2. 1 GREETINGS TO DELEGATES AT THE TRAINING WORKSHOP ON COMPETITION POLICY AND LAW FOR LAO PDR 7-8 MARCH 2006 VIENTIANE

3. Copyright - Dr. S. Chakravarthy2 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

4. Copyright - Dr. S. Chakravarthy3 LPG PARADIGM PRE-REFORMSPOST-REFORMS LICENSING PLANNING GOVERNMENT LIBERALISATION PRIVATISATION GLOBALISATION

5. Copyright - Dr. S. Chakravarthy4 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

6. Copyright - Dr. S. Chakravarthy5 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

7. Copyright - Dr. S. Chakravarthy6 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

8. Copyright - Dr. S. Chakravarthy7 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

9. Copyright - Dr. S. Chakravarthy8 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 ”

10. Copyright - Dr. S. Chakravarthy9 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 %

11. Copyright - Dr. S. Chakravarthy10 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

12. Copyright - Dr. S. Chakravarthy11 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

13. Copyright - Dr. S. Chakravarthy12 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

14. Copyright - Dr. S. Chakravarthy13 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

15. Copyright - Dr. S. Chakravarthy14 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.

16. Copyright - Dr. S. Chakravarthy15 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 ANTI- COMPETITIVE PRACTICES

17. Copyright - Dr. S. Chakravarthy16 RESTRICTIVE TRADE PRACTICES Ñ REFUSAL TO DEAL Ñ TIE-UP SALES Ñ FULL LINE FORCING Ñ EXCLUSIVE DEALINGS Ñ PRICE DISCRIMINATION Ñ RE-SALE PRICE MAINTENANCE Ñ AREA RESTRICTION

18. Copyright - Dr. S. Chakravarthy17 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

19. Copyright - Dr. S. Chakravarthy18 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)

20. Copyright - Dr. S. Chakravarthy19  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 APPLICABILITY OF COMPETITION LAW

21. Copyright - Dr. S. Chakravarthy20 RUBRIC OF COMPETITION LAW COMPETITION LAW GENERALLY HAS FOUR COMPARTMENTS : ã ANTI-COMPETITION AGREEMENTS ã ABUSE OF DOMINANCE ã MERGERS, AMALGAMATIONS, ACQUISITIONS AND TAKE-OVERS ã FOSTERING COMPETITION

22. Copyright - Dr. S. Chakravarthy21 EXCEPTIONS TO ANTI- COMPETITION 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

23. Copyright - Dr. S. Chakravarthy22 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

24. Copyright - Dr. S. Chakravarthy23 COMBINATIONS MERGERS/AMALGAMATIONS 1. REDUCTION IN NUMBER OF PLAYERS 2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH 3. DISCOURAGEMENT OF NEW ENTRANTS PEJORATIVE EFFECTS 4. DICTATION OF PRICES 5. DOMINANCE COMPETITION LAW SHOULD HAVE SURVEILLANCE OVER COMBINATIONS (OFTEN BEYOND A THRESHOLD LIMIT) REGULATION ON COMPETITION PERSPECTIVE

25. Copyright - Dr. S. Chakravarthy24 COMPETITION ADVOCACY THE COMPETITION AUTHORITY SHOULD BE Å ENABLED TO PARTICIPATE IN THE FORMULATION OF POLICIES AND REVIEWING OF POLICIES RELATING TO COMPETITION Å TO CREATE COMPETITION CULTURE Å TO ACT AS COMPETITION ADVOCATE

26. Copyright - Dr. S. Chakravarthy25 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

27. Copyright - Dr. S. Chakravarthy26 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.

28. Copyright - Dr. S. Chakravarthy27 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

29. Copyright - Dr. S. Chakravarthy28 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

30. Copyright - Dr. S. Chakravarthy29 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”

31. Copyright - Dr. S. Chakravarthy30 THANK YOU FOR YOUR KIND ATTENTION