Presented to
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Table of Contents:
Why Competition?
The New Regime Background &
Introduction
The Competition Act, 2002 - Key
Provisions
Impact of competition law in
distributorship model.
Risk Mitigation - Critical Steps
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Competition in market is
BENIGN:
Reduces prices
Improves quality
Boosts choice
Promotes efficiency
Encourages innovation
[Sec.
Contd
Impose penalty on delinquent directors and functionaries
who are delegated with requisite powers;
Declare anti-competitive agreements void;
Order division of dominant enterprise or groups;
Approve/approve
combinations;
with
modifications
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or
block
Institutional Framework:
The CCI Primary body to implement the law;
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Relevant Market
Relevant Market includes relevant product market
and relevant geographic market.
Relevant Product Market comprises all those
products
or
services
which
are
regarded
as
interchangeable or substitutable by the consumer.
United Brands v. Commission It was argued that bananas
were in the same market as other fruit. The ECJ held that the
banana constitutes a separate market since it has special
features distinguishing it from other fruits, like it is the only
fruit which can be consumed by infants and the elderly.
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Contd
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Anti-Competitive Agreements
(ACAs):
Section 3 prohibits agreements 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
(AAEC) within India.
The Act declares that agreements entered into
in contravention of the above prohibition shall
be void.
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Raw Material
Supplier
Raw Material
Supplier
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
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Horizontal Agreements
(Presumption of AAEC):
Agreements between enterprises or persons engaged in
similar trade of goods or provision of services.
Agreements including cartels that:
(a) fix prices,
(b) limit or control production,
(c) allocates markets or customers, and
(d) rig bids/collusive bidding
are presumed to have an appreciable adverse effect on
competition (AAEC)
The prosecutor needs to prove existence and not the
harm caused.
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Retail
Retail price
price is
is too
too
cheap.
cheap. Why
Why dont
dont
we
we increase
increase the
the
wholesale
wholesale price
price
by
by 5%?
5%?
Medtronics
Sales Person
I agree. Lets
implement the
price increase
next month.
Competitors Sales
Person
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Medtronic sales
person
Ex Medtronic Sales
Person working at
Competitor
Answer
" I agree. Give me your contact details so that we can
exchange information.
" It is really nice to see you again. Why dont we go
out for dinner tonight. There are lots of things that we
should talk.
Leave the place after saying "It is nice meeting you
again. But we are competitors now, and competing
with each other for this deal. It is against our
companys policy to interact with competitors. I am
afraid I will have to say I have to go.
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Vertical Agreements
(Rule of Reason)
Agreements between enterprises at different stages
or levels of the production chain.
What is the Rule of reason analysis?
A rule of reason analysis involves determining
whether conduct can be justified on the basis that
its pro-competitive gains outweigh its anticompetitive effects.
Agreements are not deemed anti-competitive
unless if they cause or are likely to cause AAEC in
India.
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Contd
(d) refusal to deal- any agreement which restricts, or
is likely to restrict, by any method the person or
classes of persons to whom goods are sold or from
whom goods are bought;
(e) resale price maintenance- any agreement to sell
goods on condition that the prices to be charged on the
resale by the purchaser shall be prices stipulated by the
seller unless it clearly stated that prices lower than those
prices may be charged.
The scope and ambit of above concepts is broad as the
definition has been made inclusive.
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Exclusions:
Section 3 does not:
- restrict right of IPR holder to prevent
infringement of IPR or impose
Reasonable Conditions on use of such
IPR;
- restrict right of a person to export
goods from India.
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Contd
Determination of
Position involves:
Abuse
of
Dominant
Types of Abuses
Determination of Dominant
Position - Factors
Market share of the enterprise
Size and resources of the enterprise
Size and importance of the competitors
Economic power of the enterprise
Vertical integration of the enterprises
Dependence of consumers on the enterprise
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Contd
Barrier to entry
Regulation of Combinations
Merger Control:
The Act regulates combinations (merger
control) which involves an ex ante assessment of
changes in the structure of the relevant market.
No combination can take effect unless the
transaction is approved by the CCI.
Combination Regulations sets out the procedure
of filing notice, fee payable and timelines.
Failure to file notice of a reportable transaction
attract penalty.
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Contd
Combinations include:
-
A word of caution in
communication?
Email, SMS, FAX, Communication in any e-mode are
admissible evidence.
Skillful communication is imperative.
Do not sound guilty .
Do not use expression like destroy after reading.
Avoid the exaggerated use of power words(e.g.
well destroy them, we will nail them to the
wall)
Avoid giving the false impression that a customer is
being given favored treatment( e.g. None of our
other
customers
is
getting
this
special
discount).
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Contd
Do not give false impression that some action is
being taken as a result of an agreement between
competitors ( e.g. Everyone in the industry
agrees that prices are too low).
Be carful with the use of the word market (e.g.
we are dominant).
Marking a document personal and confidential
or keeping it in your personal files or home office
or computer does not
mean that it wont be
discovered.
Do not use the term market when referring to
distribution channels.
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Thank you