awareness session on cci (competition commission of …

AWARENESS SESSION ON CCI

(COMPETITION COMMISSION OF INDIA)

& THE COMPETITION ACT, 2002

CCI Awareness Module 1.0

[I]

[II]

[III]

• The Objective of Competition

Commission of India [CCI]

• Overview of The Competition

Act, 2002

• Composition of CCI

• Cartels.

• Bid-Rigging.

• Combinations.

• Leniency.

[1/18]CCI

• Anti Competitive Agreements.

• Abuse of Dominant Position.

• Inquiry Process.

• Powers of CCI.

• Orders by CCI.

What ??? Why ???

What is Competition Act??

What is Competition Commission??

Scope /Applicability??

Is it applicable to HMSI??

Is it important to HMSI ??

Who are responsible officers ??

How much is the Penalty for non-

compliance??

Risk of negative publicity of company’s

brand image in market..

How to Better it & Outcome?? HMSI Situation ???

Adequate Training in identifying

Potential Risk Areas.

Guiding where there may be doubt of

possible breach of Competition rules.

By linking to Human Resource’s and

Disciplinary policy and applying in the

appraisal cycle for awareness of

existing compliance breaches.

Are associates aware of the

Competition Act regulations??

Are we prepared for future risk of non-

compliance??

Where all we need to be careful of non-

compliance under the Act??

Do we need to re-work on the existing

business practices/polices in related

areas??

Compliant under Competition Regulations, Rules & Act

CCI [2/18]

WHAT ACT SAYS ..??

Fair Competition and Protecting

Market against Anti Competitive Practices.

It prohibits Abuse of Dominant

Position where it cause Appreciable Adverse

Effect on Competition (AAEC).

LET US KNOW THE ACT ...

1. Appreciable Adverse Effect on

Competition;

2. Interests of Consumers;

3. Freedom of Trade;

To Check Actions:-Id

ea

l sit

uati

on

[3/18]

Overview ObjectiveChapters Fundamentals of CCI

CCI

List of Chapters

/ Key Impact

Relevance

Chapter Title Relevance

I Preliminary Low

IIProhibition of Certain Agreements, Abuse of Dominant Position & Regulation of Combinations

High

III Competition Commission of India Low

IVDuties, Powers and Functions of Commission

High

V Duties of DG (Director-General) Low

VI Penalties High

VII Competition Advocacy Low

VIII Finance, Accounts and Audit Med.

VIII A Competition Appellate Tribunal Med.

IX Miscellaneous Med.CCI-Selection of Chairperson and other members of the commission Rules, 2003

Med.

CCI- Lesser Penalty Regulations, 2009 Med.

CCI-Procedure for engagement of experts and professional rules, 2009

Med.

CCI-Competition Appellate Tribunal Procedure, 2011

Med.

Medium Impact

High Impact

Low Impact

[4/18]

Overview ObjectiveChapters

CCI

Fundamentals of CCI

1. Predatory Pricing :

A predatory price means a price which is below the cost with a view to reduce

competition / eliminate the competitors.

2. Cartels :

An Association of producers, sellers, distributors, traders, or service providers who, by

agreement Limit, Control, the Production, Distribution or Sale in goods or

Provision of Services.

3. Bid Rigging :

Agreements b/w Competitors or Enterprises engaged in Identical or similar

production or trading of goods or provision of services that have the effect of

eliminating or reducing competition.

Inquiry Into

Practices

The Competition Act Regulates following

areas of Conduct:-

1. Anti Competitive Agtrs. & Cartels

2. Abuse of Dominant Position; and

3. Combinations (Mergers, Acquisitions

& Amalgamations)

[5/18]


CCI

Fundamentals of CCI

[6/18]

Quoting of unusually higher rates than previous tenders;

Heightened frequency of calls and SMS exchanged between bidders prior to the bid;

Exchange of sensitive information prior to the bid;

Common mistakes in tender forms such as typographical errors;

Common patterns in the bidders price increase despite different cost of production,

taxes and so on;

Consecutive serial numbers for demand drafts;

1. Price Fixing..2. Creation of entry barriers..3. Discount Control …4. Deliberate Reduction in Output..5. Allocation of Markets..6. Bid-Rigging..7. Tie-in sales..8. Predatory Pricing..9. Geographical Limitation etc…

COMMON ANTI-COMPETITIVE ACTIONS ...

Exploitation of Market in Bidding


CCI

Fundamentals of CCI

[7/18]

Section 3:- Anti Competitive Agreements :-

No enterprise or association of enterprises or person or association of persons shall enter into any

agreement in respect of Production, Supply, Distribution, Storage, Acquisition or Control of goods or

Provision of Services which may cause AAEC.

3(3) Any agreement between enterprises or associations of persons, including cartels, engaged in identical or similar

trade of goods or provision of services, which :-

a. Directly or indirectly Determines Purchase or Sale Prices b. Limits or controls production, supply, markets, technical development, investment or

provision of services; c. Shares the market or source of production or provision of services by way of allocation

of geographical area of market;

d. Directly or indirectly results in bid rigging or collusive bidding shall be presumed to have AAEC.

3(4) Any agreement amongst enterprises or persons at different stages or

levels of production chain in different markets in respect of

production, supply, distribution, storage, sale or price of, or trade in goods or provision of services including:-

a. Tie-in arrangement;

b. Exclusive Supply Agreement;

c. Exclusive Distribution Agreement;d. Refusal to Deal;e. Resale Price Maintenance

Overview Chapters

Key Chapters

CCI

Objective Fundamentals of CCI

3(2)

[1/18]

Section 3:- Anti Competitive Agreements :-

No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of

production, supply, distribution, storage, acquisition or control of goods or provision of

services, which causes or is likely to cause AAEC.

Any agreement amongst enterprises or persons at different stages or levels of production chain in different markets in respect of production, supply,

distribution, storage, sale or price of, or trade in goods or provision of services :-

a. Tie-in arrangement;

b. Exclusive Supply Agreement;

c. Exclusive Distribution Agreement;d. Refusal to Deal;e. Resale Price Maintenance

Horizontal Agreements

Price-fixing

Limiting the production / supply

Allocation of market

Bid Rigging

Tie-in Arrangement

Exclusive Distribution Agreement

Exclusive Supply Agreement

Refusal to Deal

Resale Price Maintenance

1

1r

A purchaser is required to purchase any other goods as a condition of purchase;

Restriction on purchaser to deal with the goods of the seller

Restriction on Supply of goods or allocate any area or market for sale of goods;

Fixation of

Any restriction from or to whom goods are bought or sold;

Vertical Agreements

PROHIBITORY AGREEMENTS

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Overview ObjectiveChapters Fundamentals of CCI

CCI

1.2.

S.3(3)

S.3(4)

RPM

[9/18]

Section 4:-When an enterprise uses itsdominant position in therelevant market in anexclusionary or/and anexploitative manner.

FACTORS DETERMINING DOMINANT POSITION

• The Size and resource of the enterprise.

• Economic Power of the enterprise.

• Dependence of Consumers on the enterprise.

• Extent of Entry & Exit Barriers in the Market.

• Market Structure and size of the Market.

Bajaj Auto Ltd11.88%

H-D Motor Company India Pvt Ltd0.01%

Hero MotoCorp Ltd35.34%

Honda Motorcycle & Scooter India (Pvt) Ltd

27.67%

India Kawasaki MotorsPrivate Ltd0.01%

India Yamaha Motor Pvt Ltd3.40%

Mahindra Two Wheelers Ltd0.00%

Piaggio Vehicles Pvt Ltd0.37%

Royal Enfield (Unit of Eicher Ltd)3.39%

Suzuki Motorcycle India Pvt Ltd3.75%

Triumph Motorcycles (India) Pvt Ltd

0.00%

TVS Motor Company Ltd14.17%

UM Lohia Two Wheelers Pvt Ltd0.00%

Two Wheelers


CCI

Fundamentals of CCI

[10/18]

Chairperson7 members

Economic Div.

Combination Div.

Anti-Trust Div.

Legal Div.Investigation

Div.Secretariat DG office

ADMINISTRATIVE MACHINERY

Chairperson : By Central Govt. + Selection

Committee Panel

Selection Panel : CJI, Secretary-MCA,

Sec. ML&J+2 Experts in field-Finance,

Accounts

Member Member Member Member Member Member


CCI

Fundamentals of CCI

[11/18]

Dealership Agreement

GPA

Business Meets

Meeting with Trade

Associations

Common associations –SIAM / FADA

Inter-office Communications through email

etc.

General Discussions on Prices fixation-

Suppliers

Review of existing Business Practices

Review of Business Policies /

SOP’s

Email/ Communicatio

n Check

High Alert when sharing Price sensitive

Info.

Head Evaluations

CCI may call President, Director,

Operating heads, Div. Heads.

CCI may call for related files, Co. BL, P&L A/c

etc. financial records to investigate.

Any statement recorded during

investigating is on oath

The Competition Act does not define the

term ‘Related Company’. The CCI

recognises the single economic entity

doctrine (SEE Doctrine).

ATTENTION POINTS :-CARE FOR ASSOCIATES WHEN DEALING WITH

TRADE ASSOCIATIONS1 Past, current or future prices ?

2 Pricing policy and actual costs of individual enterprise ?

3 Possible increase or decrease in prices ?

4 Bidding prices for project ?

5 Collusive tendering (bid rigging) ?

6 Standardisation of credit and trade terms ?

7 Control of Production ?

8 Division or allocation of markets ?

9 Select customers to deal or not to deal?

10 Control of supply in the market ?


CCI

Fundamentals of CCI

[12/18]

PENALTY CLAUSE

S.27 : The commission can impose a penalty of not

more than 10 per cent of Avg. turnover for the last 3

preceding financial years.

In case of Cartel a penalty of 3 times its profits for

each year which ever is higher.

Fx. Enterprise Solutions India Pvt Ltd

and Ors V Hyundai Motor India Ltd – CCI

Penalised Hyundai India for implementing a

Discount Control Mechanism.

Fined Rs.12.5 million

CCI Probes allegations of anti-

competitive conduct by Maruti

Suzuki

RPM : Resale Price

Maintenance

Appeal to National Company Law Appellate Tribunal- U/s 53A.


CCI

Fundamentals of CCI

[13/18]

Don’t advise or require that members set particular prices or

production targets for their products

Don’t impose terms and conditions on members for selling their

products

Don’t help members in dividing up their sales territories by either

geographic areas, types of customers or types of products or any

other criteria

While collecting information from members, make sure that no

sensitive information, which may affect competition, if being shared

Don’t coordinate or facilitate collusive tendering by members

Don’t organise or support a boycott by members against targeted

businesses or individual

Don’t mandate membership of the Association or a No Objection

Certificate from the Association for Operating / dealing with other

players in the market

Don’t set up rules or codes that restrict or reduce competition among

members.


CCI

Fundamentals of CCI

[14/18]

BENEFITS OF COMPLIANCERISK OF NON-COMPLIANCE

Enhancement of Reputation and goodwill

Early Detection of Violation

Helps create a Culture of

Compliance

Liability of Officer Bearers Individually / Personal Liability

Notice to Cease and Desist

Heavy Penalties, Loss of Reputation and High Legal Cost


CCI

Fundamentals of CCI

Compliance Checklist - 1

[15/18]CCI

Compliance Checklist

[16/18]

SUMMARY …

a. Determination of selling price jointly..

b. Determination of Discounts..

c. Exchange / sharing of price related

conditions, discounts, future prices, profit

margins..

d. Exclusion conditions of certain

customers..

e. Allocation of markets..

f. Fixation of selling, production quotas,

production plans b/s competitors..

g. Multiple bids for opening..

h. Restriction on competitors to

promote/sell products..

i. Standardisation of contracts with

competitors to restrict new entrants..

j. Exchange of confidential business

information..

CCI

AVOID

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Compliance Checklist - 2

CCI

[18/18]

Compliance Checklist

CCI

WRITTEN COMMUNICATIONS.. AVOID

Use of Misleading Language..

Use of exaggerated statements not

meant for actual results..

ABUSE OF DOMINANCE.. AVOID

Use of Unfair / Discriminatory

conditions in purchase / sale;

Condition of Denial of Market access

Thank-You

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