 crore.

42(3) :

If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under sub-section (2), he shall, without prejudice to any proceeding under section 39, be

punishable with imprisonment for a term which may extend to three years, or with fine which may extend to rupees twenty-five crore, or with both

, as the Chief

Metropolitan Magistrate, Delhi may deem fit:

Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this section save on a complaint filed by the Commission or any of its officers authorized by it.Slide41

PENAL PROVISIONS - CONTD. PENALTY UNDER CHAPTER VI

Section 43

Penalty for failure to comply with directions of Commission and DG

CCI can impose fine which may extend to

Rs

. 1 lakh for each day during which such failure continues subject to a maximum of

Rs

. 1 crore

Section 43A

Penalties for non-reporting of combination

CCI can impose penalty which may extend to 1% of the total turnover or the assets, whichever is higher, of such a combination.

Section 44

Penalties for filing of incorrect information by any party to a combination

CCI can impose penalty which shall not be less than

Rs

. 50 lakhs but which may extend to

Rs

. 1 Crore. Slide42

PENAL PROVISIONS - CONTD. PENALTY UNDER CHAPTER VI Contd.

Section 45

Penalty for willingly furnishing incorrect information

CCI can impose fine

which may extend to

Rs

. 1 Crore

Section 46

Power to impose lesser penalty

Discussed

i

n

detail under Leniency Provisions

Section 48

Contravention by companies

CCI deems every person who was in charge of and was responsible to the company for the alleged anti-competitive conduct to be guilty of the contravention and is liable to be proceeded against.

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8. Appellate forum Supreme CourtEarlier COMPAT / Now NCLAT Competition Commission of IndiaSlide44

9. competition regulationsS. N.REGULATION DESCRIPTION DATE

1.

CCI (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011

11/05/2011

2.

CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011

08/02/2011

3.

CCI (Determination of Cost of Production) Regulations, 2009

20/08/2009

4.

CCI (Lesser Penalty) Regulations, 2009

13/08/2009

5.

CCI (Meeting for transaction of Business) Regulations, 2009

22/05/2009

6.

CCI (General) Regulations, 2009

22/05/2009

7.

CCI (Procedure of Engagement of Experts and Professionals) Regulations, 2009

15/05/2009Slide45

10. ISSUES DECIDED BY SUPREME COURTCCI v. STEEL AUTHORITY OF INDIA (2010)SUPREME COURT DECISION:Order passed by the Commission u/s 26(1) of the Act is an administrative direction to one of its own wings departmentally (i.e. DG).

The Commission is not bound to issue notice or grant hearing, at the stage of formation of prima facie opinion u/s 26(1) of the Act.

Order passed u/s 26(1) does not effectively determine any right or obligation of the parties to the

lis

and therefore the same is not appealable. Slide46

ISSUES DECIDED BY SUPREME COURT contd.CCI v. STEEL AUTHORITY OF INDIA (2010) contd. Closure of the case causes determination of rights and affects the informant; resultantly, the said party has a right to appeal against closure of case under Section 26(2) of the Act.No appeal will lie from any decision, order or direction of the Commission which is not made specifically appealable under Section 53A(1)(a) of the Act.

SC issued directions to ensure proper compliance in regard to procedural requirements to ensure that the procedural intricacies do not hamper in achieving the object of the Act.Slide47

ISSUES DECIDED BY SUPREME COURT contd.Co-ordination Committee of Artists & Technicians of West Bengal Film and Television and ors. (2017)SUPREME COURT DECISION:Enterprise: Any entity, regardless of its form, constitutes an 'enterprise' within the meaning of S.3 of the Act, when it engages in economic activity. An economic activity includes any activity, whether or not profit making, that involves economic trade.

Association Of Enterprises:

The

Coordination Committee is an association of enterprises as its constituent members are engaged in production, distribution and exhibition of films. The Coordination Committee cannot be treated narrowly as Trade Unions, as is backing the cause of those which are ‘enterprise’.

Agreement:

The activities of the Coordination Committee (Association of enterprises), can be treated as an 'agreement' for the purpose of Section 3 of the Act.Slide48

ISSUES DECIDED BY SUPREME COURT contd.Co-ordination Committee of Artists & Technicians of West Bengal Film and Television and ors. (2017) contd. Appreciable adverse effect If any agreement falls within the category of S.3(3)

of the Act

, it is

per se

treated as adversely effecting the competition to an appreciable extent and comes within the mischief u/S 3(1) of the Act. There is no further need to have actual proof as to whether it has caused AAEC on competition.

In order to determine whether any agreement has an appreciable adverse effect on the competition

under S. 3, factors given u/s 19(3) are to be taken into consideration.Slide49

ISSUES DECIDED BY SUPREME COURT contd.Co-ordination Committee of Artists & Technicians of West Bengal Film and Television and ors. (2017) contd. RELEVANT MARKET:The word 'market' used in S. 19(3) has reference to 'relevant market'.

The appreciable adverse effect on the Competition has to be seen in the context of ‘Relevant Market’.

In order to examine an anti competitive conduct, Relevant Market is the first aspect to be determined. Slide50

ISSUES DECIDED BY SUPREME COURT contd.CCI vs. Excel Crop Care Ltd (2017)TOTAL TURNOVER V. RELEVANT TURNOVERThe criteria of ‘relevant turnover’ is to be adopted for the purpose of imposition of penalty under S. 27(b) of the Act.

Definition of the term “relevant turnover” is entity’s turnover pertaining to products and services that have been affected by such

.

RETROSPECTIVITY

SC held that in cases where tender process is initiated prior to the date when S. 3 became operational but continued much beyond May 20, 2009, since the role of parties as tenderers did not come to an end only by submitting the tenders, the inquiry into the tender of March 2009 by the CCI is covered by S. 3 of the Act. Slide51

ISSUES DECIDED BY SUPREME COURT contd.CCI vs. Excel Crop Care Ltd (2017) Contd. JURISDICTION OF DG/ CCI WHILE INVESTIGATING AND ENQUIRING THE MATTERS:The SC held that the while carrying out DG investigation, if other facts reveals that even other parties have entered into an agreement that is prohibited by S. 3, the DG would be well within his powers to include those as well in his report. Slide52

11. Leniency programme 11.1 What is Leniency ProgrammeIt is an effective tool to detect, investigate and combat cartel cases.It is a type of whistle-blower protection It is a protection to those who come forward and submit information honestly, who would otherwise have to face stringent action by the Commission if existence of a cartel is detected by the Commission on its own.11.2 Leniency Provisions Section 46: If the Commission is satisfied that any producer, seller, distributor, trader or service provider included in any cartel has made a full and true disclosure in respect of the alleged violations and such disclosure is vital, impose a lesser penalty as it may deem fit.Slide53

Leniency programme To effectuate the leniency programme, the Commission has made Competition Commission of India (Lesser Penalty) Regulations, 2009. These Regulations provide the framework in which the Commission can give lower punishment than statutorily provided in the case of cartel membership.However, no protection under lesser penalty regulations shall be granted in the following cases:If the DG Report has been received before making of such disclosure.If the person making the disclosure does not continue to cooperate till the completion of the proceedings.If the Commission, during the course of proceedings finds that the party: (a) had not complied with the condition on which the lesser penalty was imposed; or (b) had given false evidence; or (

c) the disclosure made is not vital,Slide54

ThankS