2. GREETINGS TO DELEGATES AT THE LAUNCH MEETING ON MEKONG PROJECT HANOI 23-24 APR 2004 1

3. Copyright - Dr. S. Chakravarthy2 MRTP ACT METAMORPHOSES INTO COMPETITION ACT Dr.S.CHAKRAVARTHY (Profession : Civil Servant) Formerly, Member, Monopolies and Restrictive Trade Practices Commission, Member, High Level Committee on Competition Policy and Law And Member of Committee for Drafting the Law. Presently, Adviser/Consultant Competition Policy and Law HYDERABAD, INDIA

4. Copyright - Dr. S. Chakravarthy3 LPG SYNDROME EARLIER TILL 1991NOW AFTER 1991 LICENSING PLANNING GOVERNMENT LIBERALISATION PRIVATISATION GLOBALISATION

5. Copyright - Dr. S. Chakravarthy4 L P G S Y N D R O M E ( POST 1991 ) RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE: DEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURES APPROVAL PROCEDURES EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS NEW ECONOMIC ADJUSTMENT MEASURES NEW ECONOMIC ADJUSTMENT MEASURES DIVESTITURE AND SALE OF GOVERNMENT ASSETS DIVESTITURE AND SALE OF GOVERNMENT ASSETS GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTOR GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTOR PRIVATISATION PRIVATISATION ENCOURAGING COMPETITION ENCOURAGING COMPETITION

6. Copyright - Dr. S. Chakravarthy5 C O M P E T I T I O N……. IS A DYNAMIC CONCEPT IS AN AMALGAM OF FACTORS THAT STIMULATE ECONOMIC RIVALRY IS A TOOL TO MOUNT MARKET PRESSURE TO PENALISE LAGGARDS AND TO REWARD THE ENTERPRISING

7. Copyright - Dr. S. Chakravarthy6 COMPETITION POLICY - GOALS PRESERVATION AND PROMOTION OF THE COMPETITIVE PROCESS EFFICIENCY IN PRODUCTION AND ALLOCATION OF GOODS AND SERVICES INNOVATION AND ADJUSTMENT TO TECHNOLOGICAL CHANGE SUSTAINED ECONOMIC GROWTH

8. Copyright - Dr. S. Chakravarthy7 EXTANT COMPETITION LAW OF INDIA MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT,1969 BROUGHT INTO FORCE IN 1970

9. Copyright - Dr. S. Chakravarthy8 MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 A LODE STAR CONSTITUTION OF INDIA - DIRECTIVE PRINCIPLES OF STATE POLICY B PRINCIPLES SOCIAL JUSTICE WITH ECONOMIC GROWTH WELFARE STATE REGULATING CONCENTRATION OF ECONOMIC POWER TO THE COMMON DETRIMENT CONTROLLING MONOPOLISTIC, UNFAIR AND RESTRICTIVE TRADE PRACTICES

10. Copyright - Dr. S. Chakravarthy9 OBJECTIVES OF THE MRTP ACT  PREVENTION OF CONCENTRATION OF ECONOMIC POWER TO THE COMMON DETRIMENT;  CONTROL OF MONOPOLIES  PROHIBITION OF MONOPOLISTIC TRADE PRACTICES (MTP)  PROHIBITION OF RESTRICTIVE TRADE PRACTICES (RTP)  PROHIBITION OF UNFAIR TRADE PRACTICES (UTP)

11. Copyright - Dr. S. Chakravarthy10 1991 AMENDMENTS TO MRTP ACT 1. SIZE CONCEPT GIVEN UP 2. CURBS ON GROWTH OF MONOPOLY COMPANIES DELETED 3. MERGER CONTROL REMOVED 4. MORE EMPHASIS ON PROHIBITION OF RTPs, UTPs AND MTPs IN SUM, BIG BECOMING BIGGER IS NO MORE UGLY

12. Copyright - Dr. S. Chakravarthy11 RESTRICTIVE TRADE PRACTICES Ñ REFUSAL TO DEAL Ñ TIE-UP SALES Ñ FULL LINE FORCING Ñ EXCLUSIVE DEALINGS Ñ PRICE DISCRIMINATION Ñ RE-SALE PRICE MAINTENANCE Ñ AREA RESTRICTION

13. Copyright - Dr. S. Chakravarthy12 UNFAIR TRADE PRACTICES  MISLEADING ADVERTISEMENT AND FALSE REPRESENTATION  BARGAIN SALE, BAIT AND SWITCH SELLING  OFFERING OF GIFTS OR PRIZES WITH THE INTENTION OF NOT PROVIDING THEM AND CONDUCTING PROMOTIONAL CONTESTS  PRODUCT SAFETY STANDARDS  HOARDING OR DESTRUCTION OF GOODS

14. Copyright - Dr. S. Chakravarthy13 MONOPOLISTIC TRADE PRACTICES 1. UNREASONABLE PRICING 2. PREVENTING OR LESSENING COMPETITION IN SUPPLY/DISTRIBUTION OF GOODS/SERVICES 3. LIMITING TECHNICAL DEVELOPMENT, CAPITAL INVESTMENT OR PRODUCTION/SUPPLY 4. UNREASONABLE PROFITS (PROFITEERING)

15. Copyright - Dr. S. Chakravarthy14 ã ALL UNDERTAKINGS ENGAGED IN MANUFACTURE, SUPPLY AND DISTRIBUTION IN THE PRIVATE SECTOR ã PUBLIC SECTOR UNDERTAKINGS OWNED BY THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS ã STATUTORY CORPORATIONS ã UNDERTAKINGS UNDER THE MANAGEMENT OF CONTROLLERS APPOINTED BY LAW ã COOPERATIVE SOCIETIES ã FINANCIAL INSTITUTIONS, BANKS APPLICABILITY OF THE MRTP ACT

16. Copyright - Dr. S. Chakravarthy15 EXPERIENCE IN THE LAST THREE DECADES NO MENTION OR DEFINITION OF OFFENCES LIKE (ILLUSTRATIVE) ABUSE OF DOMINANCE CARTELS, COLLUSION AND PRICE FIXING BID RIGGING BOYCOTTS AND REFUSAL TO DEAL PREDATORY PRICING LARGE NUMBER OF INTERPRETATIONS & CASE LAWS AFFECTING THE INTENT/SPIRIT OF THE MRTP ACT WTO FALL OUT OBLIGATIONS

17. Copyright - Dr. S. Chakravarthy16 NEED FOR A NEW WINE NEED FOR A NEW LAW HAS ITS ORIGIN IN FINANCE MINISTER’S BUDGET SPEECH IN FEBRUARY,1999 : “ THE MRTP ACT HAS BECOME OBSOLETE IN CERTAIN AREAS IN THE LIGHT OF INTERNATIONAL ECONOMIC DEVELOPMENTS RELATING TO COMPETITION LAWS. WE NEED TO SHIFT OUR FOCUS FROM CURBING MONOPOLIES TO PROMOTING COMPETITION. THE GOVERNMENT HAS DECIDED TO APPOINT A COMMITTEE TO EXAMINE THIS RANGE OF ISSUES AND PROPOSE A MODERN COMPETITION LAW SUITABLE FOR OUR CONDITIONS.”

18. Copyright - Dr. S. Chakravarthy17 RUBRIC OF THE NEW COMPETITION LAW THE NEW LAW, COMPETITION ACT, 2002 WILL REPEAL THE MRTP ACT FOUR COMPARTMENTS OF NEW LAW: ã ANTI-COMPETITION AGREEMENTS ã ABUSE OF DOMINANCE ã MERGERS, AMALGAMATIONS, ACQUISITIONS AND TAKE-OVERS ã FOSTERING COMPETITION

19. Copyright - Dr. S. Chakravarthy18 ANTI - COMPETITION AGREEMENTS : HORIZONTAL RESTRAINTS : nCARTELS {FIXING PURCHASE OR SALE PRICES (EXPORT CARTELS EXEMPTED) } n BID-RIGGING (COLLUSIVE TENDERING) n SHARING MARKETS BY TERRITORY, TYPE ETC. n LIMITING PRODUCTION, SUPPLY, TECHNICAL DEVELOPMENT THE ABOVE ARE “PER SE” ILLEGAL. : VERTICAL RESTRAINTS : n TIE-IN ARRANGEMENTS n EXCLUSIVE SUPPLIES n EXCLUSIVE DISTRIBUTION n REFUSAL TO DEAL n RESALE PRICE MAINTENANCE ADJUDICATION BY RULE OF REASON

20. Copyright - Dr. S. Chakravarthy19 ABUSE OF DOMINANCE DOMINANCE NOT LINKED TO ANY ARITHMETIC FIGURE OF MARKET SHARE DOMINANCE MEANS A POSITION OF STRENGTH ENABLING AN ENTERPRISE TO OPERATE INDEPENDENTLY OF COMPETITIVE PRESSURE AND TO APPRECIABLY AFFECT THE RELEVANT MARKET,COMPETITION AND CONSUMERS. ABUSE OF DOMINANCE ARISES IF AN ENTERPRISE IMPOSES UNFAIR /DISCRIMINATORY PURCHASE OR SALE PRICES (INCLUDING PREDATORY PRICES) LIMITS PRODUCTION,MARKETS OR TECHNICAL DEVELOPMENT DENIES MARKET ACCESS CONCLUDES CONTRACTS SUBJECT TO OBLIGATIONS HAVING NO CONNECTION WITH THE SUBJECT OF THE CONTRACTS. USES DOMINANCE TO MOVE INTO OR PROTECT OTHER MARKETS RELEVANT MARKET = RELEVANT PRODUCT MARKET + RELEVANT GEOGRAPHIC MARKET

21. Copyright - Dr. S. Chakravarthy20 DOES DOMINANCE REQUIRE AN ARITHMETIC FIGURE? n SOME SUGGEST AN ARITHMETIC FIGURE OF MARKET SHARE TO ASCERTAIN DOMINANCE n EXISTING MRTP ACT STIPULATES 25% MARKET SHARE n NEW LAW DISTINGUISHES DOMINANCE FROM ITS ABUSE AND ESCHEWS ARITHMETIC FIGURE n LOGIC IS AGAINST A THRESHOLD AS IT MAY HARASS A GOOD COMPETING ENTITY AND ALLOW AN OFFENDING ENTITY TO ESCAPE n AS LONG AS DOMINANCE IS NOT TO BE FROWNED UPON, A GENERIC DEFINITION IS BETTER THAN MARKET SHARE THRESHOLD DEFINITION

22. Copyright - Dr. S. Chakravarthy21 COMBINATIONS MERGERS/AMALGAMATIONS 1. REDUCTION IN NUMBER OF PLAYERS 2. ACQUISITION OF ENORMOUS ECONOMIC STRENGTH 3. DISCOURAGEMENT OF NEW ENTRANTS PEJORATIVE EFFECTS 4. DICTATION OF PRICES 5. DOMINANCE 1. COMPETITION LAW TO HAVE SURVEILLANCE OVER COMBINATIONS BEYOND A THRESHOLD LIMIT [Assets > Rs.1000 Crores (about US $ 220 m) or Turnover > Rs.3000 Crores (about US $ 660 m)] 2. NOTIFICATION OF COMBINATIONS VOLUNTARY AND NOT MANDATORY 3. CCI MANDATED TO DECIDE WITHIN 90 WORKING DAYS ELSE DEEMED APPROVAL REGULATION ON COMPETITION PERSPECTIVE

23. Copyright - Dr. S. Chakravarthy22 IS COMBINATION CONTROL REQUIRED AT ALL? n SCAN OF 72 COMPETITION LAWS IN THE WORLD SHOWS THEY HAVE MERGER CONTROL n 51 OF THOSE HAVE MANDATORY PRE MERGER NOTIFICATION REQUIREMENT n ANOTHER 12 ALSO HAVE MANDATORY NOTIFICATION REQUIREMENT BUT AT A SLIGHTLY LATER STAGE, NAMELY, POSTCLOSING STAGE n REMAINING 9 HAVE VOLUNTARY NOTIFICATION REQUIREMENT n THIS IS NOT THE ONLY REASON WHY INDIAN LAW SHOULD HAVE MERGER CONTROL n OTHER REASONS : POSSIBLE ABUSE OF DOMINANCE, LESS CHOICE AND BARRIERS TO NEW ENTRANTS ETC n THE NEW LAW IS VERY BENIGN ON MERGER CONTROL n NOTIFICATION IS VOLUNTARY n HIGH THRESHOLD LIMIT n DEEMED APPROVAL AFTER 90 WORKING DAYS n VERTICAL AND CONGLOMERATE MERGERS WILL GENERALLY BE ALLOWED TO PASS n ONLY HORIZONTAL MERGERS WILL BE SCREENED ON COMPETITION PERSPECTIVE

24. Copyright - Dr. S. Chakravarthy23 COMPETITION ADVOCACY THE COMPETITION COMMISSION OF INDIA ¨ IS ENABLED TO PARTICIPATE IN THE FORMULATION OF POLICIES AND REVIEWING OF POLICIES RELATING TO COMPETITION AT THE INSTANCE OF THE GOVERNMENT ¨ IS REQUIRED TO CREATE COMPETITION CULTURE ¨ IS REQUIRED TO ACT AS COMPETITION ADVOCATE

25. Copyright - Dr. S. Chakravarthy24 EXEMPTIONS GOVERNMENT BY NOTIFICATION MAY EXEMPT FROM THE COMPETITION LAW A ANY CLASS OF ENTERPRISES IN THE INTEREST OF NATIONAL SECURITY/PUBLIC INTEREST. B.ANY PRACTICE/AGREEMENT ARISING OUT OF INTERNATIONAL TREATY/AGREEMENT C.ANY ENTERPRISE PERFORMING A SOVEREIGN FUNCTION ON BEHALF OF GOVERNMENT DIFFERENT PROVISIONS FROM DIFFERENT DATES IF, NEED BE.

26. Copyright - Dr. S. Chakravarthy25 COMPETITION COMMISSION OF INDIA : COMPRISES : CHAIRPERSON MEMBERS : SELECTION BY : A COLLEGIUM OR SEARCH COMMITTEE APPOINTED BY THE GOVERNMENT. SELECTION ON: MERIT BASED ON QUALIFICATIONS, EXPERIENCE, RELEVANT KNOWLEDGE AND INTEGRITY.

27. Copyright - Dr. S. Chakravarthy26 DEPOLITICISATION AND CASTING NET WIDE n RATIONALE FOR THE COLLEGIUM APPROACH IS TO MINIMISE POLITICISATION OF APPOINTMENTS n CHAIRPERSON NEED NOT BE FROM THE JUDICIARY n CHAIRPERSON AND MEMBERS FROM FIELDS – JUDICIARY, ECONOMICS, LAW, INTERNATIONAL TRADE, BUSINESS, COMMERCE, INDUSTRY, FINANCE, ACCOUTANCY, MANAGEMENT, PUBLIC AFFAIRS, AND ADMINISTRATION n EVERY BENCH WILL HAVE A JUDICIAL MEMBER

28. Copyright - Dr. S. Chakravarthy27 OLD WINE OR NEW WINE ? MRTP ACT 1. BASED ON PRE-1991 LPG 2. PREMISED ON SIZE 3. PROCEDURE ORIENTED 4. NO TEETH (REFORMATORY) 5. OFFENCES DEFINED IMPLICITLY (CARTELS, BID-RIGGING ETC.) 6. FROWNS ON DOMINANCE (25% OF MARKET SHARE) 7. A LARGE NO. OF PER SE OFFENCES (AGAINST PRINCIPLES OF NATURAL JUSTICE) NEW LAW 1. BASED ON POST-1991 LPG 2. PREMISED ON BEHAVIOUR/ CONDUCT 3. RESULT ORIENTED 4. CAN BITE (PUNITIVE ) 5. OFFENCES DEFINED EXPLICITLY 6. FROWNS ON ABUSE OF DOMINANCE (NO PERCENTAGE OF MARKET SHARE) 7. JUST FOUR ARE PER SE OFFENCES (REST BY RULE OF REASON)

29. Copyright - Dr. S. Chakravarthy28 OLD WINE OR NEW WINE ? MRTP ACT 8. COVERS UNFAIR TRADE PRACTICES (INDIVIDUAL CONSUMER INTEREST) 9. POLITICAL APPOINTMENTS OF CHAIRPERSON/MEMBERS 10. NO COMPETITION ADVOCACY ROLE 11. REACTIVE NEW LAW 8. UNFAIR TRADE PRACTICES EXCLUDED (COVERED UNDER CONSUMER PROTECTION ACT) 9. APPOINTMENTS BY A COLLEGIUM 10. CCI HAS COMPETITION ADVOCACY ROLE 11. PROACTIVE NO LAW IS BETTER THAN A POORLY ADMINISTERED LAW

30. Copyright - Dr. S. Chakravarthy29 ONE WOULD LIKE TO AVOID THE DANGER OF HOLLOW PURISM THAT HAS MADE SO MUCH OF MODERN ECONOMICS UNFIT FOR ACTUAL USE AMARTYA SEN INDIAN NOBEL LAUREATE

31. THANK YOU FOR YOUR KIND ATTENTION 30 Copy right Dr. S. Chakravarthy