Documente Academic
Documente Profesional
Documente Cultură
Contd
The term Collectively owned or held presumes a legal status.
Contd
Identifiable community: This means that co-users of the
Introduction
In the pre-reform era various restraints to competition
existed
Investment constraints commonly known as Licence Raj
Control over acquisition of economic power through
Monopolies and Restrictive Trade Practices
Public sector reservation for infrastructure and other
critical industries-State Monopolies
Product reservation for small scale sector
Trade restrictions- Protection measures through tariffs and
quotas
Restrictions on the FDI
Contd
Creation of the WTO changed the rules of the game in
Contd
Rule of reason approach in the place of market share
approach
Market power strategies like trade barriers, sunk
costs, technology, product life cycles rate of growth of
demand and the like
Stitching of trade policy and the competition policy
Inter country trade disputes
Avoidance of dominance dependence
Building up of nations powers and the like
Movement from protection to promotion
Contd...
To the Producer
the consumer of raw material and energy resources;
Contd...
To the economy
Fosters restructuring of the sectors of the economy
Decision making based on market factors, such as demand,
Demand and Supply are the two pillars of market and all
Demand
Demand is the rate at which the consumers buy a product.
Demand consists of two factors-taste and ability to buy.
Taste is the desire for good, which determines the willingness to
Consumer Surplus
Consumer Surplus
Producer Surplus
Producer surplus measures the benefit to sellers of
Supply
Supply function
An equation representing the supply curve:
Market Equilibrium
Contd...
Market Equilibrium
Balancing supply and demand
Qx S = Qx d
Price Restrictions
Price Ceilings
The maximum legal price that can be charged
Price Floors
The minimum legal price that can be charged.
Examples:
Minimum wage
Agricultural price supports
Contd...
A market for antitrust purposes is that any product or
Elasticity of Demand
The law of demand states that as the price of a good falls, the
Price of product X
Degree of Elasticity
Elastic Demand demand is elastic if its price elasticity is
Contd...
Contd...
Second, some other firms might consider entering the
Contd...
Supply-side substitution and potential entry can be
Contd...
Potential entry comes via lower post-entry prices only.
Contd...
This observation should lead to broader market definitions.
Concept of Welfare
Consumer Welfare
Consumer Welfare is defined as the maximisation of consumer surplus
This is realised through, direct and explicit economic benefits received by
Contd...
Social Welfare(Total Welfare)
The welfare of the society is the summation of the utility
Contd...
Competition policy generally has as its aim to increase the overall
Total surplus
Total surplus is the sum of consumer and producer surplus. This
Definitions
Welfare Definition
Scarcity Definition
Competition and Cost-Price relationships
Consumer Behaviour
Producers Behaviour
Market-Different types
Competition-Market relationship
Competition as an ordering force dominated the classical
Contd...
When Adam Smith spoke of competition, it was in
MARKET STRATEGY
In relation to:
Content specific relationships, offerings, timing and the
Contd
MARKET SHARE-market power
The quality explanation
The market power explanation
The efficiency explanation
MARKET PIONEERING first mover advantage
The economic-analytical perspective
The behavioral perspective (consumer preference formation0
MARKET ORIENTATION-creating/developing market power
pertaining to current and future customer needs/dissemiation of
the intelligence across departments
Market Power
Key concern of competition law is with acquisition of
suppliers/consumers
Determination of dominant position
Many factors are to be considered by the Commission in the
determination of dominance
Contd
Dominance created by statute or government authority
Relevant market
Dominance must be established in the relevant market
Relevant market has two aspects
- Relevant product market
and
Relevant geographic market
Relevant product market
Relevant product market is the smallest set of close substitutes
Determine substitutability of products
Two aspects:
Demand side substitutability-shift of demand to
competing product on price rise and
Supply side substitutability-shift
of production to meet demand
Factors to be considered while determining relevant product market:
Physical characteristics of product - End-use of product - Price Consumer preference empirical evidence - Classification of industrial
products
Competitive Advantage
An
Competitive Analysis
The process of identifying key competitors;
Competitive Strategies
Basic Winning Competitive
Strategies: Porter
Overall cost leadership
Competitive Strategies
Basic Competitive Strategies:
Value Disciplines
Operational excellence
Customer intimacy
Product leadership
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
share
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
market leader
High-risk but high-gain
Sustainable competitive
Pepsi is an
example of
market
challenger
that has
chosen to use
a full frontal
attack
Pepsi newspaper ad 1919
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
Competitive Strategy
Competitive
Positions
Market Leader
Market
Challenger
Market
Follower
Market Nicher
means targeting
subsegments
Good strategy for small
firms with limited
resources
Offers high margins
Specialization is key
By market, customer,
product, or marketing
mix lines
Competitive Rivalry
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and asymmetry
brand equity
fixed cost allocation per value added
level of advertising expense
Supplier Power
Buyer Power
Threat of Substitution
Oligopoly
Concentration ratios Oligopolies may be identified using concentration ratios, which
measure the proportion of total market share controlled by a given number of firms.
When there is a high concentration ratio in an industry, economists tend to identify the
industry as an oligopoly.
Mergers between oligopolists increase concentration and monopoly power and are likely
to be the subject of regulation.
Oligopolists have to make critical strategic decisions, such as:
Whether to compete with rivals, or collude with them.
Whether to raise or lower price, or keep price constant.
Whether to be the first firm to implement a new strategy, or whether to wait and see what
rivals do. The advantages of going first or going second are respectively called 1st and
2nd-mover advantage. Sometimes it pays to go first because a firm can generate headstart profits. 2nd mover advantage occurs when it pays to wait and see what new
strategies are launched by rivals, and then try to improve on them or find ways to
undermine them.
Barriers to entry
Oligopolies and monopolies frequently maintain their position of dominance in a Market
Might because it is too costly or difficult for potential rivals to enter the market. These
hurdles are called barriers to entry and the incumbent can raise them deliberately, or
they can exploit natural barriers that exist
Contd
Natural entry barriers include:
Economies of large scale production
costs
Contd...
Artificial barriers include:
Predatory pricing.
Limit pricing means the incumbent firm sets a low price, and a high
output, so that entrants cannot make a profit at that price. This is best
achieved by selling at a price just below the average total costs (ATC)
of potential entrants. This signals to potential entrants that profits are
impossible to make.
Superior knowledge
An incumbent may, over time, have built up a superior level of
knowledge of the market, its customers, and its production costs. This
superior knowledge can deter entrants into the market.
Predatory acquisition
Predatory acquisition involves taking-over a potential rival by
purchasing sufficient shares to gain a controlling interest, or by a
complete buy-out. As with other deliberate barriers, regulators, like
the Competition Commission, may prevent this because it is likely to
reduce competition.
Contd
Advertising
Advertising is another sunk cost
A strong brand
A strong brand creates loyalty, locks in existing customers, and deters entry.
Loyalty schemes
Exclusive contracts, patents and licences
These make entry difficult as they favour existing firms who have won the
contracts or own the licenses. For example, contracts between suppliers and
retailers can exclude other retailers from entering the market.
Vertical integration
Vertical integration can tie up the supply chain and make life tough for
potential entrants, such as an electronics manufacturer like Sony having its
own retail outlets (Sony Centres), and a brewer like Heineken owning its own
chain of UK pubs, which it acquired from the brewers Scottish and Newcastle
in 2008.
Contd
Collusive oligopolies
Another key feature of oligopolistic markets is that firms may attempt to collude, rather
than compete. If colluding, participants act like a monopoly and can enjoy the benefits
of higher profits over the long term.
Types of collusion
Overt
Overt collusion occurs when there is no attempt to hide agreements, such as the when
firms form trade associations like the Association of Petrol Retailers.
Covert
Covert collusion occurs when firms try to hide the results of their collusion, usually to
avoid detection by regulators, such as when fixing prices.
Tacit
Tacit collusion arises when firms act together, called acting in concert, but where there is
no formal or even informal agreement. For example, it may be accepted that a particular
firm is the price leader in an industry, and other firms simply follow the lead of this firm.
All firms may understand this, but no agreement or record exists to prove it. If firms do
collude, and their behaviour can be proven to result in reduced competition, they are
likely to be subject to regulation. In many cases, tacit collusion is difficult or impossible
to prove, though regulators are becoming increasingly sophisticated in developing new
methods of detection.
Contd...
Competitive oligopolies
Oligopolists prefer non-price competition in order to avoid price wars.
Cost-plus pricing
is a straightforward pricing method, where a firm sets a
Contd
Cost-plus pricing is very useful for firms that produce a number of
Non-price strategies
Non-price competition is the favoured strategy for oligopolists because
Price stickiness
The theory of oligopoly suggests that, once a price has been
Evaluation of oligopolies
The disadvantages of oligopolies
Oligopolies can be criticised on a number of obvious
grounds, including:
High concentration reduces consumer choice.
Cartel-like behaviour reduces competition and can lead to
higher prices and reduced output.
Firms can be prevented from entering a market because of
deliberate barriers to entry.
There is a potential loss of economic welfare.
Oligopolists may be allocatively and
productively inefficient.
Contd
The advantages of oligopolies
Oligopolies may adopt a highly competitive strategy, in
Monopoly
Under competitive conditions, investment will, where the
Contd...
When we use the term monopoly, we do not use it in
Contd...
These firms generally operate in oligopolistic markets,
Contd
By the Reagan era, the giant corporation at the apex of the
Contd...
what we have been witnessing in the last quarter
Contd...
Contd
The slowdown of the real growth rates of the capitalist
Contd...
The giant corporations that had arisen in the monopoly stage of capitalism
operated increasingly as multinational corporations on the plane of the global
economy as a wholeto the point that they confronted each other with greater
or lesser success in their own domestic markets as well in the global economy.
The result was that the direct competitive pressures experienced by corporate
giants went up. Nowhere were the negative effects of this change more evident
than in relation to U.S. corporations, which in the early post-Second World
War years had benefitted from the unrivalled U.S. hegemony in the world
economy.
Contd...
The U.S. automobile industry was the most visible manifestation of this
process. The Detroit Big Three, the very symbol of concentrated economic
power, were visibly weakened in the 1970s with renewed international
competition from Japanese and German automakers, which were able to seize a
share of the U.S. market itself. As David Harvey has noted: Even Detroit
automakers, who in the 1960s were considered an exemplar of the sort of
oligopoly condition characteristic of what Baran and Sweezy defined as
monopoly capitalism, found themselves seriously challenged by foreign,
particularly Japanese, imports. Capitalists have therefore had to find other
ways to construct and preserve their much coveted monopoly powers. The two
major moves they have made involve massive centralization of capital, which
seeks dominance through financial power, economies of scale, and market
position, and avid protection of technological advantagesthrough patent
rights, licensing laws, and intellectual property rights.
Contd
One of the most important historical changes affecting the competitive
nineteenth-century competitive stage, but evolving into a twenty-firstcentury phase of globalized, financialized monopoly capital. The booming
financial sector created turmoil and instability, but it also expedited all
sorts of mergers and acquisitions. In the end, finance has beenas it
invariably isa force for monopoly.
Contd...
Announced worldwide merger and acquisition deals in 1999 reached
Contd...
Contd
Antitrust law enforcement in the new neoliberal period was
- a debate
Perfect
Competition-Monopoly:
Competition
inertia
Perfect competition is not an "ordering force" but
rather an assumed "state of affairs" .
One of the great paradoxes of economic science is that
every act of competition has some degree of monopoly
power. While all other forms of competition represented, in
economic theory, are an admixture of monopoly and
competition, perfect competition means, the absence of
competition, and Monopoly is a market situation
identifying firm itself as an industry in which intra
industry comparison is not possible.
contd
Perfect Competition-Monopoly: A Competition inertia
Competition entered economics as a concept with empirical
Contd
While all other forms of competition represented, in
Definition of Competition: A
critique
Adam Smith observed that monopoly "is a great enemy to
Contd
Another fundamental weakness of the competitive concept has
Contd...
Competition, in other words, exists when, because of the large
number and small size of firms, the typical business unit has no
significant control over price, output, investment, which are all
given by the marketand when each firm stands in a non-rivalry
relation to its competitors.
An individual firm is powerless to intervene in ways that change
the basic competitive forces it or another firm faces.
The fate of each business is thus largely determined by market
forces beyond its control.
Yet, as Friedman emphasizes, the above economic definition of
competition conflicts directly with the way in which the concept
of competition is used more generally and in business analyses to
refer to rivalry, particularly between oligopolistic firms.
Contd...
Friedman states: Monopoly exists when a specific individual or enterprise has sufficient control over
a particular product or service to determine significantly the terms on which other individuals shall
have access to it. In some ways, monopoly comes closer to the ordinary concept of competition since it
does involve personal rivalry.
In economic terms, he is telling us, monopoly can be said to exist when firms have significant
monopoly power, able to affect price, output, investment, and other factors in markets in which they
operate, and thus achieve monopolistic returns.
Such firms are more likely to be in rivalrous oligopolistic relations with other firms. Hence, monopoly,
ironically, comes closer, as Friedman stressed, to the ordinary concept of competition.
The ambiguity of competition evident in Friedmans definitions of competition and monopoly
illuminates the fact that todays giant corporations are closer to the monopoly side of the equation.
Most of the examples of competition and competitive strategy that dominate economic news are in
fact rivalries struggles between quasi-monopolies (or oligopolies) for greater monopoly power.
Hence, to the extent to which we speak of competition today, it is more likely to be oligopolistic
rivalry, i.e., battles between monopoly-capitalist firms. Or to underline the irony, the greater the
amount of discussion of cutthroat competition in media and business circles and among politicians
and pundits, the greater the level of monopoly power in the economy.
What we are calling the ambiguity of competition was first raised as an issue in the 1920s by Joseph
Schumpeter, who was concerned early on with the effect of the emergence of the giant, monopolistic
corporation on his own theory of an economy driven by innovative entrepreneurs. The rise of big
business in the developed capitalist economies in the early twentieth century led to a large number of
attempts to explain the shift from competitive to what was variously called, trustified, concentrated,
or monopoly capitalism.
Marxist and radical theorists played the most prominent part in this, building on Marxs analysis of
the concentration and centralization of capital.
The two thinkers who were to go the furthest in attempting to construct a distinct theory of
monopoly-based capitalism in the early twentieth century were the radical American economist
Thorstein Veblen in The Theory of Business Enterprise (1904) and the Austrian Marxist Rudolf
Hilferding in his Finance Capital (1910). In hisImperialism, The Highest Stage of Capitalism Lenin
depicted imperialism in its briefest possible definition, as the monopoly stage of capitalism.
The Sherman Antitrust Act was passed in the United States in 1890 in an attempt to control the rise
of cartels and monopolies. No one at the time doubted that capitalism had entered a new phase of
economic concentration, for better or for worse.
Contd
In 1928 Schumpeter addressed these issues and the threat they represented to
the whole theoretical framework of neoclassical economics in an article
entitled The Instability of Capitalism. The nineteenth century, he argued,
could be called the time of competitive, and what has so far followed, the time
of increasingly trustified, or otherwise organized, regulated, or managed,
capitalism.
For Schumpeter, conditions of dual monopoly or multiple monopoly (the
term oligopoly had not yet been introduced) were much more important
practically than either perfect competition or the assumption of a single
monopoly, and of more general importance in a theoretic sense.
Trustified capitalism raised the ambiguity of competition directly ----- the use
of non-economic force, a will to force the other party to their knees, have much
Contd...
Schumpeters own solution to this in The Instability of Capitalism (and much
later in his 1942Capitalism, Socialism, and Democracy) was to introduce the
concept of corespective pricing. deliberately seeking to restrict their rivalry,
particularly in relation to price, by various forms of collusion, in order to
maximize group advantage.
Contd...
In the United States in the 1930s, the issues of economic concentration and monopoly
took on greater significance in the context of the Great Depression, with frequent claims
that administrative prices imposed by monopolistic firms and restraints on production
and investment had contributed to economic stagnation.
In the words of President Roosevelt in 1938, the United States was experiencing a
concentration of private power without equal in history, while the disappearance of
price competition was one of the primary causes of our present [economic] difficulties.
In his 1942 Capitalism, Socialism, and Democracy, Schumpeter famously responded to
these New Deal criticisms of monopoly by trying to combine realism with a defense of
monopolistic practices, viewed as logically consistent with competition in its most
important form: the perennial gale of creative destruction, or what Marx had called the
constant revolutionizing of production.
Schumpeter argued that what mattered most were the waves of innovation that
revolutionized the economic structure from within, incessantly destroying the old one,
incessantly creating a new one. This process of Creative Destruction is the essential fact
about capitalism. Yet such creative destruction, he recognized, also led to consolidation
of capitals.
Contd
In neoclassical economics, the very rigor of the
Much more significant than even conglomeration, however, was the rapid
growth of multinational corporations, a term coined by David Lilienthal,
previously director of the Tennessee Valley Authority, in 1960, and then
subsequently taken up by Business Week in a special report in April 1963.
Multinational corporations, particularly emanating from the United States,
were widely seen as increasingly menacing to states and peoples, not only in
the periphery of world capitalism but also in some states of the developed core.
For Baran and Sweezy, the rise of this phenomenon was not difficult to explain:
multinational corporations represented monopoly capital abroad, with the
giant corporations moving beyond their home countries, in the developed core
of the system, to control resources and markets elsewhere. What multinational
corporations wanted was monopolistic control over foreign sources of supply
and foreign markets, enabling them to buy and sell on specially privileged
terms, to shift orders from one subsidiary to another, to favor this country or
that depending on which has the most advantageous tax, labor, and other
policiesin a word, they want to do business on their terms and wherever they
choose.54
Contd...
Initial strategies to explain the growth of multinational
Contd...
The most important theoretical development in sidelining the
influence until the late 1970s and 80s, but was increasingly
seized, with the ascendance of free market conservatism, to
attack all notions of monopoly power, and to challenge
traditional industrial organization theory and antitrust
actions. With the new emphasis on transaction costs, all
developments in firm integration were interpreted as optimizing
efficiency, while the question of monopoly power was largely
set aside as irrelevant.
Coases transaction cost analysis was later carried forward in
Oliver Williamsons influential 1975 Markets and Hierarchies,
which extended its putative claims with respect to efficiency,
and was aimed specifically at moderating antitrust attacks on
monopolies, oligopolies, vertically integrated firms, and
conglomerates.
Collusion
Cartel is a non-competitive agreement between rivals
Market Power
Market Power is defined by the extent to which a firm can
Measurement of market
concentration
The concentration ratio measures the combined market
Contd
The Herfindahl-Hirschman Index (HHI)
This is a measure of market concentration. The index is calculated by
squaring the % market share of each firm in the market and summing
these numbers.
Contd
Proponents of the Contestability school, initiated by Baumol in the
Emerging Market
The term emerging market was originally coined by the
Contd
Emerging economies have been defined as those regions
of
the
world
that
are
experiencing
rapid
informationalisation under conditions of limited or partial
industrialisation. This framework allows us to explain how
the non-industrialised nations of the world are achieving
unprecedented economic growth using new energy,
telecommunications and information technologies
.
Contd
Developing economies have sectoral variations
Contd
The period after 1990, particularly the late 1990s, normally referred
to as post-Chicago, was characterised by the increasing popularity of
game theory and behavioural economics, in which the simplistic
modelling of human behaviour gave way to more complex depictions,
with greater emphasis on empirical relevance of economic theories.
The mentioned schools of thought have fashioned the competition
regimes of various countries over the years. Canada was the first
country in the world to adopt a competition law in 1889. The second
country to adopt a competition law was the US in 1890 (Sherman Act,
1890). Due to better implementation of the antitrust law in the US, it
is widely believed that it was the first country in the world to have a
competition law.
Contd
Most early competition laws were designed for countries in
Contd
As in the case of US, many developing countries,
Contd
In all the other emerging economies with
competition laws, a gradual approach was
preferred to ensure that the law would be
compatible with the existing economic policies
The competition laws emphasised consumer
protection, regulation of monopolies, including
natural monopolies, and regulation of misleading
advertisements and deceptive marketing.
Contd
In the 80s the approach of the developing world was to get
Contd
Porter et al , studying the Japanese model, have listed antitrust
Contd
China
During
Contd
The experiences of Japan, South Korea and China have
Contd
Although competition laws were not enforced during the periods
Contd
The CPA mandates that all relevant factors should be considered when
deciding whether restrictions on competition are warranted. CPA lays
down an array of community interest matters, where restrictions on
competition may be justified31 . These include ecologically sustainable
development, occupational health and safety, industrial relations,
access and equity, economic and regional development, including
employment and investment growth, social welfare and equity
considerations, including community service obligations, consumer
interest, the competitiveness of Australian business and the efficient
allocation of resources.
For instance, the merits of a statutory marketing arrangement in a
country would need to be reviewed in terms of factors such as the
welfare of consumers, the impact of barriers to competition on farmers
incomes, the value of exports, environmental impact, socio-economic
implications for regional communities, employment effects, economies
of scale in transport and marketing and the like.
The CPA model is fairly well-conceived and wort
Contd
A question can be raised as to whether a competition law is
Contd
Others contend that the process of establishment of
Contd
Fair trade implies the creation of an equitable trading system where the
conduct of trade is governed by the competitive advantage of market players,
rather than the economic power and
influence of government.
A liberal trade policy is no longer restricted to the reduction of traditional
border restrictions such as tariff and import licensing but also the reduction of
non-tariff barriers (NTBs), including sanitary and phyto-sanitary (SPS)
measures and technical regulations, which limit cross-border access.
It aims to address domestic and export subsidies and other forms of assistance
which discriminate in favour of domestic producers.
competition policy and liberal trade policy seek to achieve the
same objective of economic efficiency.
-by liberalising domestic markets through laws that protect and promote
competition.
-by liberalising markets through the removal of barriers to trade at the border.
Free trade and competitive behaviour are thus necessary conditions for
efficiency
Contd
The concept of competition policy includes competition laws in
Anti-Dumping Policy
Trade policy includes tariffs, quotas, subsidies, anti-dumping actions, domestic content
regulations and export restraints.
Until the 1970s, the focus of trade policy in India was on regulating the utilisation of
foreign exchange, through the use of quota restrictions.
This implied licensing for all categories of imports. The broad instruments of trade
policy were across-the-board import substitution and the protection of domestic
industry.
Eg.The State of Karnataka in India is a famous silk-producing region. There are a large
number of Karnataka-based organisations representing silk producers. The Central Silk
Board, set up by the Government, is at Bangalore. The Board, on behalf of various
associations representing the power loom silk fabric producers, alleged dumping of silk
fabrics weighing 20-100 gms per metre originating from the PRC. The allegations were
investigated by the Director General of Anti-Dumping and Allied Duties (DGAD) of the
Government of India, functioning under the Commerce and Industry Ministry. The
DGAD found evidence of dumping and levied hefty anti-dumping charges on various
Chinese firms. The popular varieties of silk covered by this levy are crepe, georgette,
chiffon and habutai
Contd
With best wishes
SESHAN RADHA
abuse of dominance to
include imposition of unjust conditions, imposition of unfair
pricing, predatory pricing, create hindrance to entry of new
operators and abuse of market positioning.
S. 2 (b) Agreement
Agreement includes any agreement, understanding or
action in concert which
a.
proceedings
S. 2 (c) Cartel
includes an association of producers, sellers, distributors,
traders or service providers.
Cartel is the group of enterprises which collectively make
some agreement to limit, control or attempt to control
production, distribution, or price of, trade in goods and
services.
The agreement between the cartel may be explicit or
implicit. But it is restricted by the competition law due
the reasons of artificial price hike, collusive bidding etc.
It
S 2 (f) Consumer
`consumer' means any person who buys any goods for a
consideration which has been
paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any
user of such goods other than the person who buys such
goods for consideration, or
under any system of deferred payment when such use is
of such services other than the person who hires or avails of the
commercial purposes.
`commercial purpose does not include use by a person of goods
bought and used by him and services availed by him exclusively for
S. 2 (h) Enterprise
Enterprise includes
a person or Government Department/ Unit engaged in any
activity,
relating
to
the
production,
storage,
supply,
or subsidiaries
But does not include sovereign functions viz. defence, atomic
S 2 (i) Goods
As defined in Sale of Goods Act
Includes products manufactured, processed or mined;
S 2 (l) Person
Person means both legal/juristic or natural person. Includes:
an individual
Hindu undivided family
Companies incorporated both within and outside India
(MNCs)
firms
association of persons
statutory bodies
Registered cooperative societies
Local authorities
S 2 (m) Practice
Any practice relating to the carrying on of any trade by a
person or an enterprise
or deferred, and
includes any consideration which in effect relates to the
Corporation
S 2 (q) Regulation means the regulations made by the
Commission under section 64
S 2 (u) Services
Service of any description which is made available to
potential users and includes
the provision of services in connection with business of
transport, storage,
entertainment,
amusement,
construction,
repair,
S 2 (v) Shares
shares in the share capital of a company carrying
voting
rights and includes
(i) any security which entitles the holder to receive
shares with voting rights;
(ii) stock except where a distinction between stock and
Provincial Act
for regulating production or supply of goods or
matters
S 2 (x) Trade
Any trade, business, industry, profession or occupation.
relating to the production, supply, distribution, storage
Anti-competitive agreements includes but is not limited to: 1. Agreement which limit the production.
2. Agreement which limit the supply.
3. Agreement to allocate market.
4. Agreement to fix prices.
5. Agreement to collusive bidding.
Dominance
Dominance refers to a position of strength which enables a
dominant firm to operate in a manner
independent of competitive forces giving it the ability to
namely:
a.
Competitors
b.
Consumers
S 4 Abuse of Dominance
It is the misuse of an advantageous position by an enterprise to
gain extra benefits but which resultantly damage the
Predatory pricing.
Predatory Pricing
Predatory pricing is some thing called pricing below then the
cost of the product. The objective of pricing to eliminate the
competition and then create dominant position in the market
and put the price so high to recover the earlier losses. It is sort
of abuse of dominant position. There are some methods in
economics to establish that whether a pricing is predatory
pricing or not. Once the predatory pricing is fixed then the
CCI can pass a order that enterprise has abuse its dominant
position in contravention of the competition act and pass the
penal order for it.
Combination
Combination is legal concept of analyzing the merger,
the Act
S 5 Meaning of Combination
The acquisition of one or more enterprises by one or more
persons or merger or amalgamation of enterprises will be treated
as combination if:
Acquisition is by a large enterprise
Acquisition is by a group
Acquisition is of enterprise having similar goods/services
goods/services
Merger of Enterprises
S 6 Regulation of Combination
S 6(1) prohibits any person or enterprise to enter into a combination which
causes or is likely to cause appreciable adverse effect on competition within
the market in India, such combinations being void.
Exemptions:
a.
Contd
Reliance Big Entertainment Private Ltd v Tamil Nadu Film Exhibitors Association
Facts: The Reliance Big Entertainment Private Limited (the informant) obtained distribution rights for film titled
Osthi in Tamil language, which was a remake of Hindi film (Dabbang), from Balaji Real Media Private Limited. The
informant granted the said exclusive distribution rights of the film for the Territory of Tamil Nadu, Kerala and
Karnataka to M/s Kural TV Creations Pvt. Ltd. Further, the informant assigned the Satellite Rights of the said film to
Sun TV Network Ltd. The Opposite party association directed its member theatre owners not to screen this film since
SUN TV was owing certain sum to the OP. The DG was asked to make an investigation on the matter.
Decision: The report said that TNFEA being the biggest and most powerful distributor in the market in the area was
abusing the dominant position to restrict the market of Reliance Big entertainment and Sun TV which was held to be
in contravention of section 3 (3)(b).
Illustration: No abuse of
dominance
Dhanraj Pillai v Hockey India
Facts: The CCI examined Hockey Indias conduct with respect to, first,
precluding other competing private professional hockey leagues from entering
into the market, on account of its rules relating to the sanctioning of events;
and secondly, restricting hockey players from participating in unsanctioned
hockey events, which included disqualification from the national team for such
participation.
Decision: The CCI absolved Hockey India, a hockey federation, of abuse of
dominance. Even though the CCI determined that Hockey India was dominant
in the relevant market for the organisation of private professional hockey
leagues in India, the CCI used an effects-based approach to absolve Hockey
India of having abused its dominance, as there was no substantive evidence to
demonstrate that Hockey India was, in fact, restricting both hockey players and
rival hockey leagues (especially given that the rival hockey league in question
had never approached it for sanction). The CCI also went so far as to state that
the restrictive conditions imposed on hockey players were intrinsic and
proportionate to Hockey Indias objectives and therefore did not amount to an
abuse of dominance.
Illustration: Anti-cartelization
Sec. 3(3) of the Competition Act prohibits formation of cartels. In the Varca
Drugs & Chemists and Ors. v. Chemists & Druggists Association in Goa
and Santukha Association Pvt. Ltd. v. AIOCD, it was held that association,
formal or informal, becomes cartel if members of association take joint
decisions in respect of maintaining prices or refuse entry into market to others
and thereby limit supply of drugs in market.
The High Court of Gawhati in the case of Jai Balaji Industries Ltd. v. UOI
held that the primary purpose of the competition law is to avoid/ restrict those
situations where the activities lead to formation of cartels.
The Competition Commission of India (CCI) in the case of FICCI Multiplex
Association of India v. United Producers/ Distributors Forum held that
controlling and fixing of market is one of the essential factors in the
formation of cartel.
Contd
M/S Gulf Oil Corporation Ltd v. Competition Commission of India (2013)
Facts: Electronic Reverse Auction was held by the Coal India Ltd. There was a bid for the
supply to CIL in 2012 where a cartel was formed between the oil company and certain
explosive suppliers.
Decision: The CCI held that the bid was a mock and the 26 suppliers had already formed
a cartel in contravention to section 3 (3) of the Act read with section 3 (1). This was an
appeal against the order of the CCI, imposing penalties. The ceiling price was already
known to all of them and this was a concerted action between the Appellants to save their
business interests. They were after all competing with each other and had to stay in the
market and any individual decision would have been fatal under the circumstances. On
the question of price fixing it was held that a company cannot be stated to enter into an
anti-competitive agreement with its subsidiary as the subsidiary is the same entity as CIL.
There will be no competition between CIL on one part and the subsidiary on the other
and thus there is no price fixing. As regards Section 4 also by merely setting a ceiling
price, there was no question of abusing its dominance by a monopoly. There was no
evidence to suggest that this price was unfair or discriminatory for purchase. There were
presence of mitigating circumstances such as trying to delay the auctions and even in the
second auction that was held and where the appellants participated, no supplier was
affected. In view of the above mitigating factors the punishments were diluted..
Contd
M/S International Cylinder (P) Ltd. And Ors. V. Competition
Commission of India and Ors. (2013)
Issue: The question before the Commission was whether the Commission had
erred in holding that LPG cylinders were in contravention of Section 3(3)(d)
read with Section 3(1) of the Act.
Decision: Wrong exoneration of some parties did not entitle others who were
decidedly guilty of breach of provisions and incorrect exoneration of some did
not create any right to others particularly when exoneration was incorrect and
party claiming such treatment was proved to be guilty. There was no reason to
disbelieve that parties had access to each other through their association and
prior meetings. There was concerted agreement between parties on the basis
of which identical or near identical prices came to be quoted in tenders for
supply of cylinders to 25 States. There was presumption about appreciable
adverse effect on competition in the wake of mere proof of agreement under
Section 3 of the Act. The turnover of immediate three years was not considered
in a number of concerns on the ground that companies had not provided
financial details of the previous year. The court held the parties guilty of
forming anti competition agreements but taking into consideration the large
no. of parties involved did not impose penalties till it had heard all the parties
Illustration: anti-competitive
agreement
Section. 3 of the Act prohibits agreements which are anti-competitive
in nature.
Recent Amendments/
Developments
CCI further amended Combination Regulations.
In exercise of the powers conferred by Section 64 of the Act, CCI by
way of a Notification dated March 28, 2014, has further amended the
Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011.
The major changes are as under:
Regulation 5: Substance of proposed combinations to be considered:
A new Sub-Regulation (5) to Regulation 9 has been inserted, which
clarifies the position that while considering a combination; CCI would
focus on the substance of the proposed combination rather than its
structure. This means that, the CCI will disregard the structure and
consider the intent of the transaction. This provision is similar to the
General Anti Avoidance Rule (GAAR to minimize tax avoidance
proposed in the Union Budget for 2012-13) to be implemented from
April 2016. This provision in intended to restrict clever manoeuvring by
companies to avoid notice to CCI when due.
Contd
Reply filed by Google: Google filed a written response to the show
cause notice and argued that it has provided the information/replies to
all the notices issued by DG. Further, Google put every effort to engage
frequently with the DG, including facilitating direct interactions with
its employees (often located overseas) who were best placed to explain
the highly technical issues that form part of the investigations. It was
further argued that, Google is a global organization with offices all over
the world. There is no single central database from which to source all
the information sought by the DG and the information sought is
seldom "off the shelf". As such, responding to information requests has
often required extensive work to be undertaken by Google employees
located in different countries, departments, divisions and roles, across
multiple time-zones.
Contd
Decision of the CCI: On the issue of widening the scope of investigation by DG, CCI held that the
scope of the investigations is very broad and encompasses various aspects relating to Googles policies
with respect to online search advertising.
Google failed to comply with the directions given by the DG. Despite liberal indulgence shown by the
DG, Google engaged in dilatory tactics in order to procrastinate and prolong the investigations
without any justifiable reason.
Law casts an obligation upon the party to comply with a direction, the same needs to be complied
with in the manner and the time stipulated therein. Every failure to comply with the directions and
requisitions constitutes a separate ground for imposition of penalties. The period of failure to comply
commenced w.e.f. February 26, 2013 in terms of the first notice of the DG dated February 12, 2013.
Google failed to comply fully with the various notices issued by the DG on different occasions.
Despite reminders and opportunities extended by the DG, Google advanced frivolous and vexatious
pleas to delay and avoid compliance.
Taking into consideration the totality of the facts and circumstances of the case, CCI imposed fine
upon Google by taking only one instance of non- compliance. CCI further observed that, if Google
failed to comply with the directions of the DG in future, each instance of non-compliance shall be
taken separately besides considering the same as aggravating factor for the purposes of imposition of
fine.
In view of the above observations, CCI decided to impose a fine of ` 10 million on Google for not
providing the complete information as sought by DG for the purpose of investigation.