Competition Law In India CMA PRANAB KR.CHAKRABARTY

COMPETITION LAW IN INDIA The Monopolies and Restrictive Trade Practices Act The liberalized economy post 1991 The Competition Act, 2002/2007 Enforcement functions from May 2009 Combination review from JUNE,2011

OBJECTIVE OF COMPETITION LAW Preamble To prevent practices having an 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.

DUTIES OF THE COMMISSION Prohibits anti-competitive agreements (S 3) Prohibits abuse of dominant position (S 4) Regulates combinations (S 6) Mandates Competition Advocacy (S 49) Advisory (S-21)

WHAT IS AN AGREEMENT Defined under Section 2(b) of the Competition Act, 2002, Which includes any : - Arrangement – Understanding – Action in concert Whether or not – In writing; - Intended to be legally enforceable

Concept of relevant Market RELEVANT GEOGRAPHICAL MARKET RELEVANT PRODUCT MARKET

ENTERPRISE Section 2(h) defines ‘ Enterprise’. Includes: Person or Department of Government Engaged in any activity relating to production, storage, supply, distribution, acquisition, or control of articles or goods or provision of services etc. Excludes: Sovereign Functions viz. atomic energy, currency, defence and space.

Anti-Competitive Agreements - Horizontal Agreements (Sec. 3(3) ) – cartel, bid rigging etc. – Vertical Agreements, Section 3(4) – exclusive supply , exclusive distribution tie in arrangement etc.

Exception Copyright Act, 1957; Patents Act, 1970; Trade and Merchandise Marks Act, 1958 Trade Marks Act, 1999; Geographical Indications of Goods (Registration and Protection) Act, 1999; Designs Act, 2000; Semi-conductor Integrated Circuits Layout-Design Act,2000

Abuse of Dominance Dominance is not anti-competitive per se Abuse of dominance is prohibited Abuse of dominant position by an enterprise detailed in Section 4 Exception not available in Section 4.

Process of enquiry Initiation of inquiry – Suo-motu On receipt of an information, on receipt of a reference from the Central Government/ State Government/ statutory authority. Decision of the Commission Prima facie view Director General to investigate and report Final order

Combinations Review: Key Features What is a Combination? Acquisition (of shares, voting rights, assets or control) or merger or amalgamation, where the value of assets or turnover of combining parties exceed the thresholds detailed in the Act. Mandatory notification regime applicable from June 1,2011 De minimis exemption for target enterprises. In three cases of phase II investigations structural remedies have been ordered

Coverage of the Act All enterprises - whether public or private, Government Departments except when engaged in discharge of sovereign functions: Currency, Atomic energy, Space and Defence specifically indicated Level Playing Field - no discrimination between domestic and foreign, between public sector and private sector, and between small and large enterprises . Extra-territoriality - Powers to inquire into conduct taking place outside India but having effect on competition in India ( Section 32)

Competition Act- remedies Temporary restraint Cease and desist - directing parties to discontinue and not to repeat anti-competitive acts Penalty - up to 10% of 3 years average turnover; in case of cartels - penalty 10% of turnover or three times of profit of each year of continuance of conduct, whichever is higher. Modification - order to modify agreement  Order Division of Enterprise – To ensure that a dominant enterprise does not abuse its position. Compensation claim – Only before COMPAT, after CCI decision Fines and Prosecution – 10 crores/25 crores/ 3 year imprisonment for non-compliance of Commissions order.

Remedies Classified Preventive measures (Advocacy, Advisory) Punitive measures (Monetary penalties, fines) Remedial measures (Cease and desist, modification of agreements) Compensatory measures (Compensation to victim only by COMPAT) Any other remedy Commission deemed fit.

COMPAT Tribunal appointed by the Central Govt. The Central Govt./State Govt./Local authority or any person aggrieved by any decision of the commission may appeal before the COMPAT.

ADVOCACY & COMMUNICATION Initiation of inquiry – Suo-motu On receipt of an information, or - On receipt of a reference from the Central Government/ State Government/ statutory authority. Decision of the Commission Prima facie view Director General to investigate and report Final order

Capital market In India

Agenda Regulatory Framework Role, Power & Functions of SEBI Market Participants Indian Securities Markets - Key Features Market Segments Primary Markets Secondary Markets Mutual Funds Myths and Realities

Regulators Security Market Banking Insurance Pension

Securities & Exchange Board of India Formed as an administrative body under Ministry of Finance in 1988. Statutory status as an Independent Regulator for Securities Market through the Act of Parliament on 04 April, 1992.

Legal framework SEBI Act, 1992 Depositories Act, 1996 Companies Act, 2013 (limited provisions) Relating to issue & transfer of securities  Relating to listing requirements & minimum subscription Relating to disclosure requirements in prospectus Securities Contracts (Regulation) Act, 1956 Rules, Regulations, Guidelines, Circulars by RBI Appellate Mechanism.

Jurisdiction of SEBI Intermediaries registered with SEBI Listed Companies & Companies seeking listing Insider trading & manipulation etc. in securities market

Powers Legislative Inspection / Investigation Surveillance Directions Enquiry / Adjudication Enforcement Suspension or cancellation Cease or desist Monetary penalty Prosecution

Function Regulation of securities market which includes: Registration of market participants Supervision & Surveillance Investigation & Enforcement Vetting of offer documents for offers made to public, schemes of mutual funds Regulation of substantial acquisitions and takeovers Investor complaints redressal Promoting investor awareness and education Research Policy formulation, Global standards

Regulations for Investors and Issuers (Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003 (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Buy Back of Securities) Regulations, 1998 (Issue of Capital and Disclosure Requirements), Regulations, 2009 (Issue of Sweat Equity) Regulations, 2002 (Prohibition of Insider Trading) Regulations, 1992 (Delisting of Equity Shares) Regulations, 2009 (Informal Guidance) Scheme, 2003 FEMA,2017

MARKET PARTICIPANTS ISSUERS REGULATORS (SEBI) STOCK EXCHANGE INVESTORS INTERMEDIARIES(BROKERS, MERCHANT BANKERS ETC.)

MARKET INTERMEDIARIES Stock Exchanges Depositories Stock Brokers Depository Participants (DPs) Custodians Merchant Bankers Underwriters Registrar to Issue and Share Transfer Agents Debenture Trustees Credit Rating Agencies

MARKET INTERMEDIARIES Stock Exchanges Depositories Stock Brokers Depository Participants (DPs) Custodians Merchant Bankers Underwriters Registrar to Issue and Share Transfer Agents Debenture Trustees Credit Rating Agencies

MARKET INTERMEDIARIES Foreign Institutional Investors Mutual Funds Portfolio Managers Alternate Investment Funds (AIFs) Collective Investment Schemes Real Estate Investment Trusts (REITs) Infrastructure Investment Trusts (InvITs) Investment Advisers (IAs) Research Analysts (RAs)

INDIAN MARKET-KEY FEATURES STATE OF THE MARKET Pricing of Securities Determined by market - Either by issuer through fixed price or by investors through book building Fair system of proportionate allotment to retail investors Trading Mechanism On-line, Electronic, Anonymous Fully-automated, order matching on a price/time priority Wide Reach with over 10000 terminals spread in over 400 cities in India and abroad Low Transaction Cost Market Paradigm shift – Merit to disclosures based regime. Access to International Market Firms allowed to issue ADRs / GDRs and raise ECBs. ADRs/GDRs have two way fungibility. FIIs allowed to invest in Indian market. MFs allowed to invest overseas. Retail investors allowed to invest in IDRs

INDIAN MARKET-KEY FEATURES STATE OF THE MARKET Clearing and Settlement System Clearing House/Corporation provides full novation Counterparty Risk is absent Risk Management Comprehensive risk management system Transfer of securities Transfers are recorded electronically in book entry form by depositories. 99% of Market Cap dematerialized Mutual Funds Open to private sector . Variety of funds and products. Corporate Compliance Emphasis on disclosures accounting standards and corporate governance. Products Available at the Exchanges Equity ,Debt ,Government Securities , Mutual Funds ,Exchange Traded Funds ,Stock Index Options & Futures Single Stock Options & Futures Interest Rate Derivative

MARKET SEGMENT PRIMARY MARKET SECONDARY MARKET

PRIMARY MARKET Market in which shares, debentures and other securities are sold for the first time for collecting long-term capital Usually known as “Initial Public Offer” (IPO) Market Flow of funds is from savers to users/ borrowers Helps in capital formation

Options for raising funds nnn Market TYPES OF EQUIPMENTS DEBTS EQUITY HYBRID IN INDIA FROM BANKS &FIs IPOs VARIOUS FORMS OF CONVERTIBLES PUBLIC ISSUES OF BONDS OR DEBENTURES FPOs RIGHT ISSUES PREF.SHARES OUTSIDE INDIA ECBs ADRs/GDRs FCCBs/FCEBs ADR = AMERICALN DEPOSITORY RECEIPT GDR = GLOBAL DEPOSITORY RECEIPT ECB = EXTERNAL COMMERCIAL BORROWING FCCB= FOREIGN CURRENCY COMMERCIAL BONDS FCEB = FOREIGN CURRENCY EXCHANGEABLE BONDS

THANK YOU