Competition Law in India – Loopholes, Complaint and Procedure

Introduction

In common parlance, market competition means that sellers fight independently for the patronage of buyers to maximize profits (or other business goals) at a price that maximizes their profits. Competition makes businesses more efficient and gives consumers more choice at lower prices. This ensures optimal utilization of available resources. It also improves consumer welfare, as consumers are able to buy more products of better quality at lower prices.

Fair competition is beneficial for consumers, producers/sellers and finally for the whole society as it induces economic growth. Whereas, unfair competition means the adoption of practices such as collusive price fixing, deliberate reduction of production to increase prices, creation of entry barriers, market allocation, tied selling, predatory pricing and discriminatory pricing.

India has been well aware of competition in the market and has been vigilant in formulating laws that limit monopolies and restrictive business practices. The Monopolies and Restrictive Trade Practices Act of 1969 is the first enactment to address competition issues and came into force on June 1. 1970.

With the advent of liberalization in economic policy and growth in the market, the Government of India reviewed the implementation of the Monopolies and Restrictive Business Practices Act, 1969 and found that it lacked force in Competition Policy. Competition policy is defined as those government measures that affect the behavior of companies and the structure of the industry with a view to promoting efficiency and maximizing welfare.

There are two elements of competition policy: First, a set of policies, such as liberalized trade policy, relaxed FDI policy, deregulation, etc., that enhance competition in markets. Second, legislation to prevent anti-competitive practices with minimal government intervention.

The Government had appointed a committee in October 1999 to review the existing MRTP Law in order to change the focus of the law from curbing monopolies to promoting competition and to suggest a modern competition law. Pursuant to the recommendations of this committee, the Competition Act of 2002 was enacted on January 13, 2003. The objectives of the Competition Act are to prevent anti-competitive practices, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade. This Law provides for different notices to give effect to different provisions of the Law, including the repeal of the MRTP Law and the dissolution of the MRTP Commission.

The objective of the Law is to eliminate the abuse of a dominant position through anti-competitive commercial agreements. Here dominance refers to a position of strength that allows a dominant company to operate independently of competitive forces or affect its competitors or consumers or the market in its favor. Abuse of dominance prevents fair competition between companies, exploits consumers and makes it difficult for other players to compete with the dominant company on merit. Abuse of dominant position includes the imposition of unfair conditions or prices, predatory pricing, limiting production/market, creating barriers to entry, and applying different conditions to similar transactions. An agreement includes any arrangement, understanding, or concerted action between the parties. It does not need to be in writing or formal or intended to be enforceable by law. An anticompetitive agreement is an agreement that has an appreciable adverse effect on competition. Anticompetitive agreements include,

or agreement to fix price
o Bid rigging or collusive bidding
or conditional purchase/sale (tying agreement)
or exclusive supply/distribution agreement
or agreement to limit production and supply
or agreement to allocate markets
or resale price maintenance
or refuse to treat

The objectives of the Act are sought to be achieved through the implementation of the Competition Commission of India (CCI) which has been established by the Central Government as of October 14, 2003.

Any business combination agreement is regulated by the Law. A combination includes the acquisition of shares, the acquisition of control by the company over another and the merger between companies. Furthermore, any combination that exceeds the thresholds specified in the Act in terms of assets or turnover, causing or likely to cause an appreciable adverse effect on competition within the relevant market in India, may be examined by the Commission. A company proposing to enter into a combination may, at its option, notify the Commission in the specified form disclosing the details of the proposed combination within 7 days of such proposal. If the Commission is of the opinion that a combination is likely to cause or has caused an adverse effect on competition, it will issue a notice to demonstrate to the parties why an investigation should not be conducted with respect to such combination. Upon receipt of the response, if the Commission has a prima facie opinion that the combination has or is likely to have an appreciable adverse effect on competition, it may order the publication of details inviting public objections and hearing them, if it deems it appropriate. . You can invite anyone who might be affected by the combination to object. The Commission may also investigate whether the disclosure made in the advertisement is correct and whether the combination is likely to have an adverse effect on competition. The commission can also pass orders in case of combinations with the following effect

o Will approve the combination if no appreciable adverse effect on competition is found
o Disapprove the combination in case of appreciable adverse effect on competition
o Mayo offers an appropriate modification as agreed to by the parties

The Commission has set the minimum limits for such combinations.

To buy –
o Combined assets of the companies greater than Rs 1,000 cr or turnover greater than Rs 3,000 cr (these limits are USD 500 million and 1,500 million in case one of the companies is located outside of India).
o The limits are more than Rs 4,000 cr or Rs 12,000 cr and US$ 2 billion and 6 billion in case the acquirer is a group in India or outside India, respectively.

By fusion/amalgamation –
o Assets of the merged entity greater than 1,000 cr rupees or turnover greater than 3,000 cr rupees (these limits are 500 million US dollars and 1,500 million in case one of the companies is located outside of India).
o The limits are more than Rs 4,000 cr or Rs 12,000 cr and US$2 billion and US$6 billion in case the merged/merged entity belongs to a group in India or outside India, respectively.

Implementation

Can the Commission launch an investigation into anti-competitive agreements/abuse of a dominant position?
o By itself on the basis of information and knowledge in its possession, or
o Upon receipt of a complaint, or
o Upon receiving a referral

Complaint procedure
o Any person, consumer, consumer association or trade association can file a complaint against anti-competitive agreements and abuse of dominant position. Here, a person includes an individual, a Hindu Undivided Family (HUF), a company, a firm, an association of persons (AOP), a body of individuals (BOI), a statutory corporation, a statutory authority, an artificial legal person , a local authority and body incorporated outside of India. A consumer is also a person who buys for personal use or for other purposes.

o The Central Government or a state government or an authority established under any law may make a referral for consultation.
o The commission may initiate an investigation on its own based on the information or knowledge in its possession
o On its own, or upon receipt of the complaint/reference, if the Commission considers that there is a prima facie case, it will order the Director General, appointed under the Law, to investigate the matter and report its findings.
o Upon receipt of the investigation report from the Director General, the Commission, after hearing the parties, will resolve the matter and issue the measures it deems appropriate.
o During the course of the investigation, the Commission may grant provisional measures that prevent a party from continuing with an anticompetitive agreement or abuse of a dominant position
o After investigation, the Commission may order an infringing company to suspend and not to enter into an anti-competitive agreement or abuse a dominant position
o To award compensation
o To modify the agreement
o Recommend to the Central Government. by company division in the event that it enjoys a dominant position.
o The parties in person or through an authorized representative or through an attorney or a practicing Secretary of the Company/Public Accountant/Costs and Works Accountant.
o The Commission can also issue orders in case of anti-competitive agreements and abuse of dominant position.
o During the course of any proceedings before it, a Statutory Authority may make a referral for an opinion if any party raises the issue that the authority’s decision is likely to be contrary to the provisions of the Competition Act.

sanctions

o The Commission may impose a penalty of not more than 10% of the turnover of the companies and, in the event of a cartel, 3 times the amount of the profit obtained from the cartel or 10% of the turnover of all the companies, whichever is greater

So far, the Act has only partially come into force and the Indian Competition Commission has not yet fully functioned. The real impact of the Law will be known only after its substantive provisions, viz. sections 3 to 6 come into force. However, the Law still shows certain deficiencies. An examination of the ICC’s powers would suggest that the commission is fully equipped to counter and correct the vagaries of the market. However, while it apparently enjoys carte blanche, there appear to be certain glaring loopholes that would undermine the effectiveness of the Competition Act provisions. It should be remembered that the Commission would initiate actions against complaints of anti-competitive agreements, abuse of a dominant position, either suo moto, or by voluntary motion of a person seeking an opinion from the Commission. Two aspects should be taken into account here — the non-existence of an imperative provision that obliges persons or entities, public or private, to go to the Commission and the corresponding logistical limitations of the Commission to be able to hear ex officio. of all bad practices in the economy.

If there is no incorporated principle that obliges legal authorities and individuals to go to the Commission to determine if an anti-competitive agreement is in force, or if there is an abuse of a dominant position or if a combination is detrimental to the public interest, ¿ can we really trust that the parties will approach the Commission of their own free will? The Central Government also enjoys unbridled power in policy-making matters and issues guidelines on policy issues that will be binding on the ICC. The government also has the power to supersede the ICC, against which the ICC can file a claim with the government. Such provisions seriously affect the independence and effectiveness of the ICC. In fact, the consultation by the Central Government in the evolution of competition policy with the ICC should be mandatory, instead of discretionary, as contemplated in the Law. In addition, the Law does not address abuses of property rights intellectual, which are monopoly rights for a limited period of time.