Dr. KUMUDHA RATHNA
THE COMPETITION LAW INTRODUCTION:
GENESIS:: The Govt. decided to liberalize its economic policy in GENESIS 1991 1991 because because of t he financial cri sis & opened up its econo my to the international market, inviting private investment, i.e., LPG. Due to this it had to fulfil obligations under World Trade Organization (WTO), General Agreement on Trade & Services (GATS), Trade Related Related Asp ects of o f Intellectual Intell ectual Prop erty Right s (TRIP (TRIPS) S) etc. MRTP MRTP Act, Act, 1969 1969 was enacted enacted mainly to contain cont ain the co ncentration of economic power & therefore wasn’t suited to deal with issues relating to preservation & protection of competition, in the new business environment. environment. Als Al s o, as cer tai n pr ov i s i ons on s i n t he MRTP Act Ac t w ere obs ob s t r uc t i v e t o priv ate investm ent, they were deleted. deleted. (Eg: (Eg: Prior Prior approv al of the Govt. for enterprises slowed the entry of foreign enterprises into India, consequently the provisions dealing with monopolistic enterprises seeking prior approval were deleted from the Statute). Only powers to Order divisi div ision on of undertaking o r to direct severance severance of inter-connection of undertakings were retained, but these pow ers were never never used. Thus the t he MRT MRTP P became a toothless tiger. In the wake of i nflu x of large MNCs, MNCs, on opening op ening up of th e econom econom y of the country & the enlargement of the range of goods/services offered to the consumer-a specific Law for preserving competition became essential.
Dr. KUMUDHA RATHNA
Als Al s o, all al l o v er t h e w orl or l d , i t w as fo un d t hat pr i v ate m on op ol i es c an be detrimental to nation nation al economy & cont rol was required. Fair Fair & free competition comp etition i s required for grow th of a healthy healthy economy. The Central Govt. in 1999, appointed a high-level committee (The ( The Raghavan Committee) on competition policy & Law, to study the Indian econom econom ic sc ene & make recommendations for a competitio n policy, to provide for a basic legislation to meet the needs of the nation, pertaining to this aspect. The TOR (Term of Reference) to the Raghavan Committee (RC) were as as foll ows:ows :o
Suitable legislative framework (in the light of international developm developm ents) to meet meet the needs needs of pro moti ng comp etition ;
o
Laws relating relating to mergers & demergers; demergers;
o
Such legis fr amewo amewo rk co uld entail a new Law OR appropri ate amendments to the th e MRTP MRTP Act, 1969. 1969.
SALIENT FEATURES OF THE REPORT OF THE RAGHAVAN COMMITTEE:: COMMITTEE ➢ The term ‘Competition’ has been used sparsely in the MRTP
Ac t (on l y in i n 2 pl aces); ac es); ➢ Lack of precise definitions of crucial terms such as-
dominance, cartel, collusion, boycott, refusal to deal, bid rigg ing, predatory pric ing etc. etc.
These These are necessary necessary to
effectively detect such behaviour & impose sanctions against them. Lack of precise definitions had led to different judicial interpretations, sometimes contradictory. So, MRTPC (Monopolies & Restrictive Trade Practices Commission) is constrained to fit anti-competitive behaviour
Dr. KUMUDHA RATHNA
Als Al s o, all al l o v er t h e w orl or l d , i t w as fo un d t hat pr i v ate m on op ol i es c an be detrimental to nation nation al economy & cont rol was required. Fair Fair & free competition comp etition i s required for grow th of a healthy healthy economy. The Central Govt. in 1999, appointed a high-level committee (The ( The Raghavan Committee) on competition policy & Law, to study the Indian econom econom ic sc ene & make recommendations for a competitio n policy, to provide for a basic legislation to meet the needs of the nation, pertaining to this aspect. The TOR (Term of Reference) to the Raghavan Committee (RC) were as as foll ows:ows :o
Suitable legislative framework (in the light of international developm developm ents) to meet meet the needs needs of pro moti ng comp etition ;
o
Laws relating relating to mergers & demergers; demergers;
o
Such legis fr amewo amewo rk co uld entail a new Law OR appropri ate amendments to the th e MRTP MRTP Act, 1969. 1969.
SALIENT FEATURES OF THE REPORT OF THE RAGHAVAN COMMITTEE:: COMMITTEE ➢ The term ‘Competition’ has been used sparsely in the MRTP
Ac t (on l y in i n 2 pl aces); ac es); ➢ Lack of precise definitions of crucial terms such as-
dominance, cartel, collusion, boycott, refusal to deal, bid rigg ing, predatory pric ing etc. etc.
These These are necessary necessary to
effectively detect such behaviour & impose sanctions against them. Lack of precise definitions had led to different judicial interpretations, sometimes contradictory. So, MRTPC (Monopolies & Restrictive Trade Practices Commission) is constrained to fit anti-competitive behaviour
Dr. KUMUDHA RATHNA
into 1 or more of the provisi ons of the Law Law in the absence absence of precise definitions. ➢ The
term
‘Cartel ’
not
mentioned
or
defined
in
any
section/clause. ➢ Existing Law inadequate to deal with implementation of the
WTO agreements. ➢ No merger cont rol prov isions. ision s.
Commi ttee recognized the
necessity of having specific merger control provisions at par with other other modern com petition Laws. ➢ Provisions dealing with unfair trade practices overlap with
similar provisions in the Consumer Protection Act, 1986 & MRTP Act, 1969. ➢ Emphasised about anti-competitive practices as follows, ‘...the MRTP Act, in comparison w ith Competition Laws of
many countries, is inadequate for fostering competition in the market & trade & for reducing, if not eliminating, anticompetitive
practices
in
the
country’s
domestic
&
international trade.’
Thus, the RC declared the MRTP Act to be falling short of addressing competition and anti-competitive practices. SUGGESTION OF RC: RC: ➢ Desired
that
competitive
the
new
practise,
Law
focus
on
preventing
‘...the
only
legitimate
anti-
goal
of
Competition L aw is th e maximization of economic welfare.’ ➢ Competition authority should be governed by established
competition p rinciples.
Dr. KUMUDHA RATHNA
➢ There is to be a balance between over-intervention &
exception exception fr om sanction in the name of ‘ Public interest ’. ➢ Essential to have merger control provisions in the new
legislation. legisl ation.
But, suggested sugg ested a soft approach, approach, i.e i.e., volu ntary
notific ation ation for m ergers. ergers. ➢ That government enterprises & departments should be
brought
under
the
exception-sovereign
purview functions
of of
Competition the
Law.
Only
government
(Eg:
Defence). ➢ Policy of purchase/price preference to government owned
enterprises was recommended to be discontinued. (This recommendation was in spite of the fact that many countries exempt
government
enterprises
from
purview
of
the
Competition Law). Law). ➢ There should be no distinction between ultimate consumer &
intermedia int ermediate te consum er. ➢ While
the
Committee
presumed
some
anti-competitive
behaviour to be injurious to competition, it recognized the prim acy of rule rul e of reason reason test for the rest. rest. The primacy of rule of reason test over per se rule is universal among modern competition Laws; the latter being invoked only against hardcore anti-competiti ve behaviour (Eg: (Eg: Cartelization Cartelization)). ➢ Suggested the setting up of a specialized agency to try
competition c ases & opin ed that that this is suit able in developing countries (though, in many countries competition cases are tried tri ed by Courts). ➢ Recomm Recommende ended d in detail regarding th e admn admn s etup of an
(i)independent & autonomous competition authority-stating that its main objectives objectives shoul d be to (ii)admi ii)administer nister the
Dr. KUMUDHA RATHNA
competition Law & engage ‘proacti vely in Governmental Governmental policy formulation ’ (proceedings shd be (iii)transparent). That the autho authorit rity y shd be (iv)manned (iv)manned by experts experts i n various fi elds who wh o can be removed only w ith the th e concurrence of the SC of India. (v)Juris (v)Juris diction dic tion -shd be extra-territor extra-territor ial. (vi)P (vi)Powers owers t opunish the guilty & l evy fines. fines. ➢ Much emphasis on competition advocacy by competition
authority (Reason-lack (Reason-lack of/low awareness of competition issues iss ues among among s takeholders). ➢ Need for a Competition Law Tribunal (CLT) (Competition
Commission of India-CCI) that will act as a watchdog for the introduct ion & maintenance maintenance of competition competition po licy. ➢ Emphasised the importance of co-ordination of different
policy measures of the Govt. for effective implementation of competition polic y. ➢ There should be progressive reduction & ultimate elimination
o f reservation reservation of products for the small-scale small-scale industries & the handloom sector. ➢ Proposed legislation should cover all industries in the public
& priv ate sector & pr ofessio nal servi services. ces. Based on its analysis, The RC found it more expedient to have a new competition comp etition Law.
This report formed the genesis of the
modern Competition Law, vide a Central Central Law, The Competiti Competiti on Act, Ac t, 2002. The Competition Law (i.e., Competition Act, 2002) was enacted in January.2003-after taking into consideration the recommendations of the (i)Raghavan Committee & deliberations of the (ii)Standing Committee on Finance.
Dr. KUMUDHA RATHNA
The Act was introduced at a time when large MNCs were taking advantage of Ind ia’s liberalized economic policy, permitting greater participation of overseas companies in economic activities in India. Indian industry, used to protection, belatedly recognized the gross inequality between them & the MNCs-in terms of size & experience & Govt. endeavoured to set up a level playing field by m eans of thi s Enactment. The progress of this Act was stymied thru
BRAHIM DUTT V. UOI
filed in the SC-challenging the authority of the Central Govt. to appoint the Chairperson & member of the CCI (Qualification for the Chairperson-A person of ability, integrity & standing who-(i)has been/is qualified to be a Judge of HC or (ii)has spl knowledge of & professional experience of not less than 15 yrs in international trade,
economics,
business,
commerce,
Law,
Finance,
accountancy, management, industry, public affairs, admn or in any other matter, which in the opinion of the C.Govt. may be useful to the Commi ssion). Ground of Challengea) CCI envisaged by the Act was more of a judicial body having adjudicatory powers & applying the Doctrine of Separation of Powers (recognized in the Indian Constitution)-the right to appoint the judicial members of the Commission should rest with the Chief Justic e (CJ) of India or his nominee. b) Chairman of the Commission shd necessarily be a retired CJ of SC/HC-to be nominated by the CJ of India or by a Committee presided over by the CJ of India.
Dr. KUMUDHA RATHNA
c) Appoi ntment of a civil servant, sans reference to the head of the Judiciary was argued as being undesirable in Law, considering the purpose of the Act & the functions to be discharged by the Competition Commission . Central Government’s representation-
a) C.Govt. intended to make certain amendments to the Act carry into effect the selection of the Chairperson & members of the Commission by a Committee presided over by the CJ of India or his nominee. b) Chairman of the Commission would be an expert in the field & that it wasn’t necessary for him to be a Judge of the SC/HC. SC was satisfied with the response of the C.Govt. & closed the WP on Jan.2005 sans pronouncing on the issues raised & left open all questions regarding the validity of the Enactment to be decided after the amendments of the Act, if there came up any challenge to the amended Act. In the light of the Order of the SC, the C.Govt. introduced into Parliament-the Competition (Amendment) Bil l, 2006. The bill was referred to the Parliamentary Standing Committee on Finance (2006-07) & after taking into account its recommendations, the Competition
(Amendment)
Bill,
2007
was
introduced
into
Parliament & after approval by both Houses, the Competition (Amendment) Act, 2007 received the assent of the President on 24th .Sept.2007. PRINCIPAL AMENDMENTS are as follow s: i.
Compositio n of the Competition Commission;
Dr. KUMUDHA RATHNA
ii.
Selection Committee for Chairperson & members;
iii.
Appointment
of
the
Secretary/experts/officers
&
other
employees of the Commission; iv.
Provision that a mandatory notice shall be given to the Commission by any person/enterprise proposing to enter into a combination t o which the Act applies (previously the notice was optional);
v.
Establishment of the Competition Appellate Tribunal (CAT)(quasi-judicial body);
vi.
Its composit ion/selection of Chairperson & members/procedure for appeals;
vii .
Provision for appeal to the SC (against the Orders of the CAT);
viii.
Repeal of the MRTP Act & dissolution of the MRTP Commissi on.
DISTINCTION BETWEEN MRTP ACT & COMPETITION ACT: Sl.
MRTP ACT
No.
1.
COMPETITION ACT
Regarding problems of monopoly Considers these issues as economic & anti-competitive practices from a issues to be dealt with from an economic Legal perspective.
2.
viewpoint.
MRTP Commission was conceived Competition Commission conceived as a as
a
quasi-judicial
body, regulatory body of experts in economic
comprising of both judicial & non- affairs looking at the issues from the judicial members (headed by a angle of their economic impact on person who is/was a Justice of business etc. SC/HC). 3.
Commission
was
sitting
Benches.
as No benches, as there will be no complaint,
but
only
information
or
reference. 4.
Hearings held of parties.
No hearings, only meetings.
To ensure that Legal issues were also given importance, the Competition Appellate
Dr. KUMUDHA RATHNA
Tribunal (CAT) was established with provision for a further appeal to SC. Thus, Competition Act is an improvement on MRTP Act.
OBJECTIVES OF COMPETITION ACT: As per the Preamble to the Act 1) Prevent practi ces having an adverse effect on competition; 2) Promote & sustain competition in markets; 3) Protect the interests of consu mers; 4) Ensure freedom of t rade carried on by other participants in markets in India; 5) For dealing with matters conn ected therewith or incidental.
ANTI COMPETITIVE AGREEMENTS: One of the objects of t he Competition Act as stated in the Preamble is to prevent practices having adverse effect/s on competitio n. The principal objective of suppliers (of goods/services) who are in a position to manipulate the market-is to maintain their profits at predetermined levels & ultimately reduce & eliminate competition . Usual modes resorted towards achieving this end are-Egs: Agreements for pri ce-fixing, limiti ng sup pl y of go ods/serv ices, dividin g the market etc. DEFINITION OF TERMS: 1) AGREEMENT: [S.2(b)]: (Includes)-any-arrangement, understanding, action-in concert. a. Needn’t be a formal arrangement ( Eg : Even a gentlemen’s ag would come within the term ‘understanding’);
b. Needn’t be in writing;
Dr. KUMUDHA RATHNA
c. Whether or not it is intended to be enforceable by Legal proceedings. (Eg: The info forming the basis for action (against the cartel) may be contained in minutes of meetings, memoranda, records of telephone conversations, correspondence etc – CASE LAWLOMBARD CLUB, Re ).
Parties: could be-bet-(i)Enterprises; (ii)Association of enterprises; (iii)Persons; (iv)Association of persons or (v)Combi of any of these entities. Subject Matter Of Agreement: Production, supply, distribution, storage, acquisiti on, control of g oods or p rovision of services. Where these agreements cause or is likely to cause an appreciable adverse effect on competition within India, it is prohibited & declared void [S.3(1)]. FACTORS
TO
BE
CONSIDERED
(by
the
Commission)
in
determining whether an ag has an appreciable adverse effect on competition: [S.19(3)]: a) Creation of barriers to new entrants in the market; b) Driving existing competitors out of t he market; c) Foreclos ure of competition by hinderin g entry into the market; d) Accrual of benefits to consumers; e) Improvements in produc tion/distribution of goods/provision s of services; f) Promotion of technical/scientific/economic developments by means of production/distributi on of goods/services. 2) CARTEL: [S.2 (c)]: (Includes) An association of producers, distributors, sellers, traders, service providers-who-by ag amongst themselves-limit,
Dr. KUMUDHA RATHNA
control/attempt to control-production, distribution, sale, price of, trade in good s or provision of services. Cartel i s a pr esumed anti-comp etitive agreement. Effect: o
Restriction of c ompetition;
o
Consequent loss of benefits to the consumer that an unhindered market would’ve offered.
o
Depending upon the size of the members of a cartel & the volume of business they control, the harm they could cause to the economy wo uld be huge.
CASE LAW: MADRAS
JEWEL LERS
&
DIAMOND
MERCHANTS’
ASSOCIATION, Re –Trade Association asking its members not to sell below the rates announced by it, with a threat of expulsion in the event of n on-compliance-HELD-It’s a cartel. DGIR
v.
MODI
ALKALI –OBSEVATION-‘3
essential
ingredients of cartel are-(i)Parity of prices; (ii)Ag by way of concerted
action
suggesting
conspiracy;
(iii)To
gain
monopoly/restrict/eliminate competition’.
SUMITOMO CORPN IN, Re –HELD-Cartelisation imposes
unjus tifi ed cost on consumers. Price fixi ng is illegal per se, therefore, further enquiry on the issue of intent or the anticompetition effect is not required. HARIDAS
MFGRS
EXPORTS v. ALL INDIA FLOAT GLASS ASSOCIATION –HELD-Protecting
inefficient
industry is not ‘public interest’ & in such cases ‘cartel’ is
Dr. KUMUDHA RATHNA
permissible-OBSERVATION- MRTP Commission can’t pass an injunction for imports at predatory prices-If the cartel is selling goods to India (at lower pri ces) & sti ll making prof it, it will not be in the interest of general body of consumers in India to prevent impor t of such goods.
The era of
protectionalism is now coming to an end. Expln: Meaning-predatory pricing : It’s the practice of selling a product/service
at
a
very
low
price,
(i)intending
to
drive
competitors out of the market, or (ii)create barriers to entry for potential new competitors. If competitors can’t sustain equal or lower prices without losing money, they go out of business or choose not to enter the busi ness. The predatory merchant then has fewer competitors or is having monopoly & can later raise the pric es (to even supra competiti ve pricing l evel). The predatory merchant undergoes short-term pain for long-term gain.
But, the predator would succeed only in adopting this
strategy only if it is (i)substantially str onger than its competitors & when (ii)barriers to entry are high, preventing new entrants from replacing others driven out, thereby allowing supra competitive pricing to prevail long enough to dwarf the initial loss. Thus predatory pricin g is a risk, may not always work out. Eg: (i) In U.S. Herbert Dow (founder of Dow Chemical Company) not only found a cheaper way to produce bromine (bromine extraction from bromide usin g electrol ysis) but also defeated a predatory pric ing attempt by the Govt. supported German Cartel Bromkonvention which objected to his selling in Germany at a lower price & retaliated by flooding the U.S. market with below-cost bromine, at an even lower price than Dow’s. But, Dow simply instructed his
agents to buy up at the very low price, then sell it back in Germany
Dr. KUMUDHA RATHNA
at a profit but still lower than Bromkonvention’s price. In the end, the cartel couldn’t keep up selling below cost, and had to give in.
(ii) Alleged predatory pricing is – Microsoft released their webbrow ser IE for free.
As a result the market leader & primary
competitor Netscape was forced to release Netscape Navigator for free in order to stay in the market. IE’s free inclusion in Windows
led to it quickl y becoming the web browser used by most compu ter users. 3) ENTERPRISE: [S.2 (h)]: •
•
A pers on/dept of Gov t.-who /whichIs/has been engaged i n any-activ ity relating t oo
production, storage, supply, distribution, acquisition or control of articl e/goods/services (of any kind) OR-
o
in i nvestment OR
o
in the business of-acquiring, holding, underwriting or dealing wit h shares/debentures/other securities-
of a body corporate (directly/indirectly or thru 1 or more of it s uni ts, divisi ons o r su bsidiaries)•
Whether the enterprise & these units etc are located in the same or different places.
DISCLUDES-Any activity of the Govt. related to sovereign funct ions of the Govt. including all activities carried on by the depts. of the Central Govt. dealing with atomic energy, currency, defence & space. [Explns: Activity-includes-profession/occupation; Arti cle-inclu des -new article; Services-includes-new services;
Dr. KUMUDHA RATHNA
Unit/division-includes-plant/factory-established
for-production,
storage, supply, distribution, acquisition, control-of any article, goods-any branch/offi ce/established for prov ision of any service. Goods-as defined in t he Sale of Goods Act, 1930 & includes•
Products manufactured/processed/mined;
•
Debentures/stocks /shares (after allotment);
•
In relation to goods supplied, distributed or controll ed in India, goods imported into India].
No Exemption to: Public Sector Undertakings (PSU) & enterprises controll ed by Govt. 4) PERSON: [S.2 (l)]: Includes•
Individual;
•
HUF;
•
Company;
•
Firm;
•
As so ciati on of per sons or bod y of indi vidual s (wheth er incorpor ated or not in India or outs ide India);
•
An y corpn est abl ished by/und er any
Central , State or
Provincial Act or Govt. Co. as defined in s.617 of the Companies Act, 1956; (S.617: Where not less than 51% of the paid-up share capital of the Co. is held by the C.Govt. or any S.Govt. or by both of them. Same applies to corpns established by any Central, State, Provincial Act.) •
An y bod y cor po rat e incorpor ated by/under th e Law s of a country ou tside India;
Dr. KUMUDHA RATHNA
•
Co-operative society registered under any Law relating to cooperative societies;
•
Local authority;
•
Every artificial juridical person (not comprised in any of the above sub-clauses).
[Expln: As s.2(h) defines enterprise as including profession or occupation-members of any profession would have to conform to the provisions of the Competition Act.] S.32: Empowers the Commission to inquire into anti-competitive acts taking place outside India-but-having an effect on competition in India. 5) GOVERNMENT: [S.2(h)]: A pers on/dept. of Govt.-engaged in the sup pl y of go ods/serv ices. INCLUDES – All economic activity other than the exceptionscarried on by the Govt. or Govt. undertaking, PSU (by whatever names call ed). EXCLUDES – (i)Any activity of the Govt. relatable to the sovereign functions of the Govt.; (ii)Including all activities carried on by the depts. of t he C.Govt dealing with atomi c energy, currency, defence & space. 6) PRICE: [S.2(o)]: INCLUDES-any form of valuable consideration (direct/indirect)which in effect relates to the sale of goods or to the performance of any
services-even
though
ostensibly
relating
matter/thing. If the parties agree-may be a deferred payment . 7) SERVICES: [S.2(t)]:
to
any
other
Dr. KUMUDHA RATHNA
Of any description-made available to potential users (INCLUDESservices in connection with business of any industrial/commercial matters). Eg: Banking, insurance, chit funds, real estate, storage, transport, construction,
advertising,
conveying
news/info,
education,
boarding, lodging etc. CASE LAW:
TMA PAI FOUNDATION v. STATE OF KARNATAKA – HELD-Education i s a servic e. Even if there is any doubt about whether education is a profession or not, it does fall within the meaning of the expression.
P.A. INAMDAR v. STATE OF MAHARASHTRA –HELDEducation which is a useful activity & irrespective of whether for charity/profit-is an oc cupation. 8) TRADE: [S.2(w)]: Trade/business/industry/profession/occupation-relating
to-
productio n/supply/distrib ution/storage/control of goods/services. [Trade] PRACTICE (habitual/custom) [S.2(l)]: Practice relating to the carrying on of any trade by a person/enterpris e. PERSUMED ANTI-COMPETITIVE PRACTICES: An y
ag
ent ered
int o
betw een
enterprises/persons/associations including
cartels
(engaged
of in
ent erp rises/as soc iati ons person/s
&
of
enterprise/s
identical/similar
trade
of
goods/services)-decision taken whic hi.
Directly/indirectly determines purchase/sale pric es;
ii.
Limits/controls-production/supply/markets/tech /investment or prov ision of services;
development
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iii.
Shares the market or sources of productio n/services by way of-allocation of geographical area of market/types of goods/ services/# of custom ers in the market/any other simi lar way;
iv.
Directly/indirectly results in bid rigging or collusi ve bidding
Shall be presumed to have an appreciable adverse effect on competition. EXCEPTION: Doesn’t apply to -Joint venture agreements-IF such ags increase efficiency in production/supply/distribution/storage/ acquisition or control of goo ds/services. Onus of proof: lies on the deft to prove that there isn’t any appreciable adverse effect on co mpetitio n. PROHIBITION IF THE AGREEMENT AFFECTS COMPETITION: HORIZONTAL (CARTELS) & VERTICAL RESTRAINTS: VERTICAL RESTRAINTS: [S.3(4)]: An y agr eement amo ng st enter pr ises/pers on s-at di ff erent stages or levels of-the production chain in diff markets-in respect of production, supply, distribution, storage, sale, price of, trade ingoods/services-shall be an agreement in contravention of S.3(1)-IF such ag causes or is likely to cause an appreciable adverse effect on competiti on in Indi a (i.e., by applyi ng th e rule of reason). There coul d be oth er types of ags falling u/s.3(4) as those stated in the sub-section are not exhaustive, i.e., gives an ‘inclusive’ definition of each of the vertical restraints, meaning-there could be other vertical restraints also . (Simple) DEF: Where the parties (to the ag) are in diff stages/levels of the production chain, this practice is called a vertical restraint.
WISCONSIN ELECTRIC CO v. DUMORE CO (OHIO) – OBSERVATION-‘The equitable Doctrine of ‘Unfair Competition’ is
Dr. KUMUDHA RATHNA
not confined to cases of actual market competition between similar products of different parties, but extends to all cases in which 1 party fraudulently seeks to sell his goods as those of another.’
RELEVANT MARKET: [s.2(q)]: The market which may be determined by the Commission with reference to the relevant product market or th e relevant geographic market or wit h reference to both t he markets. TYPES: RELEVANT GEOGRAPHIC MARKET: S.2(r): A market comprising the area in which the conditions of competition for supply of goods or prov ision o f services or demand of goods/services are distinc tly homogeneous & can be distinguished from the conditions prevailing i n the neighbouri ng areas. Eg: If customer preferences for a particular quality/price of the product are different in a neighbouring area, the compositi on of the geographical market is different in the 2 places & what shd be considered as the relevant geographic market in that case is only the area where the condit ions of competition are homogeneous. RELEVANT PRODUCT MARKET: S.2(s): A market comprising all those products/services which are regarded as inter-changeable or substitutable by the consumer, by reason of characteristics of the products /services, their prices & intended use. Eg: (Case Law – United States v. Du Pont & Co) Relevant market for Cellophane is the market for flexible packaging materials, as cellophane is interchangeable with numerous other materials, & is therefore a part of the market for flexible packaging materials. Quote
regarding
interchangeability-from
above
case –‘This
interchangeability is largely gauged by the purchase of competing
Dr. KUMUDHA RATHNA
products for similar uses considering the price, characteristics & adaptability of the competing commodities.’
If
the
effect
of
an
agreement
(includes-any
arrangement,
understanding or action in concert) is such that it will significantly reduce the level of competition existing at the time the agreement is given effect, the ag may be stated as anti -competitive. PRO-COMPETITIVE BENEFITS OF VERTICAL RESTRAINTS: Sometimes, a vertical restraint, depending upo n the structure of the market for a product, may be shown to be pro -competitive witho ut any harm to the competitive process.
The restraints may be
necessary in some situation to ensure that the sales support to the retailers extended by the manufacturers may not be exploited by the free riders. AGREEMENTS LIKELY TO ADVERSELY AFFECT COMPETITION: A. RESTRICTIONS
ON
OUTPUT/SUPPLY:
EXCLUSIVE
DISTRIBUTION AGREEMENT: [S.4-Expln (c)]: Agreements
that
li mit/con trol-pr oduc tion ,
supply,
mark ets,
technical development, investment or provision of services is a presumed anti-competitive agreement. As stated in the MRTP Act it means-Ags to restrict/with hold/limitoutput/supply of goods or allocate any market or area/s for the disposal of goods. CASE LAW: DGIR (Director General Of Investation & Registration) v.
BAYER (INDIA) LTD – Condition in ag with distri butor that he will not make supplies to chemists, Doctors & Govt. or private institutions even though he accepts the order. Seller will sell
Dr. KUMUDHA RATHNA
directly to these customers without any commission to the dist ribu tor-HELD-Anti-competitiv e ag. DGIR
v. TITAN INDUSTRIES –There was a clause in
agreement with franchisee that the franchisee will not deal in products/goods of a similar nature-for a period of 3 years from the date of determination of ag within radius of 5 Kms from show room -HELD-It is restrictive trade practice. DGIR
v.
RAJSHREE
CEMENT –HELD-An
agreement
containing the clause that the dealer will concentrate on a particular area is permissible if there is no prohibition on him from effecting sales in other areas. DELHI CLOTH & GENERAL MILLS Co LTD; DGIR v.
MODI INDUSTRIES LTD; DG v. BHARAT COMMERCE & INDUSTRIES LTD; PIRAMAL HEALTH CARE LTD, In Re –HELD-In ag with agents, restrictions as to dealing in similar
goods or as to territory-permissib le-REASON-To avoid unhealthy competition between agents. B. TIE-IN-SALE: (or-Full line forcing): [S.4-Expln (a)]: Includes any ag requiring (compulsorily forcing) a purchaser of goods-to purchase some other goods along with the goods he wis hes to purchase (as a conditi on of such purchase). A produ ct/serv ice is to be treated as being the subject of a tie-inagreement-when its supply is offered on the condition that the buyer who ordered for the product/service (the basic product) must also purchase some other produ ct/service. The produ ct/service required by the buyer is called-tying pro duct .
Dr. KUMUDHA RATHNA
The
one
that
is
forced
on
the
buyer
is
called
the-tied
product/service. Hence, the buyer is required (compelled) to buy also a product or service he doesn’t need-thereby forced to incur unnecessary
expenditure. But-under
Competition
Law-reasoning
is
different-it
is
objectionable on the ground that it reduces competition in the supply of the tied product . CASE LAW:
In Re, R.P. ELECTRONICS – As ki ng cus to mer to enter into service contract w hile buying goods .
CHANAKYA & SIDDHARTA GAS Co, In Re –Requiring customer to buy gas stove while giving gas connection.
DGIR v. STATE BANK OF INDIA –Bank asking person to keep fixed deposit with Bank while allotting him a locker (as there is d irection of RBI not to ins ist on bank deposit for l ocker).
AMAR JEEVAN PUBLIC SCHOOL, In Re –School making it compulsory to buy uniform s & books only from its own shop.
UNITED RADIO & TELEVISION Co, In Re –Compelling customer who is buying TV to also buy voltage stabiliser from the seller.
KHANDELWAL PHOTOSTAT v. KORES INDIA LTD – Insisti ng on s ervice contract at the time of sale of goods.
TCI,
In
Re –Not
tie-in
sales-egs:
(a)Insistence
by
car
manufacturer that, during the warranty period, air-conditioner can be fitted to car only by authorised dealer to ensure that improper
Dr. KUMUDHA RATHNA
air-conditioner doesn’t affect performance of car during warranty; (b)Manufacturer requiring distributors to maintain minimum quantity of spares for machinery & equipment supplied by them-to ensure prompt service; (c)Transporter charging additional amount for goods carried at c arrier’s risk-there was no compulsion on customers-they could send goods either at owner ’s risk or at carrier’s risk. Hence, charging extra amount by transporter for
taking goods at his risk is not tie-in sales. C. EXCLUSIVE SUPPLY AGREEMENT: [S.4-Expln (b)]: 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 tho se of the seller or any other person. D. EXCLUSIVE DEALING AGREEMENT: Was a RTP under MRTP Ac t. Meaning – Not to deal with goods ot her than those of seller. CASE LAW:
BHARATIA CUTLER HAMMER LTD, In Re – Manufacturer of ‘A’ type of scooter stipulating that dealer of ‘A’ should not
deal in any other type of scooter, i.e., manufacturer asking dealer not to deal in similar products of his competitor, directly/indirectly. Condition that dealer shouldn’t deal in other’s goods and di scontinuation o f suppli es on the groun d that dealer also deals in products of supplier’s competitors – HELD-RTP.
DGIR v. STUDDS ACCESSORIES (P) LTD –Buyer asking manufacturer not to manufacture identical goods for any other buyer without consent of buyer.
Dr. KUMUDHA RATHNA
DGIR v. MUNDIPHARMA AG – Ag reement that distribut or wil l purchase goods only from the manufacturer or from other as may be nomi nated by him.
VADILAL ENTERPRISES LTD. In re –Territorial restrictions, i.e., not to sale beyond prescri bed territory.
DGIR v. KOTHARI ELECTRONICS –HELD-Exclusive dealing cannot be permitted unless it is shown that it is in public interest. EXCLUSIVE DEALING AG-PERMITTED: CASE LAW:
TATA ENGINEERING (TELCO) v. RRTA (Registrar Of Restrictive Trade) –Exclusive dealing & territorial restrictions were held reasonable as it led to prompt after-sales service to buyers & hence were permitt ed.
GUJARAT BOTTLING Co LTD v. COCA COLA –SC-HELDNegative covenant restraining franchises from dealing with competing goods during term of franchise agreement is validnot RTP. E. RESALE PRICE MAINTENANCE [S.4-Expln (e)]: DIRECTLY OR INDIRECTLY DETERMINING PRICE [S.3 (3)]: Meaning: Not to allow resale below certain price or not to sell above a certain price. Includes any ag 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 thos e prices may be charged.
Dr. KUMUDHA RATHNA
CASE LAW:
CALCUTTA
GOODS
TRANSPORT
ASSOCIATION
v.
TRUCK OPERATORS UNION – Associat ion of lorry ow ners fixing freight rates & not allowing members of association to charge price low er than that fixed by associ ation is RTP.
DGIR v. INFAR (INDIA) LTD –HELD-If the price indicated is ‘Maximum Retail Price ’-it is obvious that the retailers are
authoris ed to sell the product at prices below the maximum. It is not necessary to specifi cally state that pri ce below the max retail pric e can be charged.
REGISTRAR v. BENNETT COLEMAN & Co LTD –HELDNewspapers are exempt from s.39 & 40 (i.e., they can prescribe minim um pric e). REASON-This is because speed is essence of publishing a newspaper. Allow ing retailer or vendor to bargain the price would delay the process of reaching consumers fast. This will reduce circulation, which will lead to reduction in quality & also increase in costs. This will not being long term interest of publ ic. DIRECT PRICE MAINTENANCE PERMITTED: Permitted. Meaning: Where the manufacturer sells goods through its own retail shops & fixes prices to be charged in such shops (Eg: Bata, Gwalior etc retail shops).
Fixing price in such shops is not
prohibited. F. REFUSAL TO DEAL: [S.4-Expln (d)]: Includes-any agreement which restricts/likely to restrict-by any method-the persons/classes of persons to whom goods are sold or from wh om goods are bought.
Dr. KUMUDHA RATHNA
AGREEMENT NOT ANTI-COMPETITIVE: [ S.3(5)(i)]: AGREEMENTS PERMITED BY L AW: Right
of
any
person
to-restrain
(infringement
of)-impose
reasonable conditions (for protecting any of his rights conferred upon hi m under any of the followi ng Acts)-not anti-competitiv e. ✓ The Copyr ight Act, 1957. ✓ The Patent s Act, 1970. ✓ The Trade & Merchandise Marks Act, 1958 OR The Trade
Marks Act, 1999. ✓ The Geographical Indications Of Goods (Registration &
Protection ) Act, 1999. ✓ The Desig ns Act, 2000. ✓ The Semi-conductor Integrated Circuits Layout-Design Act,
2000. RIGHT FOR EXCLUSIVE EXPORT: [S.3(5)(ii)]: No restriction on-the right of any person to export goods from India-to the extent to which the ag relates exclusively to theproduction/ supply/ control of goods/ distribution/ services-is not anti-competitive. FACTORS TO BE CONSIDERED WHILE DECIDING EFFECT OF COMPETITION: The Commission shall have due regard to the following factorswhile determini ng w hether an ag has an appreciable adverse effect on competition w ithin India (u/s.3):➢ Creation of barriers to new entrants in t he market; ➢ Driving existing competitors out of the market; ➢ Foreclosure of competition by hin dering entry into the market; ➢ Ac cr ual of benef its to c on sumers;
Dr. KUMUDHA RATHNA
➢ Improvements in production/distribution of goods or provision
of services; ➢ Promotion of technical, scientific & economic development by
means of production /distribution o f goods/services. RULES FOR DETERMINING EFFECT OF COMPETITION: A. THE RULE OF REASON: Restrictions have to be considered on a case to case basis, i.e., basing on the facts of each case, the market & the existing competition. Because the ‘per se’ rule-if applied literally, would render even normal trade as restraint of trade & as restraint of trade is the very essence of every contract, American Courts developed this ‘rule of reason .’ What determines the issue (in each case) is the actual or probable restraint on c ompetition in the relevant market. The rule of reason-explained by US SC in BOARD OF TRADE OF
CITY OF CHICAGO v. US –“Every agreement concerning trade, every regulation of tr ade, restrains. To bind, to restrain, is of their very essence.
The true test of legality is whether the restraint
imposed is such as merely regulates & perhaps thereby promotes competition or w hether it is such as may suppress or even destroy competition.”
This pri nciple has been accepted by the SC of India also. CASE: TATA ENGINEERING (TELCO) v. REGISTRAR OF
RESTRICTIVE TRADE AGREEMENT –Telco had entered into agreements w ith its (Truck) dealers. Some of the clauses w ere-
Dr. KUMUDHA RATHNA
o
Dealer will not directly/indirectly sell the Tata trucks outside the territor y assigned to him (i.e.. geo limits);
o
Dealer will maintain organisation/s for sale/service within his territory-to the satisfaction of TELCO;
o
Dealer will not sell, directly/indirectly-trucks of any other manufacturer.
Telco argued as followso
To ensure equitable distribution of trucks so that the trucks reach even remote places like Nagaland etc the first restric tion. If not, truck s will be concentrated in large metrocentres only where demand is heavy.
o
Sales tax rates vary fro m State to State.
If ther e is no
territorial restriction, business will be concentrated in the States where sales tax rate is l ower. o
Prompt/efficient after sales service is vital for the truck user. Dealer has to maintain at all times an adequate stock of spares, good service facilities & trained mechanics.
This
would cost Rs.5 Lakhs. Consumer interest demands that he gets good after sales service. o
After sales service needs specialisation which would not be possible if the dealer deals in trucks o f other makes.
Thus ultimately-consumers benefit if the clauses are included in the agreement. HELD-SC accepted these con tenti ons & declared that restricti ons imposed by TELCO do not amount to RTP. OBITER DICTA-Ag which restrains/ binds-persons/ places/ prices wouldn’t be per se, bad. The ? is whether the restraint is such as to
regulate
&
competition.
thereby
promote
competition
OR
suppresses
Hence, applying rule of reason-matters to be
Dr. KUMUDHA RATHNA
considered-(a)Facts particular to business; (b)Conditions before & after restraint & (c)Probable effects o f restraint. B. THE PER SE RULE: In U.S. in the initial stages of the admn of Sherman Act, 1980-there was a blanket prohibition of all contracts/combinations in the form of Trust in restraint of trade/commerce. These were regarded as ‘per se’ bad.
Thus-it is unnecessary to consider-whether the agreement or clauses there in-limit/restrict competition. This is based on-established experience of their nature to produce anti-competitive effects.
Hence it’s not necessary to prove anti-
competitive effect of these clauses. CASE: NORTHERN PAC. R Co v. US –“There are certain agreements or practices which because of their pernicious effect on competition & lack of any redeeming virtue are conclusively presumed to be unreasonable & therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.”
In India-these 2 rules are applied as follows-ambivalently: a) S.3(3)(a) to (d) – Following clauses in ags presumed to have an appreciable adverse effect on competition •
(a)Directly/indirectly determines pur chase/sale prices;
•
(b)Limits/controls-production/supply/markets/tech development/investment/services;
•
(c)Allocation of geographical area of market/type of goods/services or # of customers in the market or any similar way;
Dr. KUMUDHA RATHNA
•
(d)directly/indirectly results in big-rigging or collusive bidding.
b) S.3(4)(a) to (e) – will be examined by applying ‘ Rule of Reason ’-in determining
whether
they
cause
or
likely
to
cause
an
‘dominant’
is
appreciable adverse effect on co mpetition in India. •
(a)Tie-in-ag;
•
(b)Exclusive supply ag;
•
(c)Exclusiv e distribut ion ag;
•
(d)Refusal t o deal;
•
(e)Resale pri ce maintenance.
ABUSE OF DOMINANT POSITION (AOD): Definitions: DOMINANT POSITION [S.4(2) Expln (a)]: Definition: The
dictionary
meaning
of
the
word
‘overriding/influential’.
In simple terms, abuse of dominant position refers to the conduct of an enterprise that enjoys a ‘dominant position’ (as defined by the
Ac t). In substance-dominant position-means the position of strength enjoyed by an enterprise that enables it to act independently of competitive forc es prevailing in the relevant market.
Such an
enterprise will be in a position to disregard market forces & unilaterally impose trading con ditions, fix prices etc. The elements that cons titut e a dominant position are:•
•
A position o f streng th ; That pos ition being enjoyed in a relevant market in India;
Dr. KUMUDHA RATHNA
•
Such a position that gives the enterprise the power to ‘operate independently of competitive forces in the relevant market’ (i.e., it can at will, disregard market forces/conditions
& impos e its own trading condi tions (Eg: prices at which the enterprise is prepared to supply goods/services). Explanation to S.4(2)(a) exempts such unfair/discrimi natory trading conditions/prices [& predatory pricing-S.4(2)(a)(i & ii)]-stating thatwhen
enterprises
are
engaged
in
bonafide
competition
&
readjusting their trading strategies to meet the terms of offers of competitors in a market as it evolves, there is no abuse by any of the enterprises. They are only responding to the market situation. (Eg: If prices fall in the market, for reasons not the action of an enterprise, a reduction in the price by that enterprise to match its prices to the new prices cannot be termed unfair pricing or predatory pricing). Concept of DP as explained in HOFFMANN-LA ROCHE & CO. AG. BASLE v. COMMISSION OF THE EUROPEAN COMMUNITIES IN BRUSSELS:-“The concept of abuse is an objective concept relating to the behaviour of an undertaking in a DP which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition i s weakened and w hich, through recourse to methods different from those which condition normal competition in products/services on the basis of the transactions of commercial operations, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.’
A posit ion of strength, enjoyed by an ent erp ri se, in the rel evant market, in India, which enables it to-
Dr. KUMUDHA RATHNA
i.
Operate independently of competitive forc es prevailing in the relevant market OR
ii.
Affect its
competitors/consumers/relevant market in its
favour. Thus a dominant enterprise is one that has the power to disregard market forces (Competitors, customers & others) & to take unilateral decisions that would benefit itself & also, in the process, cause harm to the process of free competition, injuring the consumers by saddling them with higher prices, limited supplies etc. This capacity to engage in the market is called ‘ Market Power ’.
GROUP [S.5 Expln (b)]: 2 or more enterprises which, directly/indir ectly are in a position to i.
Exercis e 26% or more of the votin g rights in the other enterprise OR
ii.
Appoi nt more than 50% of the members of the Board of Directors i n the other enterpris e OR
iii.
Control the management/affairs of the other enterprise.
CONSUMER [S.2(e)]: An y pers on who i.
Buys any goods for a consideration which has been paid or promised or partly paid & partly promised or under any system of deferred payment-includes any user of such goods other than the person who buys such goods-when such use is made with the approval of such person, whether
Dr. KUMUDHA RATHNA
such purchase of goods is for resale or for any commercial purpose or for personal use; ii.
Hires/avails of any services for a cons ideration which has been paid or promised or.....and includes any beneficiary of such services other than the person who hires or avails of the with the approval of the first mentioned person whether such hiring or availing of services is of any commercial purpose or for personal use.
DOMINANT POSITION ITSELF ISN’T PROHIBITED :
Some acts are bonafide & not taken to hamper competition. S.4(2)(a)
exempts
such
unfair
or
discriminatory
trading
conditions/prices or predatory pricing referred to in S.4(2)(a)(i) & (ii), setting out those practices as an abuse of dominant position, from being considered as an abuse of a dominant position, when they are adopt ed to meet competi tion. REASON-When enterprises are engaged in bonafide competition & readjusting their trading strategies to meet the terms of offers of competitors in a market as it evolves, there is no abuse of any of the enterprises. They are only r esponding t o th e market situation. Eg: If prices fall in the market, for reasons not the action of an enterprisea-a reduction in the price by that enterprise to match its pric es to the new pri ces cannot be termed unfair/predatory pr icing. FACTORS TO BE CONSIDERED WHILE DECIDING WHETHER AN ENTERPRISE HAS A DOMINANT POSITION (DP): The Commission shall (while inquiring whether an enterprise enjoys a DP or not u/s.4) have due regard to all or any of the following factors-
Dr. KUMUDHA RATHNA
a) Market share of the enterpri se; b) Size & resources of the enterprise; c) Size & resources of the competitors ; d) Economic pow er of the enterpris e inclu ding comm ercial advantage over competitors; e) Vertical integration of the enterprises or sale or service network of s uch enterprises; f) Dependence of consumers on the enterprise; g) Monopoly/dominant position whether acquired as a result of any Statute or by virtue of being a Govt. 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, economics of scale, high cost of s ubstitutable goods or service for consumers; i) Countervailing buying power; j) Mark et stru ctu re & size of mark et; k) Social obligations & social costs; l) Relative 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 comp etition. m) Any other factor which the Commissio n may consider relevant for the enquiry. WHAT IS ABUSE OF DOMINANT POSITION [S.4(2)]: If an enterprise or group follows any of the following practices-it is abuse-NO further PROOF of any damage/loss is required.
Dr. KUMUDHA RATHNA
Unfair/Discretionary Conditio ns In Purchase/Sale [S.4(2)(a)]: •
Unfair/discretionary
conditions
in
purchase/sale
of
goods/services OR •
Price
in
purchase/sale
(including
predatory
price)
of
goods/services is abuse of dom inant position. Expln: A bove practice isn’t abuse if adopted to meet competition. Limiting/Restricting Production/Development [ S.4(2)(b)]: •
Limiting/restricting-production of goods or provision of services or market there for OR
•
Limiting/restricting-technical
or
scientific
development
relating to goods or services to the prejudice of consumers, is an abuse of DP. Denial Of Market Access [ S.4(2)(c)]: (in any manner), is abuse of dominant position. Supplementary
Obligations
Unconnected
To
Main
Contract :
[S.4(2)(d)] Making conclusio n (formation) of contract subject to acceptance by other parties who are not connected to the nature/subject matter of the contract-is abuse of domi nant positi on. Using Dominant Positi on To Enter Anot her Market: [S.4(2)(e)] Using dominant position in one relevant market to enter into another relevant market-is abuse of dominant position. (Eg: Microsoft used its DP in disk operating system to dominate brow ser market & ru ined Netscape).
Dr. KUMUDHA RATHNA
DIVISION OF ENTERPRISE ENJOYING DOMINANT POSITION: [S.28 – Incorpor ated into the Act in 2009]]
The Competition Commission may direct-division of an enterprise enjoying dominant position to ensure that an enterprise enjoying dominant position, doesn’t abuse it.
Such Order may provide for any/all of the below mentioned matters:•
•
Transfer/vesting of pty/rights/liabilities/obligations; Adju stm ent of con trac ts either by disch arg e or reduction of liability/obligation or o therwise;
•
Creation/allotment/surrender/cancellation
of
any
shares
/
stocks or securities; •
Formation/winding-up of an enterprise or the amendment of the MoA or AoA or any other instrument regulation th e business of any enterprise;
•
Extent to whi ch, & the circumstances in w hich, provision of the Order affecting an enterprise may be altered by the enterprise & the registration thereof;
•
An y other matt er which may be necessary to give effec t to the divi sion of the enterprise.
No Compensation to Offi cer of Company [s.28(3)]: No Officer of a company who ceases to hold office as such in consequene of the division of an enterprise shall be entitled to claim any compensation for such cesser. This is not withst anding any other Law for the time being in force OR in any contract OR in MoA OR AoA.
Dr. KUMUDHA RATHNA
INQUIRY INTO AGREEMENTS-AS TO-ABUSE OF DOMINANT POSITION: Enquiry b y CCI: CCI may enquire-into-any alleged contravention of provisions of Ss.3(1) &/or 4(1)➢ Suo Motu OR ➢ On receipt of any info (in t he manner & wit h fee as determined
by regulations)-from any person/consumer/their association or trade association OR ➢ On a reference made to it by C.Govt/St.Govt/Statutory
authorit y [ S.19(1)]. Director General has not the power to enquire on his ow n. Procedure For Enquiry u/s.19: (S.26) o
On receipt of info or suo motu-if CCI opines that there exists apri ma facie case..
o
Shall issue a direction (as per Regulation.18 of CCI (General) Regulations, 2009) to the Director General (DG) to cause an investigation to be made into the matter. This direction shall be deemed to be commencement of an inquiry u/s.26.
o
If on such receipt of info or suo motu-if CCI opines that there exists no prima facie case-shall close the matter forthwith & pass such Orders as it deems fit; Copy of the Order to be sent to C.Govt/St.Govt/Statutory Authority/parties concerned (as per Regulation.19 of CCI (General) Regulations, 2009).
Dr. KUMUDHA RATHNA
o
DG shall submit a report of his findings-within such period as may be specified by the CCI..CCI may forward a copy of the report to t he parties concerned.
o
If investigation was made on ref by C.Govt/St.Govt.Statutory Autho ri ty-CCI shal l forw ard a copy of report of DG to concern ed Autho ri ty.
Investigation & report by DG shall be as per Regulation.20 of CCI (General) Regulations,2009. o
If report of DG states that there is no contravention of provisions of Competition Act, the CCI shall invite objections from C.Govt /St.Govt/Statutory Authority/Parties Concerned.
o
If after consideration of objections/suggestions-CCI agrees with the recommendations of the DG-it shall close the matter forthwith & pass such Orders as it deems fit.
o
Copies of Order shall by communicated to concerned to the parties.
o
o
If CCI opines that further investigation is called for-May•
Direct DG for furt her investigation OR
•
Cause further enqui ry t o be made OR
•
Itself enquire into the con travention as per provi sions of Act.
Further enquiry by CCI: If DG-opines (report) that there is a contravention of any provisions of the Act & the CCI also opines simi larly-CCI shall conduct such enquiry.
o
Order by CCI after enquiry: May pass all or any of the following Orders:•
Order to discontinue agreement/abuse & not re-enter such agreement;
Dr. KUMUDHA RATHNA
•
Penalty
–
S.27-upon
each
of
the
parties
to
the
agreement/abuse-as CCI deems fit-BUT shall not be more than 10% of the average of the turnover for the immediately preceding 3 financial yrs [S.27(b)] ➢ If Cartel-penalty is equivalent to 3 times of the amount
of profits made out of such ag by cartel or 10% of the avg of the turnover of the cartel in the immediately preceding 3 financial yrs..whichever is higher- will be imposed on each producer, seller, distributor, trader, service provi der included in the cartel ➢ If penalty is proposed to be imposed on a person-
show cause notice duly signed by Secretary shall be given asking fo r submis sion of explanation-in writingwithin 15 days. CCI may direct t hat the agreement be modified to the extent & in the manner as maybe specif ied by CCI [S.27 (d)]. Other Orders & payment of cost s [S.27(e)]. Order against any group company: If the enterprise whi ch violated the provisions of Competition Act (i.e., Ss.3-4) is a member of the group & i f other members of th e group are also responsible for the contravention, the CCI can pass Orders against any member of the group [S.27-Proviso] . CASE LAW:
HOFFMANN-LA
ROCHE
&
CO.
AG,
BASLE
v.
COMMISSION OF THE EUROPEAN COMMUNITIES IN BRUSSELS –Held (by The European Commission)-
Dr. KUMUDHA RATHNA
•
Roche was in a dominant position within the common market, on the markets for certain vitamins, abused that position by concluding with 22 purchasers of these vitamins, agreements which contained an obligation upon them, or the grant of fidelity rebates offering them an incentive, to buy all or most of their requirements of vitamins exclusively, or in preference from Roche. Obiter dicta-Very large shares in the market in themselves, save in exceptional circumstances, evidence of the exis tence of a DP.
•
Exclusive purchase contracts & the fidelity rebates offered to the purchasers amounted to abuse of this dominant position because they distorted competition between producers in so far as they deprived the customers of Roche of the opportunit y of choosing t heir suppliers.
•
The effect of the contract was to apply dissimilar conditions to equivalent transactions, viz, Roche would be charging 2 diff prices for the same quantity of the same product, depending upon whether the buyer was prepared to forego purchasing from Roche’s competitors.
Court Explained-‘An undertaking which has a very large market share & holds it for some time, by means of the volume of production & the scale of the supply which it stands for-without those having much smaller market shares being able to meet rapidly the demand from those who w ould li ke to break away from the undertaking which has the largest market share-is by virtue of that share in a position of strength which makes it an unavoidable trading partner & which, already because of this secures for it, at
Dr. KUMUDHA RATHNA
the very least during relatively long periods, that freedom of action which is the special feature of a DP.’
Further the Court listed the relevant factors in determining the existence of a DP•
Relationship between the market shares of the undertaking & its competitors;
•
Technologi cal lead of an undertaking over its comp etitors;
•
Existence of a highly developed sales networ k;
•
Absenc e of po ten ti al com pet ition .
COMPAGNIE MARITIME BELGE TRANSPORTS SA & OTHERS
v.
COMMISSION
OF
THE
EUROPEAN
COMMUNITIES –The members of Associated Central West Africa Li nes (CEWAL) & 2 ot her shi ppi ng con fer enc es brought this action contesting before the Court the decision of the Commission & the Court of 1 st Instance.
The
Commission had decided that all the shipping conferences had violated Article 81(1) of the EEC (European Economic Community)
Treaty,
by
entering
into
non-competition
agreements with 1 another, imposing on themselves a restraint to the effect that each member would refrain from operating as an independent shipping company (outsider) in the area of activity of the others. HELD –This was abuse of their collective dominant position by the members of CEWALwith the intention of eliminating the principal independent competitor-by o
Participating in the implementation of the co-operation ag with Ogefrem;
Dr. KUMUDHA RATHNA
o
Modifying its freight rates by departing from the tariff in forc e in order to off er rates.
It was argued that in order to show that DP was shared by more than 1 undertaking a close economic link bet them had to be established. Court RuledDP may be held by 2 or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collecti ve entit y. It should be ascertained whether the undertakings constitute a collective entity vis-a-vis their competitors / trading partners & consumers for a particular market & if that collective entity actually holds a DP & whether its conduct constitutes abuse. Court
held
that
the
co-operation
agreement
with
Ogefrem
amounted to abuse of DP.
EUROPEMBALLAGE
CORPN
&
CONTINENTAL
CAN
COMPANY INC v. COMMISSION OF THE EUROPEAN COMMUNITIES –Continental was already enjoying a DP through the control of 1 company, in a substantial part of the common market for certain types of containers. HELD-Abuse of DP by the acquisition by Continental, through its subsidiary, Europemballage, by approximately 80% of the shares & convertible debentures of Thomassen & Drijver-Verbliva-this
Dr. KUMUDHA RATHNA
practically eliminated in a substantial part of the common market. Though the subs idiary had a separate Legal personality, its conduct could be attributed to the parent company, particularly when in essentials it follows the directives of the parent company.
TETRA PAK INTERNATIONAL SA v. COMMISSION OF THE EUROPEAN COMMUNITIES –the Tetra Pak group specialized in equipment for the packaging of liquid or semiliquid food products in cartons (covering both aseptic & nonaseptic packaging sectors).Tetra Pak held 90-95% of the market in the aseptic s ector & 50-55% in the non-aseptic s ector. The com plainant Elopak, held 27%. The com plain t by Elopak Italia before EC was that Tetra Pak imposed unfair conditions on the supply of machines for filling cartons & that the sale of cartons & equipment, in certain cases were at predatory pric es. HELD – Contracts for the sale/lease of Tetra Pak equipment for manufacturing cartons contained several clauses found to be anti-competitiv e. Main such clauses were:o
Buyers of Tetra Pak equipment were prohibited from changing the configur ation of the equipment bou ght.
o
They were also not allowed to add any part or accessor y to that equipment.
o
Tetra Pak reserved to itself the exclusive rights to inspect the equipment, maintain & repair i t & to supply s pare parts.
o
The IPR in relation to any improvement made to the produ ct by the buyer was to be assign ed to Tetra Pak.
Dr. KUMUDHA RATHNA
o
The purchaser from Tetra Pak was to ensure that hi s bu yer assumed his obligations to Tetra Pak. Breach of this condi tion entailed a penalty.
Also, gi ven the almos t comp lete do mi nati on of the asept ic markets by Tetra Pak, thanks to this posit ion in this m arket, it co uld concentrate its efforts on the non-aseptic market by acting independently of the other economic operators, and placed it in a situation comparable to that of holding a DP on the markets in question, as a whole.
COMBINATIONS: Take-over, amalgamation, mergers etc are some of the means of increasing market dominance. Competition Act intends to exercise control over such mergers & amalgamations, with a view to ensure that such amalgamations & mergers are not anti-comp etitive. COMBINATION-MEANING: The acquisition of 1 or more enterprises by 1 or more persons OR mergers/amalgamation
of
enterprises
shall
be
treated
as
combinations..in the following instances:a) Ac quisition of larg e ent erp ri ses: An acquisition where the parties (acquirer & enterprise) whose control/shares/voting rights/assets have been/being acquired-jointly have i.
In India-assets of value of more than Rs.1K cror es / turnover mor e than Rs.3K crores OR
ii.
In & out side India, in aggregate, assets of the value of mor e than $500 milion-including at least Rs,.500 crores in India /
Dr. KUMUDHA RATHNA
turn-over more than $1,500 million-including at least Rs.1,500 cror es in India As set s/tur n-ov er exc eedi ng specified limits: If aft er acqu isition , the joint assets /tur n-over increas es the afor esai d limits , it wil l be a combination. If the acquirer already had the assets/turnover-any further acquisition will be combination.
Type of Combination
Assets/turnover in India
Assets/turnover
in
or
outside India Any
Acquisition-where- Joint
assests-over-Rs.1K Joint
acquirer+enterprise jointly Crores/turnover have - [S.5(a)(i)]
Rs.3K Crores
assets-over
$500
over Million-including at least Rs.500 Crores in India OR turnover more than $1,500 Million-including at least Rs.1,500 Crores in India.
Acquisition by group of Assets over Rs.4K Crores Joint enterprise – [S.5(a)(ii)]
assets-over
/ turnover over Rs.12K Billion-including Crores
at
$2 least
500 Crores in India / turnover more than $6 Billion-including
at
least
Rs.1,500 crores in India. Acquisition by a person of Joint assets over Rs.1K Joint assets over $500 an enterprise-when such Crores/turnover person
is
having Rs.3K Crores.
direct/indirect control over another
enterprise
engaged in production / distribution / trading of similar
/
identical
/
over Million / turnover $1,500 Million.
Dr. KUMUDHA RATHNA
substitutable goods/service) – [S.5(b)(i)] Acquisition by a group with Group assets over Rs.4K Group similar
/
identical
substitutable
goods
assets
over
$2
/ Crores / turnover over Billion /turnover over $6 / Rs.12K Crores
Billion.
services – [S.5(b)(ii)] Merger / amalgamation of Combined 2
enterprises
(goods
assets
over Combined
Assets
over
/ Rs.1K Crores / turnover $500 Million / turnover
services may be similar / over Rs.3K Crores.
over $1,500 Million
dissimilar) – [S.5(c)(i)] Merger / amalgamation in Combined
assets
over Combined assets over $2
a group (goods / services Rs.4K Crores / turnover Billion / turnover over $6 maybe similar/dissimilar)
over Rs.12K Crores.
Billion.
CALCULATION of VALUE OF ASSETS [S.5(c) Explanation]: The value of assets shall b e determined by takin g the book value of the assets as shown, in th e audit ed boks of a/c of th e enterpris e, in the financial year immediately preceding the financial year in whi ch the date of proposed merger falls, as reducd by any depreciation, & the value of assets shall incl ude the brand value, value of Good-will or v alue of right s, patent, permitted use, coll ective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layoutdesign or similar oher commercial rights, if any referred to in S.3 (5). EFFECT OF INFLATION ON VALUE OF ASSETS/TURNOVER [S.20 (3)]: The Central Govt. shall, on the expiry of every 2 years-in consultation with the CCI-by notification-enhance/reduce-on the
Dr. KUMUDHA RATHNA
basis of the wholesale price index/fluctuations in exchange rate of rupees/foreign currencies-the value of assets or the value of turnover, for the purposes of that section. REGULATION OVER COMBINATIONS [S.6 (1)]: No person/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 & such a combination shall be voi d. (S.6 came int o effect on May,2009). PROVISON DOESN’T APPLY TO PFI/FII [S.6 (4)]:
The provisions of S.6 do not apply to share subscription or fianancing facility or any acquisition, by a public financial institution, FII, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement. Public Financial Institution: means such an institution specified under s.4A of the Companies Act, 1956 (Includes a State Financial, Indus tri al or Investment Corpn - S.2(o). As per s.4A of the Compani es Act-all bodies (eg. ICICI, IFCI, IDBI, LIC, UTI) are Public Securitisation
Financial
Company
&
Institut ions .
Asset
Also
Reconstruction
incl udes Company
registered wit h RBI under Securitis ation Ac t, 2002. MANDATORY NOTICE TO COMMISSION: An y
person/enterpr ise-who/which
combination-shall
give
(prescribed)
&
form
notice
pr oposes to
fee-disclosing
combination-within 30 days of –
the
to
ent er
into
Commission-in
details
of
the
a the
proposed
Dr. KUMUDHA RATHNA
o
Appr ov al of th e pr op os al rel ating to merg er/amalgamat ion (as per s.5(c) by Board of Directors of the enterprise concerned with such merger/amalgamation OR
o
Execution of any agreement/document for acquisition (as per s.5(a) or acquiring of co ntrol referred to i n s.5(b).
COOLING PERIOD OF 210 DAYS: after the notice. Combination can’t become effective during the cooling period.
PENALTY FOR NOT GIVING NOTICE u/s.6 (2) [S.43A]: If any person/enterprise fails t o give notice to the Commi ssion u/s.6 (2) of the Competition Act-the Commission shall impose on such person/enterprise-a penalty which may extend to 1% of the total turnover or th e assets, whi chever in higher, of the combination. Show cause Notice [Regulation 48 of Competition Commission of India (General) Regulations, 2009]: If penalty is proposed to be imposed by Commission on a person-showcause notice duly signed
by
Secretary
shall
be
given-asking
for
submitting
explanation in wri ting wi thin 15 days. Penalty shall be impo sed only after giving opportunit y of personal hearing t o the person. PROCEDURE AT COMMISSION AFTER RECEIVING NOTICE: On receipt of noti ce [u/s.6(2)]-examine the notice & f orm prima facie opinion [as provided in s.29(1)]-proceed as per provisions of s.2931. S.29(1): CCI has to form a prima facie opinion-whether a combination is likely to cause/has caused-an appreciable adverse effect on competiti on within the relevant market in India. If yesissue a notice to th e parties, to show cause.
Dr. KUMUDHA RATHNA
Combination not effective for 210 days from date of notice, or till CCI issues order u/s.31: The combination shal not come into effect until 210 days or order of Commi ssion u/s.31is recd, whichever is earlier. U/s.31, Commission can either•
Appro ve th e co mb inat ion or
•
Order that the combi nation shall not be effective or
•
Propose modifi cations in the combination.
FACTORS TO BE CONSIDERED [by CCI] IN DETERMINING ADVERSE EFFECT OF COMBINATION: [S.20 (4)] a) Actu al/potential level of competiti on thru imports in the market. b) Extent of b arriers to entry to t he market. c) Level of combination in the market. d) Degree of countervailing power in th e market. e) Likelih ood that the combin ation would result in the parties to the combination being able to significantly & sustainably increase prices/profit margins. f) Extent of effective competition likely to sustain in a market. g) Extent to which substi tutes are available or likely to b e available in the market. h) Market share, in the relevant market, of the persons/enterprises in a combination, individu ally/combination. i) Likelihood that the combination would result in the removal of a vigorous & effectiv e competitor/s in the market. j) Nature & extent of verticals int egr ati on in t he market. k) Possibil ity of a failing bus iness. l) Nature & extent of innovation.
Dr. KUMUDHA RATHNA
m) Relative advantage, by w ay of the contribut ion to the economic development,
by any combination having or likely to have
appreciable adverse effect on co mpetition. n) Whether the benefits of the combination outweigh the adverse impact of the combination, if any. ENQUIRY INTO COMBINATION BY CCI & ORDER: CCI can enquire•
Suo motto
•
On receipt of not ice.
Enquiry Into Combination B y Commissi on-On Its Own: •
Upon its ow n know ledge OR
•
Info relating to acquis ition referred to it u/s.5(a) OR
•
•
Ac quiring o f control ref err ed to in s.5(b) OR Merger/amalgamation referred to in s.5(c)
S.20(1) Proviso: Commission shall not initiate any inquiry under this sub-section after the expiry of 1 yr from the date on which such c ombination has taken effect. Enquiry On Combin ation-On Receiving Notice: S.20(2): On receipt of notice u/s.6(2)-Inquire as to whether a combination referred to in that notice/reference has caused or is likely to cause an appreciable adverse effect on competition in India. [Note: 1yr period mentioned in S.20(1) is inapplicable to S.20(2)] [CONFLICT of Statuto ry provisions: S.20(2): Inquir y mandatory. S.6(3) read with S.29(1): Commission can drop proceedings-if on prima facie opinion-it concludes that competition in India will not be adversely affected.]
Dr. KUMUDHA RATHNA
PROCEDURE FOR INVESTIGATION OF COMBINATIONS: S.29(1): Show-cause for investigation: If Commission prima facie opines that a combination is likely/causes ...India-it shall issue notice to the parties to show-cause-as to why investigation in of such combination should not be conducted-to respond within 30 days of receipt of not ice. S.29(1A): After r eceipt of r esponse from parties: Commissi on may call f or a report from Director General (DG)-to be submitted within 60 days (Commission-may extend time for a fur ther 60 days). S.6(2): Inquiry i nto disclosu res: If
any
person/enterprise-gives
notice
under
this
section-
Commission shall examine such notice-form prima facie opinion [as per s.29(1)] & proc eed [ as per s.30]. S.29(2): Publi sh inform ation for public knowl edge: If Commission-prima facie opines that the combination is or likely..appreciable adverse effect...India-shall (within 7 working days from date of receipt of the response of the parties to the combination OR report of DG u/s.29(1A) whichever is later-direct the parties to-publish details of the combination (within 10 working days of such direction, in such manner as it thinks appropriate)-Reason-for
bringing
the
combination
to
the
knowledge/info of the public & persons affected or likely to be affected by s uch c ombination. S.29(3): Invit e Objections: The Commission may invite any person/member of the pubic (affected or likely to be affected by the combinations)-within 15 working days from date on which the details of the combination were published.
Dr. KUMUDHA RATHNA
S.29(4): Call fo r Addi tional Details: The Commission may-within 15 working days from the expiry of the period s pecified in S.29(3)-call for su ch addit ional/other info as it deems fit-from the parties to the combinatio n. S.29(5): The additional info shall be furnished by t he parties-withi n 15 days from the expiry of t he period specified in s.29(4). S.29(6): Proceed to deal with the case: After receipt of all info & within 45 working days from expiry of the period specified in s.29(5)-Commission shall proceed to deal with the case as per s.31. Order of Commi ssion after Enquiry: Commissio n may pass any of the follow ing Orders: S.31(1): Approve the combination. S.31(2): Direct that the combination shall not take effect. S.31(3): If Commission opines that the combin ation has/is likely to have appreciable adverse effect on competition-BUT-that such adverse effect can be eliminated by modification-it may propose appropriate modification t o the combination. S.31(4): The parties (who accept the modification) shall carry it out within the time specified by the Commi ssion. S.31(5): If the parties to the combination, who have accepted the modification proposed- do not carry them out within time specified by the Commission-shall be deemed to have an appreciable adverse effect..& Commission shall deal with such combination as per the provisions of the Act. S.31(6): If the parties to the combination do not accept the modifications proposed by the Commission-they may submit an amendment to the modifications proposed by the Commission-to
Dr. KUMUDHA RATHNA
the Commissio n-within 30 working days of modific ation prop osed by the Commission. S.31(7): If the Commission agrees with the amendment proposed by the parties-it shall-by Order-approv e the combination. S.31(8): If the Commission doesn’t accept the amendments
proposed by the parties-it shall I allow a further 30 working dayswithin which time they shall accept the modifications propo sed by the Commission. S.31(9): If the parties do not accept the modifications proposed by the Commission (within period specified in sub.s.6/8) the combination shall be deemed to have an appreciable adverse effect on competition & be dealt with according to the provisions of this Act. S.31(10): Further Orders by Commission: Where the Commi ssio n •
has declared that the combination shall not take effect [S.31(2)] OR
•
Combination deemed to be having appreciable adverse effect on competition [S.31(9)]
Without prejudice to any penalty which may be imposed or any other prosecution-Commi ssio n may Order as follow sa) The acqu isition r eferred to S.5(a) OR b) The acquiri ng of control referred to i n S.5(b) OR c) The merger/amalgamation referred to in S.5(c) Shall not be given effect to. Also, the Commi ssion may, if it thi nk s approp ri ate-frame a scheme to impl ement its Order-under this sectio n.
Dr. KUMUDHA RATHNA
S.31(11): Deemed Approval: If Commission doesn’t -within 210
days from date of notice to Competition Commission-deemed to have been approved by the Commiss ion. Expln: Exclusion in computing 210 days: The 30 days specified in sub.s.6 & furt her 30 days specifi ed in sub.s.8 shall be excluded. S.31(12): If any extension of time is sought by the parties to the combination-the period shall be computed after deducting the extended p eriod. S.31 (13): Where the Commission has ordered a combination to be void-any acquisition/merger/amalgamation-shall be dealt with by authorities under any other Law for the time being in force as if such acq/merger/amalgamation-had not taken place. S.31 (14): The provisions of Chapter shall not affect-proceedings initiated or which may be initiated under any other Law for the time being in forc e. S.32: Acts taking place outside India but having an effect on competition i n India: The Commission shall, not withstanding thata) An ag referred to in S.3 has been entered into outs ide India OR b) An y party to suc h ag is outs ide India OR c) Any enterprise abusing the dominant position is outside India OR d) A combin ation has taken place outside India OR e) Any party to combi nation is outsi de India OR f) Any other matter/practice/action arising out of such ag or dominant position or combination is outsi de India Have power to inquire into such ag or abuse of dominant position or combination-if such ag/dominant position/combination-has or
Dr. KUMUDHA RATHNA
is likely to have-an appreciable adverse effect on competition in the relevant market in India. S.33:
empowers
the
Commission
to
issue
interim
Orders
restraining any party from carrying on suc h act until th e conclusion of such inquiry or until further Orders [even sans giving notice to such party, where it deems i t necessary]. S.35: Appearance before Commi ssio n: A pers on/ent erp ri se/DG may •
Appear in p ers on OR
•
Autho ri se – 1 or more o
Chartered accountants
o
Company secretaries
o
Cost accountants
o
Legal practitioners
o
An y of hi s/its Officers
to pr esent hi s/its case before the Commis sion. S.36: Power of Commissi on to r egulate its own procedure: 1) In discharging its function s-Commission shall be gui ded byprincipl es of natural Justice-subject t o a. Provisions of this Act b. Rules framed by Central Govt. Commissi on shall have power to regulate its own procedure. 2) Commission -for the purpose of discharging i ts functions -has vested in itself the same powers as that of a Civil Court under C.P.C.-namelya. Summoning/enforcing attendance of any person b. Examine him on oath c. Require discovery & production of docum ents d. Receive evidence on affidavit
Dr. KUMUDHA RATHNA
e. Issue commiss ions fo r examination of witnesses/docs f. Requisition any pubic record/doc or copy thereof from any office (subject to ss.123 & 124 of Indian Evidence Act, 1872). 3) Call upon such experts, from any discipline as it deems necessary-to assist the Commission in the conduct of any inquiry by i t. 4) The Commission may direct any person -to produce/furnis hbefore-DG/Secretary/any Officer authorised by ita. Such books/documents in custody/control of such person b. Trade or any info (in relation to the trade carried on by such person) as may be in his possession. S.38: Rectifi cation of Orders: The Commi ssio n may-suo moto or on notice given by any party to an Order-rectify any mistake apparent from the record. Expln: The Commissi on shall not -in rectifyin g any mistake-amend a subs tantive part of its Order. S.39: Execution of Orders of Commis sion i mpos ing penalty: 1) If a person on w hom monetary penalty has been impos ed by the Commission-fails to pay it-the Commission may proceed against the person to recover the penalty in such manner as may be specifi ed by the regulations . 2) If the Commi ssio n opines that recovery of penalty is to be as per provisions of the Income-Tax Act, 1961-it may make a reference to thi s effect to th e concerned IT authori ty-for r ecovery. 3) Where a reference has been made by the Commission-under sub-section.2-the person on whom the penalty has been imposed shall be deemed to be an assessee in default under IT Act.
Dr. KUMUDHA RATHNA
DUTIES OF THE DIRECTOR GENERAL: S.41: DG shall when directed by the Commission-assist the Commission
in-investigating
into
any
contravention
of
the
prov isio ns of this Act or any rules/regulations made there under. S.42: Contravention o f th e Orders of the Commi ssio n: •
The Commission may cause an inquiry to be made into compliance of its Orders/direction s.
•
If any person (sans sufficient cause) fails to comply with the Orders...he shall be punishable with-fine (max-Rs.1 lakh for each day of non-compliance subject to a max of Rs.10 crores)-as determined by the Commissi on.
•
If any person doesn’t comply with Orders/direction s or fails to
pay the above said fine-Impri sonment for a max of 3 yrs &/or f ine (max-Rs.25 crores)-as Chief Metropolitan Magistrate, Delhi, deems fit. •
But, Chief Metro Magistrate, Delhi-shall take cognizance of any offence under this section-ONLY on a complaint filed by the Commission.
S.42A: (inserted by 2007 amendment Act): Compensation in case of contravention of Orders of Commission: An y person -may make an app licati on to the Appel late Tri bunal for an Order for the recovery of-compensation for any loss/damagesuff ered as a result of •
•
An ent erp ri se vi olating di rec tion s issu ed by the Commission ; or Contravening (sans reasons) any decision/Order of Commission or
Dr. KUMUDHA RATHNA
•
Contravening (sans reasons) any conditions/restrictions subject to which any approval/sanction/direction/exemption in relation to any matter has been granted under thi s Act or
•
Delay in carrying out s uch Orders/Directions of the Commis sion.
S.43: Penalty for failure to comply with directions of Commission and Director General: If any person fails to comply (sans reasonable cause)-with a Direction given by – •
The Comm ission u/s.36 (2 & 4) or
•
The DG while exercis ing pow ers referred to i n s.41 (2)
Such person shall be punishable with fine (max-Rs.1 lakh per day of continuing default with a total max of Rs.1 crore)-as determined by the Commission. S.43A: Power to impose penalty for non-furnishing of info on combinations: If any person/enterprise-fails to give notice to the Commission [u/s.6 (2)]-Commission shall impose penalty-may extend to 1% of the total turnover or the assets (whichever is higher) of such combination. S.44: Penalty for making false statement/omission to furnish material information: If any party to a combination•
Makes a statement which is false-of a material particularknowi ngly OR
•
Omits to state any material particular-knowing it to be material
Such person shall be liable to a penalty-Rs.50 lakhs (minimum) & max of Rs.1 crore (as determined by t he Commi ssion.
Dr. KUMUDHA RATHNA
S.45: Penalty for of fences in relation to f urni shing of inf o: [Without prejudice to S.44] If any person-furnishes or reqd to furnish any info/particulars/docs•
Makes any statement/furnishes any doc-which he knows or has reason to believe to be false (relating to any material particular) OR
•
Omits to state any material fact-knowing it t o be material OR
•
Wilfully alters/suppresses/destroys-any doc-which is reqd to be furnished
Punishable wit h fine (max) of Rs.1 crore-by the Commiss ion. S.46: Power of Commi ssio n to impose lesser punish ment: If the Commission is satisfied that-any Producer/seller/distributor etc-included in a cartel (which is alleged to have violated S.3)-has made a full & true disclosure-in respect of the alleged violationsmay impose of such person-a lesser penalty-as it deems fit. S.47: Crediting sums realised by way of penalties-to-Consolidated Fund of India: All sum s real ised by way of penal ti es und er thi s Act shall be credited to thi s fund. S.49: Competition Advoc acy: The Central Govt/St. Govt. may-in formulating a policy on competition (or any other matter)-make a reference to the Commission-for its opinion-on possible effect of such policy on competition-AND-on receipt of such reference-the Commission shall-within 60 days of making the reference-give its opinion-to the Centr al/St. Gov t. The opinion of t he Commission -shall not be binding upon th e Govt.
