class project competition law

8/8/2019 Class Project Competition Law

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Name Roll No

Aamir Khan 2

Anfal Shaikh 9Ankit Shah 11Ashish Agarwal 16Bhupendra Mehta 26Dhannya DevassyDimple Dave

3134

Enam Khan 37Gaurav Jirapure 46

Harshada Bombat 52

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Table of ContentsTable of Contents ............................................................................................................................. 2

Introduction ......................................................................................................................................3

Framing of Indias New Competition Law ......................................................................................5

First Phase: The Pre-Independence Laws .................................................................................... 6

Second Phase: Controlling Big Business ..................................................................................... 6

Third Phase: Economic Liberalization and the Enactment of a New Competition Law ............ .7

Comparison between MRTP Act, 1969 & Competition Act 2002 ................................................10

Indian Context of the Law ............................................................................................................. 11

Drawbacks of MRTP ACT1969 (Need of the Competition Law) .................................................12

Objective of the Competition Act ..................................................................................................15

Composition of Competition Commission of India .......................................................................24

Amendments in the Competition Act .........................................................................................27

Advantages of the Competition Act ...........................................................................................28

Shortcomings of the Competition Act: .......................................................................................29

Case study SAIL V/s Jindal Steel and Power (JSPL) .................................................................30

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Introduction

In the recent times, the Indian economy has seen reform and restructuring initiatives in diverse

facets and dimensions (This diversity alludes to the divergent mechanism design, processes and

instruments adopted for different utility/infrastructure facilities.) since mid 1980s. In context of

the globalisation, the emergence of multinational corporations, interdependence of economies,

and role of private enterprise in economic development, the global financial crisis is emerging as

a watershed in the regulatory and reform thinking. The past two decades have witnessed an

immense interest in competition law all over the world especially among the developing

countries. More than a hundred countries have enacted new competition laws during this period.

These enactments have a lot of similarity in their philosophy, content and approach. The new

competition laws take the protection of competition as an end in itself. They contain provisions

relating to the prohibition of anti-competitive agreements including cartels, abuse of dominant

position and scrutiny of mergers from a competition stand point and establish an independent

quasi-judicial body for an efficient enforcement of the law. The interest at the domestic level is

matched by developments at the international level. The Singapore WTO Ministerial Declaration

included competition issues within the framework of topics for further negotiations. Though

future negotiations within the WTO framework are stalled for the time being, many Regional

Trade Agreements (RTAs) have included competition provisions within their ambit. In addition

to these developments, there are informal mechanisms which strive for the convergence of

substantive and procedural provisions of domestic competition laws and encourage cooperation

in the field. The International Competition Network (ICN) is an example of this.

A large body of literature has emerged in the recent past focusing on the development dimension

of competition law and policy. A persuasive argument is advanced that there is no one size-fits-

all competition law which can be adopted by all jurisdictions. It is pointed out that competition

law should correspond to the level of development of a country. It may be recalled that the 1990s

marked sweeping economic liberalization policies in India. The hitherto economic policy of

command and control and heavy reliance on public sector gave way to a policy of liberalization,

privatization and a thrust on markets. One major objective of the new economic policy was to

reform the law relating to competition. The erstwhile Monopolies and Restrictive Trade Practices

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Act 1969 (MRTP Act) gave way to the Competition Act 2002 (the Act). These two statutes

in a way capture the essence of economic reforms in India.

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Framing ofIndias New Competition Law

An analysis of the Indian Competition Act from a developmental perspective needs to be

preceded by providing a history of the framing of Indian Competition law. One can discern three

distinct phases in this regard.

pg. 5

Pre-independence Laws:PRIVATE CAPITAL

Constitution (1950); IDRAct (1951); IPR (1956);MRTP Act, 1969; StateOwnership Reserved Listsand Licensing

POST 1991PRIVATE CAPITALand PPP

Private OwnershipReasonable return on invest.Economic regulation: TRAIAct,Electricity Act, AERI Act

Level playing fieldSingle window approach:FIPB, NHAI Act, SEZ Act.


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First Phase: The Pre-Independence Laws

Though two centuries of colonial rule had a deleterious impact on Indias economy, a small but

independent industrial base had emerged during its last phase. During the independence

movement, there was a consensus as to the nature and path of development to be pursued after

the achievement of political independence. The crucial role to be played by the state in

promoting economic development; rapid industrialization; prevention of foreign capital

domination; and growth with equity were some of the important aspects of this consensus. The

initial phase was characterized by the absence of a competition law or policy. It has been argued

that the above mentioned policies and legislations which were intended to achieve the principle

of equitable distribution of material resources and prohibition of economic concentration have

actually resulted in the concentration of the Indian industry.

Second Phase: Controlling Big Business

The second phase saw the unraveling of many political events that led to the enactment of more

legislation in the field of economic activity. An understanding of the political undercurrents is

highly useful in the analysis of the competition law that emerged. The sixties was a decade of

two wars, three Prime Ministers and two consecutive droughts for India. The economic

stagnation resulting from the decline in food production and the increase in defense expenditure

presented a severe foreign exchange crisis. To tide over this crisis, India had to depend on the

IMF and the World Bank. The prescriptions of the World Bank and IMF led to a series of

economic reforms in 1966. The devaluation of the Indian rupee was a major step in that

direction. But the reform process was short lived. Many reasons have been cited for the reversal

of reforms. The Fourth general elections in 1967 saw the majority of the ruling Congress greatly

reduced at the centre and the formation of opposition party governments in many crucial states.

Big businesses were treated with suspicion. Between 1964 and 1969 the government appointed

four committees to examine the affairs of big businesses. It was also followed by nationalization

of many key sectors of the economy. Major Banks were nationalized in 1969, followed by the

insurance sector in the same year and the coal sector in 1971.Emboldened by the popular support

for these decisions, the Congress party went for an early election and won decisively in 1971.

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The framing of Indias first competition law, the Monopolies and Restrictive Trade Practices Act

(MRTP Act) in 1969 has to be understood in this backdrop.

The prevention of the concentration of economic power to the common detriment; control of

monopolies; prohibition of monopolistic trade practices; and prohibition of restrictive trade

practices were the principal objectives of the MRTP Act. In order to control concentration of

economic power, the Act adopted a command and control approach. The MRTP Commission

was established to oversee the implementation of the Act. The Industry was not happy with its

implementation. It has been described by critics as one of the most damaging legislations in

modern Indian history. The economic liberalization policies adopted by the Government in 1991

led to major amendments to the MRTP Act.

Third Phase: Economic Liberalization and the Enactment of a

New Competition Law

The third phase in the development of competition law started in the year 1991. The massive

fiscal and balance payment crisis that climaxed in that year led to a series of economic reform

measures. The Industrial Policy 1991 announced many far reaching changes on the economic

front. Declaring that the policy of the government is one of continuity with change, the policy

announced a series of reforms in industrial licensing; foreign investment; foreign technologyagreements; public sector policy and the MRTP Act. The MRTP Act was identified as a major

impediment to economic growth. The economic reforms of 1991 had impact on many of the

command and control legislations of the early years of planning. As one commentator has put it,

the effect of these reforms was the transformation of the Indian state from an interventionist to

a regulatory state. Keeping pace with the reform process, the Central Government in 1999

announced the setting up of a commission to examine the relevance of the MRTP Act and to

suggest an updated competition law in line with developments taking place at the international

level. The High Level Committee on Competition Law and Policy (Raghavan Committee) found

that the MRTP Act was limited in its sweep and hence failed to fulfill the need for a competition

law in an age of growing liberalization and globalisation. It was noted that the MRTP Act, in

comparison to the competition laws of many countries, was inadequate to foster competition in

the market. The Committee recommended the scrapping of the MRTP Act and the enactment of

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a new competition law. It was expected that the enactment of a new law would prevent

international cartels from indulging in anti-competitive practices in India.

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Another reason advanced for framing of a new law was the expectation that memorandums of

understanding could be reached with countries like the U.S. where cartels were prevented from

operating by effective domestic competition laws.

On the basis of the recommendations of the Raghavan Committee, the Indian Parliament enacted

the Competition Act 2002 (the Act) replacing the MRTP Act. The Act deals with anti-

competitive agreements, abuse of dominant position and anti-competitive combinations. It

establishes an independent body, the Competition Commission of India (CCI) for the

enforcement of the provisions of the Act. The Act underwent major amendments in the year

2007. The creation of a Competition Appellate Tribunal to decide appeals against the orders of

CCI was one major change brought by this amendment.The amendments were necessitated by

the filing of a writ petition in the Supreme Court of India challenging certain provisions of the

Act. After a hiatus of seven years, provisions relating to anti-competitive agreements and abuse

of dominant position were notified in the month of May, 2009.

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Comparison between MRTP Act, 1969 & Competition Act

2002

SR.No MRTP Act, 1969 Competition Act, 20021 Based on the pre-reforms scenario Based on the post-reforms scenario2 Based on size as factor Based on structure as factor 3 Competition offences implicit or not defined Competition offences explicit and

defined4 Complex in arrangement & language Simple arrangement5 14 per se offences negating the principles of

natural justice

4 per se offences and all the rest

subjected to rule of reason.6 Frowns upon dominance Frowns upon abuse of dominance7 Registration of agreements compulsory No requirement of registration of

agreements8 No combinations regulation Combinations regulated beyond a

high threshold limit.9 Competition Commission appointed by the

Government

Competition Commission selected by

a Collegium (search committee)10 Very little administrative and financial

autonomy for the Competition Commission

Relatively more autonomy for the

Competition Commission11 No competition advocacy role for the

Competition Commission

Competition Commission has

competition advocacy role12 No penalties for offences Penalties for offences13 Reactive and rigid Proactive and flexible14 Unfair trade practices covered Unfair trade practices omitted

(consumer forum will deal with them)15 Does not vest MRTP Commission to inquire

into cartels of foreign origin in a direct

manner

Competition Law seeks to regulate

them

16 Concept of Group Act had wider import and

was unworkable

Concept has been simplified

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Indian Context of the LawExperience shows that the objectives of a competition law vary from state to

state and from time to time. The newly enacted competition laws of

developing countries tend to have two sets of objectives.

The first set can be classified as primary objectives which speak about

economic development, promoting efficiency, increasing consumer

welfare etc.

In addition, these laws tend to have a secondary set of objectives

which address the special developmental needs of the country in

question. For example, the South African law lists the promotion of

greater spread of ownership, in particular the ownership stakes of

historically disadvantaged persons as one of the secondary objectives.

Similarly, the Chinese Antimonopoly Law mentions safeguarding social

public interest and promotion of the healthy development of the

socialist market economy as its objectives.

In the Indian context, the ultimate objective of the competition law as

articulated by the Raghavan committee is the protection of the interest of

the consumer. Viewed in that light, competition policy should, according to

the Committee, become an instrument to achieve efficient allocation ofresources, technical progress and regulation of the concentration of

economic power.The economic development of the country is set as the

overarching goal of the Act. Keeping this in mind, the Act declares the

following as its objectives: prevention of practices having an adverse effect

on competition, promotion and sustenance of competition in the markets,

protection of the interests of consumers, and ensuring freedom of trade

carried on by participants in the markets in India. It is interesting to note

that the Indian Act sets as its goals only the primary objectives of

competition law and avoids the secondary objectives.The objectives of the

Act are in sharp contrast with the objectives of the MRTP Act, 1969. The

major objective of the 1969 Act was to ensure that the operation of the

economic system did not result in the concentration of economic power to

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the common detriment. The MRTP Act was, to put it differently, enacted to

further the directive principle contained in the Indian Constitution dealing

with the concentration of economic power whereas the Competition Act is

enacted to protect and strengthen the fundamental right to freedom of

trade. This shift in the focus from directive principles to fundamental rights

especially that which protects the corporate interest is the hallmark of most

of the post reform Indian legislations. Setting only the primary objectives as

the goals of the Act can have negative consequences from a developmental

perspective. Though preamble or long title is not an operative part of a

statute, they throw useful insights when it comes to the interpretation of the

provisions. Indian courts consult the preamble in case of an ambiguity. An

active judiciary plays a major role in shaping the jurisprudence in India. As

can be seen in the coming pages, there are many crucial provisions in the

Act which will be subject to judicial interpretation. The objective of promoting

static efficiency may be a handicap in the evolution of a competition

jurisprudence which sees competition law as a tool for development.

Drawbacks of MRTP ACT1969 (Need of the Competition

Law)

1. Command and Control Policy absolute

In the period following Independence of India, the policy of the government was more of

Command and Control of economic growth in the country. Hence laws, rules, regulations were

framed in accordance with the same. However, with change in economy, the law had to be

amended. In 1980, the government, with an Industrial Policy statement gave many concessions

to companies falling under MRTP Act- an important concession was raising limit for MRTP

companies from Rs 20 crore to Rs 100 crore at one stroke. In December 1985, government

permitted unrestricted entry of large industrial house falling under MRTP, to freely take-up

manufacture of 83 items. MRTP firms (i.e. companies having assets above Rs 100 crore} would

be considered on par with other companies and not require prior approval in delicensed

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industries. The 1991 amendment to the Act deleted the concept of MRTP Company and repealed

almost all provisions relating to their expansion.

The fact that the Act has been amended several times since 1969 in1980, 1982, 1984, 1985,

1986, 1988, 1991 shows that there are many lacuna in it and that it needs to be replaced

altogether by a new comprehensive law.

2. Growth Objective

The policy of the government right since Independence has been to pursue industrial growth

without concentration of industries in the hands of a few. However, the legislation to control

concentration of industries was enacted in 1969, nearly 20 years after launching planned

economic development. Within 3-4 years, the enthusiasm of government diluted as can be seen

from the relaxations granted for expansion and growth of large companies/business houses on a

variety of grounds such as priority industries, location in backward areas, exports etc. In the

1970s especially, government has seen the conflict between objectives of rapid growth and

prevention of concentration of economic power in private hands, and government has openly

given priority to growth objective.

3. Failed to cover all Aspects

With liberalization, came WTO agreements, relation to Foreign Investment, Intellectual Property

Rights, subsidies, anti-dumping measures.MRTP Act does not cover these aspects. Hence there

was a need of a new law covering all these aspects.

4. Lack of Awareness about the Act

The Provisions relating to unfair trade practices are covered by consumer protection Act, 1986,

which is highly publicized. Hence people in general, are more aware of it than the MRTP

commission which is situated only in New Delhi, and hence is not accessible to many. The

Consumers Protection Commission is more easily accessible.

5. Does not prohibit restrictive and unfair trade practices

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MRTP does not impose any penalties on unfair trade practices. Hence business houses/traders

take advantage of this situation. Hence a need arises to impose penalties to deter industries from

unfair trade practices.

6. Lack of independent powers

It did not have powers to impose penalties for breach of its directives. Its chief investigator, the

DG (I&R) did not have powers to even enforce attendance of a witness.

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Objective of the Competition Act

Objects to be achieved & Salient Features of the New Competition Regime:

The Competition Act has been designed as an omnibus code to deal with matters relating to theexistence and regulation of competition and monopolies. Its objects are lofty, and include the

promotion and sustenance of competition in markets, protection of consumer interests and

ensuring freedom of trade of other participants in the market, all against the backdrop of the

economic development of the country. However, the Competition Act is surprisingly, compact,

composed of only 66 sections. The legislation is procedure-intensive, and is structured in an

uncomplicated manner. The various Objectives of the Act are as follows

I. To check anti-competitive practices

II. To prohibit abuse of dominance

III. Regulation of combinations.

IV. To provide for the establishment of Competition Commission of India (CCI), a quasi-judicial

body to perform below mentioned duties:

Prevent practices having adverse impact on competition

Promote and sustain competition in the market

Protect consumer interests at large

Ensure freedom of trade carried on by other participants in the market

Look into matters connected therewith or incidental thereto.

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limits or controls production, supply, markets, technical development, investment of

provision of services;

shares the market or source of production or provision of services by way of allocation of

geographical area of market, or type of goods or services, or number of customers in the

market or any other similar way;

directly or indirectly results in bid rigging or collusive bidding, shall be presumed to

have an appreciable adverse effect on competition.

Bid Rigging or Collusive Bidding

It is an illegal agreement between two or more competitors. It is a form of price fixing and

market allocation and involves an agreement in which one party of a group of bidders will be

designated to win the bid.

E.g. Government construction contracts.

Cartelization and sharing of territories

The adverse effects of cartels or collusive agreements vary in degree depending on the nature of

the companies involved. It is the hard core cartels that are the cause of immediate concern for the

government. Agreements for sharing of markets or sources of production/supply by territory,

type, size of customer or any other way are also offensive. It includes an association of

producers, distributors, sellers, traders, or services providers who, by agreement amongst

themselves, limit, control or attempt to control the production, distribution, sale of price of, or,

trade in goods or provision of services.

Provided that nothing contained in this sub-section shall apply to any agreement entered into by

way of joint ventures if such agreement increases efficiency in production, supply, distribution,

storage, acquisition or control of goods or provision of services.

E.g. : Case on DGIR v/s Srichankra Tyres :

DGIR files a case against Srichankra Tyres as the Association of lorry owners was fixing freight

rates and not allowing members of association to charge price lower than that fixed by

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association to charge price lower than that fixed by association. This is a typical case of

Cartelling where a group of players come together and by agreement amongst themselves limit

or control trade, production, sale or purchase of goods and provision of services.

4. Any agreement amongst enterprises or persons at different stages or levels of the

production chain in different markets, in respect of production, supply, distribution, storage,

sale or price of or trade in goods or provision of services.

5. Nothing contained in this section shall restrict

a. the right of any person to restrain any infringement of, or to impose reasonable conditions,

as may be necessary for protecting any of his rights which have been or may be conferred

upon him under

(a) The Copyright Act, 1957

(b) The Patents Act, 1970

(c) The Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks

Act, 1999

(d) The Geographical Indications of Goods (Registration and Protection) Act, 1999

(e) The Designs Act, 2000

(f) The Semi-conductor Integrated Circuits Layout-Design Act, 2000

b. The right of any person to export goods from India to the extent to which the agreement

relates exclusively to the production, supply, distribution or control of goods or provision

of services for such export.

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2] ABUSE OF DOMINANT POSITION

The concept of dominant undertaking prevailing in the MRTP Act has been discarded.Dominant Position has been appropriately defined in the Act in terms of the position of strength,

enjoyed by an enterprise, in the relevant market, in India, which enables it to:

1. operate independently of competitive forces prevailing in the relevant market; or

2. affect its competitors or consumers or the relevant market, in its favor.

At this point it is worth mentioning that the Act does not prohibit or restrict enterprises from

coming into dominance. There is no control whatsoever to prevent enterprises from coming intoor acquiring position of dominance. All that the Act prohibits is the abuse of that dominant

position. The Act therefore targets the abuse of dominance and not dominance per se. This is

indeed a welcome step, a step towards a truly global and liberal economy.

Dominant position is abused when an enterprise imposes unfair or discriminatory conditions in

purchase or sale of goods or services or in the price in purchase or sale of goods or services.

According to section 4 of the act:

1. No enterprise shall abuse its dominant position.

2. There shall be an abuse of dominant position under sub-section (1),

If an enterprise.-

a. Directly or indirectly, imposes unfair or discriminatory

condition in purchase or sale of goods or service; or

price in purchase or sale (including predatory price) of goods or service,

For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of

goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or

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sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include

such discriminatory condition or price which may be adopted to meet the competition; or

b. Limits or restricts

production of goods or provision of services or market therefore; or

technical or scientific development relating to goods or services to the prejudice of

consumers; or

c. Indulges in practice or practices resulting in denial of market access; or

d. Makes conclusion of contracts subject to acceptance by other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection

with the subject of such contracts; or

e. Uses its dominant position in one relevant market to enter into, or protect, other relevant

market.

3) REGULATION OF COMBINATIONS

The Act is also designed to regulate the operation and activities of Combinations, a term which

contemplates acquisition, mergers, take over or amalgamations. Thus, the operation of the

Competition Act is not confined to transactions strictly within the boundaries of India but also

such transactions involving entities existing and/or established overseas. Herein again lies the

key to understanding the Competition Act. The intent of the legislation is not to prevent the

existence of a monopoly across the board. There is a realization in policy-making circles that in

certain industries, the nature of their operations and economies of scale indeed dictate the

creation of a monopoly in order to be able to operate and remain viable and profitable. This is in

significant contrast to the philosophy, which propelled the operation and application of the

MRTP Act, the trigger for which was the existence or impending creation of a monopolysituation in a sector of industry

The Act mandates that No person or enterprise shall enter into a combination which causes or is

likely to cause an appreciable adverse effect on competition within the relevant market in India

and such a combination shall be void.. The Act has made the pre-notification of combinations

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voluntary for the parties concerned. However, if the parties to the combination choose not to

notify the CCI, as it is not mandatory to notify, they run the risk of a post-combination action by

the CCI, if it is discovered subsequently, that the combination has an appreciable adverse effect

on competition. There is a rider that the CCI shall not initiate an inquiry into a combination after

the expiry of one year from the date on which the combination has taken effect. Combination

that exceeds the threshold limits specified in the Act in terms of assets or turnover, which causes

or is likely to cause an appreciable adverse impact on competition within the relevant market in

India, can be scrutinized by the Commission

Acquisition, merger or amalgamation would become Combination when:

Nature of Combination Group Status Criterion Value

(a) Acquisition by

enterprises

No Group Assets

In India World

over

>Rs. 1,000 Cr.

>US$500 million

(b)Acquisition by

individuals

Turn over In India World

over

>Rs. 3,000 Cr.

>US$1500 million

Mergers/ amalgamation Group Assets In India World

Over

>Rs. 4,000 Cr.

>US $ 2 Billion

Turn over In India World

over

>Rs. 12,000 Cr.

>US$ 6 Billion

Threshold limits that would invite the scrutiny are specified below:

For acquisition:

Combined assets of the firm more than Rs 3,000 crore (these limits are US $ 500 millions

in case one of the firms is situated outside India).

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The limits are more than Rs 4,000 crore or 12,000 crore and US $ 2 billion and 6 billion

in case acquirer is a group in India or outside India respectively.

For mergers:

Assets of the merged/amalgamated entity more than Rs 1,000 crore or turnover more than

Rs 3,000 crore (these limits are US $ 500 million and 1,500 millions in case one of the firms

is situated outside India).

These limits are more than Rs 4,000 crore or Rs 12,000 crore and US $ 2 billion and 6

billion in case merged/amalgamated entity belongs to a group in India or outside India

respectively.

Further, such combination, which causes or is likely to cause "appreciable adverse impact" on

competition, would be treated as void.

A system is provided under the Act wherein at the option of the person or enterprise proposing

to enter into a combination may give notice to the Competition Commission of India of such

intention providing details of the combination. The Commission after due deliberation, would

give its opinion on the proposed combination to approach the Commission for this purpose.

However, public financial institutions, foreign institutional investors, banks or venture capital

funds which are contemplating share subscription financing or acquisition pursuant to any

specific stipulation in a loan agreement or investor agreement are not required to approach the

CCI for this purpose.

Competition Advocacy

Perhaps one of the most crucial components of the Act is competition advocacy . Competition

advocacy creates a culture of competition. Intention is to help evolve competition law through

review of policy, promotion of competition advocacy, creating awareness and imparting training

about competition issues. For this purpose In line with the High Level Committee's

recommendation, the Act extends the mandate of the Competition Commission of India beyond

merely enforcing the law (High Level Committee, 2000).

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The Regulatory Authority under the Act, namely, Competition Commission of India (CCI), is

enabled to participate in the formulation of the country's economic policies and to participate in

the reviewing of laws related to competition at the instance of the Central Government. The

Central Government can make a reference to the CCI for its opinion on the possible effect of a

policy under formulation or of an existing law related to competition. The Commission will

therefore be assuming the role of competition advocate, acting pro-actively to bring about

Government policies that lower barriers to entry, that promote deregulation and trade

liberalization and that promote competition in the market place.

4) COMPETITION COMMISSION OF INDIA

The apex body under the Competition Act which has been vested with the responsibility of

eliminating practices having an adverse effect on competition, promoting and sustaining

competition, protecting the interest of the consumers, and ensuring freedom of trade carried on

by other participants in India, is known as the Competition Commission of India (CCI) --- the

successor to the MRTP Commission. CCI, entrusted with eliminating prohibited practices, is a

body corporate and independent entity possessing a common seal with the power to enter into

contracts and to sue in its name. The CCI is not merely a law enforcement agency, but would be

actively involved in the formulation of the countrys economic policies, advise the government

on competition policy, take suitable measures for the promotion of competition advocacy and

create awareness and imparting training about competition issues.

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Composition of Competition Commission of India

The Commission shall consist of a Chairperson and not less than two and not more than ten

other Members to be appointed by the Central Government: Provided that the Central

Government shall appoint the Chairperson and a Member during the first year of the

establishment of the Commission.

The Chairperson and every other Member shall be a person of ability, integrity and standing

and who, has been, or is qualified to be, a judge of a High Court; or, has special knowledge

of, and professional experience of not less than fifteen years in international trade,

economics, business, commerce, law, finance, accountancy, management, industry, public

affairs, administration or in any other matter which, in the opinion of the CentralGovernment, may be useful to the Commission.

The Chairperson and other Members shall be whole-time Members.

Jurisdiction

An enquiry or complaint could be initiated or filed before the Bench of CCI if within the local

limits of its jurisdiction the respondent\s actually or voluntarily resides, carries on business or

works for personal gain, or where the cause of action wholly or in part arises.

CCI has been vested with the powers of a civil court including those provided under

sections 240 and 240A of the Companies Act, 1956 on an "Inspector of Investigation" while

trying a suit, including the power to summon and examine any person on oath, requiring the

discovery and production of documents and receiving evidence on affidavits. CCI is also vested

with certain powers of affirmative action to act in an expedited manner. Civil courts or any

other equivalent authority will not have any jurisdiction to entertain any suit or proceeding or

provide injunction with regard to any matter which would ordinarily fall within the ambit of CCI.

Exclusions from Jurisdiction

Reasonable Rights under IPRs, etc. protected under Competition Act.

Agreements exclusively for exports exempted

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Acts taking place outside India

CCI has the power to enquire into unfair agreements or abuse of dominant position orcombinations taking place outside India but having adverse effect on competition in India,

provided that any of the below mentioned circumstances exists:

An agreement has been executed outside India

Any contracting party resides outside India

Any enterprise abusing dominant position is outside India

A combination has been established outside India

A party to a combination is located abroad.

Any other matter or practice or action arising out of such agreement or dominant position or

combination is outside India.

To deal with cross border issues, CCI is empowered to enter into any Memorandum of

Understanding or arrangement with any foreign agency of any foreign country with the prior

approval of Central Government.

Powers of CCI

The CCI will have the following powers:

To issue "Cease and Desist" Orders:

To grant such interim relief as would be necessary in each case.

To award compensation.

To impose fines on the guilty.

To order division of dominant undertaking.

Power to order de-merger.

Power to order costs for frivolous complaints

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In addition to the adjudication function, the CCI will have the roles of advocacy, investigation,

and prosecution and merger control.

The Statutory Regulatory Authorities can make reference to CCI for advice.

The proposed Law provides for the post of Director General (and a host of his deputies in

various places) to assist the Competition Commission in its inquiries. Unlike in MRTP Act, the

Director General will not have powers to initiate investigations suo motu.

Extension of the executive powers

The Act contemplates the extension of the executive powers of CCI by the appointment of a

Director General and as many other persons for the purpose of assisting it in conductingenquiries into contraventions of the provisions of the Act as well as conducting cases before the

Commission.

Penalties

In case of failure to comply with the directions of CCI and Director General or false

representation of facts by parties, penalties ranging from Rs 1lac to Rs 1 crore may be misused as

the case may be.

Execution of the order

So far the execution of the order is concerned, it is the responsibility CCI. However, in the event

of its inability to execute it, CCI may send such order for execution to the High Court or the

principal civil court, as the case may be.

POST-DECISIONAL OPTIONS

The aggrieved person may apply to CCI forreview of the order within thirty days from the date

of the order, provided that the below mentioned conditions are fulfilled:

An appeal is allowed by this Act

No appeal has been preferred

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Provision has been made for an appeal against any order or decision of CCI by any aggrieved

persons. An application for this purpose has to be made to the Supreme Court within sixty days

from the date of communication of the decision or order.

Amendments in the Competition Act

In March this year the government put forward the Competition (Amendment) Bill 2006,

which has been referred to the parliamentary standing committee on finance. The bill

proposes to amend no less than 42 of the 61 sections of the Competition Act, replacing 13 and

deleting 5 sections in their entirety, and introducing about 21 new sections. These changes not

only attempt to address the Supreme Courts objections, but also modify several of the

substantive provisions of the act dealing with anti-competitive practices.

Proposals of the amendment

1. A change proposed in Section 12 increases from one year to two years the cooling-

off period for which the chairman and members of the CCI are debarred from accepting

employment with any (private) enterprise that has been party to any proceedings before it.

2. Amendments to Sections 19 and 26 allow the CCI to act on information received, not

just a formal complaint.

3. There is a statement added to Section 32, explicitly allowing the CCI to pass orders

against acts of firms outside India that adversely affect competition in India. The original

phrasing seemed to suggest that the CCI could only inquire into such acts.

4. The bill also proposes to delete the ill advised clause that allowed the CCI to issue

temporary injunctions to restrain any party from importing goods.

5. The CCI has not been given powers of search and seizure, which are crucial in

obtaining evidence in cartel cases in Europe and the US, and are even available in Section

12(5) of the outgoing MRTP Act.

6. Section 21 of the act is to be amended so that when the CCI is asked by a statutory

authority to give its opinion on any decision that might infringe the Competition Act, the

authority is now required to record its response to the CCI opinion.

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7. Section 49, which allowed the central government to seek the CCIs opinion on

formulating a policy on competition, is now to be extended to state governments.

Another measure is in the transition arrangements for dealing with cases pending before the

MRTP Commission (MRTPC). The Competition Act originally envisaged their immediate

transfer to the CCI. The new bill sensibly proposes to give the MRTPC two years to clear the

backlog, so the CCI can concentrate on the Competition Act. But no change is proposed in the

clauses transferring ongoing investigations for these MRTP cases to the CCI

Additional proposals

1. Establishment of a Competition Appellate Tribunal (CAT) to hear appeals against the

orders of the CCI and adjudicate compensation claims arising out of the finding of the CCI ororders of the tribunal.

2. Age limit of chair person and other members restricted to 65 years.

Advantages of the Competition Act

1) The foremost objective of the act is to create an environment conducive to

competition. The act does not condemn or oppose the existence of a monopoly in the

relevant market.

2) The operation of the act is not confined to transactions strictly within the boundaries

of India but also such transactions involving entities existing or established overseas.

3) Explicit definitions and criteria have been specified in order to access whether a

practice has an appreciable adverse effect on competition.

4) It is the intention of our legislators that provisions of the act in its extant form should

not be considered to be immutable and unchangeable. The intention is promotion of

competition advocacy, creating awareness and imparting training about competition

issues.

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Shortcomings of the Competition Act:

1) It is a body to which the appeals lie and not an investigative agency that proactively

goes and seeks out industrial monopolistic practice. As the executive body iscontemplated at present, it is likely to be a haven for senior bureaucrats, businessmen and

technocrats enjoying positions of sinecure.

2) There is a lack of mandatory provision compelling persons or entities whether public

or private to approach the commission that is compounded by the corresponding logistical

limitations of the commission to be able to take cognizance on its own motion of every

malpractice in the economy.

3) The IPR laws have overriding powers over the Competition Act in matters related to

competition abuses.

4) The act provides for exemptions to mergers and abuse of dominance on grounds like

economic development and public interest and in the absence of any clear

definition/criteria the relevant provisions would be open to varying interpretations.

5) The provisions in context of the autonomy of the CCI mainly aim at keeping a check

on CCIs functioning by limiting its independence.

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Case study SAIL V/s Jindal Steel and Power (JSPL)

Introduction

The questions regarding interpretation of the recently enacted Competition Act and exercise of

jurisdiction by CCI and procedure thereof, has arisen in wake of JSPL filing a complaint with

CCI in the year 2009 challenging the status of SAIL as the sole supplier of railway boogies to

Indian Railways. JSPL alleged that the exclusive agreement between the government and the

Railways was anti competitive in nature and is abuse of dominant position.

Background of the case

Naveen Jindal, Executive Vice Chairman & Managing Director of Jindal Steel and Power ltd. A

company which has given a sterling performance during the financial year 2003-2004 its net

profit has more than doubled by 110% to Rs.305.46 crores on an increased turnover of

Rs.1430.41 crores. Naveen Jindal has been trying since 1998 to get a piece of the Rs. 4,000 crore

railway line contract that the Railways needs every year to lay new tracks and replace old ones

across the country. He has even spent Rs. 1,000 crore to set up a mill at his Chhattisgarh steel

plant in 2000 only to make these rails. But the mill, which has an annual capacity of 750,000

tones of rail steel, has been lying almost idle since 2003 because every year the order goes to

SAIL.

In 1998, the Railways came out with an advertisement, inviting entrepreneurs to set up facilities

for manufacture of rails. JSPL claimed that it would set up the plant on an understanding with

the Railways that the contracts to supply tracks would be open for competition. Now it claims

the Railways backtracked on that promise. But still it is not clear that how far is this true. Jindals

case here is considerably weaker because it does not have a signed agreement with the Railways.

One thing is clear that SAIL cannot fulfill 1,000 km worth of tracks that India plans to lay every

year. Indian Railways lays only 230 km of tracks a year which is very slow. And SAIL alone

cannot meet the need of Indian Railways.

The Railways requirement which was recommended by the Justice Garg Committee that inquired

into a train accident in 1998 due to faulty rails was to use RH degasser technology for stronger

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rails; and which JSPL used tank degassing technology. And hence in 2003, the Railways signed

an exclusive agreement with SAIL.

In 2005 Railways Research Designs and Standards Organisation (RDSO) inspected JSPLs rail

mill and later in 2008 approved it. The company installed the RH degasser technology at its mill

just to make sure all ends are taken care of.

This matter is now with the Competition Commission of India (CCI) since December 2009. It is

concerned with an exclusive arrangement between the Indian Railways and the Steel Authority

of India Limited (SAIL) for the supply of rails to Indian Railways. This arrangement was

challenged by Jindal Steel and Power Limited (JSPL) before the CCI as being violative of the

Competition Act 2002 (amended Competition Act).JPSL had complained against the agreement

between SAIL and Indian Railways for exclusive supply of rails alleging it to be monopolistic.

JPSL alleged that although they too manufacture rails Indian Railways buy rails only from SAIL

which is anti-competitive.

The exclusive agreement between Railways and SAIL does look like an entry barrier for other

players and thus is against the provisions of the Competition Act.

Initially, SAIL had filed an appeal to the COMPAT on the passage of the CCI's order directing

the Director General to investigate into the exclusive arrangement. Allowing such appeal, the

COMPAT held that "any order, decision or direction of the CCI" was appealable under section

53A of the Competition Act & not only the orders under the sections listed in section 53A.

An appeal against an order, decision or direction under Section 26(1) of the Competition Act

would not be maintainable held the Supreme Court. Clearing the major blockade in effective

functioning of CCI, Apex Court full bench comprising Chief Justice SH Kapadia, Justice KS

Radhakrishnan and Justice Swatanter Kumar held that appeal against investigation by CCI under

section 26 (1) mentioned that COMPAT had erroneously interpreted Section 53 A(1) of theCompetition Act to hold that it had jurisdiction to entertain appeals against any direction issued

or decision made by the CCI. The bench was also of the opinion that the CCI was expected to

record some reasons as to the existence of a prima facie case. Partially allowing an appeal, the

Supreme Court also held that the CCI was a necessary party in an appeal filed before the

COMPAT and further observed that the preliminary enquiry has to be completed in a time-

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bound manner within 60 days. Further, the court directed that report by Director General should

be submitted in not more than 45 days.

Supreme Court on 09.09.2010 delivered the first and a land mark judgment that holds that no

appeal can be filed against an order of Competition Commission of India (CCI) directing

investigation into a complaint received by it. he judgment came in context of a dispute between

Jindal Steel and Power Limited (JSPL) and Steel Authority of India Limited (SAIL) which later

turned into virtually a dispute between Competition Commission of India (CCI) and Competition

Appellate Tribunal (COMPAT).

Addressing the concerns of SAIL as to damage or harm to reputation of the entity against which

investigations are initiated by CCI, the Court held that confidentially as envisaged under

section 57 of the Act should be maintained completely.

This decision may set the tone of competition law jurisprudence in India and hopefully in a

constructive and efficient manner.

The matter is the first major litigation in India regarding competition law in India and is set to

decide the course of competition law discourse in India for coming year.

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Competition Commission of India -

o Central Government may, by notification, appoint, a Commission to be called the

Competition Commission of India.

o The Commission shall consist of a Chairperson and not less than two and not more than

ten other Members to be appointed by the Central Government

Director General and Registrar

o The Director General will investigate the complaints/references on receipt of orders from

Commission and then submit his report to Commission. He will also conduct the cases

before CCI.

o The Director General cannot conduct investigation suo motu.

o DG will be appointed by Central Government.

o MRTP Commission will be abolished.

o Chairman and members will be paid three months pay as compensation. Staff will go

back to parent cadre.

o Cases pending in respect of Monopolistic Trade Practices or Restrictive Trade Practices

will be transferred to Competition Commission.

o All cases of Unfair Trade Practices will be transferred to National Commission

constituted under Consumer Protection Act.

o National Commission can transfer the cases to State Commission.

o Cases in respect of disparaging of goods of MRTP Act] will be transferred to

Competition Commission.

o Investigation pending with Director General of Investigation and Registration [DGIR]

will be transferred to Competition Commission/National Commission under Consumer

Protection Act, as applicable.

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o Other cases, if pending, will abate.

o The purpose of the Competition Act is to create an environment conducive to

competition. However, in a significant departure from the letter and spirit of the MRTP

Act, the Competition Act does not categorically decry or condemn the existence of a

monopoly in the relevant market.

o Section 4 enjoins that no enterprise shall abuse its dominant position.

o Dominant position is the position of strength enjoyed by an enterprise in the relevant

market which enables it to operate independently of competitive forces prevailing in the

market or affect its competitors or consumers or the relevant market in its favour

o Dominant position is abused when an enterprise imposes unfair or discriminatory

conditions in purchase or sale of goods or services or in the price in purchase or saleof

goods or services.

o There is also abuse of dominant position when an enterprise limits or restricts production

of goods or services or Technical color scientific development.

o The Competition Commission, either on its own motion, on receipt of complaint or on a

reference made to it by the Center or a State Government may enquire into any alleged

contravention regarding the nature of an agreement which is suspected to be inherently

anti-competitive or the abuse of dominant position.

o The Commission would be required to be supported by a full-fledged research

department, the members of which would be entrusted with the responsibility of

continuously reviewing economic trends

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o Thus, the Commission has the power to enquire into unfair agreements, abuse of

dominant position and combinations even in situations where an agreement has been

executed outside India if it is of the view that there is, or there is likely to be, appreciable

adverse effect on competition in the relevant market in India.

o The Commission has been vested with the powers of a civil court while trying a suit,

including the power to summon an examine any person on oath, requiring the discovery

and production of documents and receiving evidence on affidavits.

o The Act gives the Commission the power to call upon experts in any relevant field to

assist in any enquiry or proceeding.

o The Commission is also provided with the authority to review its own orders.

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