COMPETITION LAW

COMPETITION LAW

AZIZUR RAHAMAN

DELL
[Pick the date]

Azizur Rhaman
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1. Explain the meaning of “Mergers and Acquisition” along with its exceptions. Elaborate
your answer with the help of notable mergers and acquisitions India.
Ans:

inition

Mergers and Acquisitions (M&A) refer to the consolidation of companies or assets through
various types of financial transactions. A merger occurs when two companies combine to form a
new entity, while an acquisition is the purchase of one company by another in which no new
company is formed.

Types of Mergers

1. Horizontal Merger: This type of merger happens between companies that operate in the
same industry. The primary objective is to achieve economies of scale, reduce
competition, and increase market share. A notable example is the merger of Vodafone
India and Idea Cellular in 2018, which created the largest telecom company in India by
subscribers.
2. Vertical Merger: In a vertical merger, companies that operate at different stages of the
production process of a specific product merge. This type of merger aims to enhance
efficiency and reduce costs by integrating operations. An example is the acquisition of
Bharti Airtel by SingTel in 2005, where the former was a telecom service provider and
the latter a telecom infrastructure provider.
3. Conglomerate Merger: This merger occurs between companies that operate in unrelated
business activities. The purpose is to diversify the business and reduce risks associated
with dependence on a single market. An example in India is the merger between Tata
Motors and Jaguar Land Rover in 2008.
4. Market-Extension Merger: This type of merger happens between companies that sell
the same products but in different markets. The goal is to gain access to a larger market
and increase customer base. An example is the merger of GlaxoWellcome and
SmithKline Beecham in 2000, forming GlaxoSmithKline, which expanded their reach in
different markets.
5. Product-Extension Merger: This occurs between companies that sell related products in
the same market. The objective is to consolidate their product lines and gain a
competitive edge. An example is the acquisition of Heinz by Kraft Foods Group in 2015,
creating Kraft Heinz Company.

Exceptions in M&A

1. Antitrust Regulations: Regulatory authorities may block or impose conditions on M&A

transactions to prevent the formation of monopolies or reduce competition in the market.
For instance, the Competition Commission of India (CCI) has the authority to scrutinize
mergers that could adversely affect market competition.
2. Due Diligence Failures: Inadequate due diligence can uncover significant legal,
financial, or operational risks that can derail an M&A deal. For example, the failed
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acquisition of Snapdeal by Flipkart in 2017 was partly due to extensive due diligence
revealing financial concerns.
3. Cultural Integration Issues: Post-merger integration can face challenges due to cultural
differences between merging entities. The merger of Air India and Indian Airlines faced
significant integration issues due to differences in work culture and operational practices.
4. Financial Constraints: Sometimes, the financial burden or cost of the
merger/acquisition might lead to its abandonment. An example is the failed merger
between Jet Airways and Air Sahara due to financial disagreements.

Notable Mergers and Acquisitions in India

1. Hindustan Unilever Limited (HUL) and GlaxoSmithKline Consumer Healthcare

(GSKCH): In 2018, HUL announced the acquisition of GSKCH, which included brands
like Horlicks and Boost. This acquisition aimed to enhance HUL's health food drinks
portfolio and expand its market presence.
2. Flipkart and Walmart: In 2018, Walmart acquired a 77% stake in Flipkart for $16
billion. This deal was one of the largest e-commerce acquisitions globally, providing
Walmart a strong foothold in the Indian market and positioning Flipkart to compete with
Amazon India.
3. Vodafone and Idea Cellular: The merger of Vodafone India and Idea Cellular in 2018
created Vodafone Idea Limited, the largest telecom operator in India by subscriber base.
This merger was aimed at combining their strengths to better compete in the highly
competitive telecom sector.
4. ONGC and HPCL: In 2018, Oil and Natural Gas Corporation (ONGC) acquired a
51.11% stake in Hindustan Petroleum Corporation Limited (HPCL). This acquisition was
part of the Indian government's strategy to create integrated public sector oil companies.
5. Tata Steel and Bhushan Steel: In 2018, Tata Steel acquired a controlling stake in
Bhushan Steel for around $5.2 billion. This acquisition aimed to expand Tata Steel's
capacity and enhance its position in the domestic market.

Competition Law in India

The Competition Act, 2002, governs M&A activities in India. The primary objective of the Act
is to prevent practices having an adverse effect on competition, promote and sustain competition
in markets, protect the interests of consumers, and ensure freedom of trade. The Competition
Commission of India (CCI) is the regulatory authority responsible for enforcing the Act.

Provisions Related to M&A:

1. Section 5: Defines combinations, including mergers, acquisitions, and amalgamations.

2. Section 6: Prohibits combinations that cause or are likely to cause an appreciable adverse
effect on competition within the relevant market in India. The parties to the combination
must notify the CCI if the value of assets or turnover exceeds the thresholds specified in
the Act.

CCI's Role:
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 Review and Approve/Reject Combinations: The CCI examines proposed combinations

to assess their impact on competition. It can approve, reject, or suggest modifications to
the terms of the combination.
 Impose Penalties: In cases where combinations are not notified to the CCI, or if false
statements are made, the CCI can impose penalties.
 Monitor Compliance: The CCI monitors compliance with its orders and can take action
in case of non-compliance.

Conclusion

Mergers and acquisitions are strategic tools used by companies to enhance their market position,
achieve economies of scale, diversify operations, and gain competitive advantages. While they
offer numerous benefits, M&A transactions can also face challenges and exceptions such as
regulatory hurdles, cultural integration issues, and financial constraints.

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2.. Discuss the role of competition commission of India in detecting ‘cartel’ and how
leniency scheme helps the parties involved agreement.

Ans:

Definition of a Cartel

A cartel is an agreement between competing firms to control prices, limit supply, or hinder
competition by other means. Cartels are illegal because they violate principles of free
competition and harm consumers by raising prices and restricting choices.

Role of the Competition Commission of India (CCI) in Detecting Cartels

1. Investigation and Inquiry

The CCI is vested with the authority to initiate investigations into suspected cartel activities.
These investigations can be prompted by various sources:

 Suo Moto Investigations: The CCI can start an investigation on its own initiative if it
suspects the existence of a cartel. This proactive measure allows the CCI to address
potential anti-competitive behavior even without an external complaint.
 Complaints and Information: Individuals, businesses, consumer groups, or other
government entities can file complaints or provide information about suspected cartels.
This information can serve as a basis for the CCI to launch an inquiry.
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 Director General (DG) Role: The CCI directs the Director General (DG) to conduct
detailed investigations. The DG has the power to summon documents, examine
individuals under oath, and carry out inspections to gather evidence.

2. Dawn Raids

Dawn raids are unannounced inspections conducted by the CCI to gather direct evidence of
cartel activities. These raids are crucial because cartels often operate in secrecy, making it
difficult to obtain evidence through regular channels.

 Preparation and Execution: Dawn raids are meticulously planned to ensure maximum
effectiveness. The CCI, along with the DG, prepares a detailed strategy, identifying the
targets and the evidence sought.
 Seizure of Evidence: During a dawn raid, the CCI can seize physical and electronic
documents, communication records, and other materials that may provide proof of cartel
behavior.
 Legal Safeguards: The CCI ensures that dawn raids comply with legal standards and
respects the rights of the entities being investigated. The presence of legal representatives
is allowed to ensure transparency and legality.

3. Forensic Analysis

Forensic analysis is a critical tool used by the CCI to scrutinize financial records, emails, and
other forms of communication for signs of collusion.

 Electronic Data Analysis: The CCI uses advanced software and techniques to analyze
electronic records, looking for patterns or anomalies that indicate coordinated behavior
among competitors.
 Document Examination: Hard copy documents are examined for evidence of meetings,
agreements, or correspondence that may point to cartel activities.
 Financial Transactions: By analyzing financial transactions, the CCI can detect unusual
patterns that suggest price-fixing, market division, or bid-rigging.

4. Market Surveillance

The CCI continuously monitors markets for signs of anti-competitive behavior. This ongoing
surveillance helps identify potential cartels at an early stage.

 Pricing Patterns: Abnormal pricing patterns, such as simultaneous price increases by

competitors, can be indicative of cartel behavior. The CCI monitors such patterns closely.
 Supply Constraints: Unexplained supply constraints or uniform production limits across
competitors can suggest coordinated efforts to control the market.
 Market Intelligence: The CCI gathers market intelligence through various sources,
including industry reports, media articles, and information from market participants.

5. Collaboration with Other Agencies

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The CCI collaborates with other national and international competition authorities to enhance its
investigative capabilities and share best practices.

 Information Sharing: Collaboration allows the CCI to exchange information on cross-

border cartels and leverage the expertise of other competition authorities.
 Joint Investigations: The CCI can participate in joint investigations with international
bodies, ensuring a coordinated approach to tackling global cartels.
 Capacity Building: Through collaboration, the CCI benefits from training programs,
workshops, and seminars conducted by international organizations, enhancing its
capacity to detect and investigate cartels.

Leniency Scheme

The leniency scheme is a vital tool that encourages members of a cartel to come forward and
cooperate with the CCI in exchange for reduced penalties.

1. Eligibility

 Who Can Apply: Any member of a cartel, including individuals and businesses, can apply for
leniency. This broad eligibility encourages maximum participation.
 First Applicant Advantage: The first member to provide substantial evidence typically receives
the greatest leniency, creating a race to the CCI.

2. Application Process

 Initial Disclosure: The applicant must provide detailed information about the cartel’s activities,
such as its operations, participants, and key evidence.
 Continuous Cooperation: Full and continuous cooperation with the CCI is required throughout
the investigation, including providing additional information as needed.

3. Marker System

 Securing a Marker: The leniency applicant can secure a “marker” to establish their position in
line while gathering complete information. This ensures that they do not lose their place to
subsequent applicants.
 Completing the Application: The applicant must complete the application with all necessary
details within a specified timeframe to maintain their marker status.

4. Reduction in Penalties

 Percentage Reduction: The CCI can reduce penalties by up to 100% for the first applicant,
depending on the value of the information and timing. Subsequent applicants may receive lesser
reductions.
 Conditional Leniency: Penalty reductions are conditional on the applicant’s continued
cooperation and the veracity of the provided information.
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Benefits of the Leniency Scheme

1. Breaking the Cartel:

o Distrust Among Members: The possibility of leniency creates distrust within the cartel,
as members may fear being reported by others.
o Deterrence: The scheme acts as a deterrent, making cartels less stable and harder to
sustain.

2. Quick and Effective Investigations:

o Insider Information: Leniency applicants provide crucial insider information,
significantly speeding up the investigation process.
o Resource Efficiency: The CCI can focus its resources more effectively, leveraging the
information provided by leniency applicants.

3. Deterrence:
o Reduced Cartel Formation: The threat of leniency applications discourages companies
from forming cartels in the first place.
o Market Integrity: Enhanced deterrence ensures fair competition and market integrity.

4. Resource Efficiency:
o Efficient Allocation: The CCI can allocate its resources more efficiently by relying on
detailed information from leniency applicants.
o Focused Investigations: With insider information, the CCI can conduct more focused
and effective investigations.

Notable Cases and Examples

1. Cement Cartel Case:

o Background: In 2012, the CCI imposed a penalty of Rs. 6,307 crore on 11 cement
companies for cartelization.
o Evidence: The investigation revealed that these companies coordinated prices and
limited production to inflate prices artificially.
o Impact: The case highlighted the CCI’s ability to detect and penalize major cartel
activities, ensuring fair competition in the cement industry.

2. Tyre Manufacturers Case:

o Background: In 2021, the CCI imposed penalties on five tyre manufacturers for price-
fixing and limiting supply.
o Evidence: The investigation uncovered that these companies colluded to control market
prices of cross-ply tyres.
o Impact: The case demonstrated the CCI’s proactive approach to monitoring and
investigating anti-competitive behavior in essential industries.

3. Beer Cartel Case:

o Background: In 2021, the CCI imposed penalties on three beer companies for colluding
to fix prices and restrict supply in various states in India.
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o Evidence: The companies were found to have exchanged sensitive information to

maintain uniform prices across regions.
o Impact: The case underscored the CCI’s vigilance in detecting and addressing cartel
behavior in consumer goods markets.

Conclusion

The Competition Commission of India plays a critical role in detecting and dismantling cartels
through a combination of investigative techniques, market surveillance, and collaborative efforts.
The leniency scheme, in particular, serves as a powerful tool in breaking cartels and ensuring
effective enforcement of competition laws. By encouraging cartel members to come forward
with valuable information, the CCI can expedite investigations, allocate resources efficiently,
and maintain market integrity.

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3.. Explain the concept and types of Bid-rigging under the anti-competitive agreement with the
help of relevant case laws.

Ans:

Concept and Types of Bid-Rigging under the Anti-Competitive Agreement

Concept of Bid-Rigging

Bid-rigging is a form of fraud in which competitors collude to determine the winner of a bidding
process, undermining the competitive bidding system. This practice is illegal as it distorts the
free market and leads to higher prices and reduced quality of goods and services. In India, bid-
rigging is considered an anti-competitive practice under the Competition Act, 2002.

Section 3 of the Competition Act, 2002

Section 3 of the Competition Act, 2002, deals with anti-competitive agreements, including bid-
rigging. It prohibits agreements that cause or are likely to cause an appreciable adverse effect on
competition within India.

Key Provisions:

 Section 3(1): No enterprise or association of enterprises shall enter into any agreement 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
within India.
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 Section 3(3)(d): Specifically mentions bid-rigging as an anti-competitive agreement.

Types of Bid-Rigging

1. Cover Bidding:
o Definition: Competitors submit deliberately high bids that are intended to be rejected,
allowing a pre-designated competitor to win with a reasonable bid.
o Purpose: To create the illusion of a competitive bidding process while ensuring that a
specific company wins the bid.
o Case Example: In the case of Builders Association of India vs. Cement Manufacturers'
Association and Others (2012), the CCI found that cement companies indulged in cover
bidding to manipulate the bidding process in various government tenders.

2. Bid Suppression:
o Definition: Competitors agree not to submit a bid, or withdraw a bid, so that a pre-
agreed participant can win.
o Purpose: To ensure that the pre-designated bidder wins by reducing the number of bids.
o Case Example: In CCI vs. National Insurance Company and Others (2015), the CCI found
that insurance companies engaged in bid suppression by agreeing not to bid against
each other in the health insurance tender process for government employees.

3. Bid Rotation:
o Definition: Competitors take turns being the winning bidder on a series of contracts.
o Purpose: To share the winning bids among the cartel members without competing
against each other.
o Case Example: In Eastern Railways vs. Indian Railways and Others (2018), the CCI found
that certain suppliers of railways rotated bids amongst themselves to win contracts
from the Indian Railways, ensuring each member had a fair share of contracts.

4. Complementary Bidding:
o Definition: Similar to cover bidding, but involves submitting bids that are intended to be
too high or too low to be accepted.
o Purpose: To ensure the designated winner's bid appears competitive and reasonable.
o Case Example: In the Madhya Pradesh Cylinders and Containers Manufacturers
Association vs. CCI (2018), the CCI discovered that cylinder manufacturers engaged in
complementary bidding to ensure a designated winner for the procurement of LPG
cylinders by the government.

Detection and Enforcement by the CCI

Investigation Process

1. Suo Moto or Complaint-based Inquiries:

o The CCI can initiate an investigation on its own or based on complaints from individuals,
companies, or other entities.

2. Director General’s Investigation:

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o The Director General (DG) is tasked with conducting detailed investigations, gathering
evidence, and submitting reports to the CCI.

3. Evidence Collection:
o The CCI and DG collect evidence through various means, including dawn raids,
examination of documents, electronic records, and financial transactions.

4. Forensic Analysis:
o Advanced forensic tools are used to analyze data for patterns of collusion and bid-
rigging.

Case Analysis

 Case of Coal India Limited:

o In 2018, the CCI imposed a penalty on Coal India Limited for bid-rigging in the supply of
explosives. The investigation revealed that the company colluded with its subsidiaries to
fix prices and manipulate the bidding process.

 Case of Gujarat Gas Company Limited:

o In 2020, the CCI fined Gujarat Gas Company Limited and its associates for bid-rigging in
the procurement of pipeline laying and maintenance services. The companies were
found to have shared bid information and manipulated the tender process to ensure
predetermined winners.

Impact and Remedies

Impact of Bid-Rigging:

 Higher Costs: Bid-rigging results in inflated prices, leading to higher costs for consumers and
government projects.
 Reduced Quality: With reduced competition, the quality of goods and services may suffer.
 Market Distortion: Bid-rigging distorts the free market, reducing innovation and efficiency.

Remedies and Penalties:

 Penalties: The CCI can impose substantial financial penalties on entities found guilty of bid-
rigging.
 Cease and Desist Orders: The CCI can issue orders to cease and desist from anti-competitive
practices.
 Leniency Programs: Members of cartels or bid-rigging schemes can apply for leniency, providing
valuable information in exchange for reduced penalties.

Conclusion

Bid-rigging undermines the competitive bidding process, leading to higher prices and reduced
quality. The Competition Commission of India plays a crucial role in detecting and penalizing
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bid-rigging under Section 3 of the Competition Act, 2002. By employing various investigative
techniques and forensic analysis, the CCI ensures that the market remains competitive and fair.

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4.. (a) What do you mean by “Anti-Competitive Agreement””? (10)

(b) Explain different kinds of Anti-Competitive Agreement with relevant case laws.(6)

c) Explain ‘per se rule’ and ‘rule of reason”.

Ans:

Anti-Competitive Agreement

Definition and Overview

Anti-competitive agreements are arrangements between enterprises or individuals that have the
purpose or effect of preventing, restricting, or distorting competition within a market. Such
agreements are prohibited under the Competition Act, 2002, as they undermine the principles of
fair competition and can harm consumers and other businesses by increasing prices, limiting
supply, reducing innovation, and decreasing the overall efficiency of markets.

Relevant Sections of the Competition Act, 2002

Section 3: Prohibition of Anti-Competitive Agreements

Section 3 of the Competition Act, 2002, explicitly prohibits agreements that have an appreciable
adverse effect on competition (AAEC) in India. This section is divided into several subsections
that detail different types of anti-competitive agreements.

Key Provisions:

 Section 3(1): No enterprise or association of enterprises or person or association of

persons shall enter into any agreement 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 within India.
 Section 3(2): Any agreement entered into in contravention of the provisions contained in
subsection (1) shall be void.
 Section 3(3): Any agreement between enterprises or associations or persons or
associations, which directly or indirectly determines purchase or sale prices, limits or
controls production, supply, markets, technical development, investment or provision of
services, shares the market or source of production or provision of services by way of
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allocation of geographical area of market, or type of goods or services, or number of

customers in the market or in any other similar way, or directly or indirectly results in
bid-rigging or collusive bidding, shall be presumed to have an appreciable adverse effect
on competition.
 Section 3(4): Agreements among enterprises or persons at different stages or levels of the
production chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services, including tie-in
arrangement, exclusive supply agreement, exclusive distribution agreement, refusal to
deal, resale price maintenance, shall be an agreement in contravention of subsection (1) if
such agreement causes or is likely to cause an appreciable adverse effect on competition
in India.

Different Kinds of Anti-Competitive Agreements

Anti-competitive agreements can be broadly categorized into two types: horizontal agreements
and vertical agreements. Each type has specific forms and mechanisms through which
competition can be adversely affected. The Competition Act, 2002, covers these under various
sections, particularly under Section 3. Below is a detailed explanation of each type, along with
relevant case laws and examples.

1.Horizontal Agreements (Section 3(3))

Horizontal agreements are arrangements between enterprises that operate at the same level of the
production or distribution chain, essentially competitors. These agreements are considered highly
detrimental to competition and are presumed to have an appreciable adverse effect on
competition (AAEC).

Types of Horizontal Agreements:

1. Price Fixing:
o Definition: An agreement among competitors to fix prices, either directly or indirectly,
instead of allowing market forces to determine prices.
o Case Law: Builders Association of India vs. Cement Manufacturers' Association and
Others (2012)
 Details: The CCI found major cement companies guilty of fixing prices and
limiting production. This cartelization led to artificially high prices for cement,
harming consumers and the market.
 Outcome: The CCI imposed a substantial penalty on the cement companies
involved.

2. Market Sharing:
o Definition: Agreements in which competitors divide markets among themselves. This
can be done geographically, by customer type, or by product type.
o Case Law: Express Industry Council of India vs. Jet Airways (India) Ltd. & Others (2018)
 Details: Airlines were found to have colluded to allocate cargo routes and fix
freight charges, thereby reducing competition in the market.
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 Outcome: The CCI imposed penalties on the involved airlines for restricting
competition through market sharing.

3. Output Limitation:
o Definition: Agreements among competitors to limit the production or supply of goods or
services.
o Case Law: Cartelization in the Sugar Industry (2011)
 Details: Sugar manufacturers were found to have agreed to limit the supply of
sugar to maintain higher prices.
 Outcome: The CCI took action against the manufacturers to curb the anti-
competitive practices and restore normalcy in the market.

4. Bid Rigging:
o Definition: Agreements among competitors to manipulate the bidding process, ensuring
a predetermined winner.
o Case Law: National Insurance Company and Others (2015)
 Details: Several insurance companies colluded to fix premium rates and terms
for group health insurance policies for government employees.
 Outcome: The CCI imposed penalties and directed the companies to cease and
desist from such anti-competitive practices.

2.Vertical Agreements (Section 3(4))

Vertical agreements are arrangements between enterprises at different levels of the production or
distribution chain. Unlike horizontal agreements, vertical agreements are not presumed to be
anti-competitive but require a detailed analysis to determine their impact on competition.

Types of Vertical Agreements:

1. Tie-in Arrangements:
o Definition: An agreement where the sale of one product is conditional on the purchase
of another product.
o Case Law: Shamsher Kataria vs. Honda Siel Cars India Ltd. & Others (2014)
 Details: Automobile manufacturers were found to have imposed tie-in
arrangements by making the purchase of spare parts conditional on buying
them exclusively from authorized dealers.
 Outcome: The CCI imposed penalties and directed the manufacturers to remove
such restrictions.

2. Exclusive Supply Agreements:

o Definition: Agreements where a buyer is restricted from purchasing goods from any
supplier other than the designated supplier.
o Case Law: Hindustan Coca-Cola Beverages Pvt. Ltd. vs. Ghaziabad Bottling Co. Pvt. Ltd. &
Anr (2016)
 Details: Hindustan Coca-Cola was investigated for having exclusive supply
agreements with distributors, potentially foreclosing competition.
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 Outcome: The CCI found no adverse effect in this particular case, but it
highlighted the need for scrutiny of such agreements.

3. Exclusive Distribution Agreements:

o Definition: Agreements where a supplier restricts a distributor to sell only within a
specified territory or to specific customers.
o Case Law: JCB India Ltd. vs. Director General, CCI (2014)
 Details: JCB India was found to have exclusive distribution agreements that
limited the ability of distributors to sell competing products.
 Outcome: The CCI imposed a penalty and directed JCB India to amend its
agreements to ensure fair competition.

4. Refusal to Deal:
o Definition: Agreements where parties agree not to deal with certain customers or
suppliers.
o Case Law: Sonam Sharma vs. Apple Inc. & Ors (2013)
 Details: Apple was alleged to have refused to deal with certain retailers,
restricting competition.
 Outcome: The CCI examined the case and provided guidelines to prevent such
anti-competitive conduct.

5. Resale Price Maintenance:

o Definition: Agreements where a manufacturer imposes a minimum resale price on its
distributors or retailers.
o Case Law: Fx Enterprise Solutions India Pvt. Ltd. vs. Hyundai Motor India Limited (2017)
 Details: Hyundai was found guilty of imposing resale price maintenance,
restricting the ability of dealers to offer discounts to customers.
 Outcome: The CCI imposed a penalty on Hyundai and directed it to cease such
practices.

Factors to Determine AAEC

The Competition Commission of India (CCI) considers several factors to determine whether an
agreement has an appreciable adverse effect on competition, as outlined in Section 19(3) of the
Competition Act, 2002. These factors include:

1. Creation of Barriers to New Entrants: Agreements that make it difficult for new competitors to
enter the market.
2. Driving Existing Competitors Out: Agreements that force current competitors out of the market.
3. Foreclosure of Competition: Agreements that limit competition by preventing other businesses
from accessing key markets or resources.
4. Accrual of Benefits to Consumers: Whether the agreement leads to benefits for consumers,
such as improved quality or lower prices.
5. Improvement in Production or Distribution: Agreements that enhance the efficiency of
production or distribution.
6. Promotion of Technical, Scientific, and Economic Development: Agreements that encourage
innovation and development.
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Conclusion

Anti-competitive agreements, as prohibited under Section 3 of the Competition Act, 2002, are
agreements that prevent, restrict, or distort competition in the market. They can take the form of
horizontal agreements among competitors or vertical agreements along the supply chain. While
horizontal agreements are presumed to be anti-competitive, vertical agreements require a
demonstration of their adverse effect on competition. The CCI plays a crucial role in identifying,
investigating, and penalizing such agreements to ensure a fair and competitive market

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Per Se Rule and Rule of Reason

Per Se Rule

The per se rule is a legal doctrine in antitrust law that deems certain business practices inherently
illegal, regardless of their actual effects on competition. This rule is applied to categories of
agreements that are considered so detrimental to competitive markets that they warrant automatic
prohibition. Examples of practices covered by the per se rule include price-fixing, market
division, bid-rigging, and output restrictions among competitors.

Once an agreement falls within a per se category, it is deemed illegal without further inquiry into
its purpose or effects. The rationale behind this rule is that these practices almost always restrict
competition and harm consumers. Therefore, the per se rule simplifies antitrust enforcement by
providing clear-cut guidelines on certain anti-competitive practices.

Illustration: Imagine several competing gas stations in a city agree to sell gasoline at the same
high price. Under the per se rule, this price-fixing agreement is automatically illegal because it
clearly harms consumers by keeping prices artificially high. The law doesn’t need to examine the
specifics of why they did it or how it affects the market—it’s just illegal.

Rule of Reason

The rule of reason is a legal standard used to evaluate the legality of business practices based on
their actual impact on competition. Unlike the per se rule, the rule of reason requires a detailed
analysis of the circumstances surrounding the agreement. The court examines the purpose of the
agreement, its actual or potential effects on competition, and any justifications or benefits it may
provide. This involves a comprehensive assessment, including factors like market power,
competitive conditions, and the nature of the agreement.

The rule of reason adopts a balancing approach, weighing the anti-competitive harms against the
pro-competitive benefits to determine whether the agreement should be deemed illegal. This rule
is applied to a broader range of business practices, including many vertical agreements and
certain horizontal agreements that may have both positive and negative effects on competition.
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The rule of reason ensures a thorough examination of the competitive dynamics at play, allowing
for a nuanced determination of legality based on the specific details of each case.

Illustration: Suppose a large retailer enters into an exclusive supply agreement with a local
manufacturer, where the manufacturer agrees to sell its products only to that retailer. To
determine if this agreement is illegal, the rule of reason would look at various factors: Does the
agreement significantly reduce competition? Does it provide benefits like lower prices or better
products for consumers? If the benefits outweigh the harms, the agreement may be considered
legal. This approach requires a detailed examination of how the agreement affects the market.

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5.(a) What is the meaning of “Abuse of Dominant Position””

(b) Discuss the Inquiry Powers of the Competition Commission under section 19 of the
Competition Act, 2002.
c) What are the factors which help in the determination of Dominant position? Explain with
the help of case laws.

Ans:

Abuse of dominant position refers to a situation where a dominant entity in the market exploits
its position to engage in practices that restrict competition, thereby harming consumers and other
businesses. The Competition Act, 2002 in India provides a framework for the regulation of anti-
competitive practices and addresses the abuse of dominant position under Sections 4 and 19.

Definition and Elements of Dominant Position

A dominant position is defined as a position of strength enjoyed by an enterprise in the relevant

market that enables it to:

1. Operate independently of competitive forces in the relevant market, or

2. Affect its competitors or consumers or the relevant market in its favor.

Key Provisions in the Competition Act, 2002

Section 4: Prohibition of Abuse of Dominant Position

Section 4 of the Competition Act, 2002 prohibits any enterprise or group from abusing its
dominant position. The key aspects of this section are:
17

1. Abuse of Dominance: The act defines abuse of dominance through various behaviors,
which include:
o Imposing unfair or discriminatory conditions or prices in the purchase or sale of goods or
services, including predatory pricing.
o Limiting or restricting production of goods or services or technical or scientific
development to the prejudice of consumers.
o Indulging in practices that result in denial of market access.
o Making the conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
o Using dominant position in one market to enter into or protect other markets.

2. Relevant Market: For determining abuse of dominance, it is essential to define the

relevant market, which consists of two dimensions:
o Relevant Product Market: Comprises all products or services regarded as
interchangeable or substitutable by the consumer.
o Relevant Geographic Market: Area in which the conditions of competition are
sufficiently homogeneous.

Examples of Abuse of Dominant Position

1. Predatory Pricing: Selling products at very low prices with the intent to eliminate
competitors.
2. Exclusive Supply Agreements: Forcing suppliers to sell only to the dominant company,
thereby preventing competitors from accessing necessary resources.
3. Tying and Bundling: Requiring customers to buy a secondary product or service along
with a primary product, which they may not want or need.
4. Refusal to Deal: Refusing to supply goods or services to certain customers or in certain
markets.

##########################

Inquiry Powers / Procedure of the Competition Commission under section 19 of the

Competition Act, 2002.

Section 19 of the Competition Act, 2002 outlines the powers of the Competition Commission of
India (CCI) to inquire into alleged contraventions of the provisions relating to anti-competitive
agreements and abuse of dominant position. Below is a detailed discussion of the CCI's inquiry
powers under this section:

1. Initiation of Inquiry

 Suo Motu or Based on Information: The CCI can initiate an inquiry on its own motion
or upon receiving information from any person, consumer association, or trade
association.
18

 Reference from Government or Statutory Authority: The CCI can also initiate an
inquiry based on a reference made to it by the Central Government, State Government, or
a statutory authority.

2. Form of Information

 Information submitted to the CCI must be in the prescribed form and accompanied by the
prescribed fee.
 The information must provide details of the alleged anti-competitive practices or abuse of
dominant position.

3. Preliminary Investigation

 Upon receipt of information or reference, the CCI may direct the Director General (DG)
to conduct a preliminary investigation to determine the substance of the allegations.
 The DG is required to submit a report to the CCI within a specified timeframe.

4. Consideration of Factors by CCI

When determining whether an enterprise enjoys a dominant position, the CCI considers a variety
of factors, including:

 Market Share: The market share of the enterprise in the relevant market.
 Size and Resources: The size and economic resources of the enterprise.
 Size and Importance of Competitors: The size and importance of competitors in the
market.
 Economic Power: The economic power of the enterprise, including its commercial
advantages.
 Vertical Integration: The degree of vertical integration of the enterprise.
 Dependence of Consumers: The dependence of consumers on the enterprise for specific
products or services.
 Market Structure and Size: The overall structure and size of the relevant market.
 Social Obligations and Costs: Any social obligations and social costs associated with
the enterprise.
 Any Other Relevant Factor: Any other factor the CCI may consider relevant to the
inquiry.

5. Detailed Investigation

 If the preliminary investigation indicates the presence of a prima facie case, the CCI may
order a detailed investigation.
 The DG will carry out a detailed investigation, collect evidence, and submit a
comprehensive report to the CCI.

6. Powers During Investigation

19

During an inquiry, the CCI and the DG have extensive powers, including:

 Summoning and Enforcing Attendance: Summoning and enforcing the attendance of

any person and examining them under oath.
 Discovery and Production of Documents: Requiring the discovery and production of
documents.
 Receiving Evidence on Affidavit: Receiving evidence on affidavit.
 Issuing Commissions: Issuing commissions for the examination of witnesses or
documents.
 Conducting Searches and Seizures: Conducting searches and seizures in accordance
with the provisions of the Act.

7. Hearing and Decision

 Upon receiving the DG's report, the CCI will provide an opportunity for the parties
involved to present their case, including oral arguments.
 The CCI will review the evidence and arguments presented, and make a determination on
whether the enterprise has abused its dominant position or engaged in anti-competitive
practices.

8. Orders and Remedies

If the CCI finds that the provisions of the Act have been contravened, it can pass various orders,
including:

 Cease and Desist Orders: Directing the enterprise to discontinue the abusive or anti-
competitive practices.
 Penalties: Imposing penalties on the enterprise, which can be up to 10% of its average
turnover for the last three preceding financial years or three times the profit derived from
the abusive practices.
 Division of Enterprise: In cases of abuse of dominant position, the CCI can direct the
division of an enterprise to ensure that such practices do not recur.
 Modification of Agreements: Directing modification of agreements that are found to be
anti-competitive.

9. Review and Appeal

 The orders of the CCI can be appealed to the National Company Law Appellate Tribunal
(NCLAT) within 60 days from the date of the order.
 Further appeal can be made to the Supreme Court of India against the orders of the
NCLAT.

Conclusion

Section 19 of the Competition Act, 2002 equips the CCI with comprehensive powers to inquire
into and address issues related to anti-competitive agreements and abuse of dominant position.
20

These powers ensure that the CCI can effectively regulate market practices, promote
competition, and protect consumer interests.

#############################

Factors which help in the determination of Dominant position with the help of case laws:

The determination of a dominant position under the Competition Act, 2002, involves analyzing
various factors to understand whether an enterprise can operate independently of competitive
forces or affect its competitors, consumers, or the market in its favor. The following factors are
considered by the Competition Commission of India (CCI) to determine dominance, supported
by case law examples:

1. Market Share

Explanation: A high market share is a primary indicator of dominance. A firm with a significant
share of the market may have the power to act independently of its competitors and consumers.

Case Law Example:

 In Re: Google Inc. (Case No. 39 of 2012): The CCI held that Google had a dominant
position in the market for online general web search services and online search
advertising services in India due to its consistently high market share over several years.

2. Size and Resources of the Enterprise

Explanation: The economic resources available to an enterprise, including its financial strength
and assets, play a crucial role in determining its market power.

Case Law Example:

 MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. (Case No.
13/2009): The CCI found NSE dominant in the currency derivatives segment due to its
vast financial resources and established infrastructure, which dwarfed those of its
competitors.

3. Size and Importance of Competitors

Explanation: The presence and strength of competitors in the market are considered. A market
with few strong competitors may indicate a dominant position for a particular firm.

Case Law Example:

 In Re: DLF Limited (Case No. 19/2010): DLF was found dominant in the market for
high-end residential accommodation in Gurgaon. The CCI noted the lack of equally
strong competitors in the relevant market.
21

4. Economic Power of the Enterprise

Explanation: This includes an enterprise's ability to influence market conditions, set prices, and
control supply.

Case Law Example:

 In Re: Indian National Shipowners' Association (INSA) v. Oil and Natural Gas
Corporation (ONGC) (Case No. 1/2008): ONGC was found dominant in the market for
charter hiring of Offshore Support Vessels in India due to its significant economic power
and influence over market conditions.

5. Vertical Integration

Explanation: The extent to which an enterprise is vertically integrated (controlling multiple

stages of the production process) can impact its dominance by limiting competition at different
levels.

Case Law Example:

 In Re: Reliance Jio Infocomm Limited (Case No. 99/2016): The CCI noted that vertical
integration of services, infrastructure, and extensive network provided Reliance Jio a
competitive edge, although it did not find Jio dominant due to the dynamic nature of the
telecom market.

6. Dependence of Consumers on the Enterprise

Explanation: The degree to which consumers rely on a particular enterprise for goods or
services can indicate dominance, especially if there are limited alternatives available.

Case Law Example:

 In Re: Belaire Owners' Association v. DLF Limited (Case No. 19/2010): The CCI
found DLF dominant in the high-end residential market in Gurgaon, considering the
significant dependence of consumers on DLF due to its established brand and market
presence.

7. Market Structure and Size

Explanation: The overall structure and size of the market, including the number of competitors
and barriers to entry, are critical in assessing dominance.

Case Law Example:

 In Re: National Stock Exchange of India Ltd. (NSE) and MCX Stock Exchange Ltd.
(MCX-SX) (Case No. 13/2009): The CCI considered the market structure of the currency
22

derivatives market and the barriers to entry faced by new players, which contributed to
NSE's dominance.

8. Social Obligations and Social Costs

Explanation: The impact of the enterprise’s operations on society and any obligations it has can
be considered, though this factor is less frequently applied.

Case Law Example:

 This factor is less commonly cited in case laws directly, but it can play a role in
understanding the broader impact of an enterprise's dominance.

9. Any Other Relevant Factor

Explanation: The CCI may consider any other factor it deems relevant to the inquiry, providing
flexibility in its assessment.

Case Law Example:

 In Re: Google Inc. (Case No. 39 of 2012): Apart from market share and economic
power, the CCI also considered factors like network effects, brand value, and user
dependency on Google's search services.

Conclusion

The determination of a dominant position by the CCI is a multifaceted process that involves
examining various factors comprehensively. Each case's specific circumstances and the interplay
of these factors contribute to understanding whether an enterprise holds a dominant position in
the relevant market.

++++++++++++++++++++++++++++++++++++++++++++++++++++++

6.Discuss the provisions relating to the power and functions of the Competition Commission
of India ?

Ans:

The Competition Commission of India (CCI) is the regulatory body responsible for enforcing the
Competition Act, 2002. The primary objective of the CCI is to promote and sustain competition,
protect the interests of consumers, and ensure freedom of trade in Indian markets. The powers
and functions of the CCI are detailed in various sections of the Competition Act, 2002. Below is
an in-depth analysis of these powers and functions, including the relevant sections of the Act:
23

1. Preventing Practices Having Adverse Effect on Competition (Section 3 & 4)

 Section 3: Prohibits anti-competitive agreements. The CCI has the power to investigate
and penalize enterprises that enter into agreements which cause or are likely to cause an
appreciable adverse effect on competition (AAEC) within India.
 Section 4: Prohibits abuse of dominant position. The CCI can inquire into and take action
against enterprises abusing their dominant position in the market.

2. Regulation of Combinations (Section 5 & 6)

 Section 5: Defines combinations, including mergers, acquisitions, and amalgamations

that meet certain thresholds.
 Section 6: Prohibits combinations that cause or are likely to cause an AAEC. The CCI
can approve, reject, or suggest modifications to combinations to prevent anti-competitive
outcomes.

3. Inquiry into Certain Agreements and Abuse of Dominant Position (Section 19)

 Section 19: Grants the CCI the power to inquire into alleged contraventions of Sections 3
and 4 based on its own knowledge, information received, or references made by the
Central Government, State Government, or a statutory authority.

4. Conducting Investigations (Section 26)

 Section 26: Details the procedure for inquiry. It includes:

o Prima Facie Case: If the CCI finds a prima facie case, it directs the Director
General (DG) to investigate.
o Report by DG: The DG submits a report, and the CCI may invite objections or
suggestions on the report.
o Final Order: Based on the report and submissions, the CCI passes a final order.

5. Powers to Issue Interim Orders (Section 33)

 Section 33: The CCI can issue interim orders to temporarily restrain parties from
engaging in practices that may contravene the Act, pending the final investigation
outcome.

6. Power to Impose Penalties (Section 27)

 Section 27: Enables the CCI to impose penalties on enterprises for contraventions of
Sections 3 and 4. Penalties can include fines and directions to modify or discontinue
certain practices.

7. Power to Grant Leniency (Section 46)

24

 Section 46: Provides for leniency (lesser penalties) to parties involved in cartels if they
fully disclose information and cooperate with the investigation.

8. Advisory Functions (Section 49)

 Section 49: The CCI can advise the Central Government, State Governments, and
statutory authorities on competition issues, promote competition advocacy, and create
public awareness about competition law.

9. Power to Regulate Its Own Procedures (Section 35)

 Section 35: The CCI can regulate its own procedures, including the summoning and
enforcement of attendance of any person, discovery and production of documents,
receiving evidence on affidavit, and issuing commissions for examination of witnesses or
documents.

10. Review and Repeal of Orders (Section 37)

 Section 37: The CCI has the power to review its orders if there is an apparent error on the
face of the record or new evidence emerges.

11. Powers of Search and Seizure (Section 41)

 Section 41: Grants the Director General, under the direction of the CCI, the authority to
conduct searches and seizures during investigations, ensuring compliance with the Act.

12. Power to Make Regulations (Section 64)

 Section 64: Empowers the CCI to make regulations for the effective implementation of
the provisions of the Act, subject to the rules made by the Central Government.

Conclusion

The CCI, through its powers and functions enshrined in the Competition Act, 2002, plays a
critical role in maintaining market integrity and promoting competitive practices in India. By
investigating anti-competitive agreements, preventing abuse of dominant positions, regulating
mergers and acquisitions, and advocating for competition, the CCI ensures a fair and competitive
market landscape.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++
25

7. Define cartel, What are the various types of cartel? Explain how Cartel is formed and
what is the procedure to curb cartel?

Ans:

Definition of Cartel

A cartel is an agreement between competing firms to control prices, limit production, allocate
markets or customers, or engage in other collusive practices to restrict competition and maximize
collective profits. Cartels are illegal under competition law because they undermine market
competition, leading to higher prices and reduced choices for consumers.

Under the Competition Act, 2002, a cartel is specifically addressed in Section 3(3). This section
states that any agreement between enterprises or persons engaged in identical or similar trade of
goods or provision of services, which:

 Directly or indirectly determines purchase or sale prices,

 Limits or controls production, supply, markets, technical development, investment, or
provision of services,
 Shares the market or source of production or provision of services by way of allocation of
the geographical area of market, type of goods or services, or number of customers in the
market,
 Directly or indirectly results in bid-rigging or collusive bidding,

shall be presumed to have an appreciable adverse effect on competition.

Example: In the Cement Manufacturers' Case (2012), the CCI found 11 cement manufacturers
guilty of forming a cartel to fix prices and limit production, which adversely affected
competition in the market.

Types of Cartels

1. Price-Fixing Cartels

Definition: Price-fixing occurs when competing firms agree to set or maintain the price at which
their goods or services are sold, rather than allowing prices to be determined by free-market
competition.

Example: If all major airlines agree to set a minimum price for air tickets on certain routes, it
would be a price-fixing cartel.

2. Output Restriction or Production Limitation Cartels

Definition: These cartels involve agreements to limit the production or supply of goods or
services to create artificial scarcity, which usually drives up prices.
26

Example: In the 1970s, the Organization of the Petroleum Exporting Countries (OPEC) limited
oil production, which led to a significant increase in global oil prices.

3. Market Allocation Cartels

Definition: Market allocation involves dividing markets among competitors so that each firm
gets a certain geographic area, type of customer, or product type, reducing competition.

Example: If two competing car manufacturers agree that one will sell only in northern India and
the other only in southern India, it is a market allocation cartel.

4. Bid-Rigging Cartels

Definition: Bid-rigging occurs when competitors collude to influence the outcome of a bidding
process, often seen in public procurement. They may agree on bid prices or decide in advance
who will win a contract.

Example: Several construction companies might agree in advance on the winning bid for a
government construction contract, taking turns to offer the lowest bid while others submit higher,
deliberately non-competitive bids.

5. Customer Allocation Cartels

Definition: These cartels involve agreements among competitors to divide customers among
themselves, ensuring that each competitor has exclusive access to certain customers.

Example: If competing telecom companies agree that one company will serve only corporate
clients and the other will serve only individual customers, it is a customer allocation cartel.

6. Technology and Development Cartels

Definition: These cartels involve agreements to limit technological innovation or research and
development to avoid competitive pressure and maintain higher profits.

Example: If leading pharmaceutical companies agree to halt research on new drugs for certain
diseases to keep the market stable for their existing drugs, it constitutes a technology and
development cartel.

Conclusion

Cartels are a significant concern for competition authorities worldwide because they lead to
higher prices, reduced innovation, and fewer choices for consumers. The CCI, under the
Competition Act, 2002, actively works to detect, investigate, and penalize cartels to maintain
competitive markets in India.

###################################
27

Formation of Cartels

Cartels are formed when competing firms collude to control market variables such as prices,
production, and market territories to maximize their collective profits. The process typically
involves secret agreements and coordinated actions to avoid detection by regulatory authorities.

Steps in the Formation of Cartels:

1. Initial Contact and Agreement:

o Competing firms communicate secretly to discuss the potential benefits of collusion.
o They agree on key aspects such as price fixing, output limitation, market allocation, or
bid-rigging.

Example: In the Air Cargo Case (2009), several international airlines were found to
have met secretly to fix surcharges on air cargo services.

2. Planning and Coordination:

o Detailed plans are developed to implement the collusion. This includes setting target
prices, production quotas, or dividing markets.
o Communication channels are established, often through clandestine meetings, emails,
or other discreet means.

3. Implementation:
o Firms begin to execute the agreed-upon strategies, monitoring each other to ensure
compliance.
o They may use trade associations or third-party intermediaries to facilitate coordination.

Example: In the Cement Manufacturers' Case (2012), the CCI found that cement
companies used their trade association meetings to discuss and agree on price increases
and production cuts.

4. Monitoring and Enforcement:

o Cartel members regularly check on each other to ensure adherence to the agreement.
o Punitive measures may be agreed upon for members who deviate from the cartel’s
terms.

Procedures to Curb Cartels

The Competition Act, 2002, empowers the CCI to detect, investigate, and penalize cartels. The
process involves several steps:

1. Detection:
28

o Section 19: The CCI can initiate an inquiry into cartel activities based on information
received from any person, consumer association, trade association, or on its own
motion.
o Leniency Program (Section 46): Encourages cartel members to report the cartel’s
activities in exchange for reduced penalties. This is often a key tool in detecting cartels.

Example: In the Tyre Manufacturers' Case (2018), the leniency program helped the
CCI uncover a cartel where major tyre manufacturers were involved in price fixing.

2. Investigation:
o Section 26: On finding a prima facie case, the CCI directs the Director General (DG) to
investigate. The DG has powers to search and seize documents, summon individuals,
and collect evidence.
o Section 41: Grants the DG authority to conduct searches and seizures, ensuring they can
gather necessary evidence effectively.

Example: In the Dairy Products Case (2016), the DG conducted searches at the
premises of dairy firms suspected of cartel activities, gathering crucial evidence for the
investigation.

3. Interim Measures:
o Section 33: The CCI can issue interim orders to prevent any continuing anti-competitive
practices while the investigation is ongoing.

Example: The CCI can order cartel members to cease collusive practices immediately
upon finding sufficient preliminary evidence of cartel activity.

4. Final Order and Penalties:

o Section 27: If the CCI finds that a cartel exists, it can impose severe penalties, including
fines up to 10% of the turnover for each year of the continuation of the cartel or three
times the profit earned from such practices. The CCI can also issue cease and desist
orders and direct modification of agreements.

Example: In the Cement Manufacturers' Case (2012), the CCI imposed hefty fines on
the cement companies involved in price fixing and production control.

5. Appeals and Reviews:

o Section 53B: Aggrieved parties can appeal CCI orders to the National Company Law
Appellate Tribunal (NCLAT) within 60 days.
o Section 37: The CCI can review its orders if new evidence emerges or if there is an
apparent error.

6. Advocacy and Awareness:

o Section 49: The CCI also engages in competition advocacy, promoting awareness about
the harmful effects of cartels and educating businesses and the public on compliance
with competition laws.
29

Example: The CCI conducts workshops and seminars to educate industry stakeholders
on the risks and legal consequences of cartel behavior.

Conclusion

Cartels undermine the principles of fair competition and harm consumers by artificially inflating
prices and limiting choices. The Competition Act, 2002, provides a robust framework for the
CCI to detect, investigate, and penalize cartels. Through stringent enforcement, leniency
programs, and competition advocacy, the CCI aims to curb cartel activities and ensure a
competitive market landscape in India.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

9.(a) Describe the significance of AAEC.

(b) Describe the importance of Relevant-Market and explain the criteria for its
determination.
Ans:

(a) Significance of AAEC (Appreciable Adverse Effect on Competition)

The concept of AAEC (Appreciable Adverse Effect on Competition) is central to the

enforcement of competition law under the Competition Act, 2002. It refers to the negative impact
on competition that results from anti-competitive practices such as cartels, abuse of dominant
position, and anti-competitive agreements.

Significance of AAEC:

1. Guiding Principle for Prohibitions:

o Section 3(1): Prohibits anti-competitive agreements that cause or are likely to cause
AAEC within India.
o Section 4(1): Prohibits abuse of dominant position that has or is likely to have AAEC.

2. Framework for Assessment:

o The determination of AAEC involves evaluating both positive and negative impacts of an
agreement or conduct on competition.
o The CCI considers various factors to ascertain whether an agreement or conduct leads to
AAEC, balancing the benefits and adverse effects on competition.

3. Regulatory Action:
o The presence of AAEC is a precondition for the CCI to take regulatory action against anti-
competitive practices.
o If AAEC is established, the CCI can impose penalties, modify agreements, or issue cease-
and-desist orders.
30

4. Consumer Welfare:
o AAEC ensures that the interests of consumers are protected by preventing practices that
lead to higher prices, reduced choices, and stifled innovation.
o By addressing AAEC, the CCI promotes market efficiency and consumer welfare.

Factors to Determine AAEC (Section 19(3)):

To determine AAEC, the CCI considers the following factors:

1. Creation of Barriers to New Entrants:

o Evaluates if the agreement or conduct creates barriers for new players to enter the
market.
o Example: In the Cement Manufacturers' Case (2012), the CCI noted that price-fixing
agreements among cement manufacturers created barriers for new entrants by
artificially controlling prices.

2. Driving Existing Competitors Out of the Market:

o Assesses whether the practice leads to the exclusion of existing competitors.
o Example: In the DLF Case (2011), the CCI found that DLF's abuse of its dominant position
in the real estate market had the potential to drive competitors out of the market.

3. Foreclosure of Competition:
o Considers if the agreement or conduct forecloses competition by hindering the
competitive process.
o Example: In the Intel Case (2014), Intel's exclusive agreements with OEMs foreclosed
competition by limiting market access for rival chip manufacturers.

4. Benefits to Consumers:
o Takes into account any benefits such as improved production or distribution that may
result from the agreement or conduct.
o Example: In the Maruti Suzuki Case (2021), the CCI considered whether vertical
agreements between Maruti Suzuki and its dealers led to efficiencies that benefitted
consumers.

5. Improvements in Production or Distribution:

o Evaluates if the conduct results in efficiencies that enhance production or distribution.
o Example: In the Automobile Sector Case (2013), the CCI examined whether agreements
among automobile manufacturers led to improvements in production efficiencies.

6. Promotion of Technical, Scientific, and Economic Development:

o Assesses if the practice promotes technical or economic progress.
o Example: In the Telecom Sector Case (2017), the CCI considered whether certain
collaborative agreements among telecom operators promoted technical advancements
in network infrastructure.

(b) Importance of Relevant Market and Criteria for Its Determination

31

The concept of the "Relevant Market" is crucial in competition law as it defines the boundaries
within which competition is assessed. The relevant market is used to evaluate the competitive
effects of business practices and determine whether they lead to AAEC.

Importance of Relevant Market:

1. Framework for Analysis:

o The relevant market provides a framework for analyzing the competitive dynamics and
the market power of firms.
o It helps in assessing whether a firm holds a dominant position and if its conduct affects
competition within the market.

2. Determination of Dominance:
o Identifying the relevant market is essential to determine if a firm has a dominant
position that could be abused.
o Example: In the Microsoft Case (2007), defining the relevant market for PC operating
systems was crucial to establish Microsoft’s dominant position.

3. Assessment of Market Power:

o It helps in measuring market power by evaluating the firm's position relative to its
competitors within the defined market boundaries.
o Example: In the Google Case (2012), the relevant market for online search services was
critical to assess Google’s market power.

4. Regulatory Interventions:
o Accurately defining the relevant market ensures that regulatory interventions are
appropriately targeted to address anti-competitive practices.
o Example: In the Cement Manufacturers' Case (2012), the relevant market for cement
was identified to analyze the price-fixing cartel.

Criteria for Determination of Relevant Market (Section 2(r) and Section 19(5) to 19(7)):

The Competition Act, 2002, defines the relevant market as a combination of the relevant product
market and the relevant geographic market.

1. Relevant Product Market (Section 2(t)):

o Comprises all products or services regarded as interchangeable or substitutable by
consumers based on characteristics, prices, and intended use.

Criteria:

o Physical Characteristics: Products with similar physical attributes and functional uses.
o Price Levels: Products with similar price ranges.
o Consumer Preferences: Products perceived by consumers as substitutes.
32

Example: In the Hindustan Lever Case (2011), the relevant product market was defined
as "toilet soaps" based on consumer preferences and product characteristics.

2. Relevant Geographic Market (Section 2(s)):

o Encompasses the area in which conditions of competition are sufficiently homogenous
and can be distinguished from neighboring areas.

Criteria:

o Regulatory Barriers: Legal or regulatory constraints that limit market access.

o Local Preferences: Regional variations in consumer preferences.
o Transport Costs: Impact of transportation costs on the distribution of products.

Example: In the Coal India Case (2013), the relevant geographic market was defined as
India, considering the regulatory framework and distribution network of coal.

3. Assessment Factors (Section 19(6) and 19(7)):

o Factors such as market share, control over supplies, entry barriers, and the extent of
innovation are considered in defining the relevant market.
o Example: In the Telecom Sector Case (2017), factors like market share and control over
network infrastructure were crucial in defining the relevant market for telecom services.

Conclusion

The concepts of AAEC and relevant market are fundamental to the enforcement of the
Competition Act, 2002. AAEC helps in evaluating the adverse impacts of anti-competitive
practices, while the relevant market provides a framework for assessing market power and
competitive effects. Together, they ensure that the CCI can effectively regulate market practices,
promote competition, and protect consumer interests.

++++++++++++++++++++++++++++++++++++++++++

10. Is there any interface between the merger control regime under the Competition Law
and Companies Act in India? Discuss in brief the provision relating to merger control
under the Competition Act, 2002.

Ans:

Interface Between Merger Control Regime Under Competition Law and

Companies Act in India

In India, the merger control regime is governed by both the Competition Act, 2002, and the
Companies Act, 2013. The interface between these two laws ensures that mergers, acquisitions,
33

and amalgamations not only comply with corporate regulations but also do not adversely affect
market competition.

Merger Control Under the Competition Act, 2002:

The Competition Act, 2002, primarily focuses on ensuring that mergers and acquisitions do not
lead to appreciable adverse effects on competition (AAEC) within the relevant market in India.
The key provisions related to merger control are found in Sections 5, 6, 20, and 29-31 of the Act.

1. Definition of Combinations (Section 5):

o Section 5 of the Competition Act defines combinations, which include mergers,
acquisitions, and amalgamations. A combination is subject to scrutiny if it crosses
certain thresholds related to assets and turnover.
o Thresholds: The thresholds are periodically revised. As of the latest update, the
thresholds are defined in terms of the combined assets or turnover of the merging
entities, either in India or globally.

2. Regulation of Combinations (Section 6):

o Section 6(1) prohibits combinations which cause or are likely to cause an AAEC within
the relevant market in India.
o Section 6(2) mandates that parties to a combination must notify the CCI of their intent
to merge within 30 days of finalizing their merger agreement or board resolution. The
CCI then has 210 days to approve, reject, or propose modifications to the merger.

3. Inquiry into Combinations (Section 20):

o Section 20(1) empowers the CCI to inquire into combinations on its own motion or upon
receiving information.
o Section 20(4) lists the factors that the CCI considers to determine whether a
combination has or is likely to have an AAEC, such as the level of competition in the
market, market share, barriers to entry, and the extent of innovation.

4. Procedure for Investigation (Sections 29-31):

o Section 29: Upon receiving notification, the CCI conducts a preliminary assessment
(Phase I) to determine if the combination is likely to cause AAEC.
 If no AAEC is found, the CCI approves the combination.
 If potential AAEC is identified, a detailed investigation (Phase II) is initiated.
o Section 30: During the detailed investigation, the CCI may call for additional information,
consult with third parties, and hold public hearings.
o Section 31: Based on the findings, the CCI can:
 Approve the combination unconditionally.
 Approve the combination with modifications to eliminate AAEC.
 Prohibit the combination if it significantly impedes competition.

Merger Control Under the Companies Act, 2013:

The Companies Act, 2013, regulates the procedural and structural aspects of mergers,
acquisitions, and amalgamations from a corporate governance perspective.
34

1. Scheme of Arrangement (Sections 230-232):

o Section 230: Provides the procedure for companies to enter into a compromise or
arrangement with creditors or members, which includes mergers and demergers.
o Section 232: Specifically deals with mergers and amalgamations, outlining the
procedure for approval by the National Company Law Tribunal (NCLT), including the
preparation and submission of a scheme of arrangement.

2. Role of NCLT:
o The NCLT plays a crucial role in approving schemes of mergers and amalgamations. It
ensures that the schemes are fair and equitable to all stakeholders.
o The NCLT considers the scheme's impact on creditors, shareholders, and employees, as
well as compliance with legal and regulatory requirements.

Interface Between the Two Regimes:

1. Complementary Roles:
o The Competition Act, 2002, ensures that mergers do not harm market competition,
while the Companies Act, 2013, ensures that mergers are procedurally sound and fair to
stakeholders.

2. Concurrent Notifications:
o Companies must simultaneously notify the CCI and the NCLT when planning a merger.
The CCI assesses the competition aspects, while the NCLT reviews the procedural and
fairness aspects.

3. Coordination Between CCI and NCLT:

o There is a need for effective coordination between the CCI and the NCLT to avoid
conflicting decisions. While the CCI's focus is on preventing AAEC, the NCLT ensures
compliance with corporate laws and protection of stakeholder interests.

4. Sequential Approval:
o Generally, companies seek CCI approval before approaching the NCLT to avoid potential
conflicts. A merger can only proceed once it has been cleared by both authorities.

Example:

In the Bharti Airtel and Tata Teleservices Merger (2017):

 Bharti Airtel sought approval from the CCI for its acquisition of Tata Teleservices' consumer
mobile business.
 The CCI assessed the merger under Section 6 and found no AAEC, granting approval.
 Subsequently, the scheme of arrangement was submitted to the NCLT for approval under
Sections 230-232 of the Companies Act, 2013.
 The NCLT approved the merger, ensuring compliance with all corporate governance norms.

Conclusion
35

The merger control regime in India under the Competition Act, 2002, and the Companies Act,
2013, ensures that mergers and acquisitions are both competitively neutral and procedurally
sound. The CCI’s role in assessing AAEC and the NCLT’s role in ensuring procedural fairness
complement each other, providing a comprehensive framework for regulating mergers in India.

++++++++++++++++++++++++++++++++++++++++++

12.“The provisions relating to anti-competitive agreements preserve the monopoly

aspects of intellectual property rights granted in India and also permit imposition of
such conditions as may be necessary for the purposes of protecting exploiting the
intellectual property rights.”Comment in brief whether the above exemption in
consonance with the purposes of Competition clause stating the statutory provisions
of the Competition Act. 2002.

Ans:

The statement that "the provisions relating to anti-competitive agreements preserve the
monopoly aspects of intellectual property rights granted in India and also permit imposition of
such conditions as may be necessary for the purposes of protecting exploiting the intellectual
property rights" aligns with certain exemptions and considerations within the Competition Act,
2002, regarding intellectual property rights (IPR). Below is an analysis to comment on whether
this exemption is in consonance with the purposes of the Competition Act.

Statutory Provisions of the Competition Act, 2002

1. Section 3 - Anti-Competitive Agreements:

o Section 3(1): Prohibits agreements that cause or are likely to cause an appreciable
adverse effect on competition (AAEC) within India.
o Section 3(2): Declares such agreements void.
o Section 3(3): Specifically prohibits horizontal agreements, such as cartels, price-fixing,
and bid-rigging, which are presumed to have an AAEC.
o Section 3(4): Prohibits certain vertical agreements (e.g., tie-in arrangements, exclusive
supply/distribution agreements) that have AAEC.

2. Section 3(5) - Exemptions for IPR:

o Section 3(5) provides exemptions for agreements related to the protection and
exploitation of intellectual property rights. This includes patents, copyrights,
trademarks, and other forms of IPR, allowing for certain conditions necessary to protect
or exploit these rights without falling foul of anti-competitive agreement provisions.
o Section 3(5)(i): States that the prohibitions of anti-competitive agreements do not
restrict the right of any person to restrain any infringement of, or to impose reasonable
conditions for, protecting their IPR.
36

Analysis

Purpose of Competition Act

The Competition Act, 2002, aims to:

 Prevent practices that have an adverse effect on competition.

 Promote and sustain competition in markets.
 Protect the interests of consumers.
 Ensure freedom of trade carried on by other participants in markets in India.

The primary objective is to ensure a fair competitive environment while safeguarding consumer
welfare and market efficiency.

Balancing IPR and Competition

1. Preservation of Monopoly Aspects of IPR:

o Intellectual property rights inherently provide a form of legal monopoly to incentivize
innovation and creativity. By allowing the imposition of reasonable conditions necessary
to protect or exploit IPR, the law recognizes the need to balance innovation incentives
with competitive practices.

2. Exemptions for IPR (Section 3(5)):

o The exemption under Section 3(5) acknowledges that protecting IPR can sometimes
necessitate certain agreements that might otherwise be considered anti-competitive.
This ensures that the incentives for innovation provided by IPR laws are not undermined
by competition law.
o Example: A patent holder may enter into exclusive licensing agreements to recoup
investments in R&D, which is crucial for innovation.

3. Reasonableness of Conditions:
o The exemption applies only to reasonable conditions. Agreements that go beyond what
is necessary to protect or exploit IPR, such as those that unduly restrict market
competition without justification, are not protected under this exemption.
o Example: A trademark owner can prevent unauthorized use of their mark (a necessary
and reasonable condition) but cannot use trademark rights to impose unrelated market
restrictions.

In Consonance with Competition Policy

The exemption provided in Section 3(5) is in consonance with the objectives of the Competition
Act for several reasons:

1. Encouraging Innovation:
37

o By protecting IPR, the Act supports innovation, which is a key driver of economic growth
and consumer welfare. Ensuring innovators can protect their inventions encourages
continued investment in new technologies and products.

2. Balancing Interests:
o The Act balances the need to prevent anti-competitive practices with the recognition
that certain IPR-related agreements are necessary for innovation. This balance ensures
that competition law does not stifle the very innovations that benefit consumers.

3. Regulation of Unreasonable Practices:

o While reasonable conditions for IPR protection are exempt, the CCI can still regulate and
penalize unreasonable practices that extend beyond necessary protection and
exploitation, ensuring that IPR is not misused to create anti-competitive barriers.

Conclusion

The exemption for intellectual property rights under Section 3(5) of the Competition Act, 2002,
is aligned with the Act's objectives. It ensures that the incentives for innovation provided by
intellectual property laws are preserved while preventing unreasonable anti-competitive
practices.

+++++++++++++++++++++++++++++++++++++++++++++

13.What are the factors that may be considered by Competition Commission of India for
determining the relevant geographic market?

Ans:

The Competition Commission of India (CCI) is responsible for enforcing the Competition Act,
2002, which aims to prevent practices having an adverse effect on competition, promote and
sustain competition in markets, protect the interests of consumers, and ensure freedom of trade.
When determining the relevant geographic market, the CCI considers several factors as outlined
in Section 19(6) of the Competition Act, 2002. Here are the key factors in detail:

1. Regulatory Trade Barriers:

o The presence of regulatory barriers such as licensing requirements, quotas, tariffs,
and other government-imposed restrictions can significantly impact the
delineation of the geographic market. These barriers can limit the ability of firms
to enter or expand in certain regions, thus influencing market boundaries.
2. Local Specification Requirements:
38

o Different regions may have varying preferences and requirements for products
and services, often influenced by local culture, climate, or legal standards. These
specifications can create distinct markets even for similar products.
3. National Procurement Policies:
o Government policies on procurement can define the scope of the geographic
market. For instance, government tenders may be restricted to suppliers within a
certain region, thereby creating a distinct market within that geographic boundary.
4. Adequate Distribution Facilities:
o The availability and effectiveness of distribution channels, including
transportation infrastructure and logistics networks, are critical in determining the
geographic market. Efficient distribution facilities can enable firms to supply
products across broader areas, potentially expanding the geographic market.
5. Transport Costs:
o The cost of transporting goods can greatly affect market boundaries. High
transport costs can limit the reach of firms, confining them to local or regional
markets. Conversely, lower transport costs can broaden the geographic market by
making it economically feasible to serve distant areas.
6. Language:
o Language differences can create barriers to entry and affect consumer
preferences, thus influencing market boundaries. In regions with distinct linguistic
groups, firms may need to tailor their marketing and service approaches to
different languages, effectively creating separate markets.
7. Consumer Preferences:
o Variations in consumer preferences across different regions can delineate
geographic markets. Preferences can be shaped by factors such as cultural
practices, regional brand loyalty, and local consumption habits.

Practical Application and Analysis

When the CCI analyzes a case to determine the relevant geographic market, it typically conducts
a detailed market study considering the factors mentioned above. Here’s how these factors can
be applied in a practical context:

 Regulatory Trade Barriers: In a case involving the cement industry, the CCI would
examine if any regional licensing requirements exist that restrict cement producers from
supplying to certain states or districts.
 Local Specification Requirements: For the pharmaceutical industry, the CCI might look
at whether different states have unique medical requirements or regulations that create
distinct markets.
 National Procurement Policies: If the case involves government contracts, the CCI
would analyze the procurement policies to understand if they restrict competition to local
suppliers.
 Adequate Distribution Facilities: In the case of the FMCG sector, the CCI would
evaluate the distribution networks of different companies to see if they have the
capability to supply goods nationwide or if they are limited to certain regions.
39

 Transport Costs: For heavy industries like steel, the CCI would consider the impact of
transport costs on the ability of firms to compete across distant regions.
 Language: In the media and entertainment industry, language can play a significant role.
The CCI would analyze if content providers cater to different linguistic markets
separately.
 Consumer Preferences: In the case of food products, the CCI might look at regional
dietary habits and preferences to understand if they create distinct markets.

By considering these factors, the CCI aims to define the geographic market in a manner that
reflects the actual competitive constraints faced by firms, ensuring a thorough and accurate
analysis of competition in the market.

+++++++++++++++++++++++++++++++++++++++++++++++

14.“The Competition Act, 2002 was enacted in view of the economic development that
resulted in opening up of the Indian economy, removal of controls and consequent
economic liberalization which required the Indian Economy be enabled to required in in the
market from within the country and outside. To allow competition in the -Elucidate.

Ans:

The Competition Act, 2002, was a significant legislative measure introduced in India to adapt to
the changing economic landscape marked by liberalization and globalization. The Act aimed to
promote competition, prevent anti-competitive practices, and ensure a fair market environment
conducive to economic growth. Here’s a detailed elucidation of the context and objectives of the
Competition Act, 2002:

Economic Context and Need for the Act

1. Economic Liberalization:
o The early 1990s saw India embark on a path of economic liberalization, opening
up its markets to both domestic and foreign competition. This shift marked a
move away from the previous era of stringent controls and protectionism.
2. Removal of Controls:
o Deregulation involved reducing government intervention in business operations,
including the abolition of licensing requirements for many industries, lowering
trade barriers, and simplifying bureaucratic procedures. This fostered a more
dynamic business environment.
3. Globalization:
o As the Indian economy integrated with the global market, it faced new
competitive pressures from international players. This necessitated a robust legal
40

framework to ensure that competition was fair and beneficial to all stakeholders,
including consumers, businesses, and the economy at large.

Objectives of the Competition Act, 2002

1. Promote and Sustain Competition:

o The Act seeks to promote competition by prohibiting anti-competitive
agreements, abuse of dominant positions, and regulating mergers and acquisitions
that could potentially harm market competition.
2. Protect Interests of Consumers:
o By fostering competition, the Act aims to enhance consumer welfare. Increased
competition typically leads to better quality products, wider choices, and lower
prices for consumers.
3. Ensure Freedom of Trade:
o The Act guarantees that businesses have the freedom to compete in the market
without facing unfair restrictions from dominant players or cartels. This is
essential for innovation and economic progress.

Key Provisions and Their Role in Promoting Competition

1. Prohibition of Anti-Competitive Agreements (Section 3):

o Agreements that have an appreciable adverse effect on competition, such as
cartels, bid-rigging, and exclusive supply agreements, are prohibited. This ensures
that no collusive practices restrict competition.
2. Prohibition of Abuse of Dominant Position (Section 4):
o Dominant firms are prohibited from engaging in practices that abuse their market
position, such as predatory pricing, limiting production, or creating barriers to
entry for new competitors. This helps maintain a level playing field.
3. Regulation of Combinations (Sections 5 and 6):
o Mergers, acquisitions, and amalgamations that meet certain thresholds must be
reviewed by the CCI to ensure they do not harm competition. This prevents the
creation of monopolies or dominant players through consolidation.

Mechanisms to Facilitate Competition

1. Competition Commission of India (CCI):

o The CCI is the regulatory authority established under the Act to enforce its
provisions. The CCI conducts investigations, holds inquiries, and takes action
against anti-competitive practices.
2. Market Studies and Advocacy:
o The CCI also undertakes market studies to understand competition issues in
various sectors and engages in advocacy to promote a competition culture among
businesses and policymakers.

Impact and Significance

41

1. Enhanced Market Efficiency:

o By curbing anti-competitive practices, the Act ensures that markets operate
efficiently, resources are allocated optimally, and businesses can compete on
merits.
2. Consumer Welfare:
o Increased competition leads to better quality, more choices, and lower prices for
consumers, directly impacting their welfare positively.
3. Encouraging Innovation and Investment:
o A competitive environment incentivizes businesses to innovate and improve their
offerings, attracting investment and fostering economic growth.

Conclusion

The enactment of the Competition Act, 2002, was a critical step in aligning India’s economic
policies with the demands of a liberalized and globalized market. By promoting competition,
protecting consumer interests, and ensuring freedom of trade, the Act plays a vital role in
fostering a vibrant and resilient economy.

++++++++++++++++++++++++++++++++++++++++++++++

14.Discuss the powers and function of penalties can CCI impose on failure to Competition
Commission of Commission India. What comply with its orders in case of anti competitive
agreements, abuse of dominant position and combinations?

Ans?

The Competition Commission of India (CCI) is empowered under the Competition Act, 2002, to
impose penalties and enforce compliance in cases involving anti-competitive agreements, abuse
of dominant position, and combinations (mergers and acquisitions). Here’s a detailed discussion
on the powers and functions of penalties that the CCI can impose for failure to comply with its
orders:

Powers of CCI

1. Imposition of Penalties (Section 27):

o Anti-Competitive Agreements: In cases where agreements between enterprises
have an appreciable adverse effect on competition in India, the CCI can impose a
penalty of up to 10% of the average turnover of the concerned enterprise for the
preceding three financial years.
o Abuse of Dominant Position: If a dominant enterprise abuses its position in the
market, the CCI can levy a penalty of up to 10% of the average turnover of the
enterprise for the preceding three financial years.
42

o Combinations: In cases where mergers and acquisitions substantially lessen

competition or have an appreciable adverse effect on competition in India, the
CCI can impose a penalty which may extend up to 1% of the total turnover or the
assets, whichever is higher, of the combination.
2. Functions Related to Penalties:
o Investigations: The CCI conducts investigations into alleged anti-competitive
practices, abuse of dominance, or potentially anti-competitive mergers. If after
investigation, it finds that the Competition Act has been contravened, it may pass
orders directing the concerned parties to cease and desist from such activities.
o Inquiries and Orders: The CCI can hold inquiries to determine whether there
has been a contravention of the Act. Upon finding a contravention, it can pass
various orders, including directing the parties to cease and desist from such
activities, modify agreements, or require parties to undertake corrective measures.
o Enforcement of Orders: Once the CCI passes an order, it has the authority to
ensure compliance with its directives. This includes monitoring and taking further
action if parties fail to comply with the orders issued by the CCI.

Compliance and Consequences of Non-Compliance

1. Compliance Requirements (Section 42):

o Parties directed by the CCI to cease and desist from anti-competitive practices or
abuse of dominance must comply with the orders within the specified timeframe.
This may involve modifying agreements, refraining from certain business
practices, or other corrective measures deemed necessary by the CCI.
2. Failure to Comply:
o If a party fails to comply with the orders of the CCI, it may face severe
consequences, including penalties. The CCI can initiate proceedings for non-
compliance and impose penalties as specified under the Act.
3. Penalties for Non-Compliance (Section 42A):
o If any person or enterprise fails to comply with any direction or order of the CCI,
they may be liable to pay a penalty which may extend up to ₹1 crore
(approximately USD 135,000) for each day during which such failure continues,
subject to a maximum of ₹10 crore (approximately USD 1.35 million).
4. Additional Powers and Measures:
o The CCI can also take additional measures to enforce compliance, such as issuing
injunctions or taking interim measures to prevent further harm to competition
pending the final determination of a case.

Practical Application and Impact

 Case-by-Case Basis: The imposition of penalties and enforcement of compliance by the

CCI is determined on a case-by-case basis, considering the specific circumstances and
severity of the anti-competitive practices or abuse of dominance involved.
 Deterrence Effect: The ability of the CCI to impose significant penalties serves as a
deterrent against anti-competitive behavior and abuse of dominance in the market,
thereby promoting fair competition and protecting consumer interests.
43

 Judicial Review: Decisions of the CCI, including penalties imposed, can be challenged
through judicial review, providing a mechanism for parties to appeal against decisions
they believe are unjust or disproportionate.

Conclusion

The Competition Commission of India plays a crucial role in ensuring fair competition in the
Indian market by imposing penalties and enforcing compliance with its orders in cases of anti-
competitive agreements, abuse of dominant position, and combinations. The powers vested in the
CCI under the Competition Act, 2002, empower it to take effective measures against entities that
engage in practices detrimental to competition, thereby promoting economic efficiency and
consumer welfare.

+++++++++++++++++++++++++++++++++++++

15.The language of the definition of “restrictive trade practice” in the M.R.T.P. Act suggests that
in enacting the definition, our legislature drew upon the concept and rational underlying the
Rule of Reason.” Discuss the above statement with reference to decided case

Ans:

1. Definition under the M.R.T.P. Act:

o The M.R.T.P. Act, enacted in 1969 and subsequently repealed by the Competition Act,
2002, defined restrictive trade practices broadly. It encompassed agreements or
practices that had the effect of preventing, distorting, or restricting competition in
markets. The Act aimed to curb monopolistic and anti-competitive behaviors
detrimental to consumer welfare and economic efficiency.

2. Objectives of the M.R.T.P. Act:

o Protecting Competition: The primary goal was to safeguard competitive markets from
practices that stifled competition, such as price-fixing, collusive bidding, market-sharing
agreements, and unfair trade practices.
o Promoting Consumer Welfare: By promoting competition, the Act aimed to ensure
consumers had access to better quality products, wider choices, and fair prices.

Concept of the Rule of Reason in Competition Law

1. Principle of the Rule of Reason:

o The Rule of Reason is a legal doctrine used in competition law to assess whether a
particular business practice or agreement unduly restrains trade. Unlike per se rules that
automatically declare certain practices illegal (e.g., price-fixing), the Rule of Reason
requires a case-by-case analysis.
44

o Balanced Assessment: It involves evaluating the economic and competitive impact of

the practice, considering factors such as market power, efficiency gains, consumer
benefits, and overall impact on competition.

Case Example: Cement Manufacturers’ Association Case

Facts and Legal Issues:

 Background: In the case of Cement Manufacturers’ Association v. CCI (2012), the Competition
Commission of India (CCI) investigated allegations of anti-competitive practices in the cement
industry.
 Allegations: The CCI found that cement manufacturers engaged in cartelization and price-fixing,
which artificially inflated prices and restricted competition in the market.
 CCI’s Decision: The CCI imposed significant penalties on the cement manufacturers and issued
directives to cease and desist from such anti-competitive practices.

Judicial Scrutiny and Application of Competition Law Principles:

 Rule of Reason Analysis: The Supreme Court of India, in its judgment, examined whether the
conduct of the cement manufacturers fell within the scope of restrictive trade practices under
the Competition Act, 2002.
 Factors Considered: The Court evaluated the economic justifications presented by the cement
manufacturers against the adverse effects on competition and consumer welfare. It emphasized
the need for a balanced approach that weighs the competitive benefits against the harm caused
by anti-competitive practices.

Conclusion and Implications:

The Cement Manufacturers’ Association case exemplifies the application of competition law
principles in India, particularly regarding restrictive trade practices and the Rule of Reason. The
judiciary’s role in interpreting these laws ensures that economic efficiency and consumer
interests are safeguarded while promoting fair competition in the market.

Connection to the Statement

The legislative intent behind the definition of "restrictive trade practices" under the M.R.T.P. Act
and its successors, including the Competition Act, 2002, reflects a commitment to adopting
principles akin to the Rule of Reason. This legislative framework aims to:

 Balance Economic Efficiency: By allowing practices that enhance efficiency and benefit
consumers while prohibiting those that unduly restrict competition.
 Protect Consumer Interests: Ensuring consumers have access to competitive prices, quality
products, and innovation in markets.

In essence, the evolution of competition law in India demonstrates a progression towards a

nuanced understanding of restrictive trade practices, drawing upon global best practices such as
45

the Rule of Reason. This approach not only enhances regulatory effectiveness but also supports
India's economic growth by fostering competitive markets conducive to innovation and
consumer welfare.

++++++++++++++++++++++++++++++++++++++++++++++++++

16.Discuss the structure, compositions and appointment of Competition commission of

India with the help of Competition Advocacy.

Ans:

The Competition Commission of India (CCI) is the statutory body responsible for enforcing
the Competition Act, 2002, in India. The CCI aims to prevent practices that have an adverse
effect on competition, promote and sustain competition in markets, protect the interests of
consumers, and ensure freedom of trade carried out by other participants in markets in India.
Here is a detailed discussion on the structure, composition, and appointment of the CCI with
reference to competition advocacy.

Structure of the Competition Commission of India (CCI)

Legal Framework:

 The CCI is established under the Competition Act, 2002 (Act No. 12 of 2003).
 The CCI is designed to prevent practices that have an adverse effect on competition,
promote and sustain competition in markets, protect the interests of consumers, and
ensure freedom of trade carried out by other participants in markets in India.

Organizational Structure:

1. Chairperson and Members:

o The CCI consists of a Chairperson and not less than 2 and not more than 6 other
Members as determined by the Central Government (Section 8(1)).
2. Secretariat:
o The Secretariat, headed by the Secretary of the CCI, handles administration,
finance, and overall coordination.
3. Investigation Wing:
o The Director General, appointed under Section 16 of the Act, leads the
investigation wing to conduct inquiries and investigations into anti-competitive
practices.
4. Divisions:
o The CCI includes divisions such as the Legal Division, Economic Division, and
International Cooperation Division, which handle various specialized tasks.
46

Composition of the CCI

Chairperson and Members:

 The Chairperson and other Members are to be persons of ability, integrity, and standing,
and who have special knowledge of, and professional experience of not less than fifteen
years in international trade, economics, business, commerce, law, finance, accountancy,
management, industry, public affairs, or competition matters, including competition law
and policy (Section 8(2)).

Appointment of the CCI Members

Selection Process:

1. Selection Committee:
o A selection committee is constituted for the purpose of recommending persons for
appointment as the Chairperson and Members of the CCI (Section 9(1)).
o The committee consists of:
 The Chief Justice of India or his nominee.
 The Secretary in the Ministry of Corporate Affairs.
 The Secretary in the Ministry of Law and Justice (Section 9(2)).
2. Term and Conditions:
o The Chairperson and every other Member shall hold office for a term of five years
from the date on which they enter their office and shall be eligible for
reappointment (Section 10(1)).
o They shall not hold office as such after they have attained the age of sixty-five
years (Section 10(2)).
3. Removal:
o The Chairperson or any Member can be removed by the Central Government on
grounds of proven misbehavior or incapacity after an inquiry made by a judge of
the Supreme Court (Section 11(1)).

Competition Advocacy

Role and Responsibilities:

 The CCI is mandated to undertake competition advocacy to promote competition

principles and practices among stakeholders (Section 49).
 Specific activities include:
o Public Awareness Campaigns: Educating businesses and consumers about the
benefits of competition.
o Workshops and Seminars: Organizing events to discuss competition issues and
share best practices.
o Publications: Issuing reports, guidelines, and educational materials on
competition law and policy.
47

o Advisory Role: Providing advice to the government on competition-related issues

and suggesting measures to promote competitive markets.

Key Provisions of the Competition Act, 2002

1. Anti-Competitive Agreements (Section 3):

o Prohibits agreements that cause or are likely to cause an appreciable adverse
effect on competition within India.
2. Abuse of Dominant Position (Section 4):
o Prohibits the abuse of a dominant position by enterprises.
3. Regulation of Combinations (Sections 5 and 6):
o Regulates mergers, amalgamations, and acquisitions that may have an adverse
effect on competition.
4. Competition Advocacy (Section 49):
o Mandates the CCI to take suitable measures for the promotion of competition
advocacy, creating awareness, and imparting training on competition issues.

Conclusion

The Competition Commission of India, through its structured and transparent appointment
process, ensures that its members are well-equipped to handle the complexities of competition
law. The CCI’s multifaceted structure supports its mission to maintain fair competition in the
market, while its competition advocacy efforts play a crucial role in fostering a competitive
environment that benefits both consumers and the economy.

+++++++++++++++++++++++++++++++++++

17.Examine why the Monopolistic and Restrictive Trade Practice Act, 1969
metamorphosed into competition Act, 2002? Discuss the positive and negative impact of
Combination and how it can be regulated by the Competition Commission of India.

Ans:

Transition from the Monopolistic and Restrictive Trade Practices (MRTP) Act,
1969 to the Competition Act, 2002

Background and Need for Change:

The MRTP Act, 1969, was enacted to prevent concentration of economic power, control
monopolies, and prohibit monopolistic and restrictive trade practices. However, several factors
necessitated its replacement with the Competition Act, 2002:
48

1. Economic Liberalization:
o In the 1990s, India underwent significant economic liberalization, shifting from a
state-controlled to a market-driven economy. The MRTP Act was ill-equipped to
address the challenges of a liberalized economy and promote competition
effectively.
2. Globalization:
o With increasing globalization, India needed a competition law that could address
anti-competitive practices more comprehensively and align with international best
practices.
3. Limitations of MRTP Act:
o The MRTP Act focused primarily on curbing monopolies and restrictive trade
practices but lacked provisions to promote competition proactively.
o The enforcement mechanisms were weak, and the MRTP Commission had
limited powers to impose penalties or conduct detailed investigations.
4. Need for a Modern Framework:
o A modern competition law was needed to promote and sustain competition,
protect consumer interests, and ensure free trade.

The Competition Act, 2002:

The Competition Act, 2002, was enacted to replace the MRTP Act, aiming to address its
shortcomings and create a robust framework for competition regulation in India. Key features of
the Competition Act include:

1. Prohibition of Anti-Competitive Agreements (Section 3):

o The Act prohibits agreements that cause or are likely to cause an appreciable
adverse effect on competition within India.
2. Regulation of Abuse of Dominance (Section 4):
o The Act prohibits abuse of a dominant position by enterprises, including practices
such as unfair pricing and limiting production.
3. Regulation of Combinations (Sections 5 and 6):
o The Act regulates mergers, acquisitions, and amalgamations to ensure they do not
adversely affect competition.
4. Establishment of the Competition Commission of India (CCI):
o The CCI is established as a quasi-judicial body to enforce the provisions of the
Act, with powers to impose penalties, conduct investigations, and take corrective
measures.

Positive and Negative Impacts of Combinations

Positive Impacts of Combinations:

1. Economies of Scale:
o Combinations can lead to cost savings and efficiencies by pooling resources,
reducing duplication, and achieving economies of scale.
2. Enhanced Competitiveness:
49

o Mergers and acquisitions can enhance the competitiveness of firms, enabling

them to compete more effectively in domestic and international markets.
3. Innovation and Research:
o Combinations can provide the necessary capital and resources for innovation and
research and development activities.
4. Consumer Benefits:
o Consumers can benefit from improved products and services, lower prices, and
greater variety due to enhanced efficiencies and competitive capabilities of
combined entities.

Negative Impacts of Combinations:

1. Reduction in Competition:
o Combinations can lead to a reduction in competition by eliminating competitors
from the market, resulting in monopolistic or oligopolistic market structures.
2. Market Power:
o Combined entities may gain significant market power, enabling them to influence
prices, reduce output, or engage in other anti-competitive practices.
3. Barriers to Entry:
o Large combined entities may create barriers to entry for new players, limiting
market contestability and innovation.
4. Adverse Effects on Consumers:
o Reduced competition can lead to higher prices, reduced choices, and lower quality
of products and services for consumers.

Regulation of Combinations by the Competition Commission of India (CCI)

Legal Provisions:

1. Definition of Combinations (Section 5):

o The Act defines combinations to include mergers, acquisitions, or amalgamations
where the combined entity meets certain asset or turnover thresholds.
2. Notification Requirement (Section 6):
o Combinations meeting specified thresholds must be notified to the CCI for
approval before they can be consummated.

Regulatory Process:

1. Pre-Merger Notification:
o Entities planning a combination that meets the thresholds must notify the CCI and
provide details about the transaction.
2. Review Process:
o The CCI conducts a detailed review to assess the impact of the combination on
competition. This includes evaluating market share, potential reduction in
competition, and benefits to consumers.
o The CCI has the power to approve, modify, or prohibit the proposed combination.
50

3. Approval, Modification, or Prohibition:

o If the CCI determines that the combination is not likely to have an appreciable
adverse effect on competition, it will approve the transaction.
o If concerns are identified, the CCI may suggest modifications to the transaction to
address these concerns.
o If the combination is likely to have a significant adverse effect on competition, the
CCI may prohibit the transaction.
4. Penalties for Non-Compliance:
o Failure to notify the CCI or proceeding with a combination without approval can
result in significant penalties, including fines and orders to dissolve the
combination.

Conclusion

The transition from the MRTP Act, 1969, to the Competition Act, 2002, was driven by the need
for a more effective and modern legal framework to regulate competition in a liberalized and
globalized economy. The Competition Act addresses the limitations of the MRTP Act and
provides a robust mechanism for promoting competition, protecting consumer interests, and
ensuring free trade.

Combinations can have both positive and negative impacts on the market. While they can lead to
efficiencies and enhanced competitiveness, they can also reduce competition and harm consumer
interests. The CCI plays a crucial role in regulating combinations to ensure they do not adversely
affect competition, using its powers to review, modify, or prohibit transactions as necessary.

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Short Notes
1.Monopoly

Ans:

Definition

A monopoly is a market structure characterized by a single seller or producer that controls the
entire supply of a product or service for which there are no close substitutes. This single entity is
known as the monopolist.

Features of Monopoly

1. Single Seller: The monopolist is the only producer/seller in the market.

51

2. No Close Substitutes: The product or service offered by the monopolist has no close substitutes,
making it unique.
3. Price Maker: The monopolist has the power to set prices due to lack of competition.
4. High Barriers to Entry: Significant obstacles, such as high capital requirements, legal restrictions,
or control of essential resources, prevent other firms from entering the market.
5. Control Over Supply: The monopolist controls the total market supply of the product or service.

Sources of Monopoly Power

1. Natural Monopoly: Occurs when a single firm can supply the entire market at a lower cost than
multiple firms due to economies of scale (e.g., utilities).
2. Legal Monopoly: Established through government regulations, patents, or licenses that restrict
entry (e.g., pharmaceutical patents).
3. Resource Control: Ownership or control over critical resources or raw materials (e.g., De Beers
and diamonds).
4. Network Effects: When the value of a product increases with the number of users (e.g., social
media platforms).

Advantages of Monopoly

1. Economies of Scale: Monopolies can achieve lower costs per unit due to large-scale production.
2. Innovation: Monopolies may have more resources to invest in research and development.
3. Stable Prices: With no competition, prices can be more stable.

Disadvantages of Monopoly

1. Higher Prices: Lack of competition can lead to higher prices for consumers.
2. Inefficiency: Monopolies may lack the incentive to be efficient or innovative.
3. Consumer Choice: Limited options for consumers as there are no close substitutes.
4. Misallocation of Resources: Market power can lead to a misallocation of resources, as
monopolists may not produce the socially optimal quantity of goods.

Regulation of Monopolies

1. Anti-Trust Laws: Laws designed to prevent monopolistic practices and promote competition
(e.g., Sherman Antitrust Act in the US).
2. Price Controls: Government may regulate prices to prevent exorbitant pricing.
3. Breaking Up Monopolies: In some cases, governments may break up monopolies to restore
competitive markets (e.g., AT&T breakup in the 1980s).
4. Public Ownership: Essential services may be taken over by the government to ensure fair access
(e.g., nationalized utilities).

Conclusion

Monopolies can lead to inefficiencies and higher prices, impacting consumer welfare negatively.
However, they can also benefit from economies of scale and provide stable prices. Government
52

regulation plays a crucial role in balancing these aspects to ensure fair competition and protect
consumer interests.

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2.Raghavan Committee

Ans:

Introduction

The Raghavan Committee, officially known as the High-Level Committee on Competition

Policy and Law, was established by the Government of India in 1999. It was chaired by S.V.S.
Raghavan. The committee was tasked with examining the existing competition law framework in
India and suggesting measures to promote competition in the market.

Objectives

1. Review the MRTP Act: Evaluate the effectiveness of the Monopolies and Restrictive Trade
Practices (MRTP) Act, 1969, in the context of economic liberalization.
2. Draft a New Competition Law: Recommend a modern competition law to replace the MRTP Act,
aligning with global best practices.
3. Promote Competition: Suggest measures to foster a competitive environment in India’s
liberalized economy.

Key Recommendations

1. Repeal the MRTP Act: The MRTP Act was deemed outdated and inadequate for addressing the
needs of a liberalized economy. The committee recommended its repeal.
2. Enactment of the Competition Act: Propose a new Competition Act to regulate anti-competitive
practices, abuse of dominant position, and mergers and acquisitions.
3. Establishment of the Competition Commission of India (CCI): A new regulatory body to enforce
competition law, investigate anti-competitive practices, and ensure fair competition.
4. Focus on Anti-Competitive Practices: Emphasize the prohibition of anti-competitive
agreements, abuse of dominance, and regulation of combinations (mergers and acquisitions).
5. Competition Advocacy: Promote competition advocacy to educate stakeholders about the
benefits of competition and ensure compliance with the new law.
6. Independence of CCI: Ensure that the CCI operates independently without undue influence from
the government or private interests.
7. Modern Enforcement Mechanisms: Equip the CCI with modern tools and mechanisms for
effective enforcement of competition law, including the power to impose penalties and conduct
detailed investigations.
53

Impact

1. Competition Act, 2002: Based on the committee's recommendations, the Competition Act,
2002, was enacted, replacing the MRTP Act.
2. Establishment of CCI: The Competition Commission of India was established in 2003 as the
statutory body to enforce the new competition law.
3. Enhanced Competition Framework: The new legal framework provided a robust mechanism to
regulate anti-competitive practices, promote fair competition, and protect consumer interests.
4. Alignment with Global Standards: The Competition Act aligned India’s competition law with
international best practices, enhancing its credibility and effectiveness.

Conclusion

The Raghavan Committee played a pivotal role in transforming India’s competition law
framework. Its recommendations led to the enactment of the Competition Act, 2002, and the
establishment of the CCI, marking a significant shift from the outdated MRTP Act to a modern,
robust competition regime. The committee's work has had a lasting impact on promoting fair
competition, protecting consumer interests, and fostering a competitive business environment in
India.

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3.Exclusive Supply Agreement

Ans: Exclusive Supply Agreement: Short Notes for 8 Marks

Definition

An exclusive supply agreement is a contract between a supplier and a buyer in which the supplier
agrees to sell their products or services only to the specified buyer, often for a defined period.
This restricts the supplier from selling the same products or services to any other buyers.

Features

1. Exclusivity Clause: The supplier commits to supply products or services exclusively to the buyer.
2. Duration: These agreements typically have a specified duration, during which the exclusivity is
maintained.
3. Territorial Scope: The agreement may cover specific geographic regions or markets.
4. Product/Service Specificity: It usually pertains to particular products or services detailed in the
contract.

Objectives

1. Securing Supply: Ensures a consistent and reliable supply of goods or services for the buyer.
54

2. Market Stability: Provides market stability for both parties by securing a long-term business
relationship.
3. Volume Discounts: Often results in volume discounts for the buyer due to the commitment to
purchase exclusively from the supplier.
4. Quality Assurance: Ensures quality consistency as the buyer deals with a single supplier.

Benefits

1. Assured Supply: The buyer is assured a steady supply of essential products or services.
2. Predictable Costs: Helps in negotiating better prices and managing costs due to long-term
commitment.
3. Strong Business Relationships: Fosters stronger ties and trust between the supplier and the
buyer.
4. Market Entry: Helps new entrants secure supply sources and stabilize initial operations.

Drawbacks

1. Market Restriction: Limits the supplier’s ability to sell to other buyers, potentially reducing
market reach.
2. Dependency: Creates dependency for the buyer on a single supplier, which can be risky if the
supplier fails to deliver.
3. Potential for Abuse: May lead to anti-competitive practices, particularly if it creates significant
barriers for other competitors.
4. Regulatory Scrutiny: Subject to competition law scrutiny to prevent monopolistic practices.

Regulatory Aspects (Competition Act, 2002)

1. Prohibition of Anti-Competitive Agreements (Section 3): Exclusive supply agreements can be

scrutinized under Section 3 of the Competition Act, 2002, which prohibits agreements that cause
or are likely to cause an appreciable adverse effect on competition within India.
2. Exemption Criteria: Not all exclusive supply agreements are anti-competitive. They are
evaluated based on their impact on competition, market share of parties involved, and overall
market conditions.
3. Investigation by CCI: The Competition Commission of India (CCI) investigates agreements that
may restrict competition. The CCI assesses whether such agreements result in the creation of
entry barriers, limit market access, or lead to price manipulation.
4. Remedial Measures: If an exclusive supply agreement is found to be anti-competitive, the CCI
can order modifications or termination of the agreement and impose penalties.

Examples and Case Studies

1. Vertical Agreements: Exclusive supply agreements are a form of vertical agreement, commonly
seen in industries like retail, automotive, and technology sectors.
2. CCI Interventions: Instances where the CCI has intervened include cases where exclusive supply
agreements have led to market foreclosure or significant barriers to entry for other competitors.
55

Conclusion

Exclusive supply agreements can offer significant benefits, such as assured supply and cost
predictability, but they also carry risks of dependency and potential anti-competitive effects. The
regulatory framework under the Competition Act, 2002, ensures that such agreements do not
adversely affect market competition and consumer welfare. The CCI plays a crucial role in
monitoring and regulating these agreements to maintain a fair and competitive market
environment.

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4.Predatory Pricing

Ans:

Definition

Predatory pricing is a strategy where a dominant company sets its prices significantly below cost
with the intent to eliminate competitors from the market. Once the competition is driven out, the
company raises prices to recoup losses and maximize profits.

Features

1. Below-Cost Pricing: Prices are set below the cost of production to undercut competitors.
2. Intent to Harm Competitors: The primary goal is to eliminate competitors from the market.
3. Temporary Strategy: Prices are kept low temporarily until competitors exit the market.
4. Subsequent Price Increase: After driving out competition, prices are raised to recoup losses and
gain higher market share.

Objectives

1. Eliminate Competition: Drive competitors out of the market to gain a monopoly.

2. Market Dominance: Establish and maintain dominance in the market.
3. Long-Term Profitability: Increase prices once competition is reduced to gain long-term profits.
4. Barrier to Entry: Deter new entrants by demonstrating the ability to sustain low prices.

Benefits (from a company’s perspective)

1. Increased Market Share: Gains a larger market share by driving out competitors.
2. Monopoly Power: Potentially achieves monopoly status, leading to control over pricing.
3. Customer Attraction: Attracts price-sensitive customers during the low-price phase.
4. Entry Deterrence: Creates a barrier for new entrants due to the threat of future predatory
pricing.
56

Drawbacks and Risks

1. Short-Term Losses: The company incurs losses in the short term by selling below cost.
2. Legal Risks: Predatory pricing is considered anti-competitive and can attract regulatory scrutiny
and penalties.
3. Reputation Damage: May damage the company’s reputation if perceived as unfair competition.
4. Uncertain Outcome: Competitors might survive the low-price phase, leading to sustained losses
without achieving market dominance.

Regulatory Aspects (Competition Act, 2002)

1. Prohibition of Abuse of Dominance (Section 4): The Competition Act, 2002, prohibits abuse of
dominant position, including predatory pricing.
2. Investigation by CCI: The Competition Commission of India (CCI) investigates cases of alleged
predatory pricing. Key considerations include:
o Dominance of the firm in the relevant market.
o Pricing below cost for a sustained period.
o Intent to eliminate competitors.
3. Penalties and Remedies: If predatory pricing is established, the CCI can impose penalties, direct
the firm to cease the practice, and take other remedial measures to restore competition.
4. Case Precedents: Notable cases handled by the CCI, such as those involving major corporations,
set precedents for identifying and penalizing predatory pricing practices.

Examples and Case Studies

1. Airlines Industry: Cases where dominant airlines set extremely low fares to drive out low-cost
carriers.
2. Retail Sector: Instances of large retail chains lowering prices below cost to eliminate small
competitors.
3. Tech Industry: Major tech firms accused of using predatory pricing to dominate the market.

Conclusion

Predatory pricing, while potentially beneficial for the dominant firm in the short term, poses
significant risks and is often deemed anti-competitive. Regulatory frameworks like the
Competition Act, 2002, are essential to curb such practices, ensuring fair competition and
protecting consumer interests.

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5.Difference between Per ar Rule and Role of Reason

Ans:
57

\ Introduction

The Per Se Rule and the Rule of Reason are two legal standards used to evaluate the legality of
business practices under antitrust laws. These rules help determine whether certain business
conduct is anti-competitive and should be prohibited.

Per Se Rule

Definition

The Per Se Rule is a legal doctrine that deems certain business practices as inherently anti-
competitive and illegal, regardless of their actual effect on the market or intent behind them.
Once a practice is classified as per se illegal, no further investigation into its reasonableness or
actual market impact is necessary.

Characteristics

1. Automatic Illegality: Certain actions are automatically considered illegal without the need for
detailed analysis.
2. Clear-Cut Cases: Applied to practices that have historically been found to harm competition.
3. No Need for Justification: Defendants cannot justify the conduct by arguing its reasonableness
or benefits.

Examples

1. Price Fixing: Agreements among competitors to fix prices.

2. Market Allocation: Competitors agreeing to divide markets or customers.
3. Bid Rigging: Competitors conspiring to manipulate bidding processes.

Advantages

1. Simplicity: Provides a straightforward and efficient way to handle clear violations.

2. Deterrence: Strong deterrent against blatantly anti-competitive practices.

Disadvantages

1. Lack of Flexibility: Does not consider the potential benefits or justifications of the practice.
2. Overbreadth: May condemn conduct that could have pro-competitive effects in certain
contexts.

Rule of Reason

Definition

The Rule of Reason is a legal doctrine used to determine whether a business practice is anti-
competitive based on a comprehensive analysis of its purpose, context, and effect on
58

competition. Unlike the per se rule, this approach requires a detailed examination of the
practice's impact on the market.

Characteristics

1. Detailed Analysis: Evaluates the context, intent, and actual or potential effects of the practice
on competition.
2. Case-by-Case Basis: Each case is judged on its own merits and specific circumstances.
3. Balancing Test: Weighs the pro-competitive benefits against the anti-competitive harms.

Examples

1. Exclusive Dealing Agreements: Contracts that restrict a party from buying or selling goods from
or to competitors.
2. Tying Arrangements: Conditions where a customer must buy a secondary product when
purchasing a primary product.
3. Joint Ventures: Collaborative arrangements between competitors that may have both beneficial
and harmful effects on competition.

Advantages

1. Flexibility: Allows for a nuanced approach that can accommodate the complexities of different
markets and practices.
2. Economic Analysis: Considers the actual economic impact, potentially permitting beneficial
practices.

Disadvantages

1. Complexity: Requires extensive investigation and analysis, making it time-consuming and costly.
2. Uncertainty: Outcomes can be unpredictable due to the detailed fact-specific inquiry.

Key Differences

1. Nature of Analysis:
o Per Se Rule: No detailed analysis; automatic illegality.
o Rule of Reason: Detailed case-by-case analysis of context, intent, and impact.
2. Application:
o Per Se Rule: Applied to practices historically deemed harmful (e.g., price fixing).
o Rule of Reason: Applied to practices where competitive impact is unclear and needs
thorough evaluation.
3. Flexibility:
o Per Se Rule: Rigid and inflexible.
o Rule of Reason: Flexible and adaptable to various market contexts.
4. Efficiency:
o Per Se Rule: More efficient due to straightforward application.
o Rule of Reason: Less efficient due to comprehensive analysis required.
59

Conclusion

The Per Se Rule and the Rule of Reason serve distinct purposes in antitrust law, providing
different approaches to evaluating potentially anti-competitive practices. The Per Se Rule offers
simplicity and efficiency for clear-cut violations, while the Rule of Reason provides flexibility
and thoroughness for complex cases. Both standards are essential for maintaining competitive
markets and protecting consumer interests.

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6.Objectives of Competition Act, 2002

Ans:

Objectives of the Competition Act: Short Notes for 5 Marks

The Competition Act, 2002, enacted by the Government of India, aims to achieve several key
objectives:

1. Promotion of Competition: The primary objective of the Competition Act is to promote

and sustain competition in the market. This is essential for ensuring efficient allocation of
resources, fostering innovation, and offering consumers a wider choice of goods and
services at competitive prices.
2. Prevention of Anti-competitive Practices: The Act aims to prevent practices that have
adverse effects on competition, such as agreements between enterprises that restrict
competition, abuse of dominant market positions, and mergers or acquisitions that
significantly reduce competition in the market.
3. Protection of Consumer Interests: Another key objective is to protect the interests of
consumers by ensuring fair trade practices, preventing monopolistic behavior that could
lead to exploitation of consumers through excessive pricing or poor quality of goods and
services.
4. Facilitation of Market Access and Participation: The Act seeks to facilitate fair and
equal opportunities for businesses to enter and participate in the market without facing
unfair barriers or discriminatory practices from dominant players.
5. Encouragement of Competition Advocacy: Additionally, the Act aims to promote
competition advocacy, which involves creating awareness among businesses,
policymakers, and the public about the benefits of competition and the importance of
complying with competition law to foster a competitive market environment.

These objectives collectively aim to create a level playing field for businesses, protect consumer
welfare, and contribute to the overall economic development of the country by ensuring efficient
and competitive markets.

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60

7..Competition Appellate Tribunal (COMPAT).

Ans:

Competition Appellate Tribunal (COMPAT): Short Notes for 5 Marks

The Competition Appellate Tribunal (COMPAT) was a quasi-judicial body established under the
provisions of the Competition Act, 2002. Here are the key points about COMPAT:

1. Establishment: COMPAT was established in 2009 to hear and adjudicate appeals against
decisions of the Competition Commission of India (CCI).
2. Jurisdiction: It had jurisdiction over appeals related to orders passed by the CCI under
the Competition Act, including decisions on anti-competitive agreements, abuse of
dominance, and combinations (mergers and acquisitions).
3. Composition: The tribunal was typically composed of a chairperson and judicial and
technical members with expertise in competition law, economics, and related fields.
4. Powers and Functions:
o COMPAT had the authority to hear appeals against CCI decisions, review
evidence, and provide a final adjudication on matters related to competition law
violations.
o It could uphold, modify, or reverse CCI decisions based on its findings.
o The tribunal aimed to provide an independent and impartial forum for parties
aggrieved by CCI decisions to seek redressal.
5. Replacement: In 2017, the COMPAT was merged with the National Company Law
Appellate Tribunal (NCLAT) under the Finance Act, 2017. The NCLAT now handles
appeals related to competition matters along with appeals under other corporate and
economic laws.

COMPAT played a crucial role in ensuring effective enforcement of competition law in India by
providing a judicial review mechanism for CCI decisions, thereby contributing to the
development and enforcement of competitive markets in the country.

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