GREETINGS
TO
DELEGATES AT THE
TRAINING WORKSHOP ON
COMPETITION POLICY AND LAW
FOR LAO PDR
7-8 MARCH 2006
VIENTIANE
1
THE NEED AND RATIONALE FOR A
COMPETITION LAW AND POLICY
PRESENTATION
Dr. S. CHAKRAVARTHY
(Profession : Civil Servant)
Formerly, Member, Monopolies and Restrictive Trade
Practices Commission, Member, High Level Committee on
Competition Policy and Law And Member of Committee for
Drafting the Law.
Presently, Adviser/Consultant
Competition Policy and Law
HYDERABAD, INDIA
Copyright - Dr. S. Chakravarthy
2
LPG PARADIGM
PRE-REFORMS
POST-REFORMS
• LICENSING
• LIBERALISATION
• PLANNING
• PRIVATISATION
• GOVERNMENT
• GLOBALISATION
Copyright - Dr. S. Chakravarthy
3
L P G PARADIGM
( POST - REFORMS )
POLICY CHANGES POST-REFORMS INCLUDE:
•
DEREGULATION AND SIMPLIFICATION OF LICENSING AND
APPROVAL PROCEDURES
• EXEMPTION OF A SPECIFIC AND SIGNIFICANT NUMBER
OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS
• NEW ECONOMIC ADJUSTMENT MEASURES
• DIVESTITURE AND SALE OF GOVERNMENT ASSETS
• GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF
THE PUBLIC SECTOR
• PRIVATISATION
• ENCOURAGING COMPETITION
Copyright - Dr. S. Chakravarthy
4
RATIONALE FOR GLOBALISATION
1. BY AND LARGE GOVERNMENT IS INCAPABLE OF INTERVENING
EFFICIENTLY
2. GOVERNMENT NEEDS TO BE ROLLED BACK
3. STATE NEEDS TO BE MINIMALIST
4. MARKET, A PREFERRED ALTERNATIVE
5. NATIONAL BOUNDARIES AND IDEOLOGIES SHOULD NOT ACT
AS CONSTRAINTS
6. OPPORTUNITIES FOR NEW TECHNOLOGIES AND COMPETITION
DRIVEN MARKET
Copyright - Dr. S. Chakravarthy
5
C O M P E T I T I O N…….
• IS A DYNAMIC CONCEPT
• IS AN AMALGAM OF FACTORS THAT
STIMULATE ECONOMIC RIVALRY
• IS A TOOL TO MOUNT MARKET PRESSURE
TO PENALISE LAGGARDS AND TO REWARD
THE ENTERPRISING
Copyright - Dr. S. Chakravarthy
6
COMPETITION
POLICY - GOALS
PRESERVATION AND PROMOTION OF THE
COMPETITIVE PROCESS
EFFICIENCY IN PRODUCTION AND
ALLOCATION OF GOODS AND SERVICES
INNOVATION AND ADJUSTMENT TO
TECHNOLOGICAL CHANGE
SUSTAINED ECONOMIC GROWTH
Copyright - Dr. S. Chakravarthy
7
JENNY ON REFORMS AND
COMPETITION
“THE WIDELY HELD PERCEPTION THAT REGULATED
ECONOMIES IN WHICH COMPETITION IS RESTRAINED
THROUGH GOVERNMENT REGULATION ARE INEFFICIENT,
UNDEMOCRATIC OR UNFAIR EXPLAINS TO A LARGE
EXTENT WHY WE HAVE WITNESSED A PATTERN OF
CHANGES IN MANY COUNTRIES OVER THE LAST DECADE
INCLUDING DEREGULATION OF ECONOMIES,
PRIVATISATION AND INCREASING RELIANCE ON
COMPETITION IN THE MARKET PLACE”
Copyright - Dr. S. Chakravarthy
8
BENEFITS OF COMPETITION –
AN ILLUSTRATION
• IN THE EUROPEAN UNION
IMPLEMENTATION OF COMPETITION
POLICY RESULTED IN REMOVAL OF
BARRIERS TO TRADE
• INCOME INCREASED BY 1 TO 1.5 %
• THIS CREATED 30 – 90 THOUSAND
JOBS
• INFLATION DECREASED BY 1 TO 1.5 %
Copyright - Dr. S. Chakravarthy
9
TRADE POLICIES
– INDUSTRIAL POLICY
– RESERVATIONS FOR THE SMALL SCALE
INDUSTRIAL SECTOR
– PRIVATISATION AND REGULATORY REFORMS
– COMMERCE POLICY (TARIFFS, QUOTAS,
SUBSIDIES, ANTI-DUMPING ACTION, DOMESTIC
CONTENT REGULATIONS AND EXPORT
RESTRAINTS - ESSENTIALLY WTO-RELATED)
– STATE MONOPOLIES POLICY
– LABOUR POLICY
Copyright - Dr. S. Chakravarthy
10
SMALL SECTOR PROTECTION
• POLICY - ENCOURAGE AND PROMOTE SMALL,
COTTAGE AND HANDLOOM SECTORS
• RESERVATIONS FOR THE SMALL SCALE SECTOR
• THEY SUFFER FROM OLD TECHNOLOGY, LACK OF
RESOURCES AND MANAGEMENT, HIGH COST OF
PRODUCTION AND SALE
• GLOBAL COMPETITION CAN EXTINGUISH THE SMALL
SCALE AND COTTAGE SECTORS
• COMPETITION LAW COULD EXEMPT SMALL SECTOR
FOR A SPECIFIC PERIOD OF TIME TO ENABLE IT TO
BRACE ITSELF TO MEET THE CHALLENGE OF
COMPETITION
Copyright - Dr. S. Chakravarthy
11
INTERFACE BETWEEN
COMPETITION AND TRADE POLICY
• COMPETITION POLICY AIMS AT
-
ENHANCING COMPETITION BETWEEN FIRMS
CREATING A COMPETITIVE ENVIRONMENT
CURBING ANTI-COMPETITIVE PRACTICES
EFFICIENT ALLOCATION OF RESOURCES
PROTECTING CONSUMER INTEREST INTERMS OF PRICE,
QUALITY, CHOICE ETC
CONTD IN NEXT SLIDE
Copyright - Dr. S. Chakravarthy
12
INTERFACE BETWEEN
COMPETITION AND TRADE POLICY
• TRADE POLICY AIMS AT
-
-
REGULATING COMPETITION AMONG
FIRMS ACROSS NATIONAL BOUNDARIES
CREATING TRADE OPPORTUNITIES BY
REMOVING TARIFF AND NON – TARIFF
BARRIERS
ENSURING FAIR TRADE
ELIMINATING ANTI-COMPETITIVE PRACTICES
IN INTERNATIONAL TRADE
Copyright - Dr. S. Chakravarthy
13
HARMONISATION OF COMPETITION
AND TRADE POLICIES
•
•
•
•
•
COMPETITION SHOULD BE A FACTOR TO BE RECKONED IN THE
TRADE AND MARKET POLICIES OF A COUNTRY.
THERE SHOULD BE A COMPETITION POLICY AND OF COURSE A
COMPETITION LAW, WHICH SHOULD BE SO STRUCTURED THAT
THEY SUB-SERVE BY AND LARGE THE CONSUMERS, CONSUMER
INTEREST AND CONSUMER WELFARE. THERE SHOULD BE A
COMPETITION
LAW
AUTHORITY
TO
IMPLEMENT
THE
COMPETITION LAW
THE TRADE POLICY OF A COUNTRY SHOULD AT ALL TIMES
RECKON THE CONTOURS OF THE COMPETITION POLICY AND
LAW.
THERE SHOULD BE ENOUGH FLEXIBILITY IN THE
COMPETITION AND
TRADE POLICIES TO DEAL WITH THE
SPECIFIC NEEDS AND REQUIREMENTS OF A COUNTRY.
PUBLIC INTEREST DIMENSION CAN HAVE PRIMACY OVER
CONSUMER
INTEREST
DIMENSION,
IN
EXCEPTIONAL
CIRCUMSTANCES. FOR WHICH EXCEPTIONS AND EXEMPTIONS
COULD BE LAID DOWN IN THE LAW.
COMPETITION POLICY SHOULD INHERE THE DEVELOPMENT
DIMENSION IN ITS APPROACH AND IMPLEMENTATION.
Copyright - Dr. S. Chakravarthy
14
NEED FOR COMPETITION
REGIME
COMPETITION POLICY AND COMPETITION
LAW ARE REQUIRED
EFFECTIVE COMPETITION POLICY
PROMOTES A COMPETITIVE BUSINESS
ENVIRONMENT AND IMPROVES STATIC AND
DYNAMIC EFFICIENCIES
COMPETITION LAW PREVENTS ABUSE OF
MARKET POWER AND CURBS ANTICOMPETITIVE PRACTICES
Copyright - Dr. S. Chakravarthy
15
RESTRICTIVE TRADE PRACTICES
 REFUSAL TO DEAL
 TIE-UP SALES
 FULL LINE FORCING
 EXCLUSIVE DEALINGS
 PRICE DISCRIMINATION
 RE-SALE PRICE MAINTENANCE
 AREA RESTRICTION
Copyright - Dr. S. Chakravarthy
16
UNFAIR TRADE PRACTICES

MISLEADING ADVERTISEMENT AND FALSE
REPRESENTATION

BARGAIN SALE, BAIT AND SWITCH SELLING

OFFERING OF GIFTS OR PRIZES WITH THE
INTENTION OF NOT PROVIDING THEM AND
CONDUCTING PROMOTIONAL CONTESTS

PRODUCT SAFETY STANDARDS

HOARDING OR DESTRUCTION OF GOODS
Copyright - Dr. S. Chakravarthy
17
MONOPOLISTIC TRADE
PRACTICES
1. UNREASONABLE PRICING
2. PREVENTING OR LESSENING
COMPETITION IN SUPPLY/DISTRIBUTION
OF GOODS/SERVICES
3. LIMITING TECHNICAL DEVELOPMENT,
CAPITAL INVESTMENT OR
PRODUCTION/SUPPLY
4. UNREASONABLE PROFITS
(PROFITEERING)
Copyright - Dr. S. Chakravarthy
18
APPLICABILITY OF COMPETITION
LAW
 ALL UNDERTAKINGS ENGAGED IN MANUFACTURE, SUPPLY
AND DISTRIBUTION IN THE PRIVATE SECTOR
 PUBLIC SECTOR UNDERTAKINGS OWNED BY THE GOVERNMENT
OR GOVERNMENT UNDERTAKINGS
 STATUTORY CORPORATIONS
 UNDERTAKINGS UNDER THE MANAGEMENT OF CONTROLLERS
APPOINTED BY LAW
 COOPERATIVE SOCIETIES
 FINANCIAL INSTITUTIONS, BANKS
Copyright - Dr. S. Chakravarthy
19
RUBRIC OF COMPETITION
LAW
COMPETITION LAW GENERALLY HAS
FOUR COMPARTMENTS :

ANTI-COMPETITION AGREEMENTS

ABUSE OF DOMINANCE

MERGERS, AMALGAMATIONS,
ACQUISITIONS AND TAKE-OVERS

FOSTERING COMPETITION
Copyright - Dr. S. Chakravarthy
20
EXCEPTIONS TO ANTICOMPETITION AGREEMENTS
1. THE RIGHT OF ANY PERSON TO
RESTRAIN INFRINGEMENT OF OR
TO IMPOSE REASONABLE
CONDITIONS FOR PROTECTING
HIS INTELLECTUAL PROPERTY
RIGHTS
2. EXPORT CARTELS
Copyright - Dr. S. Chakravarthy
21
ABUSE OF DOMINANCE
DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO
OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY
AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS.
ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE
• IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING
PREDATORY PRICES)
• LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT
• DENIES MARKET ACCESS
• CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION
WITH THE SUBJECT OF THE CONTRACTS.
• USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS
RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC
MARKET
Copyright - Dr. S. Chakravarthy
22
COMBINATIONS
MERGERS/AMALGAMATIONS
PEJORATIVE EFFECTS
1.
2.
3.
4.
5.
REDUCTION IN NUMBER OF PLAYERS
ACQUISITION OF ENORMOUS ECONOMIC STRENGTH
DISCOURAGEMENT OF NEW ENTRANTS
DICTATION OF PRICES
DOMINANCE
REGULATION ON COMPETITION PERSPECTIVE
COMPETITION LAW SHOULD HAVE SURVEILLANCE
OVER COMBINATIONS
(OFTEN BEYOND A THRESHOLD LIMIT)
Copyright - Dr. S. Chakravarthy
23
COMPETITION ADVOCACY
THE
COMPETITION
AUTHORITY
SHOULD BE
 ENABLED TO PARTICIPATE IN THE


FORMULATION
OF
POLICIES
AND
REVIEWING OF POLICIES RELATING TO
COMPETITION
TO CREATE COMPETITION CULTURE
TO ACT AS COMPETITION ADVOCATE
Copyright - Dr. S. Chakravarthy
24
EXEMPTIONS
COMPETITION LAW COULD EXEMPT
A
ANY CLASS OF ENTERPRISES IN THE INTEREST OF
NATIONAL SECURITY/PUBLIC INTEREST.
B.
ANY PRACTICE/AGREEMENT ARISING OUT OF
INTERNATIONAL TREATY/AGREEMENT
C.
ANY ENTERPRISE PERFORMING A SOVEREIGN
FUNCTION ON BEHALF OF GOVERNMENT
Copyright - Dr. S. Chakravarthy
25
DESIGN OF COMPETITION
REGIME
•
•
•
•
•
•
•
THE COMPETITION POLICY AND THE TRADE POLICY SHOULD BE
GOVERNED BY THE PRINCIPLES ENUNCIATED IN THE COMPETITION LAW.
THE COMPETITION LAW SHOULD PROVIDE A SYSTEM OF CHECKS AND
BALANCES BY ENSURING DUE PROCESS OF LAW WITH PROVISIONS FOR
APPEAL AND REVIEW.
THE COMPETITION LAW AUTHORITY SHOULD BE INDEPENDENT AND
INSULATED FROM POLITICAL AND BUDGETARY CONTROLS OF THE
GOVERNMENT.
COMPETITION LAW SHOULD SEPARATE THE INVESTIGATIVE,
PROSECUTORIAL AND ADJUDICATIVE FUNCTIONS.
COMPETITION LAW SHOULD HAVE PUNITIVE PROVISIONS FOR PUNISHING
THE OFFENDERS BESIDES OTHER REMEDIAL METHODS (REFORMATORY).
THE PROCEEDINGS OF THE COMPETITION LAW AUTHORITY SHOULD BE
TRANSPARENT, NON-DISCRIMINATORY AND RULE-BOUND.
THE COMPETITION LAW AUTHORITY SHOULD HAVE A POSITIVE
ADVOCACY ROLE IN SHAPING POLICIES AFFECTING COMPETITION.
Copyright - Dr. S. Chakravarthy
26
IS A COMPETITION LAW REQUIRED
AT ALL?
• WITH GLOBALISATION,
THERE IS LIKELY TO BE
SIGNIFICANT RESTRUCTURING OF MANUFACTURE,
TRADE AND SERVICES
• DOMESTIC CONSOLIDATION AND ENTRY OF FOREIGN
ENTITIES
• ANTI-COMPETITION PRACTICES MAY SURFACE AS A
CONSEQUENCE
• WTO FALL OUT OBLIGATIONS NEED TO BE
ADDRESSED
• REGULATORY AND ADVOCACY FUNCTIONS NEED TO
BE POSITED
• WITHOUT A COP, TRADE TRAFFIC MAY PREJUDICE
CONSUMER INTEREST
• COMPETITION LAW WILL BE A COP AND A FRIEND
Copyright - Dr. S. Chakravarthy
27
FINALE

COMPETITION POLICY AND COMPETITION LAW NEED TO BE
COMPLEMENTARY AND IN TANDEM

COMPETITION POLICY SHOULD BE FLEXIBLE TO MEET THE
NEEDS ASPIRATIONS AND GOALS OF THE COUNTRY. FOR
INDIA, PRO-POOR POLICIES SHOULD BE FACTORED IN

COMPETITION LAW NEEDS TO BE GRADUALLY PHASED IN
TO AVOID TURBULENCE

THERE SHOULD BE POLITICAL WILL TO ENFORCE
COMPETITION LAW EFFECTIVELY AND EFFICIENTLY

NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW
Copyright - Dr. S. Chakravarthy
28
ONE WOULD LIKE TO AVOID
THE DANGER OF HOLLOW PURISM
THAT HAS MADE SO MUCH
OF MODERN ECONOMICS
UNFIT FOR ACTUAL USE
AMARTYA SEN
INDIAN NOBEL LAUREATE
WHAT IS NEEDED IS NOT ANY
“ISM” BUT “PRAGMATISM”
Copyright - Dr. S. Chakravarthy
29
THANK YOU
FOR YOUR
KIND ATTENTION
Copyright - Dr. S. Chakravarthy
30