1. Citizen consumer and civic Action Group Chennai, India
INDIA ‘S NEW COMPETITION REGIME: Competition in a large emerging economy
Bharath Jairaj
Citizen consumer and civic Action Group Chennai, India
Warning: This presentation is voice-activated. If it hears a yawn from the audience, it automatically shifts to heavy metal music and throbbing disco lights!

2. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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 ?
7Up2 Meeting, June 27-28, 2006, Bangkok.

3. 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)
7Up2 Meeting, June 27-28, 2006, Bangkok.

4. 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”
: Regimented and strict system of government controls
1969: Monopolies and Restrictive Trade Practices Act (MRTP Act) legislated
7Up2 Meeting, June 27-28, 2006, Bangkok.

5. 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
7Up2 Meeting, June 27-28, 2006, Bangkok.

6. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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
7Up2 Meeting, June 27-28, 2006, Bangkok.

7. 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
7Up2 Meeting, June 27-28, 2006, Bangkok.

8. 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
7Up2 Meeting, June 27-28, 2006, Bangkok.

9. THE COMPETITION ACT, 2002 What and how
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)
7Up2 Meeting, June 27-28, 2006, Bangkok.

10. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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)
7Up2 Meeting, June 27-28, 2006, Bangkok.

11. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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
7Up2 Meeting, June 27-28, 2006, Bangkok.

12. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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
7Up2 Meeting, June 27-28, 2006, Bangkok.

13. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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
7Up2 Meeting, June 27-28, 2006, Bangkok.

14. 7Up2 Meeting, June 27-28, 2006, Bangkok.
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)
7Up2 Meeting, June 27-28, 2006, Bangkok.

15. 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)
7Up2 Meeting, June 27-28, 2006, Bangkok.

16. 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
7Up2 Meeting, June 27-28, 2006, Bangkok.

17. 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 – )
Showed the difference between “mass media” and “mass reality”. The “India Shining” image was limited to a very few cities of India and completely ignored massive portions of rural and semi-urban India
7Up2 Meeting, June 27-28, 2006, Bangkok.

18. 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, Bangkok.

19. 7Up2 Meeting, June 27-28, 2006, Bangkok.
Thank you!
7Up2 Meeting, June 27-28, 2006, Bangkok.