Competition Act

PPT- 8

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Competition? Can it been seen? What
are the benefits?

FAIR TRADE FOR A GREATER GOOD

COMPETITION FOR PROSPERITY

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Three ways which can have adverse effect on the
competition

1. Anti competitive agreement (vertical

agreement, horizontal agreement)
2. Abuse of dominant position; enjoying a
dominant position will not be crime but its abuse
will be a crime
3. Elimination/reduction of competitors in the
market achieved through acquisition, mergers,
and amalgamation

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Horizontal and Vertical
Agreements
Raw Material Raw Material Raw Material
Supplier Supplier Supplier

Manufacturer Manufacturer Manufacturer

Wholesaler Wholesaler Wholesaler

Retailer Retailer Retailer

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Horizontal Agreements
□ Agreements between enterprises or persons engaged
in similar trade of goods or provision of services.
□ Agreements including cartels that:
(a) fix prices,
(b) limit or control production,
(c) allocates markets or customers, and
(d) rig bids/collusive bidding (explosive
manufacturers)
are presumed to have an appreciable adverse effect
on competition

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Vertical Agreements
(Rule of Reason)
□ Agreements between enterprises at different stages
or levels of the production chain.
□ Such agreements include
(a) tie-ins
(b) exclusive supply
(c) exclusive distribution
(d) refusal to deal
(e) resale price maintenance
□ Less sensitive than the Horizontal Agreement.

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 Abuse of Dominant Position

□ The Act does not prohibit dominant position – it only

frowns upon the ‘abuse’ thereof.

□ Dominant Position refers to a position of strength

enjoyed by an enterprise or group in the relevant market,
in India, which enables it to -

■ Operate independently of competitive forces

prevailing in the relevant market; or
■ Affect its competitors or consumers or the relevant
market in its favor.
■ ‘Group’ is open ended.

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Types of Abuses
□ Exploitative Abuses– i.e., conduct which results in
exploitation of others in the value chain, for e.g.,
▪ imposition of unfair or discriminatory conditions
▪ imposition of unfair or discriminatory prices

▪ Exclusionary Abuses – conduct which interferes with the

competitive process

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e.g. DISCUSS ABOUT PRICE INCREASE, TIMING OF PRICE
INCREASE WITH COMPETITORS

Retail price is too

cheap. Why don’t I agree. Let’s
we increase the implement the
wholesale price by price increase
5%? next month.

Competitors Sales
ABC Sales Person
Person
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 e.g. DISCUSS ABOUT CUSTOMERS AND
TERRITORY WITH COMPETITORS

Okay. East district is

West district of A
our territory.
city is our territory.
Promise to us that
Do not sell your
you will not sell your
products in our
products at our
territory.
territory.

ABC Sales Person Competitors Sales Person

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 Contact with former boss
(Fictional Case)
Long time no see. I did not
know you were working to
get this business for Philips.
Why don’t we keep in touch
and exchange information?

Ex ABC Sales Person sales person of ABC

working at
Competitor

What should you say? Think of a script.

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 Answer
□ " I agree. Give me your contact details so that we can
exchange information.”
No
□ " It is really nice to see you again. Why don’t we go
out for dinner tonight. There are lots of things that we
No should talk.”

□ Leave the place after saying "It is nice meeting you

again. But we are competitors now, and competing
Yeswith each other for this deal. It is against our
company’s policy to interact with competitors. I am
afraid I will have to say “I have to go.”

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Combinations
▪ Mergers & Acquisition
▪ Types of Combinations-
▪ Horizontal
▪ Vertical
▪ Conglomerate

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Objectives of the Commission.
1. To prevent practices having adverse effect on competition.
2. To promote and sustain competition in markets.
3. To ensure freedom of trade
4. To protect the interests of the consumers by providing them good
products and services at reasonable prices.
5.. To promote healthy competition in the Indian market.
6. To prevent the interests of the smaller companies or prevent the abuse
of dominant position in the market.
7. To prevent those practices which have adverse impact on competition
in the Indian markets.
8. To ensure freedom of trade in Indian markets.
9. To regulate the operation and activities of combinations (acquisitions,
mergers and amalgamation).

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How is an inquiry initiated
❑ The CCI may institute inquiry in the wake of:-
▪ Filing of Information by any person or consumer or association of
consumer/trade; or
▪ Suo motu takes cognizance; or
▪ Filing of a reference by State/Statutory authority
❑ CCI may pass an order
▪ directing the DG to investigate; or
▪ pass an order dismissing the matter
□ Powers of the DG
■ Requisition of information from the parties
■ Requisition of information from ex-employees, distributors etc.
■ The DG can summon and record evidence during investigation.
■ DG can exercise the powers of ‘Search and Seizure’ (“Dawn Raids”).
■ DG are vested with the powers of a Civil Court to aid Inquiry/Investigations

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▪ DG investigates & prepares a report
▪ Submits to CCI
▪ Objections on the same are heard by
CCI
▪ Power to issue interim orders
▪ Power to call experts from various
fields to assist CCI
▪ Decision taken
▪ Penalties imposed
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Risks of Infringement of Law

□ Monetary penalties including

compensation claims
□ Loss of reputation
□ Delinquent Officer deemed guilty person
□ Recurrence triggers criminal proceedings
□ Potential loss of business
□ Depletion of shareholder value

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The Leniency Provision

□ The Act provides for imposition of lesser penalty by the

CCI where a person makes FULL, TRUE and VITAL
disclosure of a cartel to the CCI;
□ The Leniency System is targeted at cartel participants
and seeks to induce participants to break rank and turn
approver against other cartel members.
□ A first, second and third applicants can avail the benefit
of a reduction in penalty of up to 100% or 50% or 30%
respectively.
□ Confidentiality is the bed rock of an effective leniency
regime.

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