Awareness Programme on “Competition Policy & Law ” For Media & Government Agencies By

1. CUTS Institute for Regulation & Competition Awareness Programme on “Competition Policy & Law” For Media & Government Agencies By Malaysian Competition Commission (MyCC) Kuala Lumpur June 08 – 09, 2013

2. Competition Policy & Law - Hariprasad C G, CIRC The views expressed herein are personal and not purported to reflect those of the CIRC

3. What is Competition? • Competition occurs when two or more firms are pursuing the same objective at the same time • In a healthy market economy companies compete with each other to gain the purchase of the consumer • Competition then leads to: • Greater efficiency • Fair prices • Innovation

4. Competition… • Is a Dynamic Concept • Is an amalgam factors that stimulate economic rivalry • Is a tool to mount market pressure • Is a tool to penalise laggards.. • And is a tool to reward the enterprising

5. Competition Policy vis-à-vis Competition Law

6. Goals of Competition Policy • Preservation and promotion of the competitive process • Efficiency in production and allocation of goods and services • Innovation and adjustment to technological change • Sustained economic growth • Protection of consumer interests

7. Applicability of Competition Law • All undertakings engaged in manufacture, supply and distribution in the private sector • Public sector undertakings owned by the government or government undertakings • Statutory corporations • Undertakings under the management of controllers appointed by law • Cooperative societies • Financial institutions, banks

8. Rubric of Competition Law Competition law generally has four compartments : • Anti-competition agreements • Abuse of dominance • Mergers, amalgamations, acquisitions and take-overs • Fostering competition

9. Is Competition Law Required at all.. • With globalization, there is likely to be significant restructuring of manufacture, trade and services • Domestic consolidation and entry of foreign entities • Anti-competition practices may surface as a consequence • WTO fall out obligations need to be addressed • Regulatory and advocacy functions need to be posited • Without a cop, trade traffic may prejudice consumer interest • Competition law will be a cop and a friend

10. Highest individual UK fine to date GBP122 million in Aug 2008 (BA, fuel surcharges) Highest EU cartel fine to date EURO 1.4 billion in 2008 (Car Glass manufacturer) INTEL fine on abuse of dominance EURO 1.06 billion on May 2009 Microsoft fined for bundling EURO 497 million in Mar 2004and further EURO 899 million for not paying earlier fine in Feb 2008 Largest recent US cartel fine USD 700 million in 2005/06 (DRAM semiconductor memory products) World-wide enforcement – More than 130 countries already have competition laws

11. BENEFITS OF COMPETITION Decrease in prices Telecom – Tariffs per second or minute have come down drastically Two Wheelers – from 30 kmpl to 100 kmpl Improves Quality …and choices lead to consumer achieving better quality at lower prices eg. airtravel India big market, leaders in growth Economic Growth Creates Choices Witnessed across goods, be it electronics, mobiles, automobiles…. Encourages Innovation

12. Benefits of Competition These benefits to consumers and producers can take place only if competition in the markets is free and fair. But the competition in markets is not always fair; there may be distortions to the competition through anti-competitive behavior of the market players.

13. Prohibitions regime Market Behaviour Section 4 Prohibition Anti – competitive agreements Section 10 Prohibition Abuse of dominant position Mergers and Acquisition

14. S4 Prohibitions - Anti – competitive agreements • Section 4 of the Competition Act 2010 (Act 712) (“Act”) prohibits horizontal agreements and vertical agreements between enterprises where such agreements have the object or effect of significantlypreventing, restricting or distorting competition in any market for goods or services Section 4 Prohibition Horizontal or vertical agreements Object or effect Significant prevention, restriction or distortion of competition

15. Definition of ‘agreements’ • Need not be in the form of formal agreement • Contracts, understanding, whether or not legally enforceable • “concerted practices” or "gentleman's handshake" • Decision of associations

16. Meaning of concerted practice "a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowinglysubstitutes practical cooperation between them for the risks of competition" Main elements: 1. Mental consensus - direct or indirect contact/conduct 2. Factual based (similar behaviour/circumstantial evidence) 3. Differentiate with independent parallel behaviour/oligopoly defence

17. Manufacturer A Horizontal Agreement Horizontal Agreement Manufacturer B Distributor A Distributor B Horizontal agreement • Traditionally, competition policy regards horizontal agreements as being more objectionable as these agreements are made between competitors. • Some horizontal agreements are considered Hard Core and are absolutely prohibited (S4(2)).

18. Vertical agreement Manufacturer Vertical Agreement Wholesaler Vertical Agreement Retailer

19. Meaning of 'object' or 'effect' 'Object' Type of Agreement Types of agreement the anti-competitiveness of which can be determined simply from their object deemed to have the purpose of restraining competition unnecessary to prove agreement would have an anti competitive effect subjective intention irrelevant

20. Meaning of 'object' or 'effect' 'Effect' Type of Agreement Where it is not possible to say that the object of an agreement is to restrict competition, it is then necessary to conduct an extensive analysisof its effect on competition in the marketbefore it can be found to infringe section 4 CA 2010

21. Stay Away !!!! The Object Box • Horizontal agreements: • to fix prices • to limit/share markets • to limit sales/production • to bid rig • to exchange current or future price information • collective exclusive dealing • perform group boycott • Vertical agreements: • to fix resale prices to wholesalers/distributors/retailers

22. Resale price maintenance (RPM) Exclusive distribution Selective distribution • A producer / manufacturer’s contractual requirement that its product • be retailed at a fixed or minimum price to consumers • Specification of a maximum price and/or recommended resale price (RRP) • is “usually OK” unless the specified price has the effect of fixing the retail • terms of sale or dampening retail price competition. • A manufacturer supplies its (branded) product to only one distributor • or wholesaler or retailer in a particular territory or geographical area • It may have the effect of preventing “downstream” market entry and • “intra – brand” competition • A manufacturer supplies its (branded) product to a limited number of • dealers who are contractually restricted from selling other brands • It may foreclose a market to inter – brand competition at the retail level Vertical Restraints...mostly requires effect type analysis

24. Lets decide who will win

25. Price cartel Entrepreneur A Entrepreneur B Entrepreneur C Entrepreneur D Users and Consumers Decision of selling price among competitors

26. Abuse of Dominance a) Exploitative Directly harm consumers. Ex – Excessive price b) Exclusionary Indirectly harm consumers foreclosing competitors and as a result increasing firms’ ability to increase prices to consumers. Ex – Exclusive Dealing Tying & Bundling Predation Refusals to Supply & Margin Squeeze (?) (vertical foreclosure of downstream rivals) Denial of Market Access or Foreclosure of Raw Material Sources

27. Is it fair competition?

28. Whatever…. ….The result is clear.

30. Thank You