1 CCI: ICSI-NIRC Company secretaries and the Competition Act, th October 2015 Surendra U. Kanstiya Practising Company Secretary

2 COMPETITION BENEFITS ALL Healthy competition culture promotes: Consumer welfare: Choice, price, quality Fair play: be a ‘price taker’ and not ‘price maker’ Innovation: ‘to be the best’ AND Competition kills competition

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4 ENTERPRISE PERSON OR GOVT. DEPTT. engaged in activity relating to production, supply, distribution, acquisition, control of goods; services, of any kind. PERSON: individual; firm; HUF; co.; AoP; corporation; body corp.; coop. soc.; local authority; other artificial juridical persons. EXCLUDED: Govt. Deptt. performing sovereign functions: atomic energy, currency, defence; space

5 APPEARANCE Sec. 35 and Sec. 53S: A person or enterprise or DG may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its case ……

6 COMPANY SECRETARY Join CCI / COMPAT Experts and Professionals : The CCI (Procedure for Engagement of Experts and Professionals) Regulations, 2009

77 Competition Act 2002 Behavioural Anti competitive agreements are void Sec. 3 Abuse of dominance is prohibited Sec. 4 Structural Combinations are Regulated Sec. 5, 6

8 ANTI COMPETITIVE AGREEMENTS ‘All anti-competitive agreements are void’

99 ANTI COMPETITIVE AGREEMENTS (ACA) HORIZONTAL Rule of Law (4 cases) VERTICAL Rule of reason

10 HORIZONTAL AGREEMENTS = HARDCORE CARTELS PRESUMED TO BE ANTI-COMPETITIVE Price fixing Limiting production, supply etc. Market sharing Collusive bidding/rigging Others: Subject to ‘Rule of reason’ test * EXCLUDES JV agreements if increase efficiency

11 VERTICAL AGREEMENTS PROHIBITED IF AFFECT COMPETITION Tie-in arrangements Exclusive supply agreements Exclusive distribution agreements Refusal to deal/vertical boycott Resale price maintenance Rule of reason approach

12 COMPANY SECRETARIES Manner of exchange of information within the trade bodies; joint ventures; cross directorships Communication with regard to pricing; markets; technical development in terms of productivity, investment and profitability

13 ABUSE OF DOMINANT POSITION ‘No enterprise or group shall abuse its dominant position’

14 DOMINANT POSITION DOMINANCE: - Capacity to act independent of competitive presence. -Affecting appreciably the relevant market, competition and consumers.

15 DOMINANT IF Able to act independent of competitive presence in relevant market Able to affect Competitors or Consumers or Relevant market in its favour

16 Abuse of Dominance Exploitative (Costumers) Exclusionary (Competitors)

17 ABUSE OF DOMINANCE:PRACTICES Unfair, discriminatory and predatory pricing Limiting production, markets or technical development Denial of market access Supplementary obligations unconnected to main contract: full line forcing Using dominant position to enter another market

18 JSPL v SAIL [Case No 11/2009 December 20, 2011] The DG has made reference to the minutes of the 270 th meeting of Board of Directors of SAIL held on wherein the Board has acknowledged the need "to meet the threat of competition posed by setting up of a new Mill by M/s. Jindal Steel……

19 SAIL: BOARD MINUTES In the minutes, there was a mention of JSPL's aim of setting a rail manufacturing unit. It was also mentioned in the minutes that due to competition which is going to come due to the entry of JSPL in the market for rails, SAIL should upgrade the facilities of the rail and structural plant. The D.G. further held that the MoU dated effects competition and does not ensure freedom of trade.

20 COMPANY SECRETARIES Determination of dominance and Sec. 19(4): Tall claims in Prospectus, websites, advertisements. Schemes of amalgamation. Pricing: Unfair; discriminatory; predatory - CCI (Determination of Cost of Production) Regulations, 2009

21 COMBINATIONS ‘Certain combinations are regulated’ The Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011 (Amended in 2012, 2013, 2014, 2015)

22 COMBINATION Acquisition of enterprise: acquisition of Control, shares, Voting rights, assets Acquiring of Control: over an enterprise engaged in same line of Goods or services Merger or amalgamation

23 EXEMPTIONS Sec. 6(4) (Institutions) Public Interest (Target Exemption) Schedule I Comb. (Presumed to be fair)

24 PRIOR NOTIFICATION (Filing of Form)

25 MANDATORY A notice must be given by enterprise to CCI about combination within 30 days from execution of agreement / resolution Phase I review process: CCI to form prima facie opinion in 30 days Phase II review process: CCI to pass order within 210 (180 days), failing which combination to be deemed as approved. FAILURE: Penalty, may extend to 1% of the total turnover or the assets, whichever is higher.

26 FORMS Form I - Regulation 5(2) combinations Form II - Regulation 5(3) combinations Form III - For exempt acquisition by FII etc Form IV – Advertisement

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FORMS FOR NOTIFICATIONS Form I [Reg 5(2) Combi] Phase IPhase II Form II [Reg 5(3) Combi] Phase IPhase II 28

29 CCI ORDER Approve Approve with Modification (N.C./Compliance/Com mitment/Divesture) Disapprove

30 VOID COMBINATION a combination which causes or is likely to cause an APPRECIABLE ADVERSE EFFECT ON COMPETITION (AAEC) WITHIN RELAVANT MARKET IN INDIA

31 ADVERSE EFFECTS Unilateral (AoD) Coordinated (ACA)

32 CONSULTATION PRIOR TO FILING - NON BINDING, INFORMAL The facility of informal and verbal consultation with the staff of CCI prior to the filing of notice to a proposed combination is available at CCI. The advice would be given as an additional assistance facility, and would not be deemed to be the opinion of the CCI in any manner whatsoever or binding on the CCI.

33 COMPANY SECRETARIES Assets/turnover determination Non-compete clause Market share analysis Group/control impact Failing business costing and impact Compliance report Filing of forms Divesture of assets: Independent agency – PCS firm

34 COMPANY SECRETARY i. Act as Advisors, Consultants ii. Audit of various agreements iii. Compliance certificate iv. Training programmes v. to oversee modification

35 PENALTY UNDER COMPETITION ACT, 2002 Penalty of Rs.12,474 crore has been imposed on 351 companies – Mr Arun Jaitly in Lok Sabha on 27 th February 2015 Period: May 2009 to January Average: Rs.35 Cr

36 COMPETITION COMPLIANCE PROGRAMME ‘Contraventions can be avoided’

37 THANK YOU ALL