GREETINGS

TO
DELEGATES AT THE
LAUNCH MEETING ON
MEKONG PROJECT
HANOI

23-24 APR 2004

1

MRTP ACT METAMORPHOSES INTO

COMPETITION ACT
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

LPG SYNDROME
EARLIER TILL 1991

NOW AFTER 1991

LICENSING

LIBERALISATION

PLANNING

PRIVATISATION

GOVERNMENT

GLOBALISATION

Copyright - Dr. S.

LPG SYNDROME
( POST 1991 )
RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:
INCLUDE

DEREGULATION AND SIMPLIFICATION OF LICENSING AND

APPROVAL PROCEDURES

EXEMPTION OF A LARGE 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.

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.

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.

EXTANT COMPETITION LAW OF INDIA

MONOPOLIES AND
RESTRICTIVE
TRADE PRACTICES ACT,1969
BROUGHT INTO FORCE IN 1970

Copyright - Dr. S.

MONOPOLIES AND RESTRICTIVE

TRADE PRACTICES ACT, 1969
A

LODE STAR
CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF
STATE POLICY

PRINCIPLES
SOCIAL JUSTICE WITH ECONOMIC GROWTH
WELFARE STATE
REGULATING CONCENTRATION OF ECONOMIC POWER TO
THE COMMON DETRIMENT
CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE
TRADE PRACTICES

Copyright - Dr. S.

OBJECTIVES OF THE MRTP ACT

PREVENTION OF CONCENTRATION OF
ECONOMIC POWER TO THE COMMON
DETRIMENT;
CONTROL OF MONOPOLIES
PROHIBITION OF MONOPOLISTIC TRADE
PRACTICES (MTP)
PROHIBITION OF RESTRICTIVE TRADE
PRACTICES (RTP)
PROHIBITION OF UNFAIR TRADE PRACTICES
(UTP)

Copyright - Dr. S.

1991 AMENDMENTS TO MRTP ACT

SIZE CONCEPT GIVEN UP
2. CURBS ON GROWTH OF MONOPOLY
COMPANIES DELETED
3. MERGER CONTROL REMOVED
4. MORE EMPHASIS ON PROHIBITION
OF RTPs, UTPs AND MTPs
IN SUM, BIG BECOMING BIGGER IS NO
MORE UGLY
1.

Copyright - Dr. S.

10

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.

11

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.

12

MONOPOLISTIC TRADE
PRACTICES
1.
2.

3.

4.

UNREASONABLE PRICING
PREVENTING OR LESSENING
COMPETITION IN SUPPLY/DISTRIBUTION
OF GOODS/SERVICES
LIMITING TECHNICAL DEVELOPMENT,
CAPITAL INVESTMENT OR
PRODUCTION/SUPPLY
UNREASONABLE PROFITS
(PROFITEERING)
Copyright - Dr. S.

13

APPLICABILITY OF THE MRTP ACT

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.

14

EXPERIENCE IN THE LAST

THREE DECADES
NO MENTION OR DEFINITION OF OFFENCES LIKE
(ILLUSTRATIVE)
ABUSE OF DOMINANCE
CARTELS, COLLUSION AND PRICE FIXING
BID RIGGING
BOYCOTTS AND REFUSAL TO DEAL
PREDATORY PRICING

LARGE NUMBER OF INTERPRETATIONS & CASE LAWS

AFFECTING THE INTENT/SPIRIT OF THE MRTP ACT
WTO FALL OUT OBLIGATIONS

Copyright - Dr. S.

15

NEED FOR A NEW WINE

NEED FOR A NEW LAW HAS ITS ORIGIN IN FINANCE
MINISTERS BUDGET SPEECH IN FEBRUARY,1999 :
THE MRTP ACT HAS BECOME OBSOLETE IN CERTAIN
AREAS IN THE LIGHT OF INTERNATIONAL ECONOMIC
DEVELOPMENTS RELATING TO COMPETITION LAWS.
WE NEED TO SHIFT OUR FOCUS FROM CURBING
MONOPOLIES TO PROMOTING COMPETITION. THE
GOVERNMENT HAS DECIDED TO APPOINT A
COMMITTEE TO EXAMINE THIS RANGE OF ISSUES AND
PROPOSE A MODERN COMPETITION LAW SUITABLE
FOR OUR CONDITIONS.

Copyright - Dr. S.

16

RUBRIC OF THE NEW

COMPETITION LAW
THE NEW LAW, COMPETITION ACT, 2002
WILL REPEAL THE MRTP ACT
FOUR COMPARTMENTS OF NEW LAW:

ANTI-COMPETITION AGREEMENTS

ABUSE OF DOMINANCE

MERGERS, AMALGAMATIONS,
ACQUISITIONS AND TAKE-OVERS

FOSTERING COMPETITION
Copyright - Dr. S.

17

ANTI - COMPETITION AGREEMENTS

HORIZONTAL RESTRAINTS :

VERTICAL RESTRAINTS :

CARTELS {FIXING PURCHASE OR

SALE PRICES (EXPORT CARTELS
EXEMPTED) }

TIE-IN ARRANGEMENTS

EXCLUSIVE SUPPLIES
BID-RIGGING (COLLUSIVE
TENDERING)

EXCLUSIVE DISTRIBUTION

SHARING MARKETS BY TERRITORY,

TYPE ETC.

REFUSAL TO DEAL

RESALE PRICE MAINTENANCE

LIMITING PRODUCTION,
TECHNICAL DEVELOPMENT

SUPPLY,

THE ABOVE ARE PER SE ILLEGAL.

ADJUDICATION BY RULE OF
REASON

Copyright - Dr. S.

18

ABUSE OF DOMINANCE
DOMINANCE NOT LINKED TO ANY ARITHMETIC FIGURE OF MARKET SHARE
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.

19

DOES DOMINANCE REQUIRE AN

ARITHMETIC FIGURE?

SOME SUGGEST AN ARITHMETIC FIGURE OF MARKET

SHARE TO ASCERTAIN DOMINANCE
EXISTING MRTP ACT STIPULATES 25% MARKET SHARE
NEW LAW DISTINGUISHES DOMINANCE FROM ITS ABUSE
AND ESCHEWS ARITHMETIC FIGURE
LOGIC IS AGAINST A THRESHOLD AS IT MAY HARASS A
GOOD COMPETING ENTITY AND ALLOW AN OFFENDING
ENTITY TO ESCAPE
AS LONG AS DOMINANCE IS NOT TO BE FROWNED UPON,
A GENERIC DEFINITION IS BETTER THAN MARKET
SHARE THRESHOLD DEFINITION

Copyright - Dr. S.

20

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

1. COMPETITION LAW TO HAVE SURVEILLANCE OVER
COMBINATIONS BEYOND A THRESHOLD LIMIT
[Assets > Rs.1000 Crores (about US $ 220 m) or
Turnover > Rs.3000 Crores (about US $ 660 m)]
2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND
NOT MANDATORY
3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS
ELSE DEEMED APPROVAL

Copyright - Dr. S.

21

IS COMBINATION CONTROL
REQUIRED AT ALL?

SCAN OF 72 COMPETITION LAWS IN THE WORLD SHOWS THEY HAVE MERGER

CONTROL
51 OF THOSE HAVE MANDATORY PRE MERGER NOTIFICATION REQUIREMENT
ANOTHER 12 ALSO HAVE MANDATORY NOTIFICATION REQUIREMENT BUT AT A
SLIGHTLY LATER STAGE, NAMELY, POSTCLOSING STAGE
REMAINING 9 HAVE VOLUNTARY NOTIFICATION REQUIREMENT
THIS IS NOT THE ONLY REASON WHY INDIAN LAW SHOULD HAVE MERGER
CONTROL
OTHER REASONS : POSSIBLE ABUSE OF DOMINANCE, LESS CHOICE AND
BARRIERS TO NEW ENTRANTS ETC
THE NEW LAW IS VERY BENIGN ON MERGER CONTROL
NOTIFICATION IS VOLUNTARY
HIGH THRESHOLD LIMIT
DEEMED APPROVAL AFTER 90 WORKING DAYS
VERTICAL AND CONGLOMERATE MERGERS WILL GENERALLY BE ALLOWED TO
PASS
ONLY HORIZONTAL MERGERS WILL BE SCREENED ON COMPETITION
PERSPECTIVE

Copyright - Dr. S.

22

COMPETITION ADVOCACY

THE COMPETITION COMMISSION OF INDIA

IS ENABLED TO PARTICIPATE IN THE
FORMULATION OF POLICIES AND REVIEWING
OF POLICIES RELATING TO COMPETITION AT
THE INSTANCE OF THE GOVERNMENT
IS REQUIRED TO CREATE COMPETITION
CULTURE
IS REQUIRED TO ACT AS COMPETITION
ADVOCATE

Copyright - Dr. S.

23

EXEMPTIONS
GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE
COMPETITION LAW
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

DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.

Copyright - Dr. S.

24

COMPETITION COMMISSION OF INDIA

COMPRISES :
CHAIRPERSON
MEMBERS
SELECTION BY :
A COLLEGIUM OR SEARCH COMMITTEE APPOINTED BY THE
GOVERNMENT.
SELECTION ON:
MERIT BASED ON QUALIFICATIONS, EXPERIENCE, RELEVANT
KNOWLEDGE AND INTEGRITY.

Copyright - Dr. S.

25

DEPOLITICISATION AND
CASTING NET WIDE

RATIONALE FOR THE COLLEGIUM APPROACH IS TO

MINIMISE POLITICISATION OF APPOINTMENTS

CHAIRPERSON NEED NOT BE FROM THE JUDICIARY

CHAIRPERSON AND MEMBERS FROM FIELDS

JUDICIARY, ECONOMICS, LAW, INTERNATIONAL TRADE,
BUSINESS,
COMMERCE,
INDUSTRY,
FINANCE,
ACCOUTANCY, MANAGEMENT, PUBLIC AFFAIRS, AND
ADMINISTRATION

EVERY BENCH WILL HAVE A JUDICIAL MEMBER

Copyright - Dr. S.

26

OLD WINE OR NEW WINE ?

MRTP ACT
1.

BASED ON PRE-1991 LPG

2. PREMISED ON SIZE
3. PROCEDURE ORIENTED
4. NO TEETH (REFORMATORY)
5. OFFENCES DEFINED IMPLICITLY
(CARTELS, BID-RIGGING ETC.)
6. FROWNS ON DOMINANCE
(25% OF MARKET SHARE)

NEW LAW
1. BASED ON POST-1991 LPG
2. PREMISED ON BEHAVIOUR/
CONDUCT
3. RESULT ORIENTED
4. CAN BITE (PUNITIVE )
5. OFFENCES DEFINED
EXPLICITLY
6. FROWNS ON ABUSE OF
DOMINANCE

7. A LARGE NO. OF PER SE

OFFENCES

(NO PERCENTAGE OF MARKET

SHARE)

(AGAINST PRINCIPLES OF
NATURAL JUSTICE)

7. JUST FOUR ARE PER SE

OFFENCES
(REST BY RULE OF REASON)

Copyright - Dr. S.

27

OLD WINE OR NEW WINE ?

MRTP ACT
8. COVERS UNFAIR TRADE
PRACTICES (INDIVIDUAL
CONSUMER INTEREST)
9. POLITICAL APPOINTMENTS OF

NEW LAW
8. UNFAIR TRADE PRACTICES
EXCLUDED (COVERED UNDER
CONSUMER PROTECTION ACT)
9. APPOINTMENTS BY A COLLEGIUM

CHAIRPERSON/MEMBERS
10. NO COMPETITION ADVOCACY
ROLE
11. REACTIVE

10. CCI HAS COMPETITION ADVOCACY

ROLE
11. PROACTIVE

NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW

Copyright - Dr. S.

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
Copyright - Dr. S.

29

THANK YOU
FOR YOUR
KIND ATTENTION
Copy right Dr. S. Chakravarthy

30