The Competition

Commission of India
Economics Behind the Competition
Policy

Economic Efficiency: Maximization of aggregate of consumer and producer

surplus:
❖ Static Efficiency: at a point of time
❖ Productive Efficiency: Productive efficiency is concerned with producing
goods and services with the optimal combination of inputs to produce
maximum output for the minimum cost. Producing on Production possibility
frontier.
❖ Allocative Efficiency: Allocative efficiency occurs where price = marginal cost
(MC)
❖ Dynamic Efficiency: over time

❖ Why Competition Policy?

❖ Branch of economics law, industrial organization
❖ Govern the behavior of firms/enterprises
History

◼ Post 1991 policy of Liberalisation, Privatisation and

Globalisation introduced.
◼ MRTP Act was found inadequate to meet the challenges of a
modern globalised economy.
◼ Government of India in October 1999 appointed a high level
Committee on Competition Policy and Law (the Raghavan
Committee) to advise on the competition law in consonance
with international developments.
History

◼ Acting on the report of the Committee, the Government of

India passed the Competition Act in the year 2002; to which
the President accorded assent in 2003. It was subsequently
amended by the Competition (Amendment) Act, 2007.
◼ The broad objectives of the Competition Act, as laid down in
its preamble, are:
“to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to
protect the interest of the consumers and to ensure freedom of
trade carried on by other participants in markets in India”
The Competition Act
◼ Inquire into Anti-Competitive Agreements i.e. Cartels, Bid-Rigging
etc. (Section 3)

◼ Inquire into Abuse of Dominant Position including Predatory Pricing

etc. (Section 4)

◼ Regulate Combinations i.e. Mergers, Acquisitions etc. (Sections 5 &

6)

◼ Undertake Competition Advocacy i.e. advice on policy issues, create

public awareness, training on competition issues etc. (Section 49)
The sectors that have been covered are as diverse as
infrastructure, finance, entertainment, IT, telecom,
civil aviation, energy, insurance, travel, automobile
manufacturing, real estate and pharmaceuticals etc.
Vertical Agreements Section 3(4)
 Vertical agreements

Agreement between different level of production and distribution chain

are vertical agreements. Manufacturer-dealer, dealer-supplier,
wholesaler-retailer
Prohibited Agreements:
◼ Tie in Agreement.
◼ Refusal to Deal.
◼ Exclusive Distribution Agreements.
◼ Exclusive Supply Agreements.
◼ Resale Price Maintenance. RPM refers to a vertical agreement to sell
goods on the 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.
A recent case

◼ CCI fine of Rs 200 cr on Maruti Suzuki India Ltd

◼ For indulging in anti-competitive conduct of Resale Price
Maintenance (RPM) in the passenger vehicle segment by way of
implementing Discount Control Policy vis-à-vis dealers
◼ MSIL had a ‘Discount Control Policy’ in place for its dealers whereby
the dealers were discouraged from giving extra discounts, freebies,
etc. to the consumers beyond what were permitted by MSIL. If a
dealer wanted to offer additional discounts, prior approval of MSIL
was mandatory
◼ Maruti Suzuki would employ mystery shopping agencies (MSAs) to
pose as customers to the company's dealerships and find out if any
additional discounts were being offered to customers.
Horizontal Agreements Section 3(3)
Horizontal Agreements

◼ Agreement between two or more enterprises operating at

same level of business
◼ Directly or indirectly affecting prices
◼ Limit or control production, supply, market, technical
development
◼ Market sharing by way of geographical allocation
◼ Bid rigging/collusive bidding
◼ Burden of proof is on the person or enterprise
Cartel

◼ Cartelisation is one of the horizontal agreements that shall be

presumed to have an appreciable adverse effect on
competition under Section 3 of the Competition Act, 2002.
◼ “Cartel” includes an association of producers, sellers,
distributors, traders or service providers who, by agreement
amongst themselves, limit, control or attempt to control the
production, distribution, sale or price of, or, trade in goods or
provision of services.
◼ For the consumers, cartelisation results in higher prices, poor
quality and less or no choice for goods or/ and services.
Cartel

Some of the conditions that are conducive to cartelization

are:
◼ high concentration - few competitors
◼ high entry and exit barriers
◼ homogeneity of the products (similar products)
◼ similar production costs
◼ excess capacity
◼ high dependence of the consumers on the product
◼ history of collusion
Cartel

◼ The Commission is empowered to inquire into any cartel,

and to impose on each member of the cartel.
◼ A penalty of up to 3 times its profit for each year of such
agreement or 10% of its turnover for each year of such
agreement, whichever is higher.
◼ In case an enterprise is a ‘company’ its directors/officials
who are guilty are also liable to be proceeded against.
An example
◼ CCI found the act and conduct of the cement companies to be
a ‘Cartel’ as the cement companies were acting together to
limit, control and also attempted to control the
production and price of cement in the market in India

◼ Penalty of Rs. 6307 crore was imposed on the 11 cement

companies and their associations, fixed at 50 per cent of their
profits during 2009 -10 and 2010 -11.
Source:https://www.cci.gov.in/sites/default/files/presentation_document/Competitionlawthe
keyfeatures.pdf?download=1
 The Competition Act Contd…

❖ Dominant Position means “… a position of

strength…which enables it to (i) operate independently
of competitive forces…(ii) affect its competitors or
consumers or relevant market in its favor.”

❖ Abuse of Dominant Position: Actions negatively affecting

conditions as well as prices of sales or purchase of goods
and services e.g., predatory pricing.
Source:https://www.cci.gov.in/sites/default/files/presentation_document/Competitionlawthe
keyfeatures.pdf?download=1
 The Competition Act Contd…
This Act provides for threshold limits on assets (Rs. 2000
crores) or turnover (Rs.6000 crores) in case of :
▪ Any Acquisitions.
▪ Acquisition of Similar Products.
▪ Mergers or Amalgamations.

Such combinations are reviewed to ensure that the final

entity should not become dominant which can be abusive

Concern about increase in prices, innovation and consumer

choices
Exceptions
◼ Copyright Act
◼ Patent Act
◼ Trademark act
◼ Geographical indications of Good Act
◼ Designs Act
◼ Semi-conductor integrated circuit act
 The Competition Act Contd…

Competition Commission of India (CCI)

initiates action:
(i) on its own motion,
(ii) complaint by third party,
(iii) on central or state govt. directive and,
(iv) if approval is sought in case of combinations.
Process
Decision of the Commission
◼ Prima facie view
◼ Director General to investigate and report
◼ Final View
◼ Penalty

Competition Appellate Tribunal (CAT)

To hear and dispose of appeals against the specific order of the
Commission. An appeal has to be filed within 60 days of receipt of the
order / direction / decision of the Commission. A person aggrieved with
the direction, decision or order of the CAT can appeal to the Supreme
Court of India within 60 days from the date of communication of the
direction, decision or order.
The Comission
◼ Ashok Kumar Gupta (Chairperson)
◼ Dr. Sangeeta Verma (Member)
◼ Bhagwant Singh Bishnoi (Member)

◼ Interesting ads showing What CCI does?

https://www.cci.gov.in/video-gallery/130?combine=

◼ CCI and digital economy

http://competitionlawblog.kluwercompetitionlaw.com/2018/03/20/india-matrimony-
com-v-google-cat-wall-approach-intervening-expanding-digital-space/

◼ Interesting blog on role of CCI during situation arising due to COVID 19

https://competition.cyrilamarchandblogs.com/2020/03/covid-19-and-competition-
law-concerns/#more-2152