Competition law

Avishek Singh 113
Mohammad Shadab 129
Pratik Akerkar 139
Somjeet Dutta 152
Tilottoma Sanyal 155
5/4/2012 Ethical and Legal Aspects of Business 1
Sheel Malik 159

 Prevent concentration
of economic power

 What is Competition?

 Why is Competition
important?


 “A rivalry that arises when two or more firms
strive for something that not all can obtain.”
- Palgrave 1987


 Goods and Services at competitive prices
 Efficiency and Productivity
 Innovation
 Restructuring of Uncompetitive Sectors


 Precursor to the current Competitions Act
2002
 Reasons for enactment:
 For the prevention of concentration of economic
power.
 Planned economic model: Licensing policy of the
Govt favored big industrial houses.
 Mahalonobis Committee report 1964: Top 10% of
the population cornered 40% of the national
income

The thrust area of MRTP Act 1969 is:
 The control of monopolies
 Prohibition of restrictive trade practices
 Coca Cola stopping its vendors from keeping the soft
drinks of rival brands
 M/S TELCO ordering vehicle maintenance firm near
Lonavala Ghats to refuse services of vehicles other than
TATA. TELCO won the case on the grounds that the
technician was trained only for servicing TATA Vehicles
 Prohibition of unfair trade practices
 Prohibition of monopolistic trade practices

In the New Pepsodent v Colgate case , HLL
advertised its toothpaste ‘New Pepsodent’ as
“102% better than the leading toothpaste”.
 Pepsodent claimed to perform better than
the “leading toothpaste”
 Reference to Colgate muted in the ad
 When the muting was done, there was a
sound of the jingle used in the Colgate
advertisement

 Colgate Palmolive (India) Limited filed a
complaint along with complainant No. 2,
claiming to be a consumer, before the
Monopolies and Restrictive Trade Practices
Commission against M/s. Hindustan Lever
Limited
 Complaint: the advertisement campaign of New
Pepsodent disparages the leading toothpaste
namely Colgate Dental Cream manufactured by
it.
 Asked for interim relief U/S 12A of MRTP Act,
1969

 The commission prima facie came to the
conclusion that a case of unfair trade practices had
been made out against the respondent, and the
reference in advertisements to famous toothpaste
was to Colgate Dental Cream.
 An order of interim injunction was
passed, retraining the respondent from “referring
to any Colgate toothpaste in any manner, either
directly or indirectly, by means of any illusions, or
hint, in TV commercials, newspaper
advertisements or hoardings.”

 Marico launched a three-day mass media
advertising warning consumers that a particular
brand of hair oil (to be read as Clinic Plus Hair Oil
from Hindustan Lever Limited) was 'not pure
coconut oil'
 "When they say plus, they mean 42 per cent
coconut oil plus 58 per cent paraffin"; and "When
we say Parachute, we mean 100 per cent coconut
oil. When you use coconut oil, don't buy
diluted, buy 100% pure.“
 Competition not named in the ad, but showed a
bottle with a plus sign on it

HLL complained to the Monopolies and Restrictive
Trade Practices Commission (MRTPC). The charge
was not against the comparison, but the fact that
the two products were incomparable.
 Parachute never mentioned on its bottle that it was
a hair oil – to put the product in lower excise duty
bracket
 Technically Parachute was qualified as cooking oil–
Parachute & Clinic Plus could not be compared
 Parachute contained 60% paraffin

 HLL obtained an exparte interim stay
order on the Marico campaign.
 The campaign had to be stopped by Marico
under the MRTP Act
 Marico issued a notice in public interest
by the first week of August with
the head line: "Misleading
advertising by Parachute Coconut Oil
stopped by the MRTP Commission."

Reason for repeal of MRTP Act:
 Outlived its utility: the Act was enacted when
India had a command-and-control paradigm
for the administration of the economic activity
 The existing law did not even mention a certain
offending trade practices like:
 Abuse of dominance
 Cartels, collusions, and price fixing
 Bid rigging
 Predatory pricing

There are three elements:
 Prohibiting Anti-Competitive Agreements
 Prohibiting abuse of dominant position
 Regulating combinations


Agreements in respect of
production, supply, distribution, storage, acqui
sition or control of goods or provision of
services that cause or are likely to cause
appreciable adverse effects on competition
within India.
Agreements subjected to scrutiny fall into two
broad divisions:
 Horizontal agreements

Agreements between enterprises engaged in
trade of identical or similar products
(including cartels) if they
 Fix prices
 Limit output
 Share markets
 Indulge in Bid-Rigging or Collusive Bidding


 Regarded as most pernicious form of anti-
competitive behaviour.

 Amino Acid Lysine cartel is one of the
landmark cases decided in the US


Agreements between enterprises at different
stages or levels of the production chain.
 Tie-in sales
 Exclusive supply agreements
 Exclusive distribution agreements
 Refusal to deal
 Resale price maintenance


1. No enterprise or group shall abuse its dominant position.

2. There shall be an abuse of dominant position if an enterprise or a
group:
 Directly or indirectly, imposes unfair or discriminatory—
(i) Condition in purchase or sale of goods or service
(ii)Price in purchase or sale of goods or service.
 Limits or restricts—
(i) Production of goods or provision of services
(ii) Technical or scientific development


 Indulges in practice or practices resulting in denial of
market access
 Makes conclusion of contracts subject to acceptance by
other parties of supplementary obligations which have
no connection with the subject of such contracts
 Uses its dominant position in one relevant market to
enter into, or protect, other relevant market.


Important Terms:

 “Dominant position" means a position of strength, enjoyed by an
enterprise, which operates independently of competitive forces
prevailing in the relevant market; or affect its competitors or
consumers or the relevant market in its favour.

 “Predatory price" means the sale of goods or provision of
services, at a. price which is below the cost, as may be
determined by regulations with a view to reduce competition or
eliminate the competitors.

Examples:
 DLF case by CCI


 Combination has not been defined in the act
but includes the following:
 Acquisition of controls, shares, voting rights or
assets
 Acquisition of control by a person over an
enterprise where such person has control over
another enterprise engaged in competing
business
 Merger or amalgamation between or amongst
enterprises


 Notify and seek approval of Competition
Commission of India

 If CCI concludes an adverse effect, it can
prohibit or propose modification


 IPR is an intangible right “protecting commercially
valuable products of the human intellect”
 Why IPR? To Promote Innovation, a trigger to growth of an
economy. IP laws protect these innovations from unlawful
exploitation
 It may comprise patents, copyrights, trademarks and
other similar rights governed by acts such as:
 Copyright Act, 1957 – Rights to creators of literary, musical and
artistic works
 Patents Act, 1970 – Rights to an inventor for a limited period of
time

 Trade and Merchandise Marks Act, 1958 or Trade Marks
Act, 1999 – Trade mark as an identity of the connection
between a trader and his goods.
 Geographical Indications of Goods (Registration and
Protection) Act, 1999 – Registration and better
protection of geographical indications related to goods.
E.g. Darjeeling tea, Kashmir apples
 Designs Act, 2000 – Protection of designs
 Semi-conductor Integrated Circuits Layout-Design Act,
2000 – Protection of IPR in areas of Semiconductor
Integrated Circuit Layout Designs

 Competition Act opposes Monopoly while IPR
promotes Monopoly
 IPR protects the rights of creators and owners of a
work of human intellectual creativity
 Competition act can penalize the IPR holders who
misuse their dominant position
 Both have to co-exist so that a balance between both
laws can help economic growth while taking care of
consumer/common public’s welfare

 Competition Commission of India established
on 14th October, 2003

 CCI consists of a Chairperson and not less
than two and not more than six other
Members appointed by the Central
Government


 To Prevent practices having adverse effect on
competition
 E.g. Forming Cartels, predatory pricing
 To Promote and sustain competition in
markets
 To Protect the interests of consumers
 E.g. CCI notices to banks
 To Ensure freedom of trade carried on by
other participants in markets, in India

 From 1st June, 2011, all M&A deals by companies in India have to pass muster at the
Competition Commission of India (CCI).
 M&A deals under the purview of CCI
 If the joint asset and turnover of the merging entities exceed Rs 1,500 crore and Rs
4,500 crore respectively
 In case the asset and turnover of the target company exceed Rs 250 crore and Rs 750
crore respectively
 If the joint market share exceeds 40 percent
▪ E.g. Kingfisher and Jet Airways
 M&A deals exempted from CCI clearance
 Intra group mergers
▪ E.g. merger of Rinfra, REL, REGL, RGSPL, RIVL, etc.
 Routine merger and acquisition deals
 Mergers happening entirely outside India with insignificant local nexus and effect on
markets in India
 If an acquirer has 50% stake in a firm
 An
5/4/2012 acquisition of less than Legal Aspects of Business
Ethical and 15% voting right 30

Competition law

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