Work in progress: Competition Law in India.

 

 

For 40 years, India had its own version of competition law, which was enacted through a legislation called the Monopolies and Restrictive Trade Practices Act 1969 (MRTP Act). This legislation, based on principles of a “command and control” economy, was designed to put in place a regulatory regime in the country which did not allow concentration of economic power in a few hands that was prejudicial to public interest and therefore prohibited any monopolistic and restrictive trade practices. Post-economic liberalization in 1991, it became imperative to put in place a competition law regime that was more responsive to the economic realities of the nation and consistent with international practices. Consequently, in 2002, the Indian Parliament approved a comprehensive competition legislation — the Competition Act 2002 (Competition Act), to regulate business practices in India so as to prevent practices having an appreciable adverse effect on competition (AAEC) in India. The Competition Act primarily seeks to regulate three types of conduct: anti-competitive agreements, abuse of a dominant position and combinations (i.e., mergers, acquisitions and amalgamations). The Competition Act, which was amended by the Competition (Amendment) Act 2007, later came into force on 20 May 2009, when the Government of India notified the provisions related to anti-competitive agreements and abuse of dominant position of the Competition Act. It took three more years for the merger control provisions of the Competition Act to be brought into force in June 2011.

Enforcement and administration;

The Competition Act has also created a new enforcement authority, the Competition Commission of India (CCI), which is solely responsible for the enforcement and administration of the Competition Act. The CCI comprises of a chairperson and not fewer than two and not more than six other members to be appointed by the Government of India. The CCI presently comprises five members, including the chairman , Ashok Chawla. The CCI may initiate an inquiry in relation to an anti-competitive agreement or abuse of dominant position either on its own, on the basis of information or knowledge in its possession, or on receipt of information or on the receipt of a reference from the government or a statutory authority. Any person, consumer or their associations can file a complaint/information relating to anti-competitive agreements and abuse of dominant position. With respect to combinations, the CCI may initiate an inquiry either on its own or on the basis of the notification by the firms proposing to enter into the combination. The CCI and its investigative wing, the Office of the Director General (DG), is entrusted with extensive powers of investigation with respect to anti-competitive practices, which include powers to summon and enforce the attendance of any person, examine them on oath, receive evidence on affidavit and other similar provisions. If the CCI is of the opinion that there is a prima facie case, it shall direct the DG to investigate the matter and report its findings. The DG is also empowered to carry out “dawn raids” for the purpose of its investigation. Late last year, in a case involving allegations of abuse of dominance, the DG exercised this power for the first time. The CCI may rely upon the recommendations made by the DG in its report and, after giving the concerned parties a due opportunity to be heard, pass such orders as it may deem fit, including an order to cease and desist and impose penalties. Under the Competition Act, there is a provision for appeal to the Competition Appellate Tribunal (COMPAT) against certain orders of the CCI. A further appeal from the decision of the COMPAT may lie before the Supreme Court of India.

Reform;

In an attempt to plug in existing lacunas in the Competition Act, in 2012, the Government of India issued a set of draft amendments. Based on the recommendations of the expert committee, the government introduced the Competition Amendment Bill, 2012 (Bill) in the lower house of the Indian Parliament, the Lok Sabha. While these amendments are yet to be notified, once implemented, they are likely to introduce significant changes to competition in India. Most notably, the Bill seeks to introduce the concept of “joint dominance” under section 4 of the Competition Act. With this amendment, the CCI will be able to assess dominance on the basis of the combined ability of two or more enterprises to act independently of the competitive forces in the relevant market, in cases where one enterprise doesn’t qualify as being dominant on its own. The Bill also provides an enabling provision which will give the government the flexibility to specify sector-specific asset/turnover thresholds. This will then determine whether the pre-merger notification requirement is triggered in the relevant sector. In terms of procedure, one of the most controversial amendments sought to be introduced in the Bill is in relation to the CCI’s power of “search and seizure” or dawn raids. The Bill replaces the existing requirement of the DG to seek prior sanction from the Chief Judicial or Metropolitan Magistrate for conducting a search or seizure operation with a requirement to seek prior sanction from the Chairperson of the CCI instead. This will most likely ease the process for conducting “dawn raids” and it is expected this power will be exercised frequently during investigations. The Bill also seeks to introduce several other small yet significant changes to the Competition Act. These include providing an opportunity to parties to be heard before imposing a penalty, reducing the “waiting period” for merger clearance from the existing 210 days to 180 days and clarifying the definition of the term “turnover” to exclude the taxes on the sale of goods or provision of services.

 

 

 

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