Group 5 Competition Act Report

Need for Competition in an Era of
Globalization
Mihir Morbia I041 | Sajin Padiyath I043 | Karthika Paliath I045 | Utsav Raghuvanshi I047 |
Zankar Shah I049 | Himanshu Sharma I051 | Ishita Singh I053 | Shreya Singh I055 |
Avinash Tanna I057 | Amrapali Tendolkar I059
Under the Guidance of:

Prof. Anant Amdekar
Group 5 Need for Competition Act in an Era of Globalization
Table of Contents
NEED FOR COMPETITION ACT................................................................................3
Background........................................................................................................ 3
The Scenario before MRTP Act............................................................................3
Case Illustrations of the MRTP Act......................................................................4
Disadvantages of MRTP...................................................................................... 4
EVOLUTION OF COMPETITION LAWS......................................................................6
1984 amendments to the MRTP act....................................................................6
1991 Reforms..................................................................................................... 6
1991 amendments to the MRTP Act....................................................................7
Raghavan Committee recommendation.............................................................7
Reasons for evolution of Competition Act...........................................................7
Objectives of Competition Act:...........................................................................8
ANTI COMPETITIVE AGREEMENTS..........................................................................8
Agreements:....................................................................................................... 8
Horizontal Agreements.................................................................................... 9
Vertical Agreements...................................................................................... 10
Explanation of keywords................................................................................10
Determination of Anti-Competitive nature of agreements................................11
Caselet for Anti-competitive agreement...........................................................11
ABUSE OF DOMINANCE........................................................................................ 12
Definition of Dominance................................................................................... 12
Relevant Market................................................................................................ 12
Factors determining Dominance or Dominant position.....................................12
Abuse of Dominance......................................................................................... 13
Case Study: CCI issues supplementary order u/s 27 of the Competition Act in
the DLF case; modifies Apartment Buyers Agreement as directed by COMPAT 13
Case Study: Maharashtra State Power Generation Company Ltd. (MAHAGENCO)
& Gujarat State Electricity Corporation Limited (GSECL) v. Coal India Limited
(CIL):................................................................................................................. 14
Case Study: COMPAT: NSE Guilty Of Abuse of Dominant Position.....................15
Inquiry unto Abuse of Dominance....................................................................16
Case Study: CCI rejects market abuse complaint against Adidas, Reebok........16
COMPETITION COMMISSION OF INDIA..................................................................17
Vision and Mission of CCI..................................................................................18
Current Members.............................................................................................. 18
Benches............................................................................................................ 19
1|Page
Extension of the executive powers...................................................................19
COMPETITION ADVOCACY.................................................................................... 21
Mandates of Successful Competition Advocacy:...............................................21
Promotion of Competition Advocacy and creation of awareness about
competition issues:....................................................................................... 22
Imparting Training about competition issues:...................................................24
REGULATION OF COMBINATION........................................................................... 25
What Is Combination?....................................................................................... 25
Thresholds for Combinations under the Act......................................................26
Regulation of Combinations..............................................................................27
Example: Holcim-Lafarge Merger......................................................................29
UNDERSTANDING THE EU MODEL........................................................................30
Introduction and Evolution................................................................................30
The importance of the Competition Policy to the European Union................30
Some General Points about the Law.................................................................32
Focus Areas of the Competition Rules..............................................................32
Effectiveness of the Policy................................................................................ 36
Comparison and Cooperation with US Antitrust laws........................................38
Most Favoured Nation status............................................................................40
National Treatment........................................................................................... 40
Dispute Settlement........................................................................................... 41
COMPARISION OF INDIAN COMPETITION LAW WITH UK AND CHINA LAWS...........42
Competition Law in UK..................................................................................... 42
Major Acts...................................................................................................... 42
Competition Law in China................................................................................. 45
The Anti-Monopoly Law of China...................................................................45
Enforcement Mechanism (China v/s India) - A Critical Analysis........................46
CASE STUDIES..................................................................................................... 46
Fine imposed on Alkem Laboratories................................................................46
Builders Association of India v. Cement Manufacturers Association & Ors.....49
REFERENCES........................................................................................................ 55
2|Page
NEED FOR COMPETITION ACT

Background
Competition in the market is defined as a situation in which firms or sellers independently
strive for the buyers patronage in order to achieve a particular business objective.
In 1969, an act came into existence in India to ensure that the operation of the economic
system does not result in the concentration of the economic power in hands of few, to provide
for the control of monopolies, and to prohibit monopolistic and restrictive trade practices.
This act was the Monopolistic and Restrictive Trade Practice (MRTP) Act. This was an
example of a command-and-control law. However, after 1991, economic liberalization began
to rear its head in India and an effective competitive regime was found necessary to be
implemented. With respect to this paradigm shift relating to the new economic policy, the
Competition Act, 2002 was enacted. Till 2009, the MRTP Act and the Competition Act were
both in force simultaneously. However, in September 2009, the MRTP Act was repealed and
replaced by the Competition Act.
The Scenario before MRTP Act
After enactment of the MRTP Act, the MRTP Commission was established under Section 5 of
the act, which was a quasi-judicial body for the purpose of taking action against those
companies that indulged in monopolistic and unfair trade activities. The MRTP commission
was required
to enquire into and take appropriate action in respect of unfair and restrictive trade
practices
to enquire into monopolistic trade practices upon a reference made to it by the
Central Government, or upon its own knowledge or information, and submit its
findings to Central Government for further action.
The commission was empowered to listen to the pleas under the MRTP act and discharge the
enquiry against the charged party if they found the restriction reasonable, or give temporary
injunction or award compensation if the charged party was found guilty. However, if the trade
practice was expressly authorized by any law for the time being in force, the Commission
was barred from passing any order against the charged party.
3|Page
Case Illustrations of the MRTP Act
A) Shyam Gas Company Case:
It was a case handled by MRTPC regarding the restrictive trade practices by Shyam
Gas Company. This company being the sole distributor of BPCL cooking gas cylinder
at UP, allegedly engaged in restrictive trade practices by giving gas connections only
to those customers who purchased a gas stove or hot plate from the company, and
charging twice the price for supply of fittings and appliances. The company was
found guilty.
B) Bal Krishna Khurana Case:
This case involved a sales promotion organizer Bal Krishna, who was famous all
over North India for selling export quality hosiery at low prices (he sold goods worth
Rs. 210 for Rs. 15). The consumers complained of the substandard quality of the
goods which prompted MRTPC to not only put a restraining order against Bal
Krishna from organizing such promotion activities but also advising newspapers
against printing such misleading advertisements.
Disadvantages of MRTP
There were a number of shortcomings of the MRTP act which led to the emergence of the
Competition Act, 2002.
1. Lack of Desired Results:
The act was established to promote competition in the market. Instead it led to the
creation of hostile conditions for the consumer and excessive controlling conditions
for big and small businesses. There were complex procedures restricting new ventures
due to increased governmental control leading to the firms finding it difficult to
survive or serve the consumer.
2. Stringent Provisions:
The provisions of the act aimed at removing all anti-competition laws. One such
policy that was abolished was Predatory Pricing which aimed at driving a competitor
out of the competition by pricing products below the cost of production. Although this
is an anti-competitive mechanism, it also leads to highly competitive market, leading
to advantage to the consumer. In the current market, companies strive to give
consumers good quality products at the best price in order to survive the competition.
Following are the examples of such predatory pricing against which the MRTP
commission took up a strong case in order to ensure fair competition in the market.
However, it closed down options for the consumers instead.
i. Tide, a detergent by P&G was launched in 2000, at a time when surf single-
handedly dominated the market. However, it used strong predatory pricing
4|Page
tactics, backed by P&G, to grab a large market share in no time. It offered at
prices lower than competitors, the same quality detergent, leading to increased
competition with better quality at reduced prices in the market and more
options for the benefitting consumers.
ii. Tata Docomo, a mobile service provider entered the market at a time when big
giants like Airtel, Reliance and BSNL dominated it. But Docomo started
predatory pricing with its charges per/second policy (when all others charged
per/minute), forcing the competitors offer lower rates. This benefitted the
customers.
What was required hence, was that MRTP Commission take a decision on per case
basis and not have an absolute ban on certain policies. Such stringent laws were
therefore a shortcoming of the act.
3. Ambiguity in Law:
The MRTP Act being defined broadly and containing only one section covering all
anti competition practices led to different interpretations of the Act by different courts
of law. This resulted in the true meaning of the act getting distorted. Also, the MRTP
commission tried to fit certain offences like cartels, bid rigging under certain sections
of the act although they are not specifically mentioned anywhere in the act.
4. International Norms:
The MRTP act faced lack of resources to handle international investments or trade
requirements of WTO post 1991 when WOTO came into the picture. The act had to
go through amendments and yet could not keep up with other international anti-
competition acts. Hence, it had to be replaced by a more comprehensive law.
EVOLUTION OF COMPETITION LAWS

The first competition law, which was Monopolies and Restrictive Trade Practices Act
(MRTP) was enacted in India in 1969. It was introduced in the year 1967 but came into force,
with effect from 1st June 1970. The principal objectives which were to be achieved through
the MRTP Act were:
5|Page
i prevention of concentration of economic power to the common detriment
ii control of monopolies
iii prohibition of Monopolistic Trade Practices
iv prohibition of Restrictive Trade Practices
v prohibition of Unfair Trade Practices
1984 amendments to the MRTP act
The MRTP Act, 1969 underwent amendments in the years 1974, 1980, 1982, 1984, 1986,
1988 and 1991. The amendments done in 1982 and 1984 were based on the recommendations
of the Sachar Committee, which was constituted by the Government of India under the
Chairmanship of Justice Rajinder Sachar in 1977.
The Sachar Committee stated that advertisements and sales promotions had become
established modes of modern business techniques. Representations through such
advertisements to the consumer should not become deceptive. The Committee also noted that
fictitious bargain was one of the common forms of deception and many devices were used to
lure buyers to believe that they were getting something for nothing or at a nominal value for
their money. The Committee recommended that an obligation should be cast on the seller to
speak the truth and also to avoid half-truth when he advertises, to prevent false or misleading
advertisements. Expert committee report of justice Sachar recommended that a separate
chapter should be added to the MRTP Act defining UTPs essentially in the interests of
consumers. Advertisement and representation to consumers should not become deceptive but
should be transparent.
1991 Reforms
Recent policy changes from 1991 onwards include
1. Deregulation and simplification of licensing and approval procedures
2. Exemption of a large number of industries from licenses, approvals and quotas
3. New economic adjustment measures
4. Gradual decline in the interventionist role of the public sector
5. Privatisation
6. Encouraging competition
1991 amendments to the MRTP Act

1. Curbs on growth of monopoly companies removed
6|Page
2. Merger control removed
3. More emphasis on prohibition of RTPs, UTPs and MTPs
Raghavan Committee recommendation
The Government of India constituted a High Level Committee in October 1999, under the
Chairmanship of Mr. SVS Raghavan which was known as the Raghavan Committee. This
Committee was constituted to advise a modern competition law for the country which
would be in line with international developments and suggest a legislative framework, which
might entail a new law or suitable amendments in the MRTP Act 1969. The Raghavan
Committee presented its report to the Government in May 2000.
A draft competition law was prepared and presented to the Government in November 2000,
on the basis of the recommendations of the Raghavan Committee. The Competition Bill was
introduced in the Parliament, which referred the Bill to its Standing Committee. The
Parliament passed the Competition Act, 2002 in December after considering the
recommendations of the Standing Committee. The Monopolies and Restrictive Trade
Practices Act, 1969 repealed and was replaced by the Competition Act, 2002, with effect
from September 1, 2009.
Reasons for evolution of Competition Act

1. The MRTP Act had become obsolete in certain areas in the light of international
economic developments relating to competition laws
2. Focus need to be shifted from curbing monopolies to promoting competition
3. Indian enterprises were small in size and needed to grow to become globally
competitive
The Competition Act, 2002 was enacted for the establishment of a Commission to promote
and sustain competition in the business world, to protect the interest of consumers, to prevent
practices having detrimental effect on competition and to ensure freedom of trade carried on
by other participants in markets in India. The Competition Act, 2002 came into existence in
January, 2003 and the Competition Commission of India was established on October 14,
2003. Competition Commission of India consists of a Chairperson and 6 Members who are
appointed by the Central Government. CCI functions as a market regulator for preventing and
regulating anti competitive practices in the country. A quasi-judicial body, known as the
7|Page
Competition Appellate Tribunal was established to hear and dispose of appeals against any
direction issued or decision made by the CCI.
The Act was subsequently amended by the Competition (Amendment) Act, 2007 and
Competition (Amendment) Act, 2009. The provisions of the Competition Act relating to anti-
competitive agreements and abuse of dominant position were notified on May 20, 2009.
Introduction of the Act was a key step towards facing competition.
Objectives of Competition Act:

1. To promote and sustain competition in markets
2. To prevent practices having adverse effect on competition
3. To ensure freedom of trade carried on by other participants in markets
4. To protect the interests of consumers
ANTI COMPETITIVE AGREEMENTS

Agreements:
Section 2(b) of Competition Act states that Agreement includes any arrangement or
understanding or action in concert:
whether or not, such arrangement, understanding or action is formal or in writing; or
whether or not such arrangement, understanding or action is intended to be

enforceable by legal proceedings
The agreement can be between any two of the following
A Person
Association of persons
An Enterprise
Association of enterprises
8|Page
Competition act prohibits Anti-competitive agreement (Section 3). Any agreement between
the above mentioned parties having appreciable adverse effect on competition (AAEC) are
termed as Anti-Competitive.
Section 19 of competition act deems the following situations to have appreciable adverse
effect on competition
Creation of barriers to the new entrants
Driving existing competitors out of the market
Foreclosure of competition by hindering entry into the market
Accrual of benefits to consumers
Improvements in production or distribution of goods or provision of services
Promotion of technical, scientific and economic development by means of production

or distribution of goods or provision of services
The competition Act does not specifically use the terminology, but section 3(3) and 3(4)
indirectly classifies agreements into two forms, for the purpose of ascertaining the anti-
competitive nature, viz:
i. Horizontal Agreements
ii. Vertical Agreements
Horizontal Agreements
Horizontal agreements are agreements between enterprises, group of enterprises, persons or

group of persons, engaged in trade of identical or similar products or services. Horizontal
agreements are entered between two or more competitors at same level of activity eg.
Producers, manufacturers. This is done for any of the following reasons
Price fixation
Limiting production
9|Page
Sharing of information to influence the market
Such practices adversely affect the market and may lead to antitrust law violations.
Types of Horizontal Agreements considered being anti-competitive are
Agreements that directly or indirectly determine purchase or sale prices:
Limits or controls production, supply, markets, technical development, investment or

provision of services
Shares the market or source of production or provision of services by way of

allocation of geographical area of market, or type of goods or services, or the number
of customers in the market or any other similar way
Directly or indirectly results in bid-rigging or collusive bidding
Vertical Agreements
Vertical agreements are the agreements at different stages or different levels of market chain.
In order to determine whether any agreement is in contravention of section 3(4) read with
section 3(1) of the Act, the following five essential ingredients of section 3(4) have to be
satisfied:
There must be an agreement amongst enterprises or persons;
The parties to such agreement must be at different stages or levels of production

chain, in respect of production, supply, distribution, storage, sale or price of, or trade
in goods or provision of services;
The agreeing parties must be in different markets;
The agreement should cause or should be likely to cause AAEC;
The agreement should be of one of the following nature as illustrated in section 3(4)
of the Act:
10 | P a g e
a. tie-in arrangement;
b. exclusive supply agreement;
c. exclusive distribution agreement;
d. refusal to deal;
e. resale price maintenance
Explanation of keywords
(a) tie-in arrangements includes any agreement requiring a purchaser of goods, as a

condition of such purchase, to purchase some other goods;
(b) exclusive supply agreement includes any agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in any goods other
than those of the seller or any other person;
(c) exclusive distribution agreement includes any agreement to limit, restrict or withhold
the output or supply of any goods or allocate any area or market for the disposal or sale of the
goods;
(d) refusal to deal includes any agreement which restricts, or is likely to restrict, by any
method the persons or classes of persons to whom goods are sold or from whom goods are
bought;
(e) resale price maintenance includes any agreement to sell goods on condition that the
prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller
unless it is clearly stated that prices lower than those prices may be charged.
Determination of Anti-Competitive nature of agreements
To determine whether an agreement actually has adverse effect to the market and competition
the following rules have been formulated
Rule of reason
11 | P a g e
Per Se Rule
Rule of reason
The Rule of reason is a legal approach by competition authorities or the courts where an
attempt is made to evaluate the pro-competitive features of a restrictive business practice
against its anticompetitive effects in order to decide whether or not the practice should be.
Rule of reason is applicable only for vertical agreements. Though some of the agreements
may prima facie seem anticompetitive but on further examination shows that they have valid
efficiency enhancing benefits
Per Se Rule
Per se rule is a rule that considers a particular restraint of trade to be manifestly contrary to
competition and so does not require an inquiry into precise harm or purpose for an instance of
it to be declared illegal.
Horizontal Agreements are considered to be illegal and anti-competitive ab-initio unlike

vertical agreements which are subject to rule of reasoning to validate the true nature of
illegality of the agreement.
Caselet for Anti-competitive agreement
The CCI imposes penalty of 1062602INR on Chemist and Druggists Association, Goa
(CDAG). This was on grounds that
CDAG was found to continue exercise control on supply chain through which drugs
and medicines are made available in the market through the practice of requirement of
LOC/NOC prior to the appointment of stockists by pharmaceutical companies without
having any legal or statutory authority in this respect.
CDAG forced pharmaceutical companies to follow its mandate by threatening the

other stockists in Goa to stop taking supplies or suspend receiving supplies from them
12 | P a g e
till such time they stopped supplies to the unauthorised stockists such as M/s Xcel
Healthcare.
The commission thus imposed a penalty of 1062602INR, which was calculated as 10% of
average receipts of CDAG. The penalty was supposed to be deposited within 60 days of
receipt of order.
ABUSE OF DOMINANCE
The competition laws in the world are predominantly concerned with the use of market
power and its abuse all around. This term market power is also varyingly termed as
dominant position, monopoly power and/ or substantial market power.
Definition of Dominance
The Act defines dominant position or dominance in terms of a position of strength possessed
by an organization in the relevant market in India under the following condition:
1. It is operating independently of competitive forces existing in the relevant market
2. It can affect consumers or competitors or the relevant market in its favor
Relevant Market
The relevant market means the market which is decided the Commission with reference to
the relevant product market (the market which contains the goods or services which are
regarded as homogeneous/replaceable by the end customer in their characteristics, prices and
intended use.) or relevant geographic market (the market which contains the area where the
demand and supply of goods and services are distinctly homogeneous and distinguishable
from the conditions existing in the neighboring areas) or in reference to both the markets.
Factors determining Dominance or Dominant position

Conventionally, dominance has been interpreted majorly in terms of market share of an
organization or related companies. However, there are several other factors which determine
the dominant position of a firm like market share, size of the firm and resources available,
size and significance of competitors, economic power of the firm, vertical integration,
dependence of consumers on the organization, extent of entry and exit barriers in the market,
countervailing buying power, structure and size of the market structure, source of dominant
position, etc.
13 | P a g e
Abuse of Dominance
Abuse occurs when an organization or a group of organizations tries to use their dominant
position in the relevant market in an exclusionary or an exploitative manner or both.
The Act gives a comprehensive list of scenarios that make abuse of dominant position and,
therefore, are forbidden. However such practices will be termed as abuse only when they are
being used by an organization to enjoy their dominant position in the relevant market in
India.
Section 4 (2) of the Act defines the following action by a dominant organization or group of
organization as abuses:
i. directly or indirectly imposing unfair or discriminatory condition in purchase or sale of
goods or service;
Case Study: CCI issues supplementary order u/s 27 of the Competition Act in the DLF
case; modifies Apartment Buyers Agreement as directed by COMPAT
In May 2010, the informant (Belaire Owners Association) filed an instant case under Section
19(1) (a) of the Competition Act, 2002 and claimed that DLF, by abusing its dominant
position to affect the rights of the informant.
The abuse was said to be committed by imposing unfair conditions on the buyer through the
Provisional Booking Agreement, that was to be signed by them after having paid initial costs,
hence, they have no option to object to loopy provisions of the agreement included by DLF.
There are some clauses analyzed by CCI, such as DLFs right to change the layout plan
without agreement of allottees, power to make changes in the agreement and the power to
supersede without any right to the allottees. Also allottees have no exit option except when
DLF didnt deliver possession within the stipulated time, but even in that event he gets his
money refunded without interest only after the sale of that apartment to someone else. The
CCI held that these are evidences of unequal bargaining power between the parties.
DLF was found guilty of abusing its dominant position in the market and CCI imposed a
penalty of Rs. 630 crores on DLF. They challenged the CCI order before COMPAT which
granted stay order against the CCI order of imposing penalty under section 27 (b) of the Act.
As per the COMPAT remand, both the parties submitted the revised terms and conditions
14 | P a g e
before CCI. The CCI after hearing both the parties, modified the standard terms and
conditions of the flat buyers agreement having deleted nearly 16 clauses from the
agreements. This modified agreement order by CCI was again questioned by the DLF in
COMPAT.
ii. directly or indirectly imposing unfair or discriminatory price in purchase or sale

(including predatory price) of goods or service;
Case Study: Maharashtra State Power Generation Company Ltd. (MAHAGENCO) &
Gujarat State Electricity Corporation Limited (GSECL) v. Coal India Limited (CIL):
This case was filed under section 19(1)(a) of the Act by two state owned power generation
companies in Maharashtra and Gujarat against CIL and its subsidiaries alleging contravention
of the section 4 of the Act. They alleged that opposite parties were dominant in the relevant
market and were abusing this dominance mainly through the terms and conditions included in
the FSA (Fuel Supply Agreements).
The unfair and preferential terms in the FSA related to:
a. The sampling procedure for existing PSUs and other power producers were different.
b. Regardless of the quality of coal, coal had to be accepted and paid for by the supplier
c. Charging transportation and other expenses from buyers on supply of ungraded coal
unfairly
d. Putting a cap on compensation for stones for new power producers
e. Unfair provisions relating to review and termination of the agreement
CCI, agreeing with the DG, found CIL and its subsidiaries to be violating the provisions of
Section 4(2) (a) (i) of the Act ordered CIL to undertake the following measures:
a. Cease and desist from indulging in the conduct contravening the provisions of the Act
b. Modify the FSA clauses, ensuring that the stakeholders are consulted before such
modification
c. Ensure that parity between old and new power producers is maintained
d. Considering the mitigating factors involved, CCI imposed a penalty of 3% of the average
turnover of the last three years of the OP, which amounted to approximately Rs. 1773.05
crores.
iii. limiting or restricting production of goods or provision of services or market;
15 | P a g e
iv. curbing or restraining technical or scientific development relating to goods or services
to the harm of consumers;
v. refusing market access in any manner;
vi. with tying one product into the sale of another can be considered abuse too, by
restricting the consumer choice and depriving competitors of outlets.
vii. using its dominant position in one relevant market to enter into, or protect, other
relevant market.
The abuses mentioned in the Act comes under two broad categories: exploitative (excessive
or discriminatory pricing) and exclusionary (for example, denial of market access).
The predatory price under the Act means selling goods or services at a price below the
price which is decided by the authority in order to reduce or eliminate the competition.
Case Study: COMPAT: NSE Guilty Of Abuse of Dominant Position

The informant (MCX Stock Exchange Limited) alleged violation of Section 3 and 4 of the
Act on account of anti- competitive behavior and abuse of dominant position. According to
the information, various fee were waived and require only low level of deposit only with
respect to the CD segment to eliminate competition and demoralize potential entrants. For
this they waived transaction fee on currency future trades which were executed on NSE, no
admission was required for membership in its CD segment, there were no annual subscription
fees, no charges to supply data feed in its CD segment, and much more.
CCI with the help of previous NSE circulars found that the informant has been facing the
restraint of zero fees since the beginning. While the pattern of behavior of NSE couldnt
prove anything wrong against NSE, however, the Commission concluded that the zero price
policy of NSE in the relevant market is unfair and can be termed as destructive pricing. The
Commission suggested that NSE is using its monopoly profits to leverage its position by not
charging transaction fee in subsidizing activities in CD segment which is open to
competition. Also NSE was demanded to alter its zero price policy in the relevant market and
to terminate and refrain from unfair pricing, exclusionary conduct and unfairly using its
dominant position in other market to protect the relevant CD market with immediate effect.
CCI imposed a penalty on NSE which was equal to 5% of their average turnover resulting in
an amount of Rs. 55.5 crores.
16 | P a g e
Inquiry unto Abuse of Dominance

In exercise of powers vested under section 19 of the Act, the Commission may inquire into
any alleged violation of section 4 (1) of the Act that prescribes abuse of dominance. The
Commission, on being satisfied that there exists a case of abuse of dominance, shall direct the
Director General to cause an investigation and furnish a report.
Powers of the Commission

After inquiry the Commission may pass any/ all of the following orders under section 27 of
the Act:
1) direct the parties to discontinue and not to re-enter such agreement,
2) direct the concerned organization to alter the agreement or to abide by such other orders
which is passed by the Commission and comply with them, including payment of costs
5) can impose penalty upto 10% of the average turnover for the last 3 preceding FY
Interim Order
Under section 33 of the Act, while the inquiry into abuse of dominant position is going on,
the Commission may temporarily restrain any party from continuing with the alleged
offending act until the inquiry is completed or further orders are given, without giving notice
to such party
Appeals
The Competition Appellate Tribunal (COMPAT) was established under section 53A of the
Act, to hear and dispose of appeals against any decision made or towards any order passed by
the Commission under specified sections of the Act. Furthermore an appeal has to be filed
within 60 days of receipt of the notice by the Commission.
Case Study: CCI rejects market abuse complaint against Adidas, Reebok
A complaint was filed by Kalpataru Enterprises, a franchisee of Reebok India Co. stating that
the terms and conditions of the Franchisee Agreement which was signed between Kalpataru
Enterprises and Adidas AG Group are not only unfair but also discriminatory as compared
with other franchisees which were receiving a higher rate of commission and who were
assured of a minimum guaranteed payment for running the retail outlet. It was alleged that
17 | P a g e
such discriminating practice of the Adidas AG Group had put some franchisees at a
competitive disadvantage position as compared to others thus, causing an unfavorable effect
on competition in the downstream market. It was further stated that the said acts of the
Adidas AG Group amounted to pressing of discriminatory conditions which is in violation of
the provisions of Section 4(2) (a) (ii) of the Competition Act, 2002.
After listening to both the parties, CCI noticed that although Adidas AG Group appears to be
in dominance in the relevant market, the claim against it is baseless and doesnt amount to
any abuse of dominance by the Adidas AG Group within the limits of Section 4 of the Act.
CCI said, There were two basic flaws in the allegations made by the Kalpataru. Firstly, the
agreement which was termed as unfair and erratic was entered into in 2003 when the Adidas
had not even come into existence as dominant party. Furthermore, the conduct of the Adidas
AG Group with respect to the informant remained same even if the submission of the
informant regarding dominance of the Adidas Group is approved after its formation in 2005.
Compensation [Section 53N]
A person may move an application to COMPAT to adjudicate upon claim for compensation
that may arise from the findings of the Commission.
COMPETITION COMMISSION OF INDIA

Competition is the best way to ensure that the Common Man or Aam Aadmi has access to
a wide range of goods and services at the competitive prices. With increasing competition,
producers have more and more incentive to innovate and specialize. This would result in
wider choice to consumers and reduced cost. A fair competition in market is essential to
achieve this objective. The goal of Competition Commission of India is to create and sustain
fair competition in the economy that will level the playing field for the producers and make
the markets work for the welfare of the consumers.
In order to achieve the objectives of the Competition Act, the Central Government of India
established the Competition Commission of India (CCI) with effect from 14th October 2003.
CCI is composed of a Chairperson and 6 Members appointed by the Central Government.
The following are the objectives of the Commission.
18 | P a g e
1. To prevent practices having adverse effect on competition.
2. To promote and sustain competition in markets.
3. To protect the interests of consumers and
4. To ensure freedom of trade
On receiving a reference from a statutory authority established under any law, the
Commission is also required to inquire and give opinion on competition issues and to
undertake competition advocacy, create public awareness and provide training on competition
issues.
CCI, entrusted with eliminating prohibited practices, is a corporate body and independent
entity possessing a common seal with the power to enter into contracts and to sue in its name.
Vision and Mission of CCI

Vision
To promote and sustain an enabling competition culture through engagement and
enforcement that would inspire businesses to be fair, competitive and innovative; enhance
consumer welfare; and support economic growth.
Mission
Competition Commission of India aims to establish a robust competitive environment
through:
Proactive engagement with all stakeholders, including consumers, industry, government
and international jurisdictions.
Being a knowledge intensive organization with high competence level.
Professionalism, transparency, resolve and wisdom in enforcement.
Current Members
Devender Kumar Sikri Chairperson
S. L. Bunker Member
Sudhir Mital Member
Augustine Peter Member
U. C. Nahta Member
M. S. Sahoo Member
G.P. Mittal Member
19 | P a g e
Benches
In order to execute the duties, the Competition Act exercises the jurisdiction, powers and
authority of CCI by the way of Benches. A Bench could be constituted by the chairperson of
at least two members; and it is mandatory for at least one member of each Bench to be a
"Judicial Member". The Bench over which the chairperson presides is to be known as the
Principal Bench and the other Benches known as Additional Benches. However, the Act
further empowers the chairperson to further constitute one or more Benches known as
Mergers Benches exclusively to deal with combination and the regulation of combinations.
Extension of the executive powers

The executive powers of CCI are extended by the appointment of a Director General and as
many other persons for the purpose of assisting it in conducting enquiries into contraventions
of the provisions of the Act as well as conducting cases before the Commission.
CCI is empowered to conduct enquiries into:
1 Certain agreements and dominant position of enterprise
2 Combinations
CCI, either on receipt of a complaint, on a reference made to it by the Centre or State

Government or on its own motion, may enquire into any alleged contravention regarding the
nature of the agreement, which is suspected to be inherently anti-competitive, or the abuse of
dominant position. Any person, consumer, consumer association or trade association can
make a complaint.
Jurisdiction
An enquiry or complaint could be initiated or filed before the Bench of CCI if the
respondent(s) resides within the local limits of its jurisdiction, conducts business or works for
personal gain, or where the cause of action wholly or in part arises. CCI has been vested with
the powers of a civil court including those provided under sections 240 and 240A of the
Companies Act, 1956 on an "Inspector of Investigation" while trying a suit, including the
power to summon and examine any person on oath, requiring the production and discovery of
documents and receiving evidence on affidavits. CCI is also vested with certain powers
wherein it can act in an expedited manner. Civil courts or any other equivalent authority will
20 | P a g e
not have any jurisdiction over any suit or proceeding which would normally fall within the
ambit of CCI. They cannot entertain any such suit or provide injunction with regard to such
matters.
An order of CCI subsequent to an enquiry, could consist of:

Directing the person or entities ruled against to desist from abusing a dominant position
or discontinuing acting upon anti-competitive agreements
Imposing penalty to the maximum extent of 10% of the average turnover for the
preceding three financial years upon each person or entity party to the abuse
Award compensation
Modify agreements
Recommend the division of the dominant enterprise to the Centre, which has the ultimate
authority to decide the fate of a dominant enterprise
Recovery of compensation from any enterprise for any loss or damage shown to have
suffered by the other party.
In case of combination, CCI may pass following orders:

If no appreciable adverse effect on competition is found, then it may approve the combination
In case of adverse effect on competition, disapproval of the combination
Proposal of suitable modifications to the combination as accepted by the parties
Granting relief by way of temporary injunctions during enquiry
Award compensation
Penalties
As the case may be, penalties ranging from Rs. 1 lakh to Rs. 1 crore may be imposed in case
of failure to comply with the directions of CCI and Director General or in case of false
representation of facts by parties.
Execution of the order

Execution of the order is the responsibility of the CCI. However, if CCI is unable to execute
it, CCI may send such order for execution to the High Court or the principal civil court, as the
case may be.
Post-decisional Options
If an appeal is allowed by the Competition Act, or no appeal has been preferred, then the
aggrieved person(s) may apply to CCI for review of the order within 30 days from the date of
21 | P a g e
the order.
Provisions have also been made for an appeal against any order or decision made by the CCI
by any aggrieved party. An application for the same has to be made to the Supreme Court
within 60 days from the date of communication of the said decision or order.
COMPETITION ADVOCACY
One of the most pivotal elements of the Competition Act is competition advocacy.
Intention is to help evolve competition law through review of policy, promotion of
competition advocacy, creating awareness and imparting training about competition issues.
The government can refer to the CCI out of its own volition but is not bound to abide by the
opinions provided. Centre can issue directions to CCI and these directions are binding.
The CCI assumes the role of competition advocate, assisting in government policies such as
lowering of barriers to entry, promotion of healthy competition in the market place and de-
regulation and liberalization of trade. Enforcement of Competition Law is deeply related to
competition advocacy. The aim of competition advocacy is to bolster a competitive Market
framework and business behavior without the direct intervention of CCI.
Mandates of Successful Competition Advocacy:
1. Developing relationship with the Ministries and Government departments, regulatory
bodies and other agencies so as to formulate and administer policies affecting supply-
demand gaps in various markets. The purpose is to facilitate consumer welfare and maintain
healthy competition.
2. Encouraging debates on competition so as to make a well informed economic decision.
3. Competition advocacy must be open and clear to safeguard and establish the integrity and
capability of the CCI. There should be a clear explanation in the news releases in case of
maintaining confidentiality.
4.Good media relations will ensure that the role and significance of competition policies are
explained as an inherent part of governments economic framework.
Chapter-VII, Section 49 of the Competition Act, 2002 is elucidated in the Report of the
High Level Committee. However, the scope of advocacy activities to be undertaken has
been broadened in the Act. Under the Act, the Commission is required to proactively
interact with the Government Departments, Ministries, Media houses and all the concerned
stakeholders, such as, the business community and organizations, academia, consumer
22 | P a g e
groups and professional bodies, as an advocate of competition, and, foster conditions to
create a more competitive policy regime, market structure and business behavior. To
explicate this declaration further, Chapter VII, Section 49 is replicated below:
(1) In formulating a policy on competition (including review of laws related to
competition), the Central Government may make a reference to the Commission for its
opinion on possible effect of such policy on competition and on receipt of such a reference,
the Commission shall, within sixty days of making such reference, give its opinion to the
Central Government, which may thereafter formulate the policy as it deems fit.
(2) The opinion given by the Commission under sub-section (1) shall not be binding upon
the Central Government in formulating such policy.
(3) The Commission shall take suitable measures, as may be prescribed, for the promotion
of competition advocacy, creating awareness and imparting training about competition
issues.
Thus, the Commission acts as an advocate rather than an enforcement agency and takes
suitable non-enforcement measures under section 49, together with the enforcement
measures as prescribed under the Act. Competition law enforcement is the premise as well
as the tool for fostering competitive markets which are sustainable and indulge in healthy
inter-firm rivalry, avenues for new entry, entrepreneurship, proliferating economic
efficiency and maintaining consumer welfare. Competition advocacy can supplement these
and other benefits of competition. Competition Advocacy, thus quintessentially means non-
enforcement mechanism for acquiescence of competition law and creation of competition
culture to promote economic welfare.
The Commission envisions following advocacy activities to be undertaken as a competition

advocate:
Promotion of Competition Advocacy and creation of awareness about competition issues:
The Commission shall attempt and undertake programs, activities, researches etc. for the
advancement of competition advocacy and creation of consciousness about competition
issues in India and abroad deemed apt by the Commission.
The Commission may constitute Advocacy Advisory Committee(s) so that experts and
stakeholders can participate and consult to carry forward the mission of competition
advocacy and creation of awareness about economic welfare on a continuous basis.
The Commission may also take up the task of developing and distributing advocacy
literature, which includes audio-visual and other material with an intention of promoting
23 | P a g e
competition advocacy and creating awareness about competition issues. For this purpose,
help of external professional services can also be taken.
The Commission may make widespread use of the media, print as well as electronic, with an
intention of promoting competition advocacy and creating awareness about competition
issues, and, for doing so, amongst other things summon media meets, press releases, publish
and disseminate articles/news, release advertisements and carry out other publicity related
activities on competition issues.
The Commission shall proactively interact with the organizations of stakeholders, academic
& intellectual communities, Central and State Governments, sectoral regulators, civil
society and other organizations concerned with competition matters and encourage
brainstorming and debates on competition to come up with better informed decisions related
to the economic framework.
The Commission may carry out studies and market research to investigate the level and
problems of competition advocacy and creation of awareness about competition issues;
The Commission may assume the role of a competition advocate and proactively interact
with the Central and State Governments and other administrative bodies in legislative
policies and other areas, such as, but not limited to, trade liberalization, economic
regulation, state aids, disinvestments; to bring about policies that lower barriers to entry,
promote de-regulation and trade liberalization and promote competition in the market place.
For this end in view, the Commission may, amongst all things, undertake studies and
research on the implementation of Central and State Government policies, and, propagation
of the reports as deemed appropriate; such as forwarding its opinions on competition issues
in draft legislations of some sectors such as posts and telegraph, shipping trade practices,
broadcasting, petroleum and natural gas and warehousing.
Encouraging the academic and professional institutions (Approaching UGC and NCERT) to
include competition law and policy in the curriculum administered by them should be
undertaken by the commission;
Stakeholder organizations such as, academic communities, Central and State Governments,
Civil society, sector regulators and other organizations related with competition matters
should be encouraged to take on activities, studies, research work etc. and the commission
may support such endeavors financially if deemed appropriate.
The Commission has conducted 53 advocacy and awareness programs with foremost
Industry Chambers and statutory professional Institutes, e.g., CII, FICCI, ASSOCHAM,
ICAI, ICWAI, AIAI Mumbai.
24 | P a g e
Imparting Training about competition issues:
i) Arrangement of appropriate training in India and abroad for the Chairperson, Members,
Officers and other employees supporting the Commission including the Director General
about competition issues and encouraging participation in international events as deemed
necessary by the Commission.
ii) Appropriate training might be organized by the commission in India or abroad for the
concerned stakeholders as considered necessary.
iii) Tie up with any national or international institution by the commission, for training, if
the case arises and may commence to set up a center on competition law and policy as
reasoned appropriate and
iv) Providing internship facilities and financial assistance to the students and professionals
funded by universities; academic and professional institutions for undertaking studies,
research etc. on competition issues
One unique feature of Competition Act is that it, unlike other statutes, provides specific
mandate u/s 49 for promotion of Competition Advocacy to create awareness among and
imparting training about competition issues to various stakeholders viz. consumers,
students, academicians, lawyers, professionals, trade organizations and chambers of
commerce, Centre and state governments and sectoral regulatory authorities etc.
Competition advocacy acts as friendly forewarning and advises on formulation of
competition coherent policies with competitive neutrality. Creating awareness about a
particular law serves as a catalyst in its implementation. Competition Advocacy promotes
competitive environment through non-enforcement mechanisms. Summary of advocacy
initiatives taken by CCI in the past four years is shown in table below:
Table: Advocacy Initiatives
Year Consumers Industry Students Professional Others Total
s
2011-12 3 13 15 12 19 62
2012-13 2 11 24 8 13 58
2013-14 1 20 3 31 14 69
2014-15 - - - - - 49
25 | P a g e
2011-12
2012-13
2013-14
Graph: Target Groups Covered
REGULATION OF COMBINATION
What Is Combination?
As per competition act, Combination means acquisition of control, shares, voting rights or
assets by a person over a company where such person has direct or indirect control over other
company that is engaged in the competing business and merger or amalgamation between
such companies when the combined entity exceed the thresholds set in the Act. In the Act, the
thresholds are specified in terms of assets or turnover in India and abroad.
Horizontal combinations are those that are between rivals who are at the same level in the
value chain. They are most likely to cause adverse effect on competition.
Vertical combinations are those that are at different stages of the production chain. They are
less likely to cause any appreciable adverse effect on competition.
26 | P a g e
Conglomerate combinations are between those companies that are not in the same line of
business or in the same relevant market. They are least likely to cause appreciable adverse
effect on competition.
The main idea behind regulation of combination under the Act is to prevent any anti-
competitive behavior that may adversely affect the consumers. Any combinations that may
have any anti-competitive effect can be approved only after such effects are removed.
Applicable
Assets Turnover
To
Individual Rs. 1,500 Cr Rs. 4,500 Cr
In India
Group Rs. 6,000 Cr Rs. 18,000 Cr
Assets Turnover
Min Indian Min Indian
In India Total Total
Component Component
and outside Individual
$ 750 mn Rs. 750 Cr $2,250 mn Rs. 2,250 Cr
Parties
Group $ 3 bn Rs. 750 Cr $ 9 bn Rs. 2,250 Cr
Thresholds for Combinations under the Act
We can easily assume that in the case of small size combinations, there are less chances of
appreciable adverse effect on competition in Indian markets. Sufficiently high thresholds in
terms of assets/turnover are provided in the act for mandatory notification to the CCI.
Individual:
1. Either the combined assets of the companies in India would value more than Rs.
1,500 crores or the combined turnover of the companies in India is more than Rs.
4,500 crores.
2. In case either or both of the companies have assets/turnover outside India also, then
either the combined assets of the companies value more than US$ 750 million,
including at least Rs. 750 crores in India, or turnover is more than US$ 2250 million,
including at least Rs. 2,250 crores in India.
Group:
1. The group to which the company is belonging after the merger or amalgamation or
the group to which the company would belong after the acquisition, has either assets
of value of more than Rs. 6,000 crores in India or turnover more than Rs. 18,000
crores in India.
27 | P a g e
2. When the group has presence both in India and outside India then either the group has
assets more than US$ 3 billion including at least INR 750 crores in India or turnover
more than US$ 9 billion including at least INR 2250 crores in India.
As per the Act, threshold limits are subjected to revision through notifications by the
government every two years, in consultation with the CCI based on changes in Wholesale
Price Index (WPI) or fluctuation in exchange rates of rupee or any foreign currencies.
Control includes controlling the affairs or management by

i. one or more companies, over another company or group, either jointly or singly;
i. one or more groups, over another group or company, either jointly or singly;
Group means two or more enterprises which, directly or indirectly, are in a position to
i. exercise the voting rights of twenty-six percent or more in the other company; or
ii. appoint more than fifty percent of the members of the board of directors in the other
company; or
iii. control the management or affairs of the other company;
The turnover can be determined by taking into account the values of sales of goods or
services. The value of assets is determined by taking the book value of the assets as shown in
the audited books of account of the enterprise, as reduced by any depreciation, in the
financial year immediately preceding the financial year in which the date of proposed merger
falls.
Regulation of Combinations
1. Entering into a combination which causes or is likely to cause an appreciable adverse
effect on competition within the relevant market in India is prohibited and such
combination shall be void.
2. Subject to the provisions contained in sub-section (1), any person or enterprise, who
or which proposes to enter into a combination, may, at his or its option, give notice
to the Commission, and the fee which may be determined, by regulations, disclosing
the details of the proposed combination, within seven days of
28 | P a g e
a. approval of the proposal relating to merger or amalgamation, referred to in
clause (c) of section 5, by the board of directors of the enterprises concerned
with such merger or amalgamation, as the case may be;
b. Execution of any agreement or other document for acquisition or acquiring
of control.
4. The provisions of this section shall not apply to share subscription or financing
facility or any acquisition, by a public financial institution, foreign institutional
investor, bank or venture capital fund, pursuant to any covenant of a loan agreement
or investment agreement.
5. The public financial institution, foreign institutional investor, bank or venture capital
fund, referred to in sub-section (4) shall, within seven days from the date of the
acquisition, file, in the form as may be specified by regulations, with the Commission
the details of the acquisition including the details of control, the circumstances for
exercise of such control and the consequences of default arising out of such loan
agreement or investment agreement, as the case may be.
Exemption Notifications
The Central Government as per clause (a) of Section 54 of the Act, in public interest, has
exempted:
an enterprise, from the provisions of Section 5 of the said Act, whose control, shares,
voting rights or assets are being acquired, has either assets in India valuing not more
than INR 250 crore or turnover in India of not more than INR 750 crore for a period
of five years.
a banking company for which, under Section 45 of the Banking Regulation Act, 1949,
a notification has been issued from the application of the provisions of Sections 5 and
6 of the Act by the Central Government for a period of five years.
Combination Notice
The review process for combination under the Act involves mandatory pre-combination
notification to the Competition Commission of India (CCI). Any person or enterprise who is
proposing to enter into a combination shall give notice to the CCI in the specified form
disclosing the details of the proposed combination. CCI should be informed within 30 days of
the approval of the proposal relating to merger or amalgamation by the board of directors or
29 | P a g e
of the execution of any agreement or other document in relation to the acquisition. The CCI
has the power to inquire into a combination within one year of the taking into effect, in case a
notifiable combination is not satisfied.
The CCI also has the power to impose a fine up to one per cent of the total turnover or the
assets of the combination, whichever is higher, for failure to give notice of the combination to
the CCI. Any combination for which notice has been filed with the CCI and would not take
effect for a period of 210 days from the date of notification or till the CCI passes an order,
whichever is earlier. The combination shall be deemed to have been approved if the
Commission does not pass an order during the said period of 210 days.
Example: Holcim-Lafarge Merger

Swiss cement maker Holcim and its French counterpart Lafarge, in April 2014, announced a
global merger of both. The proposed merger pursuant to a scheme of arrangement will create
the worlds largest cement maker, before Chinas Anhui Conch (production capacity of 227
million tonnes), with a combined installed capacity of 427 million tonnes. This had raised
eyebrows of anti-trust watchdogs in several countries.
Through its control of Ambuja Cements and ACC in India, Holcim, has 60 mt of capacity in
India. Lafarge, on the other hand, has 70 percent (7.8 mt) of its capacity in the eastern states
of Jharkhand, West Bengal and Chhattisgarh, out of its total capacity of 11 mt in India.
Holcims ACC and Ambuja have capacities of 6.1 mt and 4.6 mt respectively in Indias
eastern regions. So this merger will lead to capacity of 18.5 mt in eastern states for the new
company that is more than 40 percent of the estimated 46 mt of total capacity in the eastern
region. This has led to scrutiny by the CCI.
The Order
The Competition Commission of India (CCI) received noticed as per Section 6 of the Act,
from Holcim and Lafarge to pursuant the proposed merger. After considering the facts on the
record, on November 22, 2014, the CCI exercising its rarely-used powers put the deal
between Holcim and Lafarge under public scrutiny after prima facie finding that the deal
might lead to monopoly for the merged entity in eastern India and could hurt competition in
Indian cement market. This public scrutiny was ordered under Section 29(3) of the
30 | P a g e
Competition Act. The parties were directed to publish the details of the proposed
combination. Also the CCI invited comments from other stakeholders including competitors
along with supporting documents on how the merger can adversely impact the concerned
person or entity, to be submitted within 15 days.
Conclusion
After the Phase II investigations, the CCI has now said that the merger is fine, but Holcim-
Lafarge needs to divest its limestone reserves and some of its units, to prevent a monopoly in
eastern India.
This was only the second merger in India in which CCI exercised its right to put the deal
under public scrutiny, after the Sun Pharma Ranbaxy merger.
UNDERSTANDING THE EU MODEL

Introduction and Evolution
The importance of the Competition Policy to the European Union
Though the idea of a united Europe dates back centuries, it was not until after World War II
that a European union became a realistic prospect. The economic and human cost of the two
World Wars hard hit Europe the hardest and the unification of the economies of Europe was
seen as a solution to meet the desire of avoiding such catastrophes in the future. In 1957, a
European Economic Community was created which consisted of 6 nations; this gradually
evolved into the European Union (EU) which was established officially and came into force
on November 1, 1993 with the Treaty of Maastricht. The European Commission acts as the
EU's executive arm and is responsible for the day-to-day running of the EU and operates as a
cabinet government.
The formation and functioning of the Single European Market (also known as the internal
market) is one of the primary objectives and one of the major achievements of the EU. The
main objectives of the Single Market is to provide people, goods, services, and money the
freedom to move around the EU as within a single country as well as making it easier and
cheaper for companies large and small to do business across borders and to compete globally.
Herein lies the importance of the Competition Rules of the European Union.
The concept of an internal market is built on the principle that business should participate
31 | P a g e
with the greatest degree of freedom without any barriers to competition. The aim of European
competition policy is to facilitate the correct functioning of the Single Market. It is the
European Competition Policy which ensure that enterprises have the possibility to compete
on equal terms on the markets of all Member States.
The European Union Competition Rules
The objective of the European Union Competition Rules is to ensure that the competition
within the EU is not restricted or distorted inter alia (among other things) by way of the
following which, are also the four main policy areas:
Cartels, or control of collusion and other anti-competitive practices
Market dominance, or preventing the abuse of firms' dominant market positions
Mergers, control of proposed mergers, acquisitions and joint ventures
State aid, control of direct and indirect aid given by Member States of the EU to
companies
The competition rules derive mostly from Articles 101 to 109 of the TFEU and has the force
of law throughout the European Economic Area (EEA). They are enforced by the European
Commission and the Member States National Competition Authority. The member states
also have their respective competition rules which are also modelled on the EU rules. The
rules have been heavily influenced by the Sherman Act, 1890 and Clayton Act, 1914 which
are landmark statutes of the United States Antitrust Laws.
The Articles are divided into two Sections. Articles 101 to 106 constitute Section 1 which
refer to Rules applying to undertaking and Articles 107 to 109 form Section 2 which refer
to Aids granted by the State. The Section 2 is unique characteristic of the EU Law as the
EU is made up of independent nation member states, the creation of a single market and the
competition policy could be rendered ineffective if the member states were free to support the
companies.
The Broad provision of the Articles are as follows:
Article Provisions
Article 101 Prohibits Anticompetitive Agreements
Article 102 Prohibits abuse of dominant position
Article 103 Procedural framework for the adoption of implementing measures for
Articles 101 and 102
Article 104 Enforcement competence of the national authorities until the entry into force
of the provisions adopted in pursuance of Article 103
Article 105 The powers of the Commission in competition law
Article 106 Public undertakings and undertakings with special or exclusive rights
32 | P a g e
Article 107 State aids (Substance)
Article 108 State aids (Procedure)
Article 109 Implementation of state aids policy
Some General Points about the Law

General Antitrust rules:
The EU Antitrust laws are set out in Articles 101 and 102 of the TFEU. Article 101 prohibits
any agreement or conceited - formal, informal or unwritten, which is made between two or
more undertakings which may affect trade between member nations and which has the object
or effect of preventing, restricting or distorting competition within the common market. It
focuses on secret pricing or market sharing cartels which are regarded as serious
infringements and any other such agreements between businesses. Article 102 makes it illegal
for dominant companies to abuse their power which may affect the trade between Member
Nations.
Merger and Acquisition Rules:
The EU Merger Regulation allows the European Commission to control certain
concentrations which are mergers, acquisitions and joint ventures, involving companies
operating in Europe.
Rules on State Aid and Liberalization:
The EU competition rules contains special rules aimed at preventing Member states from
distorting competition through the grant of State Aids. It also contains special rules for State
Monopolies and seeks to increase the liberation of market within the EU,
Hardcore infringements
The EU commission rules are a part of the TFEU which has an objective of creating a close
union among the peoples of Europe and hence any attempts by businesses or undertakings to
partition the EU along internal or territorial lines would be considered as serious hardcore
infringement of the competition rules. Other hardcore infringements include price fixing,
market sharing or cartel agreements.
Focus Areas of the Competition Rules

Cartels
Any secret agreement understanding or agreement between competitors which fixes prices,
limits outputs, shares markets, customers or sources of supply or involves other cartel
33 | P a g e
behaviour such as bid rigging will be regarded as an agreement restricting competition
within the meaning of Article 101.
Exemptions:
Exemptions from the above would require that the efficiencies flowing from the agreement
outweigh the anti-competitive effects, with a share of those benefits going to the customers.
Cases:
1) The European Commission in 2008 imposed a total fine of 1.35 billion to 3
companies in Europe including Saint-Gobain of France and Pilkington of the United
Kingdom, in relation to cartel activity in the car-glass sector of the EEA betweem
March 1998 and March 2003. Saint-Gobain received the highest fines - 880 million
on the basis that the company had already been the subject of previous Commission
decisions for similar infringements in 1984 and 1988.
The official EU statement of the cartel activity reads Asahi (Japan), Pilkington,
Saint-Gobain and Soliver held regular discussions with a view to allocating between
themselves car glass supplies to car manufacturers in response to their tenders and to
keeping the market shares of each individual car glass supplier as stable as possible at
the European level.
2) The European Commission in 2009 fined energy giants E.On AG of Germany and
GDF Suez SA of France 1.1 billion for agreeing not to compete on sales of natural
gas in each other's home markets. The companies built the MEGAL pipeline to import
gas from Russia into Germany and France but decided not to not to sell gas
transported over this pipeline in each other's home markets.
Market Dominance
According to Article 102 - Any abuse by one or more undertakings of a dominant position
within the internal market or in a substantial part of it shall be prohibited as incompatible
with the internal market in so far as it may affect trade between Member States.
A dominant position is held by a company if behaves to an appreciable extent independently
of its competitors, customers and ultimately of its consumer. As a rule of thumb, if a
company holds a market share of 40% it is said to be in a dominant position.
Abusive Conduct:
Holding a dominant position is itself not lawful. However, a business in a dominant position
has a responsibility of not abusing that position. Such abuse may, in particular, consist in:
34 | P a g e
directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions;
limiting production, markets or technical development to the prejudice of consumers;
applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
Cases:
1. The European Commission opened formal proceedings against Gazprom, Russian
supplier and producer of natural Gas in 2012 as the Commission believed it might be
hindering competition in Central and Eastern European gas markets, in breach of EU
antitrust rules. The Commission is investigating three suspected anti-competitive
practices in Central and Eastern Europe. First, Gazprom may have divided gas
markets by hindering the free flow of gas across Member States. Second, Gazprom
may have prevented the diversification of supply of gas. Finally, Gazprom may have
imposed unfair prices on its customers by linking the price of gas to oil prices.
2. The European Commission in 2013 opened formal proceedings against Bulgarian

Energy Holding (BEH), its gas supply subsidiary Bulgargaz and its gas infrastructure
subsidiary Bulgartransgaz to investigate whether they might be hindering competitors
from accessing key gas infrastructures in Bulgaria. The Commission has concerns that
these companies may be preventing potential competitors from accessing the
Bulgarian gas transmission network and the gas storage facility by explicitly or tacitly
refusing or delaying access to third parties. In addition, these companies may be
preventing competitors from accessing the main gas import pipeline by reserving
capacity that is consistently not used, without releasing it on the market. Without
access to this key infrastructure, it is impossible for any companies to compete with
Bulgargaz on the Bulgarian gas supply markets.
Mergers, Acquisitions and Joint Ventures

The EU Merger Regulation gives the European commission the jurisdiction to controlcertain
concentrations and prevent the possibility of firms gaining a dominant position within the
market structure that enables them to behave abusively. A concentration exists when "change
35 | P a g e
of control on a lasting basis results from (a) the merger of two or more previously
independent undertakings... (b) the acquisition... if direct or indirect control of the whole or
parts of one or more other undertakings." Art. 3(1), Regulation 139/2004, the European
Community Merger Regulation.
Cases:
1. The European Union rejected a merger between General Electric and Honeywell in
2001 stating that such a merger would have severely reduced competition in the
aerospace industry and resulted ultimately in higher prices for customers, particularly
airlines.
State Aids
When businesses receive financial or other assistance from the state or other public funds,
there is a risk that this favoured treatment may act as a form of protectionism to the detriment
of other businesses in the EEA. It may harm those unsubsidised businesses which have to
compete with subsidised businesses and ultimately run into difficulties, damaging overall
competitiveness and levels of employment.
This is one of the most unique and important characteristics of the EU model of competition
rules. The Commission prohibits any aid granted by a Member State or through State
resources in any form whatsoever which distorts or threatens to distort competition by
favouring certain undertakings or the production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the internal market. The State aid may
take a variety of forms including State Grants, tax or social security exemptions, provisions
of goods and services on preferential terms etc.
Cases:
1. The European Commission opened an investigation in February 2016 to examine
whether State measures since 2004 in favour of Correos, the publicly-owned Spanish
postal operator, were in line with EU State aid rules. The Commission will assess in
particular, whether the public funding that Spain granted to Correos has
overcompensated the company for carrying out its postal public service obligation, as
well as whether a number of other measures have given Correos an undue advantage
in breach of EU state aid rules. The Commission will also investigate further other
measures granted by Spain to Correos since 2004, namely tax exemptions, capital
36 | P a g e
increases and compensation for the distribution of electoral material.
2. The European Commission opened a formal probe alleging that Luxembourg may
have granted McDonald's an advantageous tax treatment in breach of EU State aid
rules. McDonald's Europe Franchising has virtually not paid any corporate tax in
Luxembourg nor in the US on its profits since 2009 because of two tax rulings. With
the second ruling, Luxembourg authorities accepted to exempt almost all of
McDonald's Europe Franchising's income from taxation in Luxembourg.
Effectiveness of the Policy

What differentiates the EU competition policies from other national policies is that these have
been applied to a transnational environment than a national while the countries in the EU
continue to hold their sovereignty. The fact that the EU is still considered as a single entity 53
years after its inception is a measure of success of its laws and policies.
The annual Global Competitiveness Report from the World Economic Forum calculates an
index of the effectiveness of anti-monopoly policy and provides an overview of the
competitiveness performance of 140 global economies. In the 2015-16 report, 14 of the top
30 competitive countries in the world belong to the EU with Switzerland topping the
rankings. An important study based on data from 102 countries suggests that the EU has the
strongest competition regime in the world when it comes to the scope of coverage (Hylton
Deng 2007). The same study finds that the most extensive national competition laws are also
generally found in the EU. It also states that the EU regime has the widest scope for
qualifying abuse of dominant position, mergers, restrictive trade practices and collusive
behaviour as unlawful.
According to the official reports from the Commission, the fines imposed for cartel-related
cases between 2012-16 amounts to a total of 5.3 billion. Post 2000 has seen a significant
increase in the no. of cases decided and fine imposed compared to the previous decade as can
be seen from below.
No. of Cartel cases decided by the European Commission - period 1990 - 2016
37 | P a g e
No. of Fines imposed (adjusted for Court judgments) - period 1990 2016
Comparison and Cooperation with US Antitrust laws

While the EU Model is influenced by the US Antitrust laws, it also cooperates with the US as
per the 1998 Positive Comity Agreement which is an Agreement between the European
Communities and the Government of the United States of America on the application of
positive comity principles in the enforcement of their competition laws. Also, they cooperate
on merger investigation as per the 2011 Best Practices Document.
The principal actors in the EU are the council who are legislators, the Commission who
enforce the legislations, the College of Commissioners who take the decisions and the
Member States NCAs. While in the US the legislators are the Congress, while the
competition laws are enforced by the Department of Justice (Antitrust Division) and Federal
Trade Commission (Bureau of Competition).
Comparison of Indian Competition Act, EU Competition Rules and the US Antitrust Laws:
Indian Competition EU Competition Rules US Antitrust
Act Laws
38 | P a g e
Focus on i. Anti-Competition i. Cartels i. Cartels and
Policies Agreements ii. Abuse of Dominance Collusions
ii. Abuse of iii. Mergers, Acquisitions ii. Mergers
Dominance and Joint Ventures iii. Monopolization
iii. Combinations iv. State Aid and Power
Regulations
iv. Competition
Advocacy
Legislation CCI The European Commission Department of
and the European Court of Justice (Antitrust
Justice Division) and
Federal Trade
Commission
(Bureau of
Competition)
Influence of the EU model on other nations
The EU model has had an effect on several transnational plurilateral agreements and trade
bloc unions whose purpose is to promote free trade and the fluid movement of goods, people,
and currency among its constituent member states.
Andean Community: The regional legislation (Decision no. 285 of 1991) of anticompetitive
policies of the Andean community (which is a plurilateral customs union trade bloc
containing Bolivia, Colombia, Ecuador and Peru) was largely based on the EU model.
However, since these policies were not effective, in 2006 reforms were introduced in the
form of Decision No.605 which to a certain extent show the influence of the EU model and it
also has to be noted that the EU provided the Andean Community with funding in order to
harmonise competition rules in the Andean region.
Mercosur: It is a customs union and trade bloc containing Argentina, Brazil, Paraguay,
Uruguay, Venezuela, Bolivia, Chile, Peru, Colombia, Ecuador and Suriname. Competition-
related issues are addressed in MERCOSUR by the Fortaleza Protocol for the Defence of
Competition, which was signed in December 1996, seven years after the establishment of the
bloc. The similarity to the EU model can be seen in the substantive provisions of the
Protocol, although less so in relation to enforcement.
39 | P a g e
FTAA: The Chapter 19 containing the anticompetitive agreements of the Free Trade Area of
the Americas borrow heavily from the EU model on matters relating to the provision of state
aids and hence follows the precedent set by the EU model.
EAC: The EAC (East African Community) Competition Act enacted in September 2006
follows the EU model by including provisions on anticompetitive agreements, abuse of
dominance and mergers, as well as subsidies and the establishment of the EAC Competition
Committee, an intergovernmental institution composed of the representatives of the member
states.
The EU model has also influenced the competition policies of other transnational trade blocs
like COMESA (Common Market for Eastern and Southern Africa) and WAEMU (West
African Economic and Monetary Union). It has to be noted that, however, in terms of
competition law and policy, the EU model has been the only successful and operative
regional model in the world.
Most Favoured Nation status

The Most favoured nation (MFN) is a level of status given to one country by another and
countries achieving most favoured nation status are given specific trade advantages such as
reduced tariffs on imported goods, fewer barriers on trade, etc. The MFN treatment has come
under attack because of the rise of regional economic organisations like the EU. Also, the
growth of e-commerce and the use of agency agreements by online platforms have made
MFNs a controversial topic in competition law. MFN
Pros of MFN:
Gives developing and least developed nations access to wider markets
Reduces red tape
Reduces ill effect of trade protectionism
Cons of MFN:
Without tariffs, some countries might subsidise domestic industries allowing them to
export for cheap; these practices are known as dumping and will put the companies in
the other country out of business.
The European Union Competition Rules position on MFN is that MFN clauses will infringe
Article 101(i) if in the individual circumstances of the case they result in an appreciable
adversely effect on competition in the European Union. This is likely to happen when the
parties to the agreement have substantial market power.
40 | P a g e
In December 2013, the German Federal Cartel Office prohibited leading German hotel portal
company HRS from applying a MFN clause which required HRSs hotel partners to offer
their lowest rates to HRSs booking website. The Cartel Office believed MFN clauses created
barriers to entry and prevented price competition. Given the fact that HRS had a market share
of more than 30%, the effects of the MFN clause in question were particularly pronounced.
National Treatment
The principle of NT (National Treatment) is expressed in Article III of the GATT, 1947 and is
one of the core principles of the GATT and the international trade regime. Like the term
suggests, the principle endeavors to provide equal treatment to goods that originate or are
being exported by foreign countries, and like domestic goods.
NT entails to improve the conditions of competition in the market, and any protectionism
afforded to imported production shall directly hamper the conditions of the competition.
Prejudices against goods that are not locally made are considered to be unfair trade practices;
with the principle of NT ensuring that free trade is fair and fair trade is free.
Clause I - It seeks to ensure that imported goods are not subjected to any discrimination in
the country of importation either in the form of internal taxes (taxes implied once the goods
enter the importing nation) or internal charges (charges applied for sale, purchase,
transportation or storage of the imported goods) and laws, regulations and requirements.
Clause II The internal taxes and internal charges shall not be applied to imported products
in excess of domestic products, directly or indirectly. Also internal taxes or charges should
not be applied in a manner that would distort competition in favour of domestic production.
Clause IV The products which are imported from other territory shall not be treated less
favorable to like products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use. The internal transportation charges differential should be on the basis of
economic operations and not on the basis of nationality.
Clause V The principle prohibits a contracting party from making it mandatory for
importers to make use of domestic supplies (either as specific amounts or proportions); as
part of mixing, processing or use of the products. Exception is the screen quotas for
cinematographic films as to protect domestic cinematographic industry.
Clause VII Similar to clause V except it pertains to the allocation among foreign suppliers.
41 | P a g e
Clause VIII This principle is not applicable to laws, regulations or requirements governing
the procurement by government agencies of products that are exclusive for govt. use and not
for commercial resale or even for use in products for commercial sale
Dispute Settlement
After the creation of World Trade Organization (WTO) in1995, the WTO dispute settlement
mechanism also came into force. It was brought into existence for the purpose of providing
the member nations a clear legal framework for resolving disputes while implementing the
WTO agreements. It also provides a framework in case members dont agree to a solution.
Members can ask for panels which are followed by appeal procedures. The panel or Appellate
body then solves the dispute by interpreting the rules. In case a member does not comply
with the rules, then they may face a duty increase or WTO obligation suspension. The
following are the advantages of the dispute settlement mechanisms:
It facilitates a fast and efficient way of disagreement settlement regarding a countrys
compliance with the international obligations
Helps in developing interpretative understanding of the agreements by applying them
Avoids trade damaging unilateral actions as it prevent retaliation prior to dispute
settlement
The WTO dispute settlement has shown good results
There are 3 types of disputes that this mechanism deals with:

i. Differences between states under international agreements
ii. Investor-to-State dispute settlement within international trade agreements
iii. Implementation of dispute settlement policy
Although EU and all WTO members consistently use this mechanism, the EU never
initiates a dispute settlement case unless it exhausts all other ways of finding
solutions. The system has avoided trade wars and solved important disputes. It matches well
with the speed and efficiency of comparable international trade dispute systems. Lastly, the
system protects weaker members from unilateral action by the stronger ones due to its
multilateral forum.
42 | P a g e
COMPARISION OF INDIAN COMPETITION LAW WITH UK AND CHINA LAWS
Competition Law in UK
The Competition law of United Kingdom is inspired by both the European and the British
laws. For the all international disputes, European Commission has the ultimate authority to
tackle the issues and would be exclusively subject to EU laws. However, for all the national
cases, The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes.
Major Acts
The competition Act, 1998
The Competition Act 1998, along with Enterprise Act 2002, is the governing source
of competition law in UK. This act basically provides a framework to recognize and deal
with abuse of dominant market position and restrictive trade practices. One of the main
objectives of this act was to blend the UK with EU competition policy. It contains Chapter I
and II of the act reflecting the contents of Articles 81 and 82 of the Treaty of Amsterdam.
(Previously Articles 85 and 86 of the Treaty of Rome)
Chapter I Prohibitions
Deals with restrictive trade practices that the companies operating in UK might be engaged
in, which might prevent, restrict or distorts competition. These are mainly in the terms of
horizontal agreements. These agreements could handle issues related to fix prices, limit
output, collusively share information etc. Competition and Markets Authority (CMA) has the
authority to prosecute firms engaged in such activities. It can impose fines up to 10% of
annual UK turnover for every year in which a violation has taken place up to a maximum of 3
years.
Exemptions
If the firm can show that these practices are in the best interest of the customers.
Chapter II Prohibitions
It deals with the abuse of a dominant position by a firm involved in practices like refusal to
supply, excessive pricing etc.
43 | P a g e
There are two stages of investments under this chapter. Firstly, to identify whether the firm
has dominant market position. This can be done through several indices like the Herfindahl-
Hirchman Index (HHI). Usually, if a firm has a market share of over 40% then it can be
treated as a threat to competition. There are no exemptions to chapter II.
Enterprise Act, 2002
It is an Act of the Parliament of the UK and it handles issues pertaining to mergers,

insolvency or bankruptcy. This Act had five major objectives:
1. Make all competition decisions through independent bodies
2. Root out forms of anti-competitive behaviour
3. Create a strong deterrent effect
4. To redress injured parties in distortions of competition
5. Raise the profile of competition policy in the UK.
Authorities
Competition and Market Authority (CMA)
The CMA is an independent non-ministerial department. It looks after strengthening business

competition and reducing and preventing anti-competitive activities. The CMA was launched
on October 1, 2013 and became fully operational on April 1, 2014.
Major responsibilities:
Investigating mergers which could restrict competition
Conducting market studies and investigations in markets where there may be

competition and consumer problems
Investigating where there may be breaches of UK or EU prohibitions against anti-

competitive agreements and abuses of dominant positions
44 | P a g e
Bringing criminal proceedings against individuals who commit the cartel offence
Office of Communication (Ofcom)
Ofcom is a government-approved regulatory and competition authority for the

telecommunications, broadcasting and postal industries of the United Kingdom. It is
responsible for representing the interests of consumers by encouraging competition and
upholding the integrity of the consumers. Its tasks include codes and policies, complaints,
licensing, competition, research etc.
Enforcement Mechanism (UK v/s India) - A Critical Analysis
Despite India and UK having similar enforcement authorities, there are a few remarkable
differences between the enforcement mechanism of competition law between U.K and India.
Some of them are explained below:
Indian Competition Act doesnt talk about the power of the enforcement authority as
mentioned in the Section 27 and 28 of U.K Competition Act. Non-inclusion of such provision
in Indian Competition Act can severely hamper the investigation process.
The concept of privileged communication as provided under Section 30 of the U.K

Competition Act is also not included in the Indian Competition Act. This non-inclusion can
affect the right of the undertakings or legal or natural persons who are undergoing
investigation.
In India there are sectoral regulators along with Competition law enforcement authorities for
handling the affairs of cross sectoral issues. For instance, undertaking may be guided by one
authority on a certain aspect and by another agency on some other aspect. This creates an
ambiguous as well as complex atmosphere. There may be conflicting directions given by
different agencies. In India there is no framework for coordination between different agencies
and may at times the duties of various authorities overlap one another. However, that is not
45 | P a g e
the case with UK. They have a proper framework on issues concerning cross sectional
regulators.
Competition Law in China

The Anti-Monopoly Law of China
The Chinese Competition Law deals with three major areas:
(i) the prohibition of anti-competitive monopoly agreements;
(ii) the prohibition of the abuse of a dominant position; and
(iii) merger control.
As stated in Article 1, the purpose of the Chinese Competition Law is to:
(i) guard against monopolistic conduct,
(ii) safeguard and promote the order of market competition,
(iii) improve economic efficiency,
(iv) protect consumers interest,
(v) protect the public interest, and
(vi) promote the healthy development of the socialist market economy
Authorities
Ministry of Commerce (MOFCOM)
MOFCOM is responsible for reviewing Mergers and Acquisitions and other similar business
concentrations. Its Antimonopoly Bureau has the right to approve or reject these transactions
with or without explanations.
46 | P a g e
National Development and Reform Commission (NDRC)
NDRC manages issues in the areas of price practices by companies, price-related conduct,
and price-related aspects of monopoly agreements. Its Price Supervision and Antimonopoly
Bureau has the right to take punitive actions as and when required.
Enforcement Mechanism (China v/s India) - A Critical Analysis
The Chinese Competition Law targets a special type of monopolistic conduct, i.e.
administrative monopoly, which is a striking feature of the communist regime that governs
China. The Chinese Competition Law does not have any provisions for a competition
tribunal, unlike the Indian Competition Law. In China, both the advisory and adjudicatory
powers are vested in the Anti-Monopoly Enforcement Authority, whereas India as a separate
body for these two powers.
CASE STUDIES
Fine imposed on Alkem Laboratories
December 2015
The CCI penalized All Kerala Chemists and Druggists Association (AKCDA) and Alkem
Laboratories Limited (ALKEM) for limiting and controlling the supply of medicines in
Kerala in an order dated on December 1, 2015.
The Informant of the case was Mr. P. K. Krishnan Proprietor, Vinayaka Pharma. Mr. Krishnan
runs a pharmaceutical distribution store in Palakkad, Kerala. It was alleged that Alkem
refused to appoint the Informant as its stockist since the Informant did not have a No
Objection Certificate (NOC) from the AKCDA for appointment as a stockist.
During investigation, it was found that the AKCDA, along with All India Organization of
Chemists and Druggists (AIOCD), had been involved in the practice of issuing NOC with co-
operation of pharmaceutical companies. It was found AKCDA implemented the same
practice at the district level with threats of boycott and stoppage of supplies. The Director
General (DG) found a contravention of Section 3(3) (b) of the Act. Section 3(3) (b) pertains
to anti-competitive agreements that limit or control production, supply, markets, technical
development, investment or provision of services.
Section 3: Anti-competitive agreements
47 | P a g e
(3) Any agreement entered into between enterprises or associations of enterprises or persons
or associations of persons or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of services, which
(b) limits or controls production, supply, markets, technical development, investment
or provision of services;
DG further found that the conduct of Alkem in refusing to deal with the Informant was
pursuant to an arrangement between Alkem and AKCDA. Accordingly, DG found that the
conduct of Alkem has contravened provisions of Section 3(1) of the Act. Section 3(1) of the
Act clearly states that no enterprise or association of enterprises or person or association of
persons shall enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India.

(1) No enterprise or association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply, distribution, storage, acquisition
or control of goods or provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.
Through a perusal of the E-Mail(s) sent by AKCDA, the CCI was of the opinion that the
appointment of stockiest was being made with the approval of district/State units of AKCDA.
AKCDA also boycotted various pharmaceutical companies, for instance Merck Ltd., for
failure to follow its diktats. The CCI considered that the conduct of AKCDA results in
restricting the provisioning of goods in the market in contravention of Section 3(3) (b) of the
Act.
The CCI also noted that AKCDA had given an undertaking that, pursuant to the directions by
the CCI in one of the previous cases, AKCDA shall not engage in anti-competitive practices
such as issue of grant of NOC for appointment of stockists, fixation of trade margins, and
collection of PIS charges and boycott of products of pharmaceutical companies. The CCI
noted that the conduct is in the nature of continued contravention with complete disregard to
the mandate of the CCI. The CCI also penalized the President and General Secretary of the
48 | P a g e
AKCDA liable under Section 48 of the Act for being in-charge of organizations indulged in
malpractices.
Section 48: Contravention by companies

(1) Where a person committing contravention of any of the provisions of this Act or of any
rule, regulation, order made or direction issued thereunder is a company, every person who,
at the time the contravention was committed, was in charge of, and was responsible to the
company for the conduct of the business of the company, as well as the company, shall be
deemed to be guilty of the contravention and shall be liable to be proceeded against and
punished accordingly: Provided that nothing contained in this sub-section shall render any
such person liable to any punishment if he proves that the contravention was committed
without his knowledge or that he had exercised all due diligence to prevent the commission of
such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of
the provisions of this Act, or of any rule, regulation, order made or direction issued
thereunder has been committed by a company and it is proved that the contravention has
taken place with the consent or connivance of, or is attributable to any neglect on the part of,
any director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of that contravention and shall be
liable to be proceeded against and punished accordingly. Explanation.For the purposes of
this section,
(a) "company" means a body corporate and includes a firm or other association of
individuals; and
(b) director, in relation to a firm, means a partner in the firm.
Most importantly, CCI noted with regards to Alkem that denial of supply by Alkem is
established through a perusal of evidence on record. Such refusal was because of the
instructions given by AKCDA and amounts to an understanding between AKCDA and
Alkem. The CCI held that the agreement between AKCDA and Alkem was violative of
Section 3(1) of the Act, subject to establishment of appreciable adverse effect on competition
(AAEC).
Even though Alkem contended that its market share in the relevant market is miniscule, the
CCI noted that the conduct of Alkem and AKCDA causes potential consumer harm as well as
49 | P a g e
lessens competition. Even though Alkem acted under threat from AKCDA, the same cannot
absolve it of liability from the provisions of the Act.
A penalty on AKCDA at the rate of 10% of its average turnover for the past three was
imposed (totaling INR 4, 35,778.26/-). A penalty on Alkem at the rate of 3% of its average
turnover for the past three was imposed.
The CCIs comments in this regard are notable,
Such denial of supply to unauthorized stockists by various pharmaceutical companies like

OP 2 undoubtedly affects the competition in the market adversely and appreciably. The
Commission thinks it appropriate to issue orders against such pharmaceutical companies as
well to deter their actions of facilitating the associations in indulging in anti-competitive
practices in the market. OP 2 here refers to the Alkem Laboratories.
Builders Association of India v. Cement Manufacturers Association & Ors

June 2012
The CCI, through its order dated 20 June 2012, imposed a fine of six thousand crores
(approx. USD 1.1 billion) on cement companies in India after holding them guilty of
cartelization in the cement industry. The fine has been imposed at rate 0.5 times the net profit
of such manufactures for the past two years. In addition to this, the Cement Manufacturers
Association (the CMA) has been fined 10% of its total receipts for the past two years for its
role as the platform which allowed the cartel activity to take place.
The CCI initiated an inquiry into the activities of the Cement Companies and the Cement
Manufacturers Association (CMA) after receiving information from the Builders Association
of India (Informant) alleging that the Cement Companies were directly or indirectly
indulging in restrictive trade practices.
Allegations by the informant against the Cement Companies are mentioned below:
(a) Cement Companies created an artificial deficit of cement in the market by limiting and
restricting the production and supply of cement.
50 | P a g e
(b) Cement Companies were involved in collusive price fixing and had formed a cartel, and
were acting in violation of the provisions of the Competition Act.
(c) Cement Companies together held a huge stake in the Indian cement market and were thus
in a dominant position, and that the Cement Companies were abusing their dominant position
to raise the prices of cement exorbitantly.
(d) Although the growth in the construction sector had reduced over the last few years, the
cement prices continued to increase during this phase, which showed that the increase in
prices was due to cartelization and abuse of dominant position by Cement Companies and not
due to the demand and supply corelation.
(e) The prices and the information exchanged at the meetings of CMA were used by the
Cement Companies to increase the prices and restrain their production and supply in tandem.
On the basis of the above information, the CCI believed that there was a prima facie case
against the Cement Companies and the CMA. Hence, it ordered the Director General
appointed under the Competition Act (DG) to investigate and look into the allegations made
by the Informant. The DG, in its report remarked that 12 (twelve) cement manufacturing
companies controlled 75% of the cement manufacturing market in India. The DG also
reported that the cement manufacturing companies had divided the industry into 5 different
zones/regions, which allowed them to maximize profits in each of these regions because of
lack of competition. Further, it was reported by the DG that the Cement Companies increased
the prices of cement frequently even when the cost of cement manufacturing did not change
or vary in similar proportion. According to the DG's Report, the fixing of prices by Cement
Companies was arbitrary in nature and the pricing could not be explained by any economic
rationale. The Informant contended that the Cement Companies, in connivance with and
under the backing of the CMA, were involved in collusive price fixing, as the pattern of
production and pricing of cement could not be uniformly consistent across the country
without an understanding or agreement amongst the Cement Companies. Further, the
Informant contended that the Cement Companies were deliberately not undertaking
production at their maximum installed capacities and that they were producing only at around
70% of their installed capacities to create an artificial shortage of cement in the market.
Additionally, the DG's report and the contentions of the Informant suggested that the price
rise in cement was not due to inflationary pressures but was artificially created by the Cement
Companies.
51 | P a g e
The substantive question before the CCI was whether the conduct of the cement companies
violated Section 3 of the Competition Act. The CCI also examined whether there was an
abuse of dominant position, but found that the market was characterized by several players
and no single firm or group was in a position to operate independent of competitive forces or
affect its competitors or consumers in its favor. The CCI saw this as violation of Section 3(1).

(1) No enterprise or association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply, distribution, storage, acquisition
or control of goods or provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.
The CCI also conducted investigation around proofs that pointed towards abuse of dominant
position as stated under Section 4 of the Competition Act.
Section 4: Abuse of dominant position.

(1) No enterprise shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,
(a) directly or indirectly, imposes unfair or discriminatory
(i) condition in purchase or sale of goods or services; or
(ii) price in purchase or sale (including predatory price) of goods or service; or Explanation.
For the purposes of this clause, the unfair or discriminatory condition in purchase or sale
of goods or services referred to in sub-clause (i) and unfair or discriminatory price in
purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii)
shall not include such discriminatory conditions or prices which may be adopted to meet the
competition; or
(b) limits or restricts
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of
consumers; or
(c) indulges in practice or practices resulting in denial of market access; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection
with the subject of such contracts; or
52 | P a g e
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant
market. Explanation .For the purposes of this section, the expression
(a) dominant position means a position of strength, enjoyed by an enterprise, in the
relevant market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour;
(b) 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, of production of the goods or provision
of services, with a view to reduce competition or eliminate the competitors.
In respect of violations of sections 3(1) (a) and (b), the CCI examined the following facts and
submissions:
Market Structure of the Cement Industry: The CCI observed that no player could be named
dominant in the market. The industry is characterized by twelve cement companies having
about 75% of the total capacity in India and about 21 companies controlling about 90%
market share in terms of capacity. Given the oligopolistic nature of the market, each company
takes into account the likely reactions of other companies while making decisions particularly
as regards prices. In such a scenario, collusion between companies is possible and can be
adduced from circumstantial evidence.
Circumstantial evidence is sufficient to prove violation: The chief objection raised by the
cement companies was that the DG failed to support his findings with any direct evidence.
The CCI, relying on international practice, noted that given the clandestine nature of cartels,
circumstantial evidence is of no less value than direct evidence to prove cartelization.
CMA is engaged in collecting competition sensitive data: As per the respondents, CMA
collects retail and wholesale prices data from different parts of the country and transmits
them to the Ministry of Commerce, as per the latters request. The CCI held that the
competitors were interacting using CMA as the platform, and this gave them an opportunity
to determine and fix prices. The CCI also noted that the CMA publishes statistics on
production and dispatch of each company (factory wise) and circulates such information
amongst its members. The sharing of price, production and dispatch data makes co-ordination
easier amongst the cement companies.
High Power Committee Meetings: The CCI took note of the fact that cement prices increased
immediately after the High Power Committee Meetings of the CMA which were attended by
the cement companies in January and February 2011. It further noted that ACC and ACL,
53 | P a g e
despite having ceased to be members of the CMA, attended these meetings. The CCI
observed that whilst ACC and ACL admitted to having attended these meetings, both CMA
and JAL refuted their presence. The inconsistencies in the statements of the different
respondents established that they were keen on hiding material information.
Price Parallelism: The DG had conducted an economic analysis of price data which indicated
that there was a very strong positive correlation in the prices of all companies. This,
according to the DG, confirmed price parallelism. The respondents argued that the correlation
benchmark of 0.5 taken by the DG was arbitrary. Moreover, the prices used by the DG were
incomparable since the prices submitted by the companies differed from each other (some
had submitted gross prices, while others had submitted depot prices, average retail prices
etc.). The CCI did not accept these arguments and stated that given the nature of data
exchanged between the parties, price parallelism could not be a reflection of non-collusive
oligopolistic market conditions.
Limiting and controlling production: The Report submitted by the DG suggested that whilst
capacity utilization increased during the last four years, the production has not increased
commensurately during this period. The various respondents contested these figures and led
evidence to show that capacity utilization was on the increase. It was also argued that the DG
had incorrectly relied upon name plate capacity whereas actual capacity was dependent on
raw materials, plant stabilization time, power supply etc. Therefore, if the aforesaid is taken
into account, the capacity utilization would be much higher. These submissions did not hold
water with the CCI, which observed that on a year on year and plant wise basis, the capacity
utilization across the respondents had decreased.
Limiting and controlling supply: The CCI observed that the forces of demand and supply
dictated that the dispatch figures should have been more than or equal to consumption of
cement in the corresponding period of the previous year. However, in two months of
November and December 2010, the dispatch was lower than the actual consumption for the
corresponding months of 2009. It was not the case that the market could not absorb the
supplies, but, instead, the lower dispatches coupled with the lower utilization establishes that
the cement companies indulged in controlling and limiting the supply of cement in the
market.
Production Parallelism: The production figures across cement companies (in a particular
geographical region) showed strong positive correlation. According to the CCI, in November
December 2010 the cement companies reduced production collectively, although during the
54 | P a g e
same period in 2009, the production of the cement companies differed. This was a clear
indication of coordinated behavior.
Dispatch Parallelism: It was observed that the dispatches made by the cement companies
have been almost identical for the period from January 2009 to December 2010. The cement
companies argued that the parallelism in both production and dispatch is on account of the
commoditized nature of cement, the cyclical nature of the cement industry and the ability of
competitors to intelligently respond to the actions of their competitors. The CCI noted that
the drop in production and dispatch in the November 2010 was unusual especially when
November 2009 witnessed a mixed trend. Interestingly, the CCI held that the parties to a
cartel may not always co-ordinate their action; periodically their conduct may reflect a
competitive market. Where co-ordination proves gainful, parties will substitute competition
for collusion.
Increase in price: The deliberate act of shortage in production and supplies by the cement
companies and almost inelastic nature of demand of cement in the market resulted into higher
prices for cement. The CCI was of the view that there was no apparent constraint in demand
which could justify the lower capacity utilization. Further, there was no constraint in demand
during November and December 2010, and, in fact, the construction industry saw a positive
growth in the third quarter of 2010-11.
Price Leadership: The CCI noted that the given the small number of major cement
manufacturers, the price leaders gave price signals through advanced media reporting which
made it easier for other manufactures to co-ordinate their strategies.
High Profit Margins: The profit margins of all the cement companies were examined by the
Commission, which arrived at the conclusion that some companies posted a high Return on
Capital Employed and higher EBITDA in 2010-11 as compared with 2009-10. Additionally,
the CCI observed that the respondents earned huge margins over the cost of sales.
In cartel cases, the CCI has the power to fine parties up to three times of its profit for each
year of the continuance of the cartel or 10% of its turnover for each year of the continuance
of the cartel, whichever is higher. The turnover and profit for the cement companies were
examined. Considering the totality of facts and circumstances of the case, the commission
decided to impose a penalty of 0.5 times of net profit for 2009-10 (from 20.05.2009) and
2010-11 in case of each cement manufacturer named as Opposite Parties in this case. Section
3 (3) (b) is referred to in cases involving cartelization.
55 | P a g e
(3) Any agreement entered into between enterprises or associations of enterprises or persons
or associations of persons or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of services, which
(b) limits or controls production, supply, markets, technical development, investment
or provision of services;
Company Penalty (INR in Crores)
ACC Ltd. 1147.59
Ambuja Cements Ltd. 1163.91
Binani Cements Ltd. 167.32
Century Textiles Ltd. 274.02
India Cements Ltd. 187.48
J K Cements Ltd. 128.54
Lafarge India Pvt. Ltd. 480.01
Madras Cements Ltd. 258.68
Ultratech Cement Ltd. 1175.49
Jaiprakash Associates Ltd. 1323.60
In addition, the CMA was fined 73 Lakhs (10% of its average turnover for the past two
years).
The respondents have been directed to pay the above penalties within 90 days of the receipt
of the CCI order.
The CCI also directed the companies to cease and desist from indulging in agreement or
understanding on prices, production and supply of cement in the market. Similarly, the CMA
has been directed 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.
56 | P a g e
The CCI's decision clearly established that the CCI can rely on circumstantial factors and
market data to determine the existence of a cartel and that it is not required for the CCI to
find a written agreement of understanding amongst the parties to a cartel. Further, the
decision can have a far reaching impact on the functioning of various industry confederations
and bodies, as the existence of the CMA as a common platform for collection and exchange
of data was a crucial reason for the CCI's finding that a cartel indeed existed amongst the
Cement Companies.
The CCI's decision had been criticized on the grounds that the CMA was only collecting the
industry information for sharing it with the Government; however, the CCI's decision did not
solely rest on the collection of information but also on the fact that the CMA supplied the
information to its member companies apart from providing it to the Government. The CCI
had also validly noted that parties to a cartel are unlikely to enter into formal agreements and
leave traces of their concerted behavior, in which case, circumstantial indicators become the
basis for determining the existence of anticompetitive practices by cartels.
After the companies appealed in 2012, the Tribunal had issued notice on the merits as well as
on the stay application by order dated 13.09.2012. By the same order it had directed that no
coercive steps should be taken against the appellants for recovery of the penalty ordered by
the Competition Commission of India.
The Competition Appellate Tribunal on 17th May 2013 stayed a Rs 6300 crores penalty on 11
cement makers that had been levied on them for acting as a cartel but directed them to deposit
10% of the amount pending their appeal. The tribunal directed the companies to pay Rs 630
crores collectively. The appellate tribunal had said previously that no coercive steps should
be taken against the cement companies.
Against the order of the COMPAT, the cement firms moved the apex court. Based on an
appeal, the apex court on 12th June 2013 declined to interfere with the order of the
competition tribunal directing 10 cement firms to deposit 10% of the penalty of Rs 6,300
crore imposed on them for allegedly indulging in cartelization.
57 | P a g e
REFERENCES
[1] in India
http://www.legalserviceindia.com/articles/compet.htm
[2] Competition Commission of India
http://www.cci.gov.in/competition-act
[3] UKEssays
http://www.ukessays.com/essays/economics/mrtp-act-rise-fall-and-need-for-change-eco-
legal-analysis-economics-essay.php
[4] Dispute settlement
http://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/
[5] Antitrust Around the World: An Empirical Analysis of the Scope of Competition
Laws and Their Effects
Keith Hylton - Fei Deng - SSRN Electronic Journal SSRN Journal
[6] TREATIES OFFICE DATABASE
http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.d
o?step=0
[7] Wikisource, the free online library
https://en.wikisource.org/wiki/Consolidated_version_of_the_Treaty_on_the_Functioning_of_
the_European_Union/Title_VII:_Common_Rules_on_Competition,_Taxation_and_Approxi
mation_of_Laws#Article_101
[8] About - Competition and Markets Authority - GOV.UK
https://www.gov.uk/government/organisations/competition-and-markets-authority/about
[9] Libertatem Magazine
http://mylibertatem.com/competition-law-regime-in-india-usa-european-union/
[10] Section 3 in the Competition Act, 2002 - Indian Kanoon
http://indiankanoon.org/doc/1153878/
[11] Case Study 05 - CUTS Institute for Regulation & Competition
http://circ.in/pdf/Case_Study_05.pdf
58 | P a g e

Group 5 Competition Act Report

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Group 5 Competition Act Report

Uploaded by

Copyright:

Available Formats

Need for Competition in an Era of

Under the Guidance of:

NEED FOR COMPETITION ACT

EVOLUTION OF COMPETITION LAWS

1984 amendments to the MRTP act

1991 amendments to the MRTP Act

Raghavan Committee recommendation

Reasons for evolution of Competition Act

Objectives of Competition Act:

ANTI COMPETITIVE AGREEMENTS

whether or not, such arrangement, understanding or action is formal or in writing; or

whether or not such arrangement, understanding or action is intended to be

The agreement can be between any two of the following

Creation of barriers to the new entrants

Driving existing competitors out of the market

Foreclosure of competition by hindering entry into the market

Accrual of benefits to consumers

Improvements in production or distribution of goods or provision of services

Promotion of technical, scientific and economic development by means of production

ii. Vertical Agreements

Horizontal agreements are agreements between enterprises, group of enterprises, persons or

Types of Horizontal Agreements considered being anti-competitive are

Agreements that directly or indirectly determine purchase or sale prices:

Limits or controls production, supply, markets, technical development, investment or

Shares the market or source of production or provision of services by way of

Directly or indirectly results in bid-rigging or collusive bidding

There must be an agreement amongst enterprises or persons;

The parties to such agreement must be at different stages or levels of production

The agreeing parties must be in different markets;

The agreement should cause or should be likely to cause AAEC;

b. exclusive supply agreement;

c. exclusive distribution agreement;

e. resale price maintenance

(a) tie-in arrangements includes any agreement requiring a purchaser of goods, as a

Determination of Anti-Competitive nature of agreements

Horizontal Agreements are considered to be illegal and anti-competitive ab-initio unlike

Caselet for Anti-competitive agreement

CDAG forced pharmaceutical companies to follow its mandate by threatening the

Factors determining Dominance or Dominant position

ii. directly or indirectly imposing unfair or discriminatory price in purchase or sale

iii. limiting or restricting production of goods or provision of services or market;

Case Study: COMPAT: NSE Guilty Of Abuse of Dominant Position

Inquiry unto Abuse of Dominance

Powers of the Commission

COMPETITION COMMISSION OF INDIA

The following are the objectives of the Commission.

Vision and Mission of CCI

Extension of the executive powers

CCI, either on receipt of a complaint, on a reference made to it by the Centre or State

An order of CCI subsequent to an enquiry, could consist of:

In case of combination, CCI may pass following orders:

Execution of the order

The Commission envisions following advocacy activities to be undertaken as a competition

Graph: Target Groups Covered

Control includes controlling the affairs or management by

iii. control the management or affairs of the other company;

Example: Holcim-Lafarge Merger

UNDERSTANDING THE EU MODEL

Some General Points about the Law

Focus Areas of the Competition Rules

2. The European Commission in 2013 opened formal proceedings against Bulgarian

Mergers, Acquisitions and Joint Ventures

Effectiveness of the Policy