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Understanding the Competition Act: Implications for Enterprises

Learn about the Competition Act, its benefits, anti-competitive agreements, abuse of dominance, and more. Stay compliant and competitive.

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Understanding the Competition Act: Implications for Enterprises

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  1. CCI: ICSI-NIRC Company secretaries and the Competition Act, 2002 17th October 2015 Surendra U. Kanstiya Practising Company Secretary kanstiyask@rediffmail.com

  2. COMPETITION BENEFITS ALL Healthy competition culture promotes: • Consumer welfare: Choice, price, quality • Fair play: be a ‘price taker’ and not ‘price maker’ • Innovation: ‘to be the best’ AND Competition kills competition

  3. ENTERPRISE • PERSON OR GOVT. DEPTT. engaged in activity relating to production, supply, distribution, acquisition, control of goods; services, of any kind. • PERSON: individual; firm; HUF; co.; AoP; corporation; body corp.; coop. soc.; local authority; other artificial juridical persons. • EXCLUDED: Govt. Deptt. performing sovereign functions: atomic energy, currency, defence; space

  4. APPEARANCE • Sec. 35 and Sec. 53S: A person or enterprise or DG may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its case ……

  5. COMPANY SECRETARY • Join CCI / COMPAT • Experts and Professionals : The CCI (Procedure for Engagement of Experts and Professionals) Regulations, 2009

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  7. ANTI COMPETITIVE AGREEMENTS ‘All anti-competitive agreements are void’

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  9. HORIZONTAL AGREEMENTS = HARDCORE CARTELS PRESUMED TO BE ANTI-COMPETITIVE • Price fixing • Limiting production, supply etc. • Market sharing • Collusive bidding/rigging Others: Subject to ‘Rule of reason’ test * EXCLUDES JV agreements if increase efficiency 10

  10. VERTICAL AGREEMENTS PROHIBITED IF AFFECT COMPETITION • Tie-in arrangements • Exclusive supply agreements • Exclusive distribution agreements • Refusal to deal/vertical boycott • Resale price maintenance Rule of reason approach

  11. COMPANY SECRETARIES • Manner of exchange of information within the trade bodies; joint ventures; cross directorships • Communication with regard to pricing; markets; technical development in terms of productivity, investment and profitability

  12. ABUSE OF DOMINANT POSITION ‘No enterprise or group shall abuse its dominant position’

  13. DOMINANT POSITION • DOMINANCE: - Capacity to act independent of competitive presence. - Affecting appreciably the relevant market, competition and consumers.

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  15. ABUSE OF DOMINANCE:PRACTICES • Unfair, discriminatory and predatory pricing • Limiting production, markets or technical development • Denial of market access • Supplementary obligations unconnected to main contract: full line forcing • Using dominant position to enter another market

  16. JSPL v SAIL [Case No 11/2009December 20, 2011] • The DG has made reference to the minutes of the 270th meeting of Board of Directors of SAIL held on 28.05.2001 wherein the Board has acknowledged the need "to meet the threat of competition posed by setting up of a new Mill by M/s. Jindal Steel…… 18

  17. SAIL: BOARD MINUTES • In the minutes, there was a mention of JSPL's aim of setting a rail manufacturing unit. It was also mentioned in the minutes that due to competition which is going to come due to the entry of JSPL in the market for rails, SAIL should upgrade the facilities of the rail and structural plant. The D.G. further held that the MoU dated 01.02.2003 effects competition and does not ensure freedom of trade. 19

  18. COMPANY SECRETARIES • Determination of dominance and Sec. 19(4): Tall claims in Prospectus, websites, advertisements. Schemes of amalgamation. • Pricing: Unfair; discriminatory; predatory - CCI (Determination of Cost of Production) Regulations, 2009

  19. COMBINATIONS ‘Certain combinations are regulated’ The Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulations, 2011 (Amended in 2012, 2013, 2014, 2015)

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  21. PRIOR NOTIFICATION (Filing of Form) 24

  22. MANDATORY A notice must be given by enterprise to CCI about combination within 30 days from execution of agreement / resolution Phase I review process: CCI to form prima facie opinion in 30 days Phase II review process: CCI to pass order within 210 (180 days), failing which combination to be deemed as approved. FAILURE: Penalty, may extend to 1% of the total turnover or the assets, whichever is higher. 25

  23. FORMS • Form I - Regulation 5(2) combinations • Form II - Regulation 5(3) combinations • Form III - For exempt acquisition by FII etc • Form IV – Advertisement

  24. FORMS FOR NOTIFICATIONS

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  26. VOID COMBINATION a combination which causes or is likely to cause an APPRECIABLE ADVERSE EFFECT ON COMPETITION (AAEC) WITHIN RELAVANT MARKET IN INDIA 30

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  28. CONSULTATION PRIOR TO FILING- NON BINDING, INFORMAL The facility of informal and verbal consultation with the staff of CCI prior to the filing of notice to a proposed combination is available at CCI. The advice would be given as an additional assistance facility, and would not be deemed to be the opinion of the CCI in any manner whatsoever or binding on the CCI. 32

  29. COMPANY SECRETARIES Assets/turnover determination Non-compete clause Market share analysis Group/control impact Failing business costing and impact Compliance report Filing of forms Divesture of assets: Independent agency – PCS firm 33

  30. COMPANY SECRETARY i. Act as Advisors, Consultants ii. Audit of various agreements iii. Compliance certificate iv. Training programmes v. to oversee modification

  31. PENALTY UNDER COMPETITION ACT, 2002 Penalty of Rs.12,474 crore has been imposed on 351 companies – Mr Arun Jaitly in Lok Sabha on 27th February 2015 Period: May 2009 to January 2015. Average: Rs.35 Cr 35

  32. COMPETITION COMPLIANCE PROGRAMME ‘Contraventions can be avoided’ 36

  33. THANK YOU ALL

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