COMPETITION ACT,2002 Presented by: Lakshmi Arun (Assistand Director) C R Pal (Assistant Education Director)

ORIGIN Article 19(1)(g) of the Constitution of India Article 38 of the Constitution of India Article 39 of the Constitution of India Article 301 of the Constitution of India

PREAMBLE To prevent practices having adverse effect on competition To promote and sustain competition in markets To protect the interests of consumers To ensure freedom of trade carried on by other participants in markets in India.

CREDIBLE COMPARTMENT OF COMPITITION ACT, 2002 A NTI-COMPITITIVE AGREEMENT A BUSE OF DOMINANT POSITION C OMBINATION A DVOCACY

MEANING OF COMPETITION Competition in the market means sellers striving independently for buyers’ patronage to maximize profit (or other business objectives). A buyer prefers to buy a product at a price that maximizes his benefits whereas the seller prefers to sell the product at a price that maximizes his profit.

BENEFIT OF COMPETITION A LLOCATIVE EFFICIENCY P RODUCTIVE EFFICIENCY D YNAMIC EFFICIENCY W IDER CHOICE TO CONSUMER A FFORDABLE PRICE Q UALITATIVE PRODUCT

ANTI-COMPETITIVE AGREEMENT HORIZONTAL AGREEMENTVERTICAL AGRREMENT Cartel Bid Rigging Price Fixing Limiting output Market Sharing Tie-in Arrangement Exclusive Supply Agreements Exclusive Distribution Agreements Resale Price Maintenance

CASE STUDY – ANTI COMPETITIVE AGREEMENT Subject: Cartelization by Cement Manufacturers’ Association (CMA) Information was filed under Section 19 of the Competition Act 2002 against 11 Cement manufacturing companies against alleged violation of Section 3.

The Facts Parallel and co-coordinated behavior of Cement Companies on price, dispatch and supplies in the market. The cement companies have not utilized the available capacity so as to reduce supplies and raise prices in times of higher demand.

The observation of the commission The Commission has also observed that the act of these Cement Companies in limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country.

The decision The commission slapped a penalty of more than 6000 crores on 11 cement manufacturing companies. The contravening Cement Manufacturers had been directed to deposit the penalty amount within 90 days. They have also been directed to ‘cease and desist’ from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market. CMA has been asked to disengage and disassociate itself from collecting wholesale and retail prices through the member cement companies and also from circulating the details on production and dispatches of cement companies to its members.

Some questions for discussion 1. What is the type of agreement that has been entered into between CMA? 2. How do we decide that the agreement between CMA is anti competitive?

The Analysis The agreements between CMA is horizontal. The agreement is anticompetitive under Section 3(3) as it limits production, supply etc of goods into the market.

ABUSE OF DOMINANT POSITION Dominance refers to a position of strength which enables an enterprise to operate independently of competitive forces or to affect its competitors or consumers or the market in its favour. Abuse of dominant position includes: Imposing unfair conditions or price, Predatory pricing, Limiting production/market or technical development, Creating barriers to entry, Applying dissimilar conditions to similar transactions, Denying market access, and Using dominant position in one market to gain advantages in another market.

Case study – Abuse of Dominance The information was filed under Section 19(1)(a) of the Competition Act, 2002 (“Act”) by Belaire Owners’ Association (“Informant”) against the three respondents which are DLF, Haryana Urban Development Authority (“HUDA”) and Department of Town and Country Planning, Haryana(“DTCP”).

The contentions In place of 19 floors with 368 apartments at gurgaon, which was the basis of the Informant booking its respective apartments 29 floors have been constructed by DLF, unilaterally. Consequently, not only the areas and facilities originally earmarked for the apartment allottees were substantially compressed, but the project has also been abnormally delayed without providing any reasons to the Informants whatsoever.

The commission analyzed four crucial issues i. Do the provisions of Competition Act, 2002 apply to the facts and circumstances of the instant case? (This agreement was entered into before setting up of the commission or before enforcement of Section 4) ii. What is the relevant market? iii. Is DLF dominant in the above relevant market, in the context of Section 4 read with Section 19 (4) of the Competition Act, 2002? iv. In case DLF is found to be dominant, is there any abuse of its dominant position in the relevant market by the above party?

The Decision of the commission DLF contended that Agreement would not fall under the jurisdiction of the Commission as the Agreement entered into between DLF and the allottees was before setting up of the Commission and before section 4 of the Act was enacted. The Commission however held that the Act applies to all the existing agreements and covers those also which though entered into prior to the coming into force of Section 4 but sought to be acted upon now thereby denying the contention of DLF.

The decision of the commission DLF further contended that as sale of an apartment can neither be termed as sale of “goods” nor sale of “service” Section 4(2) (a) (ii) of the Act is not relevant and applicable in the present case as the same can be invoked only when there is purchase or sale of either goods or service. The Commission however rejected this contention by relying on several Supreme Court judgements wherein it has time and again held that housing activities undertaken by development authorities are a “service” and are covered within the definition of “service” given in Section 2(o) of the Consumer Protection Act, 1986.

The decision of the Commission As regards relevant market the commission held that ‘Gurgaon’ the relevant geographical market. As regards dominance the commission held that DLF holds dominant position as it is fully capable of operating independently of competitive forces in the relevant market.

The decision of the commission As regards abuse of dominance, the commission held that DLF has abused its dominance because of its unilateral decisions, without the consent of allottees with respect to construction of floors, change of lay out plans, impostion of unfair conditions on allottees etc.,

The penalty Keeping, in view the totality of the facts and circumstances of the case, the Commission passed an order imposing a penalty at the rate of 7% of the average of the turnover for the last three preceding financial year (i.e. Rupees Six Hundred and Thirty Crores) on DLF.

COMBINATION

ADVOCACY The major tasks for the Commission under advocacy functions were to: Spread awareness about Competition Act and the CCI among various stakeholders. Reach out to all the stakeholders including the consumers, the Government departments, industry organizations etc. through various Seminars, Workshops and Symposiums to make them aware of the need and beneficial role of competition. Sensitize the stake-holders about nuances of competition law, to facilitate competition audit of their respective laws on different subjects. Take up the issues of National Competition Policy

ROLE OF COMPANY SECRETARY Appearance before CCI Appearance before CAT Acting as an Expert/Advisor

CASE STUDY Anti-Competitive Aggrement(Cartel)=Cement Manufacturer Association Abuse of Dominant Position=DLF Ltd.

THANK YOU Disclaimer Clause: Views expressed in this presentation views of the author do not necessary reflect those of the Institute.