COMPETITION ACT,2002

ACT NO. 12 OF 2003[13th January, 2003.]

 

MPE Div: C Batch 2009 – 2011 Submitted by: Swapnali Nalavde 176 Anil Naik 173 Venkat Raghavan 165 Shrawan Sureka 154 Amit Shrimankar 144 Nikhil Talreja 180

IndexAim and ObjectFeaturesCompetition commission of IndiaComposition of CommissionDuties, Powers, Functions & PenaltiesFinance Competition Appellate TribunalDistinction between MRTP & Competition actMerits & demeritsCase on Ackruti V/S Reliance InfrastructureTAFI V/s Lufthansa Airlines

Introduction & Objective The Competition Act 2002 which has replaced the MRTP Act, 1969 The MRTP Act. 1969 had become obsolete and was choking the economy. The Competition Commission of India was established on the 14th October, 2003 but

could not be made functional due to filing of a writ petition Competition Act, 2002 has finally been made effective from 20th May 2009. Most of

the provisions of Competition Act, 2002 (as amended by Amendment Act, 2007)

Objectives: An act to provide, keeping in view of the opening of the Indian economy development of the country

Establishment of a commission to prevent practices having adverse effect on competition

To promote and sustain competition in markets, To protect the interests of consumers and to ensure freedom of trade carried on

by other participants in markets, In India, and for matters connected there with or incidental thereto.

Prohibition of agreements

Overall scheme of Competition Act (Purposes)

 Prohibition of Anti-competitive agreements (Section 3)Prohibition of abuse of dominant position (Section 4)Regulation of combinations (Sections 5 and 6)Competition advocacy (Section 49)

Prohibition of Anti-competitive agreements

Two Types: Horizontal & Vertical

Agreements between Competitors(Horizontal agreements) Including Cartels Presumed to have appreciable adverse effect on competition

Any agreement entered into in breach of the provision contained shall be avoids

Price Fixing, Sharing of Market, Limiting Production supply, Bid Rigging Collusive bidding

Other Horizontal agreements and Vertical agreements: subject to rule of reason; burden of proof lies with prosecutor

Tie-in arrangements, exclusive supply / distribution agreements, refusal to deal, resale price maintenances

Prohibition of Anti-competitive agreements

Any agreement between two entities at any stages or levels of the production chain in different markets, production, supply, distribution, storage, sale or price, provision of services shall be an agreement of breach likely to cause an appreciable adverse effect on competition in India

Tie-in arrangement: Any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods

Exclusive supply agreement; restricting the purchaser during the trade from Buying other than those of the seller or any other person goods

Exclusive distribution agreement; includes an agreement to limit, the output of any goods at any area market for the disposal or sale of the goods

Refusal to deal; which restricts by any method the persons to whom goods are sold or from whom goods are bought

Resale price maintenance: Agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices Fixed by the seller

Abuse of Dominant Position Sec 4No enterprise or group shall abuse its dominant position.a) directly or indirectly, imposes unfair or discriminatorycondition in purchase or sale of goods or serviceprice in purchase or sale (including predatory price) of goods or

service.

b) Limitations or Restrictions sproduction of goods or provision of services or Marketstechnical or scientific development relating to goods or services

unfair for consumers indulges in practice unfair for the market structureuses its dominant position in one relevant market to enter into,

or protect, other relevant markets

Competition Commission of India Establishment of commission

Central Government has appointed CCI as a governing Body

The Commission shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable,

The head office of the Commission shall be at such place as the Central Government may decide from time to time (New Delhi)

CCI may also assign office in other places in India

Composition of CommissionThe Chairperson and other Members of the Commission shall be

appointed by the Central GovernmentSelection Committee includes Chief Justice of India or his nominee,

Secretary in the Ministry of Corporate Affairs, Secretary in the Ministry of Law and Justice, two experts of repute who have special knowledge.

The Commission shall consist of a Chairperson and not less than two and not more than six other Members to be appointed by the Central Government.

The Chairperson and every other Member shall be a person of ability, integrity and standing and who has special knowledge of, and such professional experience of not less than 15 years in

( International trade, economics business, commerce, law, finance, accountancy, management industry, public affairs or competition matters, including competition law and policy) which in the opinion of the Central Government, may be useful to the Commission

The Chairperson and other Members shall be whole-time Members

Competition Commission of India Structure

Duties, Powers, Functions & PenaltiesEliminate practices having adverse effect on competitionPromote and sustain competitionProtect the interest of customersEnsure freedom of trade carried by other participants, in

markets in IndiaThe Commission may inquire into any alleged contravention of

the provisions accompanied by such fee as may be determined by regulations

Power to award compensation (Sec.34) Power of commission to regulate its own procedure

DutiesCreation 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 or distribution of goods or provision of services;

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

DutiesThe Commission shall, while inquiring whether an enterprise enjoys a

dominant position Economic Power / market share / size /resource Importance of the

enterprise; vertical integration /sale or service network of such enterprises; dependence of consumers on the enterprise;

Countervailing buying power; market structure and size of market; social obligations, social costs;

Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; any other factor which the Commission may consider relevant for the inquiry.

"relevant geographic market", regulatory trade barriers; local specification requirements; national procurement policies; adequate distribution facilities; transport costs;

PenaltiesIf any person, without reasonable clause, fails to comply

with the orders or directions of the Act, he shall be punishable with fine which may extend to rupees 1 Lac for each day during which such non-compliance occurs, subject to a maximum of rupees 10 Cr, as the Commission may determine

If any person does not comply with the orders or directions issued, or fails to pay the fine imposed be punishable with imprisonment for a term which may extend to 3 years, or with fine which may extend to rupees 25 Cr

PenaltiesPower to impose penalty for non-

furnishing of information on combinations a penalty which may extend to 1% of the total turnover or the assets, whichever is higher, of such a combination

Penalty for making false statement or omission to furnish material information: 50 Lacs to 1 Cr as may be determined by the Commission.

Regulation of CombinationsAcquisition Being the acquirer and the enterprise, whose control, shares, voting rights or

assets have been acquired or are being acquired jointly In India assets of above 1000 Cr or Turnover of above 3000 Cr In India or outside India assets of the value of Above 500 million US dollars,

including at least rupees 500 Cr in India, or turnover more than 1500 US dollars, including at least rupees 1500 Cr in India

Acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical goods

Any Merger or amalgamation Any person / enterprise who proposes to enter into a combination may, at his or

its option, give notice to the Competition Commission which causes appreciable adverse effect on competition within the relevant market in India and such a combination shall be void

Should Intimate the commission and Pay the fees within 30 days Either in India asset of value of above 1000 Cr or more

COMPETITION ADVOCACY The Central Government may, including review of laws related to

competition in formulating a policy on competition as the case may be, make a reference to the Commission for its opinion on possible effect of such policy on competition and on the receipt of such a reference, the Commission shall, within sixty days of making such reference, give its opinion to the Central Government, or the State Government, as the case may be, which may thereafter take further action as it deems fit.

The opinion given by the Commission shall not be binding upon the Central Government or the State Government, as the case may be in formulating such policy.

The Commission shall take suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues

Finance The Central Government may, after due appropriation made by

Parliament by law in this behalf, make to the Commission grants of such sums

of money as the Government may think fit for being utilised for the purposes of this Act.

Constitution a Fund is called “Constitution of Fund’

All Government grants & fees received by the Commission; the interest accrued on the amountsFunds can also be used for meetings salaries and allowances

payable to the CCI

COMPETITON APPELLATE TRIBUNAL to hear and dispose of appeals against any direction issued or

decision made or order passed by the Commission to adjudicate on claim for compensation that may arise from the

findings of the Commission or the orders of the Appellate Tribunal in an

appeal against any finding of the Commission and pass orders for the recovery of compensation under

Every appeal shall be filed within a period of 60 days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise accompanied by such fee as may be prescribed

Condemnation of delay

Distinction between MRTP and Competition Act

Competition act MRTP

Competition concepts expressly defined

Competition concepts not expressly defined

Provision for regulation of combinations

No regulations of combinations

Power to impose penalty factor No power to impose penalty

Statutory authority can seek CCI’s opinion

No provision for statutory authorities to seek opinion.

Government department within its ambit

Government department outside its ambit

Merits Anti-competitive Agreement.Clearly explains and composes the

commission of the Act.Explains the procedure of the selected

chairperson and other members.Explains the duties, powers and functions.Explains the penalties and Legal procedures.Approval by Central Government .Clearly explains the Offences and penalties.

Demerits Difficult to understand the Rules and

Regulation. Directly and indirectly effect to the AOA and

FOA.Vast Judicial procedure for wrong doer.

TAFI V/s Lufthansa Airlines The Travel Agents Federation of India (the complainant) has filed a complaint

against the Lufthansa Airlines (the Respondent) alleging unfair trade practices on the grounds of differential tariff published for a given destination for same inventory of seats in class of service by the respondent.

The complainant has further alleged that the respondent is adopting the practice of dual or multi pricing intentionally to attract passengers directly in order to stem the legitimate earnings of the travel agents who are members of the complainant association

Certain costs elements are not present in booking process when undertaken online, and as such a different and perhaps lower cost structure applies to it.

The Respondent (Lufthansa Airlines) further pointed that a guaranteed quote which is made available to the members of Complainant (TAFI) incorporates several costs, including infrastructure costs, marketing costs etc. They stressed that some of these costs are eliminated when tickets are sold online through the respondent’s (Lufthansa Airline) website, this benefit is passed to purchasers who pay a lower price.

The respondent also pointed that being in highly competitive market all the stakeholders attempt to maximize sales & earnings through innovative marketing and sales strategies.