CUTS Institute for Regulation &
Competition, World Trade Centre, Mumbai
& Institute of Company Secretaries of India
– Centre for Corporate Training &
Research
Presents
Competition Policy and Law in a
Liberalising Economy
by
Prof. H D. Pithawalla, Advocate & Solicitor
Thursday, 7th December 2006
Competition Law
A myth or a reality in India ?
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Contents
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Background of the Competition Act
Unfair Trade Practices
Restrictive Trade Practices
Protection of Intellectual Property Rights
Abuse of Dominance and Combinations
Case Studies
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Background
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“Competition” (L – “compete”) is an ageold phenomenon
In olden days, competition
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existed amongst cave-men
is also reflected in the Mahabharat
In modern times, competition
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has become a global phenomenon
starts right from Kindergarten & Nursery
classes
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Benefits of Competition….
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Companies : Efficiency, cost-saving
operations, better utilization of
resources, etc.
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The Consumer : Wider choice of goods
at competitive prices
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The Government : Generates revenue
BUT…………………………
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….Benefits of Competition
………all these benefits are lost if
Competition is UNFAIR or NONEXISTANT
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Choice of CARS in the olden days
MTNL Monopoly : The position today
Airlines : INDIAN AIRLINES : JET :
SAHARA
Mobiles : Price Wars
Indian Railways : The monopoly
continues….
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Perfect Competition – A Myth
“PERFECT COMPETITION” is an
ideal situation which exists only on
paper. It implies:
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A large number of Sellers
A large number of Buyers
Free entry
Free exit
Manufacturers are “price-takers” and
not “price-makers”
No single manufacturer can influence
the market
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Evaluation of Country’s
Competition Regime
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Competition Policy & Philosophy of the
Government
Trade Agreements & Practices which are
RESTRICTIVE
Trade Agreements & Practices which are
UNFAIR
Abuse of dominance
Combines : Mergers, amalgamations and takeovers
Protection (or lack of it) of Intellectual Property
Rights
Competition at the international level : Trade
Blocs
Consumer activism : NGOs and Consumer
Associations
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Evolution of Competition Law
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Before MRTP Act came into force (1970),
limited provisions existed under :
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The Indian Contract Act
The Law of Torts
Directive Principles of State Policy (Nonenforceable)
The MRTP Act brought in a four-pronged
thrust :
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Concentration of economic power ( - Repealed
in 1991 - )
Restrictive Trade Practices
Monopolistic Trade Practices ( - Almost a dead
letter - )
Unfair Trade Practices ( - Added in 1984 - )
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Competition Act - “Still in
Incubator”
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Raghwan Committee
Two Writ Petitions – as soon as
Act was notified
Observations of the Hon'ble
Supreme Court
The position on date
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Unfair Trade Practices
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Many competition regimes do NOT consider this
as part of Competition Law
BUT, it does affect competition – directly or
indirectly
Consumer protection provisions made for the
first time in India by 1984 Amendments in the
MRTP Act
The Consumer Protection Act came only 2
years later
How Consumer Courts were hurriedly
constituted
After 1986, MRTP Commission and Consumer
Courts had parallel jurisdiction
Consumer Courts v MRTP Commission : Pros
& Cons
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Unfair Trade Practices
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HOW UTPs affect competition :
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Warranties not based on lab tests
After sales guarantees not honoured
Contests & Competitions
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Disparagement of competing products
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View of the MRTP Commission
View of the Supreme Court
Godrej v Kelvinator
Colgate v Pepsodent
Rulings in RIDAKE (India) & XENICAL (USA)
Misleading sales ads
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“ 60% OFF”
Guptaji’s Sales
Ads of CURRYS (U.K.’s biggest electrical chain)
UPTO
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UTPs vis-à-vis Competition Act
Under the Competition Act :
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No provision for Unfair Trade Practices
Only Consumer Courts will have
jurisdiction
Pending cases will be continued by
MRTPC for 2 years
After 2 years :
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All cases (except Disparagement Cases) will
be transferred to National Commission under
CPA
All Disparagement Cases will be transferred
to Competition Commission
Q. : After 2 years, WHERE can a
Company file Disparagement Cases ?
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Restrictive Trade Practices
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MRTP Act
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Today, the Act contains a two-pronged
approach to RTPs
RTPs (except one) are NOT declared
void. Only registration formalities are to
be complied with
MRTP Commission can issue Notice of
Enquiry – followed by Cease-&-Desist
Order if RTP proved to be against public
interest : No jail, no fine
“Gateways” are available
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Restrictive Trade Practices
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Competition Act
9 “Anti-competitive Agreements”
are declared void
 “Per Se Rule” applied to 4
Horizontal Agreements
 “Rule of Reason” applied to 5
Vertical Agreements
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Anti-competitive Agreements
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Horizontal Agreements
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Persons engaged in identical or similar goods or
services enter into an agreement :
to determine purchase or sales prices
to limit / control production, supply, technological
developments, etc.
to share the market, allocate geographical
markets or number of customers
for bid rigging or collusive tendering
All the above 4 Agreements “shall be
presumed to have an appreciable adverse
effect on competition”
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Anti-competitive Agreements
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Vertical Agreements
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“Tie-in” Arrangements
Exclusive Supply Agreements
Exclusive Distribution Agreements
Refusal to deal
Resale price maintenance
Such an Agreement will be contravention of
the Act IF the Agreement causes – or is
likely to cause – an appreciable adverse
effect on competition
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Powers of Competition Commission as
Regards Agreements
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After the inquiry into the Agreement,
Competition Commission can:
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direct parties to discontinue the
agreement
prohibit parties from re-entering such
agreement
direct modification of the agreement
impose penalty upto 10% of average
turnover of the enterprise
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PROTECTION OF INTELLECTUAL
PROPERTY RIGHTS
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MRTP Act
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Firstly, the MRTP Commission cannot pass
Orders which restrict
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the right of any person to restrain the infringement
of a patent granted in India, or
any person as to the condition he attaches to a
licence to do anything, the doing of which, but for
the licence, would be an infringement of a patent
granted in India
Secondly, Section 39, which declares resale
price maintenance to be void, does not affect the
validity of a licence granted by the proprietor of a
patent or trade-mark, so far as it regulates the
price at which articles produced by the licensee
may be sold by him.
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PROTECTION OF INTELLECTUAL
PROPERTY RIGHTS
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Competition Act
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The prohibition on horizontal and
vertical agreements do not restrict
the right of any person to impose
reasonable restrictions to protect
any of his rights under the
Copyright Act, the Patents Act, the
Trade and Merchandise Marks
Act, Designs Act
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Abuse of Dominance
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Mandate of the Act : “No enterprise
shall abuse its dominant position.”
5 categories of “abuse” are listed in
the Act, as for instance, 
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Imposing discriminatory conditions in
purchase or sale of goods
Predatory pricing
Limiting production or scientific or
technical development
Using dominant position in one market
to enter another market, etc.
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Abuse of Dominance
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“Dominant position” is defined as a
position of strength which enables
the enterprise
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to operate independently of competitive
forces in the market, or
to affect its competitors or consumers in
its favour.
No mathematical or statistical
formula is adopted to “measure”
dominance – as under the repealed
provisions of the MRTP Act ( - 25%
of market share - )
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Abuse of Dominance
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Power of the Competition
Commission
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After inquiry into abuse of
dominant position, the
Competition Commission can
order:
discontinuance of abuse of dominant
position
 impose a penalty upto 10% of the
average turnover of the enterprise
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Combinations
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MRTP Act
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Provisions of the MRTP Act regarding
registration of undertakings,
establishment of new undertakings,
take-overs, mergers and amalgamation
were criticized on the ground that they
were based on an impractical and
untenable proposition that “BIG is BAD”
Ultimately, these provisions were
repealed in 1991
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Combinations
Competition Act
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NOW, the Competition Act seeks to regulate
any “acquisition”, “acquiring of control”,
“mergers or amalgamations” if it results in
assets or turnover exceeding specified
monetary limits
Concept of voluntary notice is introduced. On
receipt of such notice, Competition
Commission can inquire – and
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approve the combination, or
direct that the combination shall not take effect,
or
propose modifications
If no such Order is passed within a timebound frame, the combination is DEEMED TO
HAVE BEEN APPROVED.
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Combinations
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Powers of Competition Commission
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It can :
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issue a Show Cause Notice to the parties
direct the parties to publish details of the
combination
invite members of the public to file written
objections
pass appropriate Orders
Two questions are worth considering :
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Is this just a back-door entry of earlier
provisions of the MRTP Act ?
Will monetary limits fixed five years ago
remain relevant five years hence ?
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Case Studies
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Columbia
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AVIANCA, Columbia’s largest airline planned a
merger with the country’s second largest airline,
ACE.
Justifications given for the merger were :
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AVIANCA had huge accumulated losses, and the
merger would be a potential answer to its financial
problems
The merged airline could effectively compete with
foreign carriers in the international market
HELD : Merger would be anti-competitive : The
merged airline would be FOUR times the size of
its nearest domestic rival.
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Case Studies
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India
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The JET take-over of SAHARA : A damp squib ?
Australia
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Co X with 75% of domestic biscuit market
proposed a merger with Co Y, which had 15%
market share of Australia’s biscuit market.
Justification given for the merger : “Snacks” and
NOT “Biscuits” is the relevant market. In the
snacks market, Co X had a 10% share of the
market and Co Y, a mere 1%.
HELD : The relevant market was “Biscuits” and
not “Snacks”. Merger NOT ALLOWED.
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Thank You!
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