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Indian Competition Regime and Experiences with Cartels Pradeep S Mehta CUTS International

Indian Competition Regime and Experiences with Cartels Pradeep S Mehta CUTS International. Constitutional Provisions. Articles 38 and 39, part of the Directive Principles of State Policy The State shall, in particular, direct its policy towards securing:

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Indian Competition Regime and Experiences with Cartels Pradeep S Mehta CUTS International

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  1. Indian Competition Regime and Experiences with CartelsPradeep S MehtaCUTS International

  2. Constitutional Provisions • Articles 38 and 39, part of the Directive Principles of State Policy • The State shall, in particular, direct its policy towards securing: • that the ownership and control of material resources of the community are so distributed as best to subserve the common good; and • that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

  3. Trigger Cause • There were essentially three enquiries/studies, which acted as the lodestar • Hazari Committee report (1955): the licensing system had resulted in disproportionate growth of some of the big business houses • Mahalanobis Committee (1964): big business houses were emerging because of the “planned economy” model; the need to collect comprehensive information relating to the various aspects of concentration of economic power • Monopolies Inquiry Commission (1965) came out with the Bill for MRTP

  4. Concentration of top three firms 1964

  5. Thrust Areas • the prevention of concentration of economic power to the common detriment • the control of monopolies • the prohibition of monopolistic trade practices • the prohibition of unfair trade practices

  6. Amendment to MRTPA –1984 • Rajindar Sachar Committee (1978) • Provisions for UTPs included • An office of DGIR created to investigate cases

  7. Economic Reforms - Key Elements • Industrial Policy: Licensing has been abolished except in respect of six industries • Public sector: monopoly only where security and strategic concerns • Small scale industries: many industries de-reserved • Price control: Relaxed • Import Restrictions: Relaxed • Foreign Investment: liberalised • Financial Sector: de-regulated • Exit Policies: Not much change • Privatisation: Limited progress

  8. Impact on MRTPA • Prevention of concentration of economic power to the common detriment; and control of monopolies de-emphasized • Major amendments were effected to the MRTP Act in 1991 in the following areas: • pre-entry restrictions • expanding an existing undertaking • amalgamations, mergers and takeovers of undertakings

  9. Experience with MRTPA • Inadequacy of budget and expertise • Huge number of pending cases • Not much success in handling cartels • Unaware of international cartels and their impacts on India

  10. The Metamorphosis • MRTP Act: neither definition nor even a mention of certain offending trade practices which are restrictive in character. Some illustrations of these are: • Abuse of Dominance • Cartels, Collusion and Price Fixing • Bid Rigging • Boycotts and Refusal to Deal • Predatory pricing

  11. New Competition Law • In October 1999, High Level Committee to advise on Competition Policy & Law for the country • Involvement of Stakeholders • Recommends a new law with all regular features • Adopted after much debate, particularly surrounding M&A • High threshold for M&A evaluation and voluntary notification

  12. Other Regulations • Consumer Protection Act, 1986 • Sectoral Regulatory Authorities • Telecommunications Regulatory Authority of India (TRAI) • Central Electricity Regulatory Commission (CERC) at the federal level and State Electricity Regulatory Commission (SERC) in most states • Securities and Exchange Board of India (SEBI) • Reserve Bank of India • Insurance Regulatory & Development Authority (IRDA) • There are other statutory bodies for regulating some other sectors and some more are in the offing

  13. Dealing with Cartel Cases • Cartel cases in cement, transport (trucking), tyres, pharma-retailing, BOPP film (Biaxially Oriented Polypropelene film, used for packaging), rubber chemicals • In some cases cease and desist order passed (trucking, pharma-retailing, tyres) • In some cases matter went to Supreme Court (cement) • In some cases not enough evidence was found(BOPP film, rubber chemicals)

  14. International Cartel • Vitamins cartel • India hit – CUTS intervention – No action • Heavy electrical equipment cartel • India hit – No action • Flat-rolled steel cartel • India hit – No action

  15. Export Cartel • US Export Trade Act 1918 (Webb-Pomerene) • ANSAC as export cartel • Action in EU • Action in India • Restrictive trade practices (cartel) • Predatory pricing • Problems with enforcement • Supreme Court verdict

  16. Where we stand • The new Competition Act, 2002 became a part of Indian jurisprudence • Certain sections of the new Act came into force • One member of the Commission appointed • Supreme Court case on the matter of the qualifications of the Chairperson and other issues • Government proposed some changes • Amendment Bill • Commission engaged in advocacy and capacity building with limited staff

  17. Thank you

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