INDIA ‘S NEW

COMPETITION REGIME:
Competition in a large
emerging economy
Bharath Jairaj
Citizen consumer and civic Action Group
Chennai, India
www.cag.org.in
 Contents
 Where are we today?
 How did we get here?
– MRTP Act, 1969
– New Economic Policy 1991 – Amendments to
MRTP Act
– Competition Act 2002
– Competition Policy 2006-07?

7Up2 Meeting, June 27-28, 2006, Bangk

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India’s Competition Regime today:
 New Competition Law:
– The Competition Act , 2002
 The Competition Commission of India (CCI);
 The Competition Appellate Tribunal (CAT)
 New Competition Policy:
– Advisory Committee to prepare draft National
Competition Policy (December 2005)
– Working group on ‘Competition Policy’ at the
Planning Commission (for 11th Five Year Plan)

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 EVOLUTION- How We Got Here - 1
 Constitution of India, Art. 39 (c) – “the
operation of the economic system does
not result in the concentration of wealth
and means of production to the common
detriment”
 1947- 1969: Regimented and strict system
of government controls
 1969: Monopolies and Restrictive Trade
Practices Act (MRTP Act) legislated

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 Monopolies and Restrictive Trade
Practices Act , 1969
OBJECTIVES:
 Prevention of concentration of economic
power in a few hands
 Control and regulation of monopolies in
certain sectors
 Prevention of unfair trade practices
 Prevention of restrictive trade practices

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 THE MRTP COMMISSION
 A Quasi-Judicial Authority (Chairman (SC/HC
Judge) and 2-8 members)
 Assisted by Dir Gen of Investigation
 MRTPC vested with powers of a Civil Court:
“cease and desist” orders; injunction; award
compensation, etc.
 Can make recommendations to Central
Government on functioning of enterprises, when
such functioning was detrimental to public interest
 Suo Moto action possible, though not used

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 EVOLUTION- How We Got Here - 2
 1991: Widespread economic reforms in India –
Aimed at Liberalisation, Privatisation and
Globalisation
 Changes felt necessary in MRTP Act
 Concentration of economic power to the
common detriment and control of monopolies –
de-emphasised
 Pre-entry restrictions (prior approval of
government), expanding existing undertaking,
M&A’s, takeovers – deleted from Act

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 EVOLUTION- How We Got Here - 3
 1999: Expert Group on interaction between
Trade and Competition Policy recommended new
competition law to “promote fair competition
and control (eliminate) anti-competitive
practices” in the market
 2000: GoI High Level Committee on Competition
Law and Policy provided a draft Competition law.
 2002:The Competition Act legislated

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 THE COMPETITION ACT, 2002
What and how

WHAT?
Main Focus areas of the Act :
 Prohibition of Anti Competitive Agreements
 Prohibition of Abuse of Dominance
 Regulation of Combinations
 Competition Advocacy

HOW?
Through establishment of a Competition
Commission of India (CCI) and Competition
Appellate Tribunal (CAT)

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 FOCUS AREAS OF 2002 ACT - 1
A. PROHIBITION OF ANTI-COMPETITIVE
AGREEMENTS
 All Anti-competitive agreements are void, i.e.,
agreements which could restrict competition, vertical
or horizontal
 Rule of Reason to be applied for determining legality
of an agreement
 Certain agreements between same or similar
enterprises regarding prices or quantities, on bidding,
or to share or divide markets are per se illegal
 Leniency provision – for whistleblowers in a cartel (if
disclosure is before prosecution)

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 FOCUS AREAS OF 2002 ACT - 1
EXCEPTIONS:
 Export cartels (problem is somewhere else!)
 Agreements permitted in law
 Agreements under IPR (not unreasonable restrictions
like patent pooling, price-fixing etc.)

RULE OF REASON TO BE APPLIED (factors):

 Creation of entry barriers
 Driving existing competitors out of the market
 Accrual of benefits to consumers
 Improvements in goods and services
 Increase in Technical development

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 FOCUS AREAS OF 2002 ACT - 2
B. PROHIBITION OF ABUSE OF
DOMINANT POSITION:
 Mere dominance is not an offence, abuse of
dominance is prohibited
 Important shift from ‘size’ / ‘structure’ to
‘behaviour’ / ‘conduct’
 Instances of unfair, discriminatory or predatory
pricing; restricting quantities, markets or
technical development, etc. will qualify

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 FOCUS AREAS OF 2002 ACT - 3
C. REGULATION OF COMBINATIONS:
 Includes M&A’s, Amalgamations, Acquisitions of control -
all above a certain high level threshold (Rs.1000 crore
aggregate value of assets or Rs.3000 crore turnover of
combining parties)
 Thresholds deliberately high to allow small Indian
companies to combine to become active international
players
 Combinations that cause or are likely to cause an
adverse effect on competition are under focus (e.g.,
horizontal mergers between competitors; vertical merger
by dominant player with firm in adjacent market, etc.)
 Pre-notification voluntary

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 FOCUS AREAS OF 2002 ACT - 4
D. COMPETITION ADVOCACY:
 CCI to create “culture of competition”
 Empowered to participate in formulation of
country’s economic policies
 Create awareness and training on competition
issues
 Establishment of “Competition Fund” for above
 Recently asked to develop Consultation Paper on
National Competition Policy (to harmonise
various government policies)

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 COMPETITION COMMISSION
OF INDIA (CCI)
 Adjudicative wing distinct from Investigative and
Prosecution wing
 Allows appointment of economists, lawyers, other
professionals as investigators (departure from
practice of appointing retd. bureaucrats)
 UTPs removed from the purview of Act and all
pending cases transferred to the Consumer
Protection Act, 1986 (CPA)
 Phased introduction of Act – competition
advocacy (Y1); Anti-Competitive Practices and
Abuse of Dominance (Y2); Combinations (Y3)
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COMPETITION APPELLATE TRIBUNAL
(CAT)
 Established after intervention by Supreme Court
of India – to retain “judicial powers” within the
judicial system
 CAT to hear and dispose appeals against any
direction issued or decision made or order
passed by CCI

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 EVOLUTION- How We Got Here - 4
 2004: UPA government elected despite “India
Shining” belief
 NCMP commits to greater effort towards increasing
competition and a competitive environment – broad
basing development
 2005: GoI asks CCI to develop consultation paper on
National Competition Policy
 2005: CCI establishes Advisory Committee to develop
draft National Competition Policy
 2006: Planning Commission establishes Working
Group on Competition Policy (for 11th Plan – 2007-12)

7Up2 Meeting, June 27-28, 2006, Bangk

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 Competition in India – the road map
 Shift from “size / structure” focus to “conduct”
 Shift from discouraging “dominance” to discouraging
“abuse of dominance”
 Includes “combinations” (previously ignored)
 Includes strong component on “competition advocacy”
 Replaces “Rule of Law” approach with “Rule of Reason”
approach
 New Competition law to deliver above
 Decision to locate Competition law within broader
Competition Policy – that harmonises various policies

7Up2 Meeting, June 27-28, 2006, Bangk

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Thank you!

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