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The Competition Act, 2002

Contents
Introduction .................................................................................................................................................. 3
Need for Competition Act ............................................................................................................................. 4
Objectives of Competition Act ...................................................................................................................... 4
Anti-Competitive Agreements ...................................................................................................................... 4
Horizontal agreement ............................................................................................................................... 6
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Vertical agreement ................................................................................................................................... 6

Restrictive Trade Practices ............................................................................................................................ 7
Tie-in Arrangements ................................................................................................................................. 7
Vertical Tie-in ............................................................................................................................................ 8
Horizontal Tie-in........................................................................................................................................ 8
Exclusive Supply ........................................................................................................................................ 8
Collusive Bidding ....................................................................................................................................... 9
Tariff and non-tariff barriers ..................................................................................................................... 9
Tariff Barriers ............................................................................................................................................ 9
Non-Tariff Barriers .................................................................................................................................. 10
Dumping .................................................................................................................................................. 10
Abuse of Dominance ................................................................................................................................... 11
Dominance .............................................................................................................................................. 11
Abuse of Dominant position? ................................................................................................................. 12
Dominant Position .................................................................................................................................. 12
Relevant Market...................................................................................................................................... 12
Predatory Price ....................................................................................................................................... 13
The case against Google ......................................................................................................................... 13
Competition Commission – Competition Regulator ................................................................................... 14
Competition Advocacy ................................................................................................................................ 15
Foundation for Competition Advocacy ................................................................................................... 17
Competition advocacy in practice........................................................................................................... 18
The Relationship Between Competition Advocacy and Competition Law Enforcement ....................... 18
Competition Advocacy in brief................................................................................................................ 19
International Comparison ........................................................................................................................... 19
Procedures used to implement and enforce antitrust law : ................................................................... 21
The Indian Competition Law: .................................................................................................................. 23
EU Antitrust law: ..................................................................................................................................... 24
Dispute Settlement Mechanism ................................................................................................................ 25
The case has been decided: what next? ................................................................................................. 28
How long to settle a dispute? ................................................................................................................. 30
CASE STUDY 1 .............................................................................................................................................. 31
Conclusion And Summary of Case 1 ....................................................................................................... 35
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CASE STUDY 2 .............................................................................................................................................. 35

Conclusion And Summary of Case 2 ....................................................................................................... 39
Conclusion ................................................................................................................................................... 40
Webliography .............................................................................................................................................. 42
Bibliography ................................................................................................................................................ 43

Introduction
Mr Anant Ambdekar has given us the opportunity to conduct research and learn about the
Competition Act of 2002 brought upon by the Competition Commission of India. This research
was conducted for Business Law project. The research consists of topic wise discussion along
with two case studies to exemplify our work.

The competition act of 2002 was passed by the parliament of India so as to form a commission to
oversee the business operations of companies and individuals in the country following fair
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practices of competition and economic growth of the country. This act applies to the whole of
republic of India except for Jammu and Kashmir. Any person, consumer, consumer association
or trade association can make a complaint against anti-competitive agreements and abuse of
dominant position.

Need for Competition Act

 The Monopoly and Restrictive Trade Practice Act 1969 became obsolete in the present
world
 The basic motto of MRTP Act was to control monopolies, preventing concentration of
economic power in few hands
 The act prevented the expansion of the companies whose assets was 100 crore
 These companies required government permission to expand their business
 As against this, the Competition Act intends to initiate and sustain competition

Objectives of Competition Act

 To promote and sustain healthy competition in the Indian market.
 To prevent the interests of the smaller companies or prevent the abuse of dominant
position in the market.
 To prevent those practices which have adverse impact on competition in the Indian
markets.
 To ensure freedom of trade in Indian markets.
 To regulate the operation and activities of combinations (acquisitions, mergers and
amalgamation)

Anti-Competitive Agreements
Section 3(1) of the Competition Act, 2002 prevents any enterprise, person or association from
entering into any agreement which causes or will be causing any adverse or restrictive effect on
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competition within India. Competition Act emphasises that any agreement which is formed
before or after the enforcement of the Act under section 3 will be termed as void.

“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. Any agreement which causes an appreciable adverse effect on
competition shall be void”

E.g. two or more companies operating as competitors in the market make an agreement to fix
prices or limit production which has the result of reducing the competition on that particular
market. This agreement is void as per the law mentioned above.

Even though this Act in in favour of the competition the Central Government may exempt
certain parties which are as follows

 Any class of enterprises in the interest of security of the State or Public interest.
 Any obligation assumed by India under any treaty, agreement or convention with any
other country or countries
 Any party which performs a sovereign function of the Central or State Government

Agreements that can cause an adverse Effect on Competition

1) Any agreement entered into between parties which
a. Directly or indirectly determines purchase or sale prices
b. Limits or controls production, supply, markets, technical development, investment
or provision of services
c. Shares the market or source of production or provision services by way of
allocation of geographical area of market, or type of goods or services, or number
of customers in the market or any other similar way
d. Directly or indirectly results in bid rigging or collusive bidding
2) Any agreement entered into between parties with:
a. Tie-in arrangement
b. Exclusive supply agreement
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c. Exclusive distribution agreement

d. Refusal to deal
e. Resale price maintenance

Horizontal agreement
It is an agreement for co-operation between two or more competing businesses operating at the
same level in the market. This type of an agreement generally develops a healthy relationship
between competitors. The substantial clauses of the agreement may include policies regarding
pricing, production, market allocation & distribution. It may include policies sharing of
information regarding the products and the market. This type of agreements are entered into
between rivals or competitors.

E.g. Cartels, Bid rigging, Output restrictions

Zinc dry cell battery cartel case Panasonic Energy India Co Ltd – a subsidiary of Panasonic
Corporation, Japan – filed a leniency application on 25 May 2016 with the Competition
Commission disclosing the existence of a cartel among all major manufacturers of zinc dry cell
batteries operating in the Indian market (i.e, Panasonic India, Eveready Industries India Ltd and
Indo National Limited (Nippo) ) for fixing and increasing the prices of zinc dry cell batteries.
The Competition Commission conducted an investigation and found that the manufacturers were
guilty of cartel conduct.

Vertical agreement
It includes those agreements which are entered into by two enterprises at different stages of the
production agreement. For instance between producer and seller or between seller and
distributor. This type of agreement are entered into between parties having actual or potential
relationship of purchasing or selling to each other.

E.g. Tie-in Arrangements, Refusal to deal

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DTH operators sell their service with hardware tied-in. Also the hardware is manipulated to deny
access to other DTH operators. To further enforce the tie in arrangement, DTH operators do not
provide viewing card if a buyer does not buy set top box from it.

What Agreements do not cause adverse effect on competition?

1) The right of any person to restrain any infringement of, or to impose reasonable
conditions, as may be necessary for protecting any of his rights which have been
conferred upon him under
 The Copyright Act, 1957
 The Patent Act, 1970
 The Trade and Merchandise Marks Act, 1958or the Trade Marks Act,1999
 The Geographical Indications of Goods Act, 1999
 The Designs Act, 2000
 The Semi-conductor Integrated Circuits Layout-Design Act,2000
2) The right of any person to export goods from India
3) Any agreements entered into Joint ventures which increase efficiency in production,
supply, distribution, storage, acquisition or control of goods or provisions of services.

Restrictive Trade Practices

Tie-in Arrangements
This arrangement is a type of arrangement which refers to selling a product to a buyer with their
agreement to buy another product from the same seller. Tie-in arrangement can be considered as
an anticompetitive practice if it restricts trade or decreases competition in a given market. If tied
product is being sold at a lower price or at the same price at which it is available in the market or
if the tied product is required by the purchaser then such tie-in arrangement cannot be said to be
anti-competitive.

In this arrangement, a company sells a product or services to a buyer that is explicitly or

implicitly tied to the purchase of another product or service from that same seller
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Types of Tie-in arrangements

Vertical Tie-in
It requires consumers to purchase a related product or service from the same
company. Purchaser who wants to buy product ‘X’ must also purchase product
‘Y’. Tie-in is of type X-Y package
For example: FIFA 19 EA sports game is exclusively to the PS4 format. A
purchaser of game must buys PS to play the game
Horizontal Tie-in
It requires consumers to pay for an unrelated product or services from the same
company. The purchaser of product ‘X’ has to buy ‘Y’ where Y varies from
customer to customer. The items for sale are a package of X-Y1 or X-Y2 type etc.
For example: A photocopy machine seller may require the purchaser to use
specific quality of print paper where purchaser has the choice to use different
quality or brand print paper.

Exclusive Supply
Exclusive supply arrangement can benefit competition in the market by ensuring supply sources
or sale outlets, reducing contracting costs or creating dealer loyalty. Arrangements such as these
between manufacturers and suppliers or between manufactures and dealers are lawful since they
improve competition among the brands of different manufacturers.

Though arrangements like this favours competition but competition mitigates with parameters
like

 Term length of the contract

 Fewer alternative outlets or sources not covered

For example: For example, the Federal Trade Commission stopped a large drug maker from
enforcing 10-year exclusive supply agreements for an essential ingredient to make its medicines
in return for which the suppliers would have received a percentage of profits from the drug. The
FTC found that the drug maker used the exclusive supply agreements to keep other drug makers
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from the market by controlling access to the essential ingredient. The drug maker was then able
to raise prices for its medicine by more than 3000 per cent.

Collusive Bidding
Collusive bidding refers to agreements in a particular trade or area to cooperate and defeat
bidding process in order to inflate prices to artificially high levels. This agreement often involves
corruption to facilitate the collusion in exchange of bribes. These agreements are more likely to
occur if there are few qualified competitors in the area and where access to the market is difficult
because of high entry costs and time consuming legislation.

For example: In South East Asia: From 2000 to 2003 small groups of local construction
companies rigged contract awards in road rehabilitation projects in collusion with government
and project officials. To execute the schemes, the project officials would, among other things,
deliberately fail to announce or publicize requests for bids in a timely manner, refuse to sell bid
documents to outside companies or find trivial or invented reasons to disqualify those companies
that were able to bid. Senior government officials would then choose the winning bidder, or
“champion,” from among those allowed competing after private negotiations with all of the
companies. The designated losing bidders would submit deliberately higher priced or non-
responsive bids to allow the winner to inflate its prices sufficiently to fund the necessary bribes
and enjoy handsome profits.

Tariff and non-tariff barriers

Tariff Barriers
Tariff is a custom, duty or a tax imposed on products that move across border. It is the most
common instrument used for controlling imports and exports.

 Import tariff/duty – It is the custom duty imposed by the importing country i.e. the tax
imposed on goods imported. It is levied to raise revenue and protect domestic industries.
 Export tariff – It is the duty imposed on goods by the exporting country on its exports.
Generally certain mineral and agricultural products are taxed.
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 Transit duties – It is levied on commodities that originate in one country, cross another
and are consigned to another. Transit duties are levied by the country through which the
goods pass. It results in increased cost of products and reduction in amount of
commodities traded.

Example- US-China trade war in which both the countries are imposing taxes on goods being
imported. US wants to reduce imports from China and wants to create employment protecting
the domestic industries.

Non-Tariff Barriers

Non-Tariff Measures are primarily for restricting or denying the market access. They are barriers
to free trade however, sometimes essential for national economic interest. Certain Non-Tariff
Measures are applied worldwide as they are for protecting environment, quality standards and
safety.

 Quotas – It is a numerical limit on the quantity of goods that can be imported or exported
during a specified time period. The quantity may be stated in the license of the firm. If
the importer imports more than specified amount, he has to pay a penalty or fine.
 VER (voluntary export restraint) – It is a quota on exports fixed by the exporting country
on the request of the importing country. The exporting country fixes a quota regarding
the maximum amount of quantity that will be exported to the concerned nation.
 Subsidies – It is the payment made by the government to the domestic producer so that
they can compete against foreign goods. It can be a cash grant, subsidized input prices,
tax holiday, government equity participation etc. It helps a local firm to reduce costs and
gain control over the market.

Example- The EU gives €39 billion to farmers in direct subsidies. Indirectly, this makes EU
agricultural exports more competitive and gives EU farmers an advantage in trade.

Dumping
Dumping is done by a country or company when it exports a product at a price that is lower in
the foreign importing market than the price in the exporter's domestic market. Dumping
typically involves substantial export volumes of a product. It often endangers the financial
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viability of the product's manufacturers or producers in the importing nation. Dumping is

considered a form of price discrimination. It occurs when a manufacturer lowers the price of an
item entering a foreign market to a level that is less than the price paid by domestic customers in
the originating country. The practice is considered intentional with the goal of being obtaining
a competitive advantage in the importing market.

Example- In January 2017, the International Trade Association (ITA) decided that the anti-
dumping duty levied on silica fabric products from the People’s Republic of China the previous
year would remain in effect based on the investigation by the Department of Commerce
and International Trade Commission. The ITA ruling is based on the fact that there was a
strong likelihood that dumping would repeat if the tariff was removed.

Abuse of Dominance

Dominance
The competition Act, prohibits an enterprise from abusing its dominant position under section 4
of the Competition Act. There shall be an abuse of dominant position if an enterprise or a group:
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.

(b) limits or restricts

(i) production of goods or provision of services or market therefor; or
(ii) Technical or scientific development relating to goods or services to the prejudice of
consumers; or

(c) indulges in practice or practices resulting in denial of market access 5 [in any manner]; or

(d) makes 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; or
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(e) uses its dominant position in one relevant market to enter into, or protect, other relevant
market.

Abuse of Dominant position?

There are primarily three stages in determining whether an enterprise has abused its dominant
position, they are-
1. Relevant Market
2. Degree of Market Power/Monopoly Power in that relevant market
3. Determining whether the undertaking in a dominant position has engaged in conducts
specifically prohibited by the statute or applicable law

Dominant Position
“dominant position” means a position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.

Relevant Market
For determining whether a market constitutes a “relevant market” for the purposes of this Act,
the Commission shall have due regard to the “relevant geographic market’’ and “relevant
product market”.
The Commission shall, while determining the “relevant geographic market”, have due regard
to all or any of the following factors, namely:—
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales services.
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The Commission shall, while determining the “relevant product market”, have due regard to
all or any of the following factors, namely:—
(a) physical characteristics or end-use of goods;
(b) price of goods or service
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products

Predatory Price
“predatory price” means the sale of goods or provision of services, at a. price which is below the
cost, as may be determined by regulations, of production of the goods or provision of services,
with a view to reduce competition or eliminate the competitors

The case against Google

The abuse of dominant position can be related to the case of Google India in 2012, where Google
was asked to pay a fine of Rs 136 Crore by the CCI
The complaint was filed by 2 parties namely Cuts International and Bharat Matrimony.

When competing in the online space brands compete to be visible in the first 5 links of Google.
Their presence among these links depict the brands search engine optimization. The CCI has
found that google has abused the space usage in the search engine space to its own advantage. As
per the competition law, an entity is said to abuse their dominant position if that position is used
to exclude others from competing in that space or exploits users.

As avid internet users we are well aware of the fact that Google is not only a search engine, but it
also sells products of its own and sells advertising space. In view of this law it raises 2 important
questions.
1. Is content on Google really unbiased?
2. Is content on Google treated equally?
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Area 1: Flight Search

Searching a flight initially on google meant less screen space for travel websites like yaatra.com,
makemytrip.com, cleartrip.com. What we saw was a large space occupied on google dedicated to
the destinations entered in the search bar. It was clearly stated to be a “Google sponsored ad”, on
clicking these links a user would be redirected to the airlines web page. This clearly meant that
Goolge used its dominant position as a search engine to help other businesses and reduce its
competitions businesses. Which raised another key question, “What choice did the customers
have left?”

Area 2: Custom Search Bar

On many websites google had a custom search bar. Google signed agreements with these
websites based on conditions that no other search engine should have any space on that particular
website. Which again meant Google used its dominant position to drive down competition.

Area 3: Top results

Pritor to 2010, google ranked the top results in position 1, 4 and 10. The rest of the positions
however had sponsored on manual content. By doing this Google has not giving other websites
the screen space that they deserve and thus has been instrumental in driving their sales down.
This now raises a fundamental question,
Paid content = Featured Content?
In view of this the CCI levied a penalty of 5% of their Indian revenue. Their total penalty
accounted for Rs. 136 crores. However to many industry stalwarts this seemed to be a small
amount of money for Google to pay. Manipulation should be followed by Punishment.

Competition Commission – Competition Regulator

A competition regulator is a government agency that regulates and enforces competition

laws and may sometimes also enforce consumer protection laws.
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For India, the Competition Regulator is the Competition Commission of India, which has been
established by the Central Government with effect from 14th October 2003. CCI consists of a
Chairperson and 6 Members appointed by the Central Government.

It is the duty of the Commission to eliminate practices having adverse effect on competition,
promote and sustain competition, protect the interests of consumers and ensure freedom of trade
in the markets of India.

The Commission is also required to give opinion on competition issues on a reference received
from a statutory authority established under any law and to undertake competition advocacy,
create public awareness and impart training on competition issues.

They prohibit anti-competitive agreements, abuse of dominant position by enterprises and

regulate combinations (acquisition, acquiring of control and M&A), which cause or are likely to
cause an appreciable adverse effect on competition within India.

Competition Advocacy

Definition of competition advocacy given by the International Competition Network:

Competition advocacy refers to “those activities conducted by the competition authority related
to the promotion of a competitive environment for economic activities by means of non-
enforcement mechanisms, mainly through its relationships with other governmental entities and
by increasing public awareness of the benefits of competition”

Hence there are two parts of the definition. The first part of this definition defines competition
advocacy in terms of what it is not and refers to almost all activities of the competition authority
that do not fall under the enforcement category.
The second part of the definition identifies the two main branches of competition advocacy:
1. Initiatives undertaken by the competition authority towards other public entities in order to
influence the regulatory framework and its implementation
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2. Activities by competition authorities aimed at raising the awareness of economic agents,

public authorities and the general public about the benefits of competition to the society as a
whole and about the role competition policy can play to promote and protect competition

Therefore, the competition authority can use its formal powers to influence (government,
legislature, and other public authorities) in order to persuade them not to adopt unnecessarily
anticompetitive measures or help them to describe the boundaries of business regulation by
adapting regulations and policies which unnecessarily restrict competition in the market. This
means that competition authorities must act proactively to help the government to eliminate
barriers to competition and to bring about public policies that lower barriers to entry, promote
deregulation and trade liberalisation, and otherwise minimise unnecessary government
intervention in the marketplace.

To address the problems of government-created barriers to competition, the competition

authorities analyse and advocate for policies that promote and protect competition by providing
methods for identifying unnecessary restraints on market activities and by developing alternative,
less restrictive regulatory approaches that can achieve the same goals, but at a lower cost than the
competitive process. For this reason, competition advocacy becomes a more effective segment of
competition policy than legislation enforcement, since the latter is inevitable and very resources
consuming, i.e. it inevitably creates a huge administrative burden on the competition authority
and other institutions

That is why competition advocacy represents a soft power in promoting competition and
liberalisation measures to improve the performance of market-based economies. Having in mind
its objective, “the promotion of a competitive environment for economic activities”, replacing
regulations with greater anti-competitive effects by government measures with less adverse
consequences appears to be one operational way of interpreting this objective of competition
advocacy.

Hence, the need for appropriate competition advocacy appears to be quite clear in developing
and transition countries as economic policies in these countries are undergoing fundamental
changes, markets are becoming more open, new government and regulatory institutions are being
formed, trade is assuming greater influence and state owned enterprises are being privatized.
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Competition policy should have a fundamental role in this transition process, but it is difficult for
a new competition agency to acquire the influence and the skills that it needs for this purpose.

Foundation for Competition Advocacy

There are certain prerequisites for effective advocacy by a competition agency
1. The agency should have a significant degree of independence from political influence
from both inside and outside the government. It has long been recognised that
independence is important for the law enforcement function of a competition agency, but
it is a necessary component of effective advocacy as well.
2. The agency should have sufficient resources to support both its enforcement and
advocacy functions. The resource issue is well understood as critical to all aspects of a
competition agency’s work. Competition agencies, whether in developing or developed
countries, seldom have enough resources. Given this scarcity, the competition agency
must constantly make decisions about how to allocate resources between its law
enforcement and advocacy functions. It is sometimes said that a successful competition
advocacy effort, for example in regulatory reform, can bring about economic benefits far
in excess of a single successful enforcement action, or even more than one. If that is so,
then it is logical that an agency should focus most of its resources on competition
advocacy
3. The agency must acquire credibility as an effective and impartial advocate for
competition. Its reputation must extend throughout the public and private sectors.
Policymakers and their constituents –businesses, workers and consumers – must
understand how competition benefits an economy and have confidence in the competition
agency as an advocate for sound competition policy
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Competition advocacy in practice

The opportunities for competition advocacy are numerous, and take several different forms.
Below is a brief discussion of four principal forums in which a competition agency may practice
advocacy:
i. Privatisation
ii. Legislation, government policy and regulatory reform
iii. Competition policy in regulation
iv. Building a competition culture

These classifications are not mutually exclusive.

For example, Privatisation issues may arise in the course of regulatory reform in a given sector.
Again, the emphasis is on advocacy in developing countries

The Relationship Between Competition Advocacy and Competition Law Enforcement

The definition of advocacy suggests that advocacy and enforcement are mutually exclusive, but
they are not. Success in building a competition culture has obvious benefits for enforcement:
businesses will more readily comply voluntarily with the competition law, businesses and the
public will more willingly co-operate with enforcement actions, by providing evidence and the
like and policy makers will more enthusiastically support the mission of the competition agency
in particular by giving more resources to it. But competition law can enforcement can also affect
competition advocacy. The factor in consideration can be the importance of the agency’s
credibility and reputation to successful competition advocacy efforts. The credibility cannot be
gained through advocacy alone. It must be enhanced by success in enforcing the competition
law. In the end, a competition agency’s reputation will be built largely upon its record in
enforcing the competition law, and this reputation will significantly affect its influence as an
advocate in other forums.
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Competition Advocacy in brief

It is important that competition agencies in all countries engage in competition advocacy, but the
discussions above suggest that it is especially critical for those in developing countries to do so.
There are certain events that occur in the formative stages of a market economy, including
privatisation and regulatory reform, which will significantly impact how the new economy
develops. It is better to accomplish these changes properly at the outset than to try to amend them
later, and the participation of the competition agency as an advocate for competition has obvious
value to that end. Further, most developing countries lack suitable competition cultures, and it is
important for the agency to begin the process of building one. These circumstances suggest that
competition agencies in developing countries should be relatively more active in competition
advocacy than their counterparts in developed countries. At the same time, however, they may
lack the foundation for doing so – they may not yet have acquired the independence, the
resources and the credibility necessary for effective advocacy. There is no obvious solution to
this dilemma. The agency must simply exercise good judgment in selecting and pursuing its
advocacy projects. It must seek out matters that are economically important, politically visible,
that will not occupy too many resources and in which the agency has a reasonable chance of
success. It must give ongoing attention to building a competition culture through aggressive
public relations and circulation of information. And importantly, it must not neglect its law
enforcement responsibilities

International Comparison
Competition law is a law that promotes or seeks to maintain market competition by regulating
anti-competitive conduct by companies. Competition law is implemented through public and
private enforcement. Competition law is known as "antitrust law" in the United States for
historical reasons, and as "anti-monopoly law" in China and Russia. In previous years it has been
known as trade practices law in the United Kingdom and Australia. In the European Union, it is
referred to as both antitrust and competition law.
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The two largest and most influential systems of competition regulation are United States antitrust
law and European Union competition law. National and regional competition authorities across
the world have formed international support and enforcement networks.

The U.S. Competition Law

U.S. competition law is based on three statutes.

1. The Sherman act

The Sherman Act broadly prohibits anticompetitive agreements and unilateral conduct that
monopolizes or attempts to monopolize the relevant market. The purpose of the act is not to
protect businesses from the working of the market but it is to protect the public from the failure
of the market. The law directs itself not against conduct which is competitivebut against conduct
which unfairly tends to destroy competition itself. The Sherman Act authorizes a court to provide
remedies for a violation of the Act that include an order declaring a practice unlawful, an order
enjoining an unlawful practice, civil penalties, criminal penalties, and award of treble damages to
parties that have been damaged by violations of the Act. The law attempts to prevent the
artificial raising of prices by restriction of trade or supply. Monopoly achieved solely by merit is
perfectly legal but acts by a monopolist to artificially preserve that status or wicked dealings to
create a monopoly are not legal. The purpose of the Sherman Act is not to protect competitors
from harm from legitimately successful businesses nor to prevent businesses from gaining honest
profits from consumers, but rather to preserve a competitive marketplace to protect consumers
from abuses.

2. The Clayton Act

The Clayton Act of 1914 prohibits price discrimination, tying one product or service to another,
requirements contracts, mergers and acquisition. But this is only true when the effect of that
conduct is to substantially lessen the competition or tend to create monopoly.

3. The Federal Trade Commission Act

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The Federal Trade Commission Act of 1914 created the Federal Trade Commission (FTC) and
gave it concurrent power to enforce the Sherman and Clayton Acts through use of civil remedies.
Only the courts acting in response to charges brought by the Department of Justice have the
power to impose the criminal penalties authorized by the antitrust acts. Generally, FTC has the
same powers as DOJ but it also has three unique powers

i. The power to enforce a statutory prohibition on unfair methods of competition, and unfair
or deceptive acts or practices
ii. The power to obtain a court order temporarily enjoining conduct that violates the antitrust
laws by meeting a standard that is less demanding than the standard DOJ must meet to
obtain such an order
iii. The power to conduct hearings to decide whether a firm has violated the antitrust laws in-
house before one of the FTC’s Administrative Law Judges instead of asking a court to
make that decision. The first unique power has rarely been used. FTC uses the second
and third powers with great frequency but both are controversial.

There are six institutions who plays important role in implementing competitions laws in U.S.

1. The Department of Justice

2. The Federal Trade Commission
3. The Courts
4. Juries
5. Private Parties
6. State Attorney Generals

Procedures used to implement and enforce antitrust law :

The procedures used to implement and enforce antitrust law vary significantly depending on the
context in which implementation and enforcement takes place.

1. Adjudication of Criminal Cases

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If any firm violates antitrust law then Department of Justice is the only institution that is
authorized to ask a court to impose criminal penalties against a firm. Example of this is the
vitamin price-fixing conspiracy that DOJ discovered in 1999.This is relatively rare circumstance
in which DOJ seeks criminal penalties. All of the major manufacturers of vitamins met regularly
and secretly in various locations in many countries to agree to fix prices at levels that had the
effect of increasing the firms’ revenues by billions of dollars each year. With the active
cooperation of antitrust authorities in several other countries, DOJ obtained evidence that was so
powerful that each of the firms and individuals in the firms that participated in the conspiracy
agreed to accept serious criminal and civil penalties without a court trial.

2. Adjudication of Civil Cases

DOJ, FTC, a state Attorney General, or a private party with antitrust standing can seek civil
remedies against firms that they claim to have violated antitrust law by filing a complaint in a
federal court. The court then conducts a trial to determine whether the defendants violated
antitrust law .If so, what remedies the government or private party is entitled to obtain. A trial of
that type typically takes many years and is extremely expensive

3. Mergers and Acquisitions

Until 1976, mergers and acquisitions were subject to the same procedures as any other civil case.
If DOJ or FTC believed that a merger or acquisition violated antitrust law, one or the other filed
a complaint in court against the parties who were involved in the transaction. The agency sought
either an order forbidding the parties from completing the transaction or an order requiring the
parties to reverse the transaction through forced disinvestment of assets in the frequent situation
in which the parties had completed the transaction by the time that DOJ or FTC filed a complaint
in court in which they sought to prove that the transaction was illegal. This method of proceeding
produced unacceptable results in two forms—the proceedings took far too long and they often
produced poorly reasoned court opinions. In 1976, Congress changed the decision making
process in merger cases dramatically by enacting the Hart-Scott-Rodino (HSR) Act. That Act
requires any large firm that proposes to merge with, or to acquire the assets of, another large firm
to make a filing with both DOJ and FTC at least 30 days before the date on which the firms
23

propose to take the proposed action. In the HSR filing the firms are required to describe the
proposed action and they are given the opportunity to explain why they believe that the propose
transaction does not violate antitrust law.
4. Procedures to Announce Interpretations of Antitrust Law
The substantive standards in the Sherman and Clayton antitrust statutes are broad and vague. The
statutes prohibit contracts that unreasonably restrain trade, conduct that is considered to be an
inappropriate means of obtaining, retaining monopoly power and requirements contracts, price
discrimination, mergers and acquisitions when the effects of any of those forms of conduct may
be to substantially lessen competition or tend to create a monopoly. Thus, it is particularly
important that government officials, judges, and firms have good ways of determining how those
vague standards are interpreted by DOJ, FTC, and the courts. It is much easier to determine the
law that is applicable to mergers and acquisitions. DOJ and FTC publish joint guidelines that
describe in detail the analytical framework that they apply when they decide whether to oppose
or to acquiesce in a proposed merger or acquisition.16 They update the guidelines frequently to
insure that they reflect the analytical tools that the agencies are using to evaluate proposed
mergers and acquisitions and the ways in which they are applying those tools on a current basis.

The Indian Competition Law:

Indian competition law is much younger than U.S. competition law. The basic statute that
governs competition law in the U.S., the Sherman Antitrust Act, was enacted 77 years before
India existed as an independent country. Development of competition law in India also was
delayed by the lack of enthusiasm for a market-based economy that was shared by most of the
population and political leadership of India for several decades after India obtained its
independence. The first Indian competition statute, the Monopolies and Restrictive Trade
Practices Act of 1969, was replaced by the Competition Act of 2002 . That statute prohibits any
agreement “which causes or is likely to cause an appreciable adverse effect on
competition(AAEC) within India. Some agreements are presumed to have AAEC. They are
unlawful unless they can be shown to create efficiency gains. They correspond roughly to U.S.
laws. The statute also prohibits abuse of dominant position.
24

The competition act also regulates mergers but those provisions did not go into effect until
2011.Large firms that propose to merge or to acquire other large firms must notify the
government in advance. Mergers that have AAEC are unlawful. The competition act specifically
authorizes the government to issue rules to implement the Act and the government has already
issued many procedural and substantive rules.

There are five institutions who plays important role in implementing competitions laws in India

1. The Competition Commission

2. The Director General
3. The Competition Appellate Tribunal
4. The Supreme Court
5. Private Parties

EU Antitrust law:

The EU antitrust law has long been influenced by the traditional ordo-liberal view originating
and drawing greatly from the anticompetitive effects of economic power, seen through
widespread cartels in Germany during the 1920s. According to the ordo-liberal view,
competition has a prime role in the effective functioning of markets, where each market actor is
treated equally under the law and enjoys full freedom to make operational decisions. As a result,
EU antitrust law and its enforcement has been focused around factors such as market structure,
concentration, market access and dispersal of economic power which are aimed to protect
competitors and their freedom to operate in the market. Further, the liberals assign a key role to
regulations and institutional frameworks in protecting the competitive process and hence
competition in the economy. They viewed dominance by a firm to be contradictory to a
competitive market scenario and hence influenced the EU’s antitrust law on abuse of dominance.
Therefore, the early court decisions in the EU demonstrated a typical form-based approach in
which the courts often upheld incorrect presumptions about anticompetitive practices, market
structures and market share thresholds in establishing abuse of dominance. However, in the
1990s these decisions invited significant criticism as they ignored considering the actual impact
of the practices being assessed or evaluating the possibility of any efficiencies. Hence the
25

revolution in the approach of anti-trust law in EU started (1989 onwards) with guidelines and
regulations being issued in relation to merger control and anticompetitive agreements. This
created a wave of change in the formulation and implementation of antitrust law towards a more
effects-based approach, thereby reducing presumptions of illegality, recognizing efficiencies, and
evaluating actual effects on consumer welfare. Following these changes, the EU’s approach on
assessing abuse of dominance cases (under Article 102 of the EC Treaty) also started evolving
towards adopting an effects-based approach that is grounded in economic analysis. EC has been
making a marked effort to move towards an effects-based approach through the issue of various
discussion papers and guidelines, it has left the interpretation and implementation of the law up
to the courts. As a result, the EU has not yet fully built-in the use of an effects-based approach in
undertaking abuse of dominance enforcement, similar to many other jurisdictions (except the
United States) around the world. 13While the EC has been making a marked effort to move
towards an effects-based approach through the issue of various discussion papers and guidelines,
it has left the interpretation and implementation of the law up to the courts. As a result, the EU
has not yet fully built-in the use of an effects-based approach in undertaking abuse of dominance
enforcement, similar to many other jurisdictions (except the United States) around the world.
This is likely attributable to

i. The predominance of the ordo-liberal or traditional mind-set

ii. The ease with which courts can adjudicate as the acts are deemed to be anticompetitive
are codified, thereby minimizing grey areas and scope for discretion
iii. convenience

Dispute Settlement Mechanism

The Dispute Settlement Body [DSB]:

 Settling disputes is the responsibility of the Dispute Settlement Body (DSB), which
consists of all WTO members, usually represented by ambassadors or equivalent.
 The DSB has the sole authority to establish “panels” of experts to consider the case, and
to accept or reject the panels’ findings or the results of an appeal.
26

 It monitors the implementation of the rulings and recommendations, and has the power to
authorize retaliation when a country does not comply with a ruling.

The Appellate Body:

 The Appellate Body was established in 1995 under Article 17 of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU).
 It is a standing body of seven persons that hear appeals from reports issued by panels in
disputes brought by WTO Members.
 The Appellate Body can uphold, modify or reverse the legal findings and conclusions of
a panel, and Appellate Body Reports, once adopted by the Dispute Settlement Body
(DSB), must be accepted by the parties to the dispute.
 Normally appeals should not last more than 60 days, with an absolute maximum of 90
days.

Panels:

 Panels are like tribunals. But unlike in a normal tribunal, the panelists are usually chosen
in consultation with the countries in dispute.
 Only if the two sides do not meet an agreement does the WTO director-general appoint a
panel.
 Panels consist of three (possibly five) experts from different countries who examine the
evidence and decide who is right or wrong. The panel’s report is passed to the Dispute
Settlement Body, which only can reject the report by consensus.
 Panelists for each case can be chosen from a indicative list of well-qualified candidates,
or from elsewhere. They serve in their individual capacities. They cannot receive
instructions from any government.

How are disputes settled?

 Before taking any action the countries in dispute have to talk to each other to see if they
can themselves settle their differences.
 If that fails, they can also ask the WTO director-general to mediate or try to help in any
other way.
27

 If consultations fail, the complaining country can ask for a panel to be appointed.

Second stage: Panel to be appointed:

 45 days for a panel to be appointed, plus 6 months for the panel to conclude.
 Officially, the panel helps the DSB to make rulings or recommendations. But because the
panel’s report can only be rejected by consensus in the DSB, its conclusions are difficult
to overturn. The panel’s findings have to be based on the agreements cited.
 The panel’s final report should normally be given to the parties in dispute within six
months. In cases of urgency, including those concerning perishable goods, the deadline is
shortened to three months.
 The agreement describes in some detail how the panels are to work. The main stages
are:

a) Before the first hearing: Each side in the dispute presents its case in writing to the
panel.

b) First hearing: The case for the complaining country and defense: the complaining
country (or countries), the responding country, and those who have an interest in the
dispute, make their case at the panel’s first hearing.

c) Rebuttals: The countries involved submit written rebuttals and present oral arguments at
the panel’s second meeting.

d) Experts: If one side raises scientific or other technical matters, the panel may consult
experts or appoint an expert review group to prepare an advisory report.

e) First draft: The panel submits the descriptive (factual and argument) sections of its
report to the two sides, giving them two weeks to comment. This report does not include
findings and conclusions.

f) Interim report: The panel then submits an interim report, including its findings and
conclusions, to the two sides, giving them one week to ask for a review.
28

g) Review: The period of review must not exceed two weeks. During that time, the panel
may hold additional meetings with the two sides.

h) Final report: A final report is submitted to the two sides. Three weeks later, it is
circulated to all WTO members. If the panel decides that the disputed trade measure does
break a WTO agreement or an obligation, it recommends that the measure be made to
confirm with WTO rules. The panel may suggest how this could be done.

i) The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling
or recommendation within 60 days unless a consensus rejects it. Both sides can appeal
the report (and in some cases both sides do).

 Appeals:

 Either side can appeal a panel’s ruling. Sometimes both sides do so.
 Appeals have to be based on points of law such as legal interpretation — they cannot
reexamine existing evidence or examine new issues.
 Each appeal is heard by three members of a permanent seven-member Appellate
Body set up by the DSB broadly representing the range of WTO membership.
 Members of the Appellate Body have four-year terms. They have to be individuals
with recognized standing in the field of law and international trade, not affiliated with
any government.
 The appeal can uphold, modify or reverse the panel’s legal findings and conclusions.
 Normally appeals should not last more than 60 days, with an absolute maximum of 90
days.
 The Dispute Settlement Body has to accept or reject the appeal’s report within 30
days — and rejection is only possible by consensus.

The case has been decided: what next?

 If a country has done something wrong, it should swiftly correct its fault. If it continues
to break an agreement, it should offer compensation or suffer a suitable penalty.
29

 If the country that is the target of the complaint loses, it must follow the
recommendations of the panel report or the appeals report.

 It must state its intention to do so at a Dispute Settlement Body meeting held within 30
days of the report’s adoption.

 If complying with the recommendation immediately proves impractical, the member will
be given a “reasonable period of time” to do so.

 If it fails to act within this period, it has to enter into negotiations with the complaining
country (or countries) in order to determine mutually-acceptable compensation — for
instance, tariff reductions in areas of particular interest to the complaining side.

 If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the
Dispute Settlement Body for permission to impose limited trade sanctions (“suspend
concessions or obligations”) against the other side.

 The Dispute Settlement Body must grant this authorization within 30 days of the expiry
of the “reasonable period of time” unless there is a consensus against the request.

 In principle, the sanctions should be imposed in the same sector as the dispute.

 If this is not practical or if it would not be effective, the sanctions can be imposed in a
different sector of the same agreement.

 In turn, if this is not effective or practicable and the circumstances are serious enough, the
action can be taken under another agreement.

 The objective is to minimize the chances of actions spilling over into unrelated sectors
while at the same time allowing the actions to be effective.

 In any circumstances , case is outstanding then its agenda remains until the case is
resolved. Dispute Settlement Body, monitors how adopted rulings are implemented.
30

How long to settle a dispute?

These approximate periods for each stage of a dispute settlement procedure are target
figures — the agreement is flexible. In addition, the countries can settle their dispute
themselves at any stage. Totals are also approximate.

60 days Consultations, mediation, etc

45 days Panel set up and panellists appointed

6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute Settlement Body adopts report (if no appeal)

Total = 1 year (without appeal)

60-90 days Appeals report

30 days Dispute Settlement Body adopts appeals report

Total = 1y 3m (with appeal)

31

CASE STUDY 1

UPSE SECURITIES LIMITED VS NATIONAL STOCK EXCHANGE OF INDIA ON 19

FEBRUARY, 2013

COMPETITION COMMISSION OF INDIA Case No. 67 of 2012 19/02/2013 UPSE Securities

Limited Informant v.

1. National Stock Exchange of India Limited Opposite Party ORDER UNDER SECTION 26(2)
OF THE COMPETITION ACT, 2002 The informant is a body corporate and a wholly owned
subsidiary of UP Stock Exchange Limited (UPSE), a Regional Stock Exchange (RSE). The
opposite party is a national level stock exchange.

2. As per informant since the operationalization of the opposite party in 1994, the turnover of the
RSEs (including UPSE) started eroding which adversely affected their operations. In 1999, the
Securities and Exchange Board of India (SEBI) envisaged a route to rescue the RSEs. The
suggested route required the RSEs to form a subsidiary company. This subsidiary was permitted
to acquire membership of stock exchanges such as NSE (the opposite party), BSE (Bombay
Stock Exchange) etc. and the members of the RSEs could obtain sub-broker ship of the
subsidiary company and could trade there. UPSE accordingly formed a subsidiary (the
informant) in the year 2000 and obtained membership of BSE. In response to the constant
demand from its members, the informant obtained membership of NSE in 2009 by paying a high
deposit (Rs.2.71crores) to enable the members of UPSE to trade at the opposite party stock
exchange as sub brokers.

3. Briefly stated, the informant is aggrieved by an alleged excessive and discriminatory deposit
structure imposed by opposite party for membership upon subsidiaries of RSEs (informant) vis-
à-vis other corporate members. Besides the higher deposit amount, other alleged discriminatory
32

stringent conditions imposed on subsidiaries (including the informant) of RSEs in comparison to

other corporate members are, inter alia, as under:

a) Subsidiaries can't do business in their own name/account, while other corporate members can
do share trading on their own account.

b) In case of a subsidiary, only a sub-broker who himself is a member of the RSE can trade,
whereas in case of other corporate members, any sub broker of that corporate member can trade.

c) A subsidiary is not permitted to allow 'Authorized Persons' to trade on its account unless such
person is registered with opposite party stock exchange, whereas other corporate members are
permitted to allow 'Authorized Persons' to trade on their own account, even if they are not
registered with SEBI at all.

d) Dual membership of sub-brokers of subsidiary requires base minimum capital at the level of
RSE and subsidiary, whereas in case of a sub-broker of other corporate members, deposit of
minimum base capital is not required.

4. These conditions, according to the informant, were discriminatory and amounted to abuse of
dominant position by the opposite party in the securities market. Therefore, the informant has
prayed the Commission to initiate an investigation under section 26(1) to scrutinize the conduct
of the opposite party under section 4 of the Act.

5. The Commission has considered the submissions and materials provided by the parties. The
definition of relevant market proposed by the informant viz 'securities market in India' seems to
be correct. It may be relevant here to note that the Commission had held opposite party to be
dominant in the 'Currency Derivative segment in India' in an earlier case [MCX Stock Exchange
Ltd. & Ors. v. National Stock Exchange of India Ltd. & Ors (13 of 2009)]. Though the relevant
market is much broader in this case, the assessment done in that case and the information
available in the public domain indicates that opposite party was a dominant player in 'securities
market in India' as well, considering its market share, size & resources, its economic power,
advantage over competitors, absence of countervailing buying power and existence of entry
barriers etc.
33

6. Unlike the Monopolies and Restrictive Trade Practices Act, 1969, dominance in itself is not
prohibited by the Competition Act, 2002. It is only abuse of dominance, which the Act intends to
proscribe. Undoubtedly, the opposite party treated the RSE members (including informant)
differently from other corporate members. However, differential treatment in itself cannot
always be discriminatory. The notion of equality enshrined under the Indian Constitution
recognizes reasonable classification and conceives different treatment may be accorded to
different classes. There are significant differences, as explained by the opposite party, between
ordinary corporate members and RSE members wishing to obtain membership of the opposite
party stock exchange. In particular the differences in the risk posed by each of them to the
financial system. Securities and Exchange Board of India (SEBI) itself recognized this difference
and has provided for a stricter regulatory regime for RSE members. Further, SEBI's and opposite
party's decision to permit RSEs to obtain their membership was aimed at the revival of regional
stock exchanges. Membership at the opposite party stock exchange was open to different
categories of persons who fulfilled the eligibility criterion laid down by SEBI and opposite party.
For purposes of risk assessment, opposite party treated individuals and partnership firms as one
class of members, ordinary corporate members as another class of members, and RSEs as a third
class of members. Market integrity was the essence of any financial market and therefore, to pre-
empt market failures and protect investors, SEBI and the stock exchanges developed a
comprehensive risk management system, which was constantly monitored and upgraded. It
encompassed capital adequacy of members, deposit and adequate margin requirements, limits on
exposure and turnover, indemnity insurance, on-line position monitoring and automatic
disablement, etc. The RSE members and other corporate members differed from each other in
terms of composition and business.

7. An ordinary corporate member could carry out proprietary trades on the opposite party stock
exchange as well as trades on behalf of sub-brokers/clients. Whereas, an RSE Member (like
informant) was a special purpose vehicle established as a subsidiary of a regional stock
exchange. Such RSE subsidiary was prohibited by SEBI from undertaking any dealing in
securities on its own account and its only source of income could be brokerage fees collected for
trades on the nationwide stock exchange of which it was a member. It is also relevant to be noted
that it is not the RSE Member who competes with the ordinary corporate member on the stock
34

exchange, but the members of the RSE registered as sub-brokers of the RSE Members compete
with corporate members. The RSE Member structure is only a methodology adopted by SEBI to
allow for the revival of RSEs and permit the members of RSEs to trade on opposite party stock
exchange by registering themselves as sub-brokers of the RSE Member. In the absence of this
scheme, the members of the RSE, had they wished to trade on opposite party stock exchange,
would have had to obtain its direct membership. In the case of an ordinary corporate member,
opposite party grants membership to one corporate entity, whereas, in the case of granting an
RSE Member right to trade, opposite party was granting indirect membership to many members
of the RSE who would otherwise had to directly obtain its membership by paying the deposit fee.

8. Another important difference between ordinary corporate members and RSE member lies in
the liability for paying shortfall in the margins to the opposite party stock exchange. In case of
shortfall in the margins payable to the stock exchanges (like opposite party), an ordinary
corporate member is directly liable to meet the shortfall to opposite party, whereas the RSE
Member has to necessarily collect the shortfall from its sub-brokers to pay to the opposite party.
This is because, under the spirit of the SEBI regulations governing RSE Members, the RSE
Members can neither use their own money, nor the money of the parent RSE to cover any
shortfall. SEBI mandates that RSE Members trading limits/exposure of a sub-broker shall be
based on the deposit received by the RSE Member. Therefore, the RSE subsidiary would have to
collect margins from sub-brokers in order to make a trade on the national exchange. Such a back-
to-back margin requirement imposed on RSE Members was to ensure that they do not trade on
their own account and do not utilize any of their own funds to complete trades.

9. In addition to this, all trades entered, but not completed, involving other sub-brokers of the
RSE Member was also at risk and the opposite party was required to compensate all clients of
the RSE Member for trades that did not complete. The stringent requirements on the opposite
party were necessary to ensure investor protection, and the risks involved in allowing RSE
Members to trade on its exchange without being able to access external funds as in the case of
ordinary corporate members. This also justified the higher deposit requirements imposed on RSE
Member by opposite party.
35

Conclusion And Summary of Case 1

The Competition act strictly says we shouldn’t create a barrier for entry and also a barrier for exit
for other firms which wish to operate here. The SEBI after seeing the RSE struggling, bought out
an ordinance which said the RSE could get a membership of stock from NSE and hence do their
trading there as they were making losses and couldn’t really do anything until and unless they
could also trade in NSE. In this case the RSE claim that NSE had come with a very unreasonable
and hefty deposit of RS 2.71 crore, which was acting as a barrier to entry and also said this way
only a single subsidiary can run. For another one to run in the same way that will require
separate payment again. The investment business is highly emotional and here the business is
done on the basis of trust and in this case the subsidiaries were classes and RSE were in third
class and hence moreover when a trader could directly trade with NSE it was difficult to convert
the same person into trading thru RSE. Hence the case was contemplated by the Commission
with the view that there does not exist a prima facie case under section 4 of the Act. The case
deserves to be closed under section 26 (2) of the Act and is accordingly it was hence closed.

CASE STUDY 2

Shri K. Rajarajan vs Mahindra & Mahindra Ltd. & Others on 30 June, 2015

1. The present information has been filed by Shri K. Rajarajan ("Informant") under section
19(1)(a) of the Competition Act, 2002, ("Act") alleging, inter- alia, contravention of the
provisions of sections 3and 4 of the Act by the Opposite Parties who are manufacturers of
passenger cars, two wheelers, trucks, buses, three wheelers and tractors in India. The Opposite
Parties against whom the present information has been filed are Mahindra & Mahindra Ltd.(OP
1), Tata Motors Ltd.(OP 2), Honda Siel Cars India Ltd. (OP 3),Volkswagen India Pvt. Ltd. (OP
4), General Motors India Pvt. Ltd. (OP 5),Toyota Kirloskar Motor Pvt. Ltd. (OP 6), Ford India
Pvt. Ltd. (OP 7), Renault India Pvt. Ltd. (OP 8), Hyundai Motor India (OP 9), Ashok Leyland
(OP 10), VEVC (OP 11), Tractor and Farm Equipment Ltd. (OP 12), Piaggio Vehicles Pvt. Ltd.
36

(OP 13), Bajaj Auto Ltd. (OP 14), Hero MotoCorp. (OP 15), Mahindra Two Wheeler (OP 16),
Honda Motorcycle & Scooter India Pvt. Ltd. (OP 17) and TVS Motor Co.(OP 18), collectively
referred to as Opposite Parties/ OPs.

2. The Informant claims to be a businessman, engaged in the business of automobile dealership

for passenger cars, two wheelers, commercial vehicles such as trucks, buses and three wheelers
and tractors in the State of Tamil Nadu and Union Territory of Pondicherry for the last 25 years.
The Informant has submitted that OPs are the manufacturers and sellers of automobile products
in India and their combined market share is more than 50%.

3. The Informant has submitted that he has dealership of OP 1 for heavy, medium and light
commercial vehicles since 2007 for the territories of Villupuram and Cuddalore. The dealership
agreement between the Informant and OP 1 has been renewed from time to time and the last
renewal was made for the period 2011 to 2014. Another dealership agreement was also entered
into between the Informant and OP 1 for the retail sales and distribution of the vehicles. This
dealership agreement was last renewed for the period 2013 to 2015.

4. The Informant has further submitted that he is also a dealer of OP 14 for two wheelers in the
Union Territory of Pondicherry since 2004 and for the territory of Cuddalore since 1991.
Dealership agreements for both Pondicherry and Cuddalore were renewed for the period from
2013 to 2015. However, both the agreements were terminated by OP 14 on 10.11.2014.

5. The Informant has filed the present information alleging restrictive trade practices being
followed by OPs which have appreciable adverse effect on competition (AAEC) in India. It is
alleged that the dealership agreements between the automobile manufacturers and authorized
dealers are completely one-sided and in favour of the automobile manufacturers. The Informant
has alleged that the dealership agreements are in violation of the provisions of the Act, especially
in relation to the following:

a) Creation of barriers to new entrants in the market,

b) Foreclosure of competition by hindering entry into the market,

37

c) Accrual of benefits to the consumer; and

d) Restricting the dealer not to deal other Products/ Services to make the dealership viable.

6. It is submitted that the automobile manufacturers in India generally sell their vehicles to
consumers through authorized dealers. The automobile manufacturers appoint their authorized
dealers through dealership agreements, which are preceded by Letter of Intent (LOI). Usually a
prospective dealer seeking dealership of an automobile company has to satisfy the automobile
manufacturer that he has adequate infrastructure, personnel, investments, working capital etc.

7. It is averred that setting up of a showroom involves huge investments. The Informant in the
present case has referred to some LOIs in order to highlight the requirement of huge investments
for setting up of a showroom. The Informant has further pointed out that many a times, the
manufacturer refuses to enter into dealership agreement after the authorized dealer has built the
infrastructure in accordance with the terms of the LOI. The Informant has also highlighted
certain restrictive clauses in the dealership agreements like restriction on dealing in vehicles
similar to the manufacturer's vehicles directly or indirectly, maintenance of minimum stock in
the showrooms, incurring huge expenditure in promotion of sales, exit barriers etc.,which are
alleged to be one-sided and heavily biased in favour of OP 1 and OP 14.

8. Based on the above allegations, the Informant has prayed, inter alia, for restraining OPs from
imposing restrictive/ anti-competitive conditions which are contrary to the provisions of sections
3(1), 3(4)(a) to (d) in their LOIs and dealership agreements.

9. The Commission has perused the material available on record. The arguments made by the
counsel on 12.05.2015 on behalf of the Informant were also considered by the Commission.

10. At the outset, the Commission notes that though the Informant has made allegations of
contravention of the provisions of the Act against all the OPs, he has entered into dealership
agreements with OP 1 and OP 14 only.

11. From the facts of the case, it is revealed that the Informant is primarily aggrieved by the
imposition of alleged anti-competitive terms and conditions by OPs in their LOI and dealership
38

agreements. The Informant has alleged that the terms of the agreements entered with OP-1 and
OP-14 are one-sided and loaded in favor of these two manufacturers only.

12. So far as the huge investment incurred for setting-up of a showroom for the sale of
automobiles of a specific manufacturer is concerned, the Commission observes that the same is
dependent on the brand, goodwill of the manufacturer and the nature of product. Every
prospective dealer, who wishes to become an authorized dealer, is well aware of the
requirements in terms of investment, infrastructure, stock of minimum vehicles, promotional
activities etc., thus the dealer has the choice of selecting the automobile manufacturer after
weighing out the cost and other conditions. Therefore, the stringent criteria adopted by the
automobile manufacturers in terms of technical expertise, infrastructure, investment etc. while
appointing their authorized dealers may not be considered as unreasonable.

13. As regards the practices which have been alleged by the Informant to be contrary to the
provisions of the Act, the Commission is of the view that such practices which have been
highlighted by the Informant like non-compete clauses, maintenance of minimum stock in
showroom, incurring expenditure in promotion of sales etc. are standard business practices being
followed by the automobile manufacturers and do not by themselves appear to be contrary to the
provisions of section 3 of the Act. As far as the issue of maintenance of minimum stock in
dealer's showroom and promotion of sales, it is observed that such practices are trade customs
and usages which are prevalent in the market and also do not appear to create any AAEC.
Further, it is observed that OPs are competing each other in order to obtain the patronage of a
large number of customers.

14. The Commission notes that the Informant has not provided any evidence to establish that
OP1 and OP14 have compelled the Informant to accept any anti- competitive terms and
conditions, which are contrary to the provisions of the Act. Essentially, the grievances of the
Informant appear to be monetary disputes for which Informant has already initiated civil suits
and arbitration proceedings before the appropriate authorities.
39

Conclusion And Summary of Case 2

The case here is about K.Rajan who is a dealer of Cars as well as tractors, he’s been in the
business since a while but unfortunately has all his contracts cancelled recently .To his surprise
he finds out this is because of certain practice/ regulations followed by the organizations that
they do not let you have products of competing clients. This seems like an unfair trade practice
and is strictly prohibited under the Competition Act. This was hence a serious case as setting up
of showrooms for dealerships are a huge investment and also takes time and a lot of efforts. It is
also noticed a LOI is required for the operation of these dealership which again is in possession
with the party. The case has mainly arised due to alleged anti competitive terms and conditions
imposed by OP’s. Here it also should be noted that the compline hasn’t been able to provide
enough evidence against OP1 and OP14, which is one of the major reasons for the court not to
take actions against them. The case majorly went against informant as the Commission found
that no prima facie case of contravention of the provisions of sections 3 and 4 of the Act is made
out against OPs in the instant matter. Accordingly, the matter is closed under the provisions
of section 26(2) of the Act.
40

Conclusion
Competition is a process of economic rivalry between market players to attract customers.
Competition also refers to a situation in a business environment where businesses independently
strive for the patronage of customers in order to achieve their business objective. There has been
increasing reliance on competition policy and law across the World to address market abusive
and anti-competitive practices at the market place and to preserve and promote competition for
ensuring consumer welfare and efficient allocation of resources in an economy. Thus,
competition is seen as the life of the market economy. Free and fair competition is one of the
pillars of an efficient business environment. In the recent years the Indian economy has been one
of the best performers and is on high growth path. Infusion of greater degree of competition can
play a catalytic role in unlocking the fuller growth potential in many critical areas of the
economy. In the interest of consumers, and the economy as whole, it is necessary to promote an
environment that facilitates fair competition outcomes in the market, restrain anticompetitive
behavior and discourage market players from adopting unfair trade practices. Therefore,
competition has become a driving force in the global economy. Hence Developing countries like
India should not lag behind in putting in place an effective competitive regime to address
effectively the manipulations and distortions taking place in the market place and also to foster
competition culture in all the spheres of the national economy. So there is a Competition act
(2002) which covers all those things which are helpful in creating fair competition to boost the
economy.

The competition law is applicable worldwide. But the name of competition law is different in
different countries and it contains rules according to that country. In U.S. the name is antitrust
law but in India it is Competition law.

The competition Act, 2002 has been designed as a code to deal with matters pertaining to the
existence and regulation of competition and monopolies. Its objective include the promotion and
sustenance of competition in markets, protection of consumer interests and ensuring freedom of
trade of other participants in the market, all against the backdrop of the economic development
of the country in the post reforms era.
41

India's Competition Act, 2002 is undoubtedly an improvement over the earlier MRTP Act. 1969
as it obviously reflects the changing economic scenario. The Competition Act, 2002 has made
radical departure from the earlier competition law in dealing with abuse of dominance, cartels,
merger regulation, extra-territorial jurisdiction etc. Further, the Competition Act, 2002 has
assigned the competition advocacy role to the Competition Commission of India to promote
competition process in the Indian economy and it is definitely a step in the right direction.
For India the basic elements of the Indian competition law are excellent. The statutes are drafted
in ways that recognize the need for the institutions to decide when a particular type of conduct is
likely to produce bad effects on the performance of a market and when that same type of conduct
is unlikely to produce bad effects and has the potential to produce socially desirable results. India
can learn from the trial and error method which U.S. has used to try to create a good competition
law. By studying the history of U.S. competition law, Indian scholars and government officials
can avoid the mistakes the U.S. has made and can create a competition law that functions better
than the U.S. competition law. The basic elements of the Indian competition law are better than
their U.S. counterparts in several important ways. First, unlike the FTC and DOJ, the CCI has the
power to issue substantive rules to implement the competition act. Second, unlike the U.S., India
has avoided the risk that private parties will create bad legal precedents by litigating cases before
courts of general jurisdiction whose judges lack the expertise required to consider critically the
probable theories the private parties urge the courts to adopt. India has accomplished that both by
conferring exclusive jurisdiction on institutions with appropriate expertise and by declining to
allow private parties to initiate competition law proceedings. Third, the Indian Competition
Commission has the power to determine its own rules of procedure. The power allows the
Commission to adopt procedures that are adequate to the task.

It is quite apparent that the Competition Act, 2002 has a very limited existence and operation
since it has been put into enforcement in its entirety very recently. Therefore, it is not possible to
evaluate and appraise its efficacy, effectiveness and suitability, given the unreasonably short time
of its enforcement. However, the researcher has focused on the suitability of the provisions of the
Act to the changing economic conditions of the Indian economy in the light of experience of
some of the developed as well as developing countries.
42

In the present globalized economy, the business activities in any part of the world can impact the
Indian market, and vice versa. This process of integration will only grow in future. The
act empowers the Commission to take cognizance of cases where an anti-competitive practice
outside India has its effect in the Indian market, i.e., the "the effects doctrine". Meaningful and
purposive action by the Commission may require close cooperation with competition authorities
outside India. Hence, CCI should have effective co-operative arrangements with other
authorities.
The Competition Act, 2002 is definitely an outcome of the changing economic milieu of our
country. It has been brought into force to meet the changing needs and times of the Indian
economy and to strengthen the competitive process. It is not feasible to any researcher to address
and gauge the efficacy and relevancy of the Act to the Indian conditions as it has been in
existence for a limited period and therefore, only time could disclose whether the Competition
Act really addresses the ground realities of the Indian economy. However, the new Act is
definitely a prelude to the right beginning as it lays down adequate thrust on the need to curb and
combat market abusive trade practices and the need to foster and promote competitive culture in
the Indian economy

Webliography
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43

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