THE COMPETITION LAW INTRODUCTION: GENESIS: The Govt.

decided to liberalize its economic policy in 1991 because of the financial crisis & opened up its economy 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 Aspects of Intellectual Property Rights (TRIPS) etc. MRTP Act, 1969 was enacted mainly to contain the concentration of economic power & therefore wasnt suited to deal with issues relating to preservation & protection of competition, in the new business environment. Also, as certain provisions in the MRTP Act were obstructive to private investment, they were deleted. (Eg: Prior approval 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 division of undertaking or to direct severance of inter-connection of undertakings were retained, but these powers were never used. Thus the MRTP became a toothless tiger. In the wake of influx of large MNCs, on opening up of the economy of the country & the enlargement of the range of goods/services offered to the consumer-a specific Law for preserving competition became essential. Also, all over the world, it was found that private monopolies can be detrimental to national economy & control was required. Fair & free competition is required for growth of a healthy economy. The Central Govt. in 1999, appointed a high-level committee (The Raghavan Committee) on competition policy & Law, to study the Indian economic scene & make recommendations for a competition 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 follows:O Suitable legislative framework (in the light of international developments) to meet the needs of promoting competition; O Laws relating to mergers & demergers; O Such legis framework could entail a new Law OR appropriate amendments to the MRTP Act, 1969. SALIENT FEATURES OF THE REPORT OF THE RAGHAVAN COMMITTEE: The term Competition has been used sparsely in the MRTP Act (only in 2 places); Lack of precise definitions of crucial terms such as-dominance, cartel, collusion, boycott, refusal to deal, bid rigging, predatory pricing etc. These are 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 into 1 or more of the provisions of the Law in the 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 control provisions. Committee recognized the necessity of having specific merger control provisions at par with other modern competition 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 with Competition Laws of many countries, is inadequate for fostering competition in the market & trade & for reducing, if not eliminating, anticompetitive practices in the countrys domestic & international trade. Thus, the RC declared the MRTP Act to be falling short of addressing competition and anti-competitive practices. SUGGESTION OF RC: Desired that the new Law focus on preventing anti-competitive practise, ...the only legitimate goal of Competition Law is the maximization of economic welfare. Competition authority should be governed by established competition principles. There is to be a balance between over-intervention & exception from sanction in the name of Public interest. Essential to have merger control provisions in the new legislation. But, suggested a soft approach, i.e., voluntary notification for mergers. That government enterprises & departments should be brought under the purview of Competition Law. Only exception-sovereign functions of the 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). There should be no distinction between ultimate consumer & intermediate consumer. While the Committee presumed some anti-competitive behaviour to be injurious to competition, it recognized the primacy of rule of reason test for the rest. The primacy of rule of reason test over per se rule is universal among modern competition Laws; the latter being invoked only against hard-core anti-competitive behaviour (Eg: Cartelization). Suggested the setting up of a specialized agency to try competition cases & opined that this is suitable in developing countries (though, in many countries competition cases are tried by Courts). Recommended in detail regarding the admn setup of an (i)independent & autonomous competition authoritystating that its main objectives should be to (ii)administer the competition Law & engage proactively in Governmental policy formulation (proceedings shd be (iii)transparent). That the authority shd be (iv)manned by experts in various fields who can be removed only with the concurrence of the SC of India. (v)Jurisdiction-shd be extra-territorial. (vi)Powers to-punish the guilty & levy fines. Much emphasis on competition advocacy by competition authority (Reason-lack of/low awareness of competition issues among stakeholders). Need for a Competition Law Tribunal (CLT) (Competition Commission of India-CCI) that will act as a watchdog for the introduction & maintenance of competition policy.

Emphasised the importance of co-ordination of different policy measures of the Govt. for effective implementation of competition policy. There should be progressive reduction & ultimate elimination of reservation of products for the small-scale industries & the handloom sector. Proposed legislation should cover all industries in the public & private sector & professional services. Based on its analysis, The RC found it more expedient to have a new competition Law. This report formed the genesis of the modern Competition Law, vide a Central Law, The Competition Act, 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. The Act was introduced at a time when large MNCs were taking advantage of Indias 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 means of this 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 Commission). 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 Justice (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. c) Appointment 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 Governments representationa) 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 wasnt 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) Bill, 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 follows: i. ii. iii. Composition of the Competition Commission; Selection Committee for Chairperson & members; 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 to which the Act applies (previously the notice was optional); v. vi. vii. viii. Establishment of the Competition Appellate Tribunal (CAT)-(quasi-judicial body); Its composition/selection of Chairperson & members/procedure for appeals; Provision for appeal to the SC (against the Orders of the CAT); Repeal of the MRTP Act & dissolution of the MRTP Commission.

DISTINCTION BETWEEN MRTP ACT & COMPETITION ACT:

Sl. No.

MRTP ACT

COMPETITION ACT

1.

Regarding problems of monopoly & Considers these issues as economic anti-competitive practices from a issues to be dealt with from an economic Legal perspective. viewpoint.

2.

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 Benches. was sitting as No benches, but as there will be no or

complaint, reference.

only

information

4.

Hearings held of parties.

No hearings, only meetings.

To ensure that Legal issues were also given importance, the Competition Appellate 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) 2) 3) 4) 5) Prevent practices having an adverse effect on competition; Promote & sustain competition in markets; Protect the interests of consumers; Ensure freedom of trade carried on by other participants in markets in India; For dealing with matters connected therewith or incidental.

ANTI COMPETITIVE AGREEMENTS: One of the objects of the Competition Act as stated in the Preamble is to prevent practices having adverse effect/s on competition. The principal objective of suppliers (of goods/services) who are in a position to manipulate the market-is to maintain their profits at pre-determined levels & ultimately reduce & eliminate competition. Usual modes resorted towards achieving this end are-Egs: Agreements for price-fixing, limiting supply of goods/services, dividing the market etc. DEFINITION OF TERMS: 1) AGREEMENT: [S.2(b)]: (Includes)-any-arrangement, understanding, action-in concert. a. b. c. Neednt be a formal arrangement (Eg: Even a gentlemens ag would come within the term understanding); Neednt be in writing; 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 LAW-LOMBARD 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, acquisition, control of goods or provision 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) b) Creation of barriers to new entrants in the market; Driving existing competitors out of the market;

c) d) e)

Foreclosure of competition by hindering entry into the market; Accrual of benefits to consumers; Improvements in production/distribution of goods/provisions of services;

f) Promotion of technical/scientific/economic developments by means of production/distribution of goods/services. 2) CARTEL: [S.2 (c)]:

(Includes) An association of producers, distributors, sellers, traders, service providers-who-by ag amongst themselveslimit, control/attempt to control-production, distribution, sale, price of, trade in goods or provision of services. Cartel is a presumed anti-competitive agreement. Effect: o o Restriction of competition; Consequent loss of benefits to the consumer that an unhindered market wouldve 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 would be huge. CASE LAW: MADRAS JEWELLERS & 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 non-compliance-HELD-Its 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 unjustified cost on consumers. Price fixing is illegal per se, therefore, further enquiry on the issue of intent or the anti-competition effect is not required. HARIDAS EXPORTS v. ALL INDIA FLOAT GLASS MFGRS ASSOCIATION HELD-Protecting inefficient industry is not public interest & in such cases cartel is permissible-OBSERVATION-MRTP Commission cant pass an injunction for imports at predatory prices-If the cartel is selling goods to India (at lower prices) & still making profit, it will not be in the interest of general body of consumers in India to prevent import of such goods. The era of protectionalism is now coming to an end. Expln: Meaning-predatory pricing: Its 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 cant sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is having monopoly & can later raise the prices (to even supra competitive pricing level). 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 stronger 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 pricing 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 using electrolysis) but also defeated a predatory pricing 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 Dows. But, Dow simply instructed his agents to buy up at the very low price, then sell it back in Germany at a profit but still lower than Bromkonventions price. In the end, the cartel couldnt keep up selling below cost, and had to give in.(ii) Alleged predatory pricing is Microsoft released their web-browser 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. IEs free inclusion in Windows led to it quickly becoming the web browser used by most computer users. 3) ENTERPRISE: [S.2 (h)]: A person/dept of Govt.-who/whichIs/has been engaged in any-activity relating too ORo o in investment OR in the business of-acquiring, holding, underwriting or dealing with shares/debentures/other securitiesproduction, storage, supply, distribution, acquisition or control of article/goods/services (of any kind)

of a body corporate (directly/indirectly or thru 1 or more of its units, divisions or subsidiaries) Whether the enterprise & these units etc are located in the same or different places.

DISCLUDES-Any activity of the Govt. related to sovereign functions 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; Article-includes-new article; Services-includes-new services; Unit/division-includes-plant/factory-established for-production, storage, supply, distribution, acquisition, control-of any article, goods-any branch/office/established for provision of any service. Goods-as defined in the Sale of Goods Act, 1930 & includes Products manufactured/processed/mined; Debentures/stocks/shares (after allotment); In relation to goods supplied, distributed or controlled in India, goods imported into India].

No Exemption to: Public Sector Undertakings (PSU) & enterprises controlled by Govt. 4) PERSON: [S.2 (l)]: Includes- Individual; HUF; Company; Firm;

Association of persons or body of individuals (whether incorporated or not in India or outside India);

Any corpn established by/under 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.) Any body corporate incorporated by/under the Laws of a country outside India; Co-operative society registered under any Law relating to co-operative 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 person/dept. of Govt.-engaged in the supply of goods/services. INCLUDES All economic activity other than the exceptions-carried on by the Govt. or Govt. undertaking, PSU (by whatever names called). 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 the C.Govt dealing with atomic 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 to any other matter/thing. If the parties agree-may be a deferred payment. 7) SERVICES: [S.2(t)]:

Of any description-made available to potential users (INCLUDES-services 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 is a service. 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 HELD-Education which is a useful activity & irrespective of whether for charity/profit-is an occupation.

8)

TRADE: [S.2(w)]: to-production/supply/distribution/storage/control of

Trade/business/industry/profession/occupation-relating goods/services.

[Trade] PRACTICE (habitual/custom) [S.2(l)]: Practice relating to the carrying on of any trade by a person/enterprise. PERSUMED ANTI-COMPETITIVE PRACTICES: Any ag entered into between enterprises/associations of enterprises/persons/associations of person/s & enterprise/s including cartels (engaged in identical/similar trade of goods/services)-decision taken whichi. ii. Directly/indirectly determines purchase/sale prices; Limits/controls-production/supply/markets/tech development /investment or provision of services;

iii. Shares the market or sources of production/services by way of-allocation of geographical area of market/types of goods/ services/# of customers in the market/any other similar way; iv. Directly/indirectly results in bid rigging or collusive bidding Shall be presumed to have an appreciable adverse effect on competition. EXCEPTION: Doesnt apply to-Joint venture agreements-IF such production/supply/distribution/storage/ acquisition or control of goods/services. ags increase efficiency in

Onus of proof: lies on the deft to prove that there isnt any appreciable adverse effect on competition. PROHIBITION IF THE AGREEMENT AFFECTS COMPETITION: HORIZONTAL (CARTELS) & VERTICAL RESTRAINTS: VERTICAL RESTRAINTS: [S.3(4)]: Any agreement amongst enterprises/persons-at different stages or levels of-the production chain in diff markets-in respect of production, supply, distribution, storage, sale, price of, trade in-goods/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 competition in India (i.e., by applying the rule of reason). There could be other 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 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 the relevant geographic market or with reference to both the markets.

TYPES: RELEVANT GEOGRAPHIC MARKET: S.2(r): A market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods/services are distinctly homogeneous & can be distinguished from the conditions prevailing in the neighbouring areas. Eg: If customer preferences for a particular quality/price of the product are different in a neighbouring area, the composition 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 conditions of competition are homogeneous. RELEVANT PRODUCT MARKET: S.2(s): A market comprising all those products/services which are regarded as interchangeable 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 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 upon the structure of the market for a product, may be shown to be procompetitive without 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 limit/control-production, supply, markets, 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/limit-output/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 distributor that he will not make supplies to chemists, Doctors & Govt. or private institutions even though he accepts the order. Seller will sell directly to these customers without any commission to the distributor-HELD-Anti-competitive 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 showroom-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-permissible-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 wishes to purchase (as a condition of such purchase). A product/service is to be treated as being the subject of a tie-in-agreement-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 product/service. The product/service required by the buyer is called-tying product. 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 doesnt 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 Asking customer to enter into service contract while 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 direction of RBI not to insist on bank deposit for locker). AMAR JEEVAN PUBLIC SCHOOL, In Re School making it compulsory to buy uniforms & 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 Insisting on service 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, airconditioner can be fitted to car only by authorised dealer to ensure that improper air-conditioner doesnt 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 carriers risk-there was no compulsion on customers-they could send goods either at owners risk or at carriers 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 those of the seller or any other person. D. EXCLUSIVE DEALING AGREEMENT: Was a RTP under MRTP Act. Meaning Not to deal with goods other 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 shouldnt deal in others goods and discontinuation of supplies on the ground that dealer also deals in products of suppliers 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. DGIR v. MUNDIPHARMA AG Agreement that distributor will purchase goods only from the manufacturer or from other as may be nominated by him. VADILAL ENTERPRISES LTD. In re Territorial restrictions, i.e., not to sale beyond prescribed 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 permitted. GUJARAT BOTTLING Co LTD v. COCA COLA SC-HELD-Negative covenant restraining franchises from dealing with competing goods during term of franchise agreement is valid-not 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 those prices may be charged. CASE LAW: CALCUTTA GOODS TRANSPORT ASSOCIATION v. TRUCK OPERATORS UNION Association of lorry owners fixing freight rates & not allowing members of association to charge price lower than that fixed by association is RTP. DGIR v. INFAR (INDIA) LTD HELD-If the price indicated is Maximum Retail Price-it is obvious that the retailers are authorised to sell the product at prices below the maximum. It is not necessary to specifically state that price below the max retail price can be charged. REGISTRAR v. BENNETT COLEMAN & Co LTD HELD-Newspapers are exempt from s.39 & 40 (i.e., they can prescribe minimum price). REASON-This is because speed is essence of publishing a newspaper. Allowing 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 public. 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 whom goods are bought. AGREEMENT NOT ANTI-COMPETITIVE: [S.3(5)(i)]: AGREEMENTS PERMITED BY LAW: Right of any person to-restrain (infringement of)-impose reasonable conditions (for protecting any of his rights conferred upon him under any of the following Acts)-not anti-competitive. The Copyright Act, 1957. The Patents Act, 1970. The Trade & Merchandise Marks Act, 1958 OR The Trade Marks Act, 1999. The Geographical Indications Of Goods (Registration & Protection) Act, 1999. The Designs 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 the-production/ 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 factors-while determining whether an ag has an appreciable adverse effect on competition within India (u/s.3):Creation of barriers to new entrants in the market; Driving existing competitors out of the market; Foreclosure of competition by hindering entry into the market; Accrual of benefits to consumers; Improvements in production/distribution of goods or provision of services; Promotion of technical, scientific & economic development by means of production/distribution of 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 competition 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 trade, 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 whether it is such as may suppress or even destroy competition.This principle has been accepted by the SC of India also. CASE: TATA ENGINEERING (TELCO) v. REGISTRAR OF RESTRICTIVE TRADE AGREEMENT Telco had entered into agreements with its (Truck) dealers. Some of the clauses wereo o o Dealer will not directly/indirectly sell the Tata trucks outside the territory assigned to him (i.e.. geo limits); Dealer will maintain organisation/s for sale/service within his territory-to the satisfaction of TELCO; 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 restriction. If not, trucks will be concentrated in large metro-centres only where demand is heavy. o Sales tax rates vary from State to State. If there is no territorial restriction, business will be concentrated in the States where sales tax rate is lower. 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 of other makes.

Thus ultimately-consumers benefit if the clauses are included in the agreement. HELD-SC accepted these contentions & declared that restrictions imposed by TELCO do not amount to RTP. OBITER DICTA-Ag which restrains/ binds-persons/ places/ prices wouldnt be per se, bad. The ? is whether the restraint is such as to regulate & thereby promote competition OR suppresses competition. Hence, applying rule of reasonmatters to be considered-(a)Facts particular to business; (b)Conditions before & after restraint & (c)Probable effects of 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. Thusit 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 its 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 purchase/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; (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 appreciable adverse effect on competition in India. (a)Tie-in-ag; (b)Exclusive supply ag; (c)Exclusive distribution ag; (d)Refusal to deal; (e)Resale price maintenance.

ABUSE OF DOMINANT POSITION (AOD): Definitions: DOMINANT POSITION [S.4(2) Expln (a)]: Definition: The dictionary meaning of the word dominant is 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 Act). In substance-dominant position-means the position of strength enjoyed by an enterprise that enables it to act independently of competitive forces prevailing in the relevant market. Such an enterprise will be in a position to disregard market forces & unilaterally impose trading conditions, fix prices etc. The elements that constitute a dominant position are: A position of strength; That position being enjoyed in a relevant market in India;

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 & impose its own trading conditions (Eg: prices at which the enterprise is prepared to supply goods/services). Explanation to S.4(2)(a) exempts such unfair/discriminatory trading conditions/prices [& predatory pricing-S.4(2)(a)(i & ii)]-stating that-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 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 is weakened and which, 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 position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it toi. ii. Operate independently of competitive forces prevailing in the relevant market OR 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/indirectly are in a position toi. ii. iii. Exercise 26% or more of the voting rights in the other enterprise OR Appoint more than 50% of the members of the Board of Directors in the other enterprise OR Control the management/affairs of the other enterprise.

CONSUMER [S.2(e)]: Any person whoi. 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 such purchase of goods is for resale or for any commercial purpose or for personal use; ii. Hires/avails of any services for a consideration 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 ISNT 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 adopted to meet competition. 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 responding to the 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 prices to the new prices cannot be termed unfair/predatory pricing. 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 factorsa) b) c) d) e) f) Market share of the enterprise; Size & resources of the enterprise; Size & resources of the competitors; Economic power of the enterprise including commercial advantage over competitors; Vertical integration of the enterprises or sale or service network of such enterprises; 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 substitutable goods or service for consumers; i) j) k) Countervailing buying power; Market structure & size of market; 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 competition. m) Any other factor which the Commission 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. Unfair/Discretionary Conditions 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 dominant position.

Expln: Above practice isnt 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 conclusion (formation) of contract subject to acceptance by other parties who are not connected to the nature/subject matter of the contract-is abuse of dominant position. Using Dominant Position To Enter Another 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 browser market & ruined Netscape). DIVISION OF ENTERPRISE ENJOYING DOMINANT POSITION: [S.28 Incorporated 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, doesnt abuse it. Such Order may provide for any/all of the below mentioned matters: Transfer/vesting of pty/rights/liabilities/obligations; Adjustment of contracts either by discharge or reduction of liability/obligation or otherwise; 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 the business of any enterprise; Extent to which, & the circumstances in which, provision of the Order affecting an enterprise may be altered by the enterprise & the registration thereof; Any other matter which may be necessary to give effect to the division of the enterprise.

No Compensation to Officer 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 withstanding any other Law for the time being in force OR in any contract OR in MoA OR AoA. INQUIRY INTO AGREEMENTS-AS TO-ABUSE OF DOMINANT POSITION: Enquiry by 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 the manner & with 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 authority [S.19(1)]. Director General has not the power to enquire on his own. Procedure For Enquiry u/s.19: (S.26) o On receipt of info or suo motu-if CCI opines that there exists a-prima 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). 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 the parties concerned. o If investigation was made on ref by C.Govt/St.Govt.Statutory Authority-CCI shall forward a copy of report of DG to concerned Authority. 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 o Copies of Order shall by communicated to concerned to the parties. If CCI opines that further investigation is called for-May Direct DG for further investigation OR Cause further enquiry to be made OR Itself enquire into the contravention as per provisions of Act.

o Further enquiry by CCI: If DG-opines (report) that there is a contravention of any provisions of the Act & the CCI also opines similarly-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;

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 higherwill be imposed on each producer, seller, distributor, trader, service provider 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 for submission of explanation-in writing-within 15 days. CCI may direct that the agreement be modified to the extent & in the manner as maybe specified by CCI [S.27 (d)]. Other Orders & payment of costs [S.27(e)]. Order against any group company: If the enterprise which violated the provisions of Competition Act (i.e., Ss.34) is a member of the group & if other members of the 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) 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 existence 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 opportunity of choosing their 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 Roches 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 would like 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 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; Technological lead of an undertaking over its competitors; Existence of a highly developed sales network; Absence of potential competition.

COMPAGNIE MARITIME BELGE TRANSPORTS SA & OTHERS v. COMMISSION OF THE EUROPEAN COMMUNITIES The members of Associated Central West Africa Lines (CEWAL) & 2 other shipping conferences brought this action contesting before the Court the decision of the Commission & the Court of 1st 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 CEWAL-with the intention of eliminating the principal independent competitor-by o o Participating in the implementation of the co-operation ag with Ogefrem; Modifying its freight rates by departing from the tariff in force in order to offer 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 collective entity. 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 & DrijverVerbliva-this practically eliminated in a substantial part of the common market. Though the subsidiary 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 semi-liquid food products in cartons (covering both aseptic & non-aseptic packaging sectors).Tetra Pak held 90-95% of the market in the aseptic sector & 50-55% in the non-aseptic sector. The complainant Elopak, held 27%. The complaint 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 prices. HELD Contracts for the sale/lease of Tetra Pak equipment for manufacturing cartons contained several clauses found to be anti-competitive. Main such clauses were:O Buyers of Tetra Pak equipment were prohibited from changing the configuration of the equipment bought. O They were also not allowed to add any part or accessory to that equipment. O Tetra Pak reserved to itself the exclusive rights to inspect the equipment, maintain & repair it & to supply spare parts. O The IPR in relation to any improvement made to the product by the buyer was to be assigned to Tetra Pak. O The purchaser from Tetra Pak was to ensure that his buyer assumed his obligations to Tetra Pak. Breach of this condition entailed a penalty. Also, given the almost complete domination of the aseptic markets by Tetra Pak, thanks to this position in this market, it could 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-competitive. 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) Acquisition of large enterprises: 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 crores / turnover more than Rs.3K crores OR

ii. In & outside India, in aggregate, assets of the value of more than $500 milion-including at least Rs,.500 crores in India / turn-over more than $1,500 million-including at least Rs.1,500 crores in India Assets/turn-over exceeding specified limits: If after acquisition, the joint assets/turn-over increases the aforesaid limits, it will 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 outside India

in

or

Any

Acquisition-where- Joint

assests-over-Rs.1K Joint

assets-over

$500

acquirer+enterprise jointly Crores/turnover have - [S.5(a)(i)] Rs.3K Crores

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 at

$2 least /

/ turnover over Rs.12K Billion-including Crores 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. over Million / turnover $1,500 Million.

direct/indirect control over another enterprise

engaged in production / distribution / trading of

similar

identical

substitutable goods/service) [S.5(b)(i)] Acquisition by a group with Group assets over Rs.4K Group similar / identical goods / Crores / turnover assets over $2

over Billion /turnover over $6 Billion.

substitutable

/ Rs.12K Crores

services [S.5(b)(ii)] Merger / amalgamation of Combined 2 enterprises (goods assets over Combined Assets over

/ Rs.1K Crores / turnover $500 Million / turnover over $1,500 Million

services may be similar / over Rs.3K Crores. 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 be determined by taking the book value of the assets as shown, in the audited boks of a/c of the enterprise, in the financial year immediately preceding the financial year in which the date of proposed merger falls, as reducd by any depreciation, & the value of assets shall include the brand value, value of Good-will or value of rights, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout-design 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 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 void. (S.6 came into effect on May,2009). PROVISON DOESNT 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, Industrial or Investment Corpn - S.2(o).

As per s.4A of the Companies Act-all bodies (eg. ICICI, IFCI, IDBI, LIC, UTI) are Public Financial Institutions. Also includes Securitisation Company & Asset Reconstruction Company registered with RBI under Securitisation Act, 2002. MANDATORY NOTICE TO COMMISSION: Any person/enterprise-who/which proposes to enter into a combination-shall give notice to the Commission-in the (prescribed) form & fee-disclosing details of the proposed combination-within 30 days of o Approval of the proposal relating to merger/amalgamation (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 control referred to in s.5(b).

COOLING PERIOD OF 210 DAYS: after the notice. Combination cant become effective during the cooling period. PENALTY FOR NOT GIVING NOTICE u/s.6 (2) [S.43A]: If any person/enterprise fails to give notice to the Commission 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 the assets, whichever 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 writing within 15 days. Penalty shall be imposed only after giving opportunity of personal hearing to the person. PROCEDURE AT COMMISSION AFTER RECEIVING NOTICE: On receipt of notice [u/s.6(2)]-examine the notice & form prima facie opinion [as provided in s.29(1)]-proceed as per provisions of s.29-31. 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 competition within the relevant market in India. If yes-issue a notice to the parties, to show cause. 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 Commission u/s.31is recd, whichever is earlier. U/s.31, Commission can either Approve the combination or Order that the combination shall not be effective or Propose modifications in the combination.

FACTORS TO BE CONSIDERED [by CCI] IN DETERMINING ADVERSE EFFECT OF COMBINATION: [S.20 (4)] a) b) c) Actual/potential level of competition thru imports in the market. Extent of barriers to entry to the market. Level of combination in the market.

d)

Degree of countervailing power in the market.

e) Likelihood that the combination would result in the parties to the combination being able to significantly & sustainably increase prices/profit margins. f) g) Extent of effective competition likely to sustain in a market. Extent to which substitutes are available or likely to be available in the market. in the relevant market, of the persons/enterprises in a combination,

h) Market share, individually/combination. i) the market. j) k) l)

Likelihood that the combination would result in the removal of a vigorous & effective competitor/s in

Nature & extent of verticals integration in the market. Possibility of a failing business. Nature & extent of innovation.

m) Relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition. 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 notice.

Enquiry Into Combination By Commission-On Its Own: Upon its own knowledge OR Info relating to acquisition referred to it u/s.5(a) OR Acquiring of control referred 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 combination has taken effect. Enquiry On Combination-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 Statutory provisions: S.20(2): Inquiry 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.] 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 conductedto respond within 30 days of receipt of notice. S.29(1A): After receipt of response from parties: Commission may call for a report from Director General (DG)-to be submitted within 60 days (Commission-may extend time for a further 60 days). S.6(2): Inquiry into disclosures: If any person/enterprise-gives notice under this section-Commission shall examine such notice-form prima facie opinion [as per s.29(1)] & proceed [as per s.30]. S.29(2): Publish information for public knowledge: 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 such combination. S.29(3): Invite 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. S.29(4): Call for Additional Details: The Commission may-within 15 working days from the expiry of the period specified in S.29(3)-call for such additional/other info as it deems fit-from the parties to the combination. S.29(5): The additional info shall be furnished by the parties-within 15 days from the expiry of the 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 Commission after Enquiry: Commission may pass any of the following 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 combination has/is likely to have appreciable adverse effect on competition-BUTthat such adverse effect can be eliminated by modification-it may propose appropriate modification to the combination. S.31(4): The parties (who accept the modification) shall carry it out within the time specified by the Commission. 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 the Commission-within 30 working days of modification proposed by the Commission. S.31(7): If the Commission agrees with the amendment proposed by the parties-it shall-by Order-approve the combination. S.31(8): If the Commission doesnt accept the amendments proposed by the parties-it shall I allow a further 30 working days-within which time they shall accept the modifications proposed 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 Commission 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-Commission may Order as followsa) b) c) The acquisition referred to S.5(a) OR The acquiring of control referred to in S.5(b) OR The merger/amalgamation referred to in S.5(c)

Shall not be given effect to. Also, the Commission may, if it thinks appropriate-frame a scheme to implement its Order under this section. S.31(11): Deemed Approval: If Commission doesnt-within 210 days from date of notice to Competition Commissiondeemed to have been approved by the Commission. Expln: Exclusion in computing 210 days: The 30 days specified in sub.s.6 & further 30 days specified 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 period. 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 force. S.32: Acts taking place outside India but having an effect on competition in India: The Commission shall, not withstanding thata) b) c) d) e) f) India Have power to inquire into such ag or abuse of dominant position or combination-if such ag/dominant position/combination-has or 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 such act until the conclusion of such inquiry or until further Orders [even sans giving notice to such party, where it deems it necessary]. S.35: Appearance before Commission: A person/enterprise/DG may Appear in person OR Authorise 1 or more Chartered accountants Company secretaries Cost accountants Legal practitioners Any of his/its Officers An ag referred to in S.3 has been entered into outside India OR Any party to such ag is outside India OR Any enterprise abusing the dominant position is outside India OR A combination has taken place outside India OR Any party to combination is outside India OR Any other matter/practice/action arising out of such ag or dominant position or combination is outside

to present his/its case before the Commission. S.36: Power of Commission to regulate its own procedure: 1) In discharging its functions-Commission shall be guided by-principles of natural Justice-subject to a. Provisions of this Act b. Rules framed by Central Govt.

Commission shall have power to regulate its own procedure. 2) Commission-for the purpose of discharging its functions-has vested in itself the same powers as that of a Civil Court under C.P.C.-namely-

a. b. c. d. e.

Summoning/enforcing attendance of any person Examine him on oath Require discovery & production of documents Receive evidence on affidavit Issue commissions for 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 it. 4) The Commission may direct any person-to produce/furnish-before-DG/Secretary/any Officer authorised by ita. b. Such books/documents in custody/control of such person Trade or any info (in relation to the trade carried on by such person) as may be in his possession.

S.38: Rectification of Orders: The Commission may-suo moto or on notice given by any party to an Order-rectify any mistake apparent from the record. Expln: The Commission shall not-in rectifying any mistake-amend a substantive part of its Order. S.39: Execution of Orders of Commission imposing penalty: 1) If a person on whom monetary penalty has been imposed by the Commission-fails to pay it-the Commission may proceed against the person to recover the penalty in such manner as may be specified by the regulations. 2) If the Commission opines that recovery of penalty is to be as per provisions of the Income-Tax Act, 1961it may make a reference to this effect to the concerned IT authority-for recovery. 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. DUTIES OF THE DIRECTOR GENERAL: S.41: DG shall when directed by the Commission-assist the Commission in-investigating into any contravention of the provisions of this Act or any rules/regulations made there under. S.42: Contravention of the Orders of the Commission: The Commission may cause an inquiry to be made into compliance of its Orders/directions.

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 Commission. If any person doesnt comply with Orders/directions or fails to pay the above said fine-Imprisonment for a max of 3 yrs &/or fine (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: Any person-may make an application to the Appellate Tribunal for an Order for the recovery of-compensation for any loss/damage-suffered as a result of An enterprise violating directions issued by the Commission; or Contravening (sans reasons) any decision/Order of Commission or which any

Contravening (sans reasons) any conditions/restrictions subject to approval/sanction/direction/exemption in relation to any matter has been granted under this Act or Delay in carrying out such Orders/Directions of the Commission.

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 Commission u/s.36 (2 & 4) or The DG while exercising powers referred to in 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 particular-knowingly 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 the Commission. S.45: Penalty for offences in relation to furnishing of info: [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 to be material OR Wilfully alters/suppresses/destroys-any doc-which is reqd to be furnished

Punishable with fine (max) of Rs.1 crore-by the Commission. S.46: Power of Commission to impose lesser punishment: 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 violations-may 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 sums realised by way of penalties under this Act shall be credited to this fund. S.49: Competition Advocacy: 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 Central/St. Govt. The opinion of the Commission-shall not be binding upon the Govt. The Commission shall take suitable measures for the promotion of competition advocacy-creating awareness & imparting training about competition issues.