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1 GREETINGS TO CHARTERED ACCOUNTANTS FOR ICAIS POST QUALIFICATION COURSE VIDEO CONFERENCE FROM HYDERABAD 25 AUGUST 2005.

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Presentation on theme: "1 GREETINGS TO CHARTERED ACCOUNTANTS FOR ICAIS POST QUALIFICATION COURSE VIDEO CONFERENCE FROM HYDERABAD 25 AUGUST 2005."— Presentation transcript:

1 1 GREETINGS TO CHARTERED ACCOUNTANTS FOR ICAIS POST QUALIFICATION COURSE VIDEO CONFERENCE FROM HYDERABAD 25 AUGUST 2005

2 Copyright - Dr. S. Chakravarthy2 EVOLUTION OF COMPETITION POLICY AND LAW IN INDIA 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

3 Copyright - Dr. S. Chakravarthy3 EXTANT COMPETITION LAW OF INDIA MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT,1969 BROUGHT INTO FORCE IN 1970

4 Copyright - Dr. S. Chakravarthy4 MRTP ACTS ROOT PEG A LODE STAR CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF STATE POLICY B PRINCIPLES SOCIAL JUSTICE WITH ECONOMIC GROWTH WELFARE STATE REGULATING CONCENTRATION OF ECONOMIC POWER TO THE COMMON DETRIMENT CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE TRADE PRACTICES

5 Copyright - Dr. S. Chakravarthy5 CONSTITUTION – DIRECTIVE PRINCIPLES ARTICLES 38 & 39 MANDATE THAT 1. THE OWNERSHIP AND CONTROL OF MATERIAL RESOURCES OF THE COMMUNITY ARE SO DISTRIBUTED AS BEST TO SUBSERVE THE COMMON GOOD; AND 2. THE OPERATION OF THE ECONOMIC SYSTEM DOES NOT RESULT IN THE CONCENTRATION OF WEALTH AND MEANS OF PRODUCTION TO THE COMMON DETRIMENT.

6 Copyright - Dr. S. Chakravarthy6 THREE WATERSHEDS 1. INDUSTRIAL POLICY RESOLUTION OF 1948 – ROLE OF STATE AS ENTREPRENEUR AND AUTHORITY. 2. INDUSTRIAL POLICY RESOLUTION POLICY OF 1956 – EMPHASIS ON GROWTH, SOCIAL JUSTICE AND SELF RELIANCE – GOVERNMENT INTERVENTION AND REGULATION – PUBLIC SECTOR TO ACHIEVE COMMANDING HEIGHTS. 3. ECONOMIC REFORMS OF 1991 – LIBERALISATION, PRIVATISATION AND GLOBALISATION. ON THE WHOLE TRANSITION FROM COMMAND – CONTROL PARADIGM TO MARKET PARADIGM.

7 Copyright - Dr. S. Chakravarthy7 THREE STUDIES SHAPE THE MRTP ACT « HAZARI COMMITTEE REPORT ON INDUSTRIAL LICENSING PROCEDURE, 1955 – WORKING OF THE LICENSING SYSTEM HAS RESULTED IN DISPROPORTIONATE GROWTH OF SOME BIG HOUSES « MAHALANOBIS COMMITTEE REPORT ON DISTRIBUTION AND LEVELS OF INCOME, 1964 – TOP 10 % OF THE POPULATION CORNERED 40 % OF INCOME AND BIG BUSINESS HOUSES WERE EMERGING BECAUSE OF PLANNED ECONOMY MODEL « MONOPOLIES INQUIRY COMMISSION REPORT OF DAS GUPTA, 1965 – THERE WAS CONCENTRATION OF ECONOMIC POWER AND A FEW INDUSTRIAL HOUSES WERE CONTROLLING A LARGE NUMBER OF COMPANIES AND THERE EXISTED LARGE SCALE RTP & MTP.

8 Copyright - Dr. S. Chakravarthy8 MRTP ACT DREW UPON SHERMAN ACT, 1890, CLAYTON ACT, 1914– USA MRTP (INQUIRY AND CONTROL) ACT, 1948, RESALE PRICES ACT, 1964, RTP ACT, 1964 – UK COMBINES INVESTIGATION ACT, 1910 – CANADA LEGISLATIONS IN JAPAN, GERMANY AND SOME OTHER COUNTRIES

9 Copyright - Dr. S. Chakravarthy9 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)

10 Copyright - Dr. S. Chakravarthy AMENDMENTS TO THE MRTP ACT HIGH - POWERED EXPERT COMMITTEE REPORT OF JUSTICE SACHAR THE REPORT RECOMMENDED THAT A SEPARATE CHAPTER SHOULD BE ADDED TO THE MRTP ACT DEFINING UTPs ESSENTIALLY IN THE INTERESTS OF CONSUMERS. ADVERTISEMENT AND REPRESENTATION TO CONSUMERS SHOULD NOT BECOME DECEPTIVE BUT SHOULD BE TRANSPARENT.

11 Copyright - Dr. S. Chakravarthy REFORMS AND SINCE RECENT POLICY CHANGES FROM 1991 ONWARDS 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

12 Copyright - Dr. S. Chakravarthy AMENDMENTS TO MRTP ACT 1. 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

13 Copyright - Dr. S. Chakravarthy13 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

14 Copyright - Dr. S. Chakravarthy14 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.

15 Copyright - Dr. S. Chakravarthy15 HIGH LEVEL COMMITTEE ¯ GOVERNMENT APPOINTED A HIGH LEVEL COMMITTEE TO ADVISE A MODERN COMPETITION LAW FOR INDIA IN LINE WITH INTERNATIONAL DEVELOPMENTS AND TO SUGGEST A LEGISLATIVE FRAME WORK. ¯ THE COMMITTEE INCLUDED COMPETITION EXPERT, REPRESENTATIVES OF INDUSTRY AND CONSUMERS, ECONOMIST, CHARTERED ACCOUNTANT, ADVOCATE ETC.

16 Copyright - Dr. S. Chakravarthy16 TRIGGER FOR METAMORPHOSIS FROM MRTP ACT TO COMPETITION ACT |RECOMMENDATIONS OF EXPERT GROUP |RECOMMENDATIONS OF HIGH LEVEL COMMITTEE |RECOMMENDATIONS OF STANDING COMMITTEE OF PARLIAMENT |UNANIMITY TO REPEAL MRTP ACT AND TO ENACT A NEW LAW |APPRECIATION THAT THE MRTP ACT WAS MORE CONCERNED WITH CURBING MONOPOLIES RATHER THAN WITH PROMOTING COMPETITION |APPRECIATION THAT PRE-1991 LPG HAS CHANGED TO POST-1991 LPG |RECOGNITION THAT INDIAN ENTERPRISES ARE SMALL IN SIZE AND NEED TO GROW TO BECOME GLOBALLY COMPETITIVE

17 Copyright - Dr. S. Chakravarthy17 COMPETITION NEEDS TO BE INCORPORATED IN INDUSTRIAL POLICY RESERVATIONS FOR SSI TRADE POLICY (TARIFFS, SUBSIDIES ETC) STATE MONOPOLIES POLICY LABOUR POLICY REFORMS POLICY (PRIVATISATION ETC) COMPETITION LAW CAN NOT OPERATE IN A VACUUM UNLESS PRE-REQUISITES OF COMPETITION POLICY ARE ALSO IN PLACE

18 Copyright - Dr. S. Chakravarthy18 INDUSTRIAL POLICY INDUSTRIES DEVELOPMENT AND REGULATION ACT, 1951 (IDR ACT) SETS THE POLICY DURING PRE-1991 LPG ERA LICENSING PREDOMINATED DURING POST-1991 LPG ERA 1. LICENSES REQUIRED ONLY FOR SIX INDUSTRIES 2. GREATER AUTONOMY FOR PEs 3. GREATER PRIVATE SECTOR OWNERSHIP

19 Copyright - Dr. S. Chakravarthy19 SMALL SECTOR PROTECTION n POLICY - ENCOURAGE AND PROMOTE SMALL, COTTAGE AND HANDLOOM SECTORS n RESERVATIONS FOR THE SMALL SCALE SECTOR n THEY SUFFER FROM OLD TECHNOLOGY, LACK OF RESOURCES AND MANAGEMENT, HIGH COST OF PRODUCTION AND SALE n GLOBAL COMPETITION CAN EXTINGUISH THE SMALL SCALE AND COTTAGE SECTORS n UNDER COMPETITION ACT, 2002, GOVERNMENT CAN EXEMPT SMALL SECTOR FOR A SPECIFIC PERIOD OF TIME TO ENABLE IT TO BRACE ITSELF TO MEET THE CHALLENGE OF COMPETITION

20 Copyright - Dr. S. Chakravarthy20 PRIVATISATION AND REGULATORY REFORMS FIRST GENERATION REFORMS UNDER IMPLEMENTATION SECOND GENERATION REFORMS BEING FORMULATED AND IMPLEMENTED REFORMS POLICIES NEED TO INHERE COMPETITION PRINCIPLES NEED FOR FLEXIBILITY TO PROVIDE FOR NEEDS, ASPIRATIONS AND GOALS OF THE COUNTRY

21 Copyright - Dr. S. Chakravarthy21 TRADE POLICY THIS INCLUDES (ESSENTIALLY WTO – RELATED) TARIFFS QUOTAS SUBSIDIES ANTI-DUMPING ACTION DOMESTIC CONTENT REGULATIONS EXPORT RESTRAINTS TRADE POLICY NEEDS TO CONFORM TO COMPETITION PRINCIPLES

22 Copyright - Dr. S. Chakravarthy22 STATE MONOPOLIES POLICY STATE MONOPOLIES AND PUBLIC ENTERPRISES - AGENTS OF GOVERNMENT WITH SOCIO - ECONOMIC AND POLITICAL GOALS BUT SUCH ENTERPRISES SHOULD ALSO BE IN COMPETITION TO SUBSERVE CONSUMER INTEREST APPROPRIATE BLEND OF COMPETITION PRINCIPLES AND GOVERNMENT POLICIES TOWARDS STATE AND OTHER MONOPOLIES COMPETITION ACT, 2002 APPLIES TO ALL UNDERTAKINGS INCLUDING PUBLIC ENTERPRISES AND STATE MONOPOLIES AND THEREFORE CAN PREVENT RTPs, UTPs & MTPs ON THEIR PART

23 Copyright - Dr. S. Chakravarthy23 LABOUR POLICY INDUSTRIAL DISPUTES ACT, 1947 PROTECTS LABOUR INTEREST ENTERPRISES DESIRING TO EXIT CANNOT DO SO EASILY UNVIABLE UNITS IMPOSE HEAVY PRICE ON THE SOCIETY COMPETITION DEMANDS CONTESTABLE MARKET (EASY ENTRY, EASY EXIT) LEGISLATION NEEDS AMENDMENTS TO PROVIDE FOR EASY EXIT SUBJECT TO PROTECTION OF LEGAL OBLIGATIONS AND LIABILITIES DUE TO THE LABOUR

24 Copyright - Dr. S. Chakravarthy24 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

25 Copyright - Dr. S. Chakravarthy25 IDEOLOGY COMPETITION NEEDS TO BE FOUNDED NOT ON ANY ISM LIKE CAPITALISM, SOCIALISM OR COMMUNISM BUT ON PRAGMATISM

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


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